With pollution being a huge crisis all over the world, a company that offers transportation that helps cut down on the same seems like a great idea. Especially when it comes out of Beijing – the most polluted city in the world. OFO was born from this ideology and was a bicycle sharing platform that garnered a fantastic response when it first started out. However, from having its bike fleets in over 20 countries, to now having lines of investors and consumers standing at its door demanding their deposits back daily, OFO has fallen a long way.
The good old days
Founded in 2014 to facilitate bicycle tourism, OFO started off with a team of 5 people from Peking University. Its official launch occurred in 2015 and by this time, the company had over 20,000 users and over 2,000 bicycles all over Beijing. While they received their initial funding from Peking University, OFOs appeal as a start-up in China began to grow and it soon raised 130 million USD in funding from big names like Xiaomi and Didi Chuxing in 2016. By now, the company had 85,000 bicycles spread all over the country and they were geared to expand globally.
A barrage of fundings
In 2017, OFO received a series D funding of 450 million USD and its market value was then estimated to be 1 Billion USD. With these resources, the company began to expand by making its bicycles available in Singapore, UK, Seattle, and Sydney.
At this point, it seemed as though nothing could go wrong with this company. The United Nations Development Program partnered with OFO to raise more public awareness on hot-button issues like climate change. From this platform, OFO gained another partnership with singer Rihanna’s Clara Lionel Foundation, which offers bikes to girls in Malawi. With such positive and well-backed CSR initiatives, OFO was the darling of the tech world.
These big moves garnered attention from Ant Financial, an affiliate of China’s Alibaba, and the company invested an undisclosed amount in OFO. Moreover, Alibaba, Citic PE, and Hony Capital gave OFO funding of 700 million USD in June 2017. By the end of 2017, OFO had expanded into France too.
By March of 2018, OFO had received yet another round of funding worth 866 Million USD by Alibaba. It was perhaps this constant validation in the form of funding and praise that ultimately led to this company’s top decision makers feeling so secure and confident in their positions, that they declined the opportunity to merge with Mobike. OFO had also pinned its hopes on an acquisition deal with Didi Chuxing which did not pan out as expected. As a result, the company was now scrambling with excessively high operational costs, poor management plans and a towering mountain of debt.
Mobike received a 2.7 Billion USD funding the same year from Meituan-Dianping. Recognizing that they could not hope to sustain their business, OFO then put in place a contraction plan that applied internationally as well as domestically.
Global Layoffs and bankruptcy
OFO announced its decision to only focus on a few priority markets while exiting from various cities. They ceased all their operations in Germany, India, Spain, Thailand, Austria, Israel and Australia. It left key cities in the UK like Cambridge, Oxford, Norwich, and Sheffield, and chose to retain its London operations until those were closed down too in January 2019. OFO also laid off 70% of its staff in the United States.
Sometimes, when you’re drowning, life hands you a boat to save yourself. For OFO, this boat came in the form of Didi Chuxing and Ant Financial offering a buyout worth 2 Billion USD. However, Dan Wei, the founder of OFO, turned it down, stating that he would also turn down any higher buyouts, including staggering amounts like 10 Billion USD. With that, OFO turned its nose away from its boat and continued to drown.
October 2018 saw the compelling grappling with a flood of requests regarding refunds for user deposits. While OFO agreed to refund the money, they struggled with their cash flow at such a huge level that they considered declaring bankruptcy a few times over the course of the remaining year.
Now, with all its operations ceased, OFO must face the long line of users waiting for refunds at its door.
What can we learn from this?
Huge funding is not what determines a company’s success, no matter how high it may be flying at any given point. An expansion that occurs without proper management and cash flow decisions will ultimately lead to debt and crisis at phenomenal levels. Sometimes, it is best to brush the ego aside and take whatever buy-outs you are offered. At this point, OFO is facing an estimated debt of over 1 Billion Yuan, with regards to paying back user deposits.