Ofo, the Chinese bicycle sharing company, has raised $1 billion or more from Alibaba, the Chinese eCommerce giant, and other investors.
According to a report in Financial Times, citing two sources familiar with the deal, the investment brings the company’s value to $3 billion, which is in line with the valuation of Mobike, its rival and the market leader.
“Mobike versus Ofo is not just a battle between the two companies, but the whole ecosystem of services that their [respective] backers, Tencent and Alibaba, have created,” said Xue Yu, an analyst at research company IDC. Ofo and Alibaba declined to comment for the report.
Ant Financial, the financial affiliate of Alibaba, participated in a $350 million round of fundraising for Hellobike, the third largest bike-sharing startup in the country, earlier this week, reported Financial Times.
While money has been pouring into the market, the bike-sharing industry has had some troubles along the way, with five or more startups going under over the course of the past six months. Many were hurt by theft and vandalism of the bicycles. Experts expect the market to undergo a shakeup, with only the strongest surviving.
“The cards are being dealt right now,” said Rong Hua, an investor in rival Xiaoming Bike. “There are 10 players now, but only three will remain.” While the companies aren’t profitable and need to spend more to grow, they believe they can make money on user fees – but some analysts claim that the real money-making opportunity lies in letting marketers tap into the user data they amass.
“You know where the user is much of the day based on their travel patterns, and can aggregate this to calculate the demographics of traffic flows through a city,” said Mark Natkin of tech research firm Marbridge Consulting. “And if you’re partnered with Alibaba or Tencent, you may have access to a staggeringly enormous vault of data based on the telephone number alone.”