Ofo Inc (共享單車), a pioneer of China’s bike-sharing boom, considered filing for bankruptcy in what would have been the nation’s biggest start-up failure in years.
Ofo CEO Dai Wei (戴威) on Wednesday laid out the company’s challenges in a letter to employees, from customers seeking deposit refunds to suppliers demanding unpaid bills.
While the 28-year-old weighed bankruptcy after misreading the market, he suggested that such a move was no longer an option.
Dai’s emotional missive capped a horrendous year for a start-up that epitomized the can-do nature of China’s technology scene and raised more than US$2 billion in funding from investors.
Ofo helped spur a trend of dockless bike-sharing in Taipei and as far as Paris.
However, it also came to symbolize the industry’s excesses.
Along with rival Mobike (摩拜單車), Ofo’s canary-yellow bicycles piled up in junkyards across China as dozens of competitors jumped into the fray, fomenting a glut and pricing war that ultimately killed off all but a handful of players.
“In the past half-year, thanks to cash flow and media pressures, we’ve expended effort without reward. It’s especially so after the company failed to raise new funding,” Dai said in a memo shared by a company representative. “I considered, countless times, cutting off all our operational capital to repay customers and suppliers, even breaking up the company and filing for bankruptcy. Then no one will have to bear this enormous burden.”
That would have been a remarkable about-face for a company that clawed its way up from an experimental project for college students to one of China’s most visible start-ups.
Dai, who dropped out of a doctoral program at Peking University, founded Ofo in 2014 with four other students.
Shared bicycles rapidly gained favor among students and commuters tired of inching their way through traffic.
Dai did not elaborate on how Ofo misjudged the market, but the company has said it intends to withdraw from several cities abroad.
Heavy discounts and the need to saturate large cities with available bikes took a toll. At the height of the boom, local manufacturer Shanghai Phoenix disclosed an agreement to supply Ofo with at least 5 million bikes.
That same company in September said that it was suing Ofo for 68 million yuan (US$9.87 million) in unpaid bills.
Long before that, observers had pointed out flaws in the industry model apart from unsustainable discounts. The cycles tend to be easy targets for thieves and vandals, and require a lot of personnel to maintain and redistribute.
For now, Ofo fully intends to soldier on.
In his brief memo, Dai exhorted his workers to tackle the company’s issues head-on, while conceding the immense pressure his start-up is under.
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