Ofo Bike, the former Chinese powerhouse of bike sharing, is close to declare bankruptcy following a turbulent 2018 that registers the closure of the European and American operations.
Ofo Bike was able to raise in the previous years over $2bn, of which $846m from Alibaba in March 2018.
What went wrong?
Simple, the business model missed completely one of the 5 Michael Porters forces: barriers to entry in the market.
Ofo failed to recognise how easy was for rivals to replicate its business model and raise their own funds. You go to a bike manufacturer, give him a spec and buy the bikes. Pay people to put them around the city. Launch an app. Subsidize the consumers with great offers, spend huge amount of marketing money to try to retain the customer.
Who pay for all of this? The Venture Capital Firms, that invented with bike sharing the VC2C model” venture capital to consumer.
Did they learn the lesson?
Oh no! The Us Electric Scooter companies are replicating 100% the craziness of bike sharing Chinese models.
Billions of dollars have already been invested in https://www.li.me, https://www.bird.cohttps://jump.comfrom the top US VCs.
In Europe is the same story. Just in Germany in the 4Q of 2018, 3 electric scooter companies (Etergo, Wind Mobilitu and Unu) received investment for over $50m. Revenues generated so far by those 3 companies? 0
Electric scooters as bikes are easy to manufacture, face the same regulatory hurdles and requires huge marketing spending money.
And as for the bikes, it is easy to steal or vandalize an electric scooter (over 30% of Ofo Bike in London have been vandalised).
The winner of this crazy race is the consumer that can have access to new “90% free” form of transportation around the city.