The encyclopedia · Strategy & Leadership · Strategic decision · 2014–2018
Ofo raised over $2B to flood the world with bikes — then couldn't repay a single deposit
The Beijing bike-share pioneer burned over $2B racing rivals into dozens of cities, then collapsed owing millions of users their deposits.
Ofo · 2018-12-01
What happened
Ofo was founded in 2014 at Peking University by Dai Wei as a dockless bicycle-sharing service: users unlocked bikes with a smartphone app and paid by the hour. It grew explosively, and by 2017 had deployed over 10 million bicycles across 250 cities in 20 countries, was valued at up to US$2 billion, and claimed over 62.7 million monthly active users.
The model funded itself on user deposits and investor cash rather than profit: riders paid a small deposit for the right to rent, and Ofo subsidized rides heavily to win market share from rival Mobike and other entrants. Every subsidized ride lost money, so each new city and fleet only widened the hole it needed new capital to fill.
In late 2018 the deposit crisis broke. Thousands of angry users queued at Ofo's Beijing headquarters and submitted over 10 million online applications for deposit refunds, but the company could not pay. The founder admitted considering bankruptcy, and the once-$2-billion company collapsed into a daily subsistence operation, its assets stripped and its fleet abandoned on streets worldwide, never formally liquidating.
Why it happened
- The business was funded by deposits and fresh investment, not profit: a subsidized ride lost money, so growth only made the funding need bigger.
- A subsidy war against Mobike and rivals: competing to give rides away in city after city meant no trip ever covered its cost.
- The capital tap closed: when investors stopped funding loss-making bike-sharing, there was no new money left to return deposits.
- Deposits were a liability, not revenue: millions of users were effectively lenders, and the moment Ofo stalled, that debt became a run.
The lesson
A land-grab in a commodity market is a race to lose money. When two rivals subsidize the same product down to zero price, the winner is whoever runs out of cash last.
Aftermath
Ofo's deposit crisis hit in late 2018, with users queuing at its Beijing headquarters and over 10 million online refund applications piling up. The company shrank to a subsistence operation, its founder acknowledging bankruptcy was on the table, and its bikes were left abandoned across the cities it had once flooded. Ofo was never formally liquidated, but its operations effectively collapsed and the refunds went unpaid for years.
Sources
- Yahoo Finance (Reuters), 2018 — Bike-sharing firm Ofo's dramatic fall a warning to China's tech investors (millions of Ofo users clamoring for deposit refunds, founder admitting he considered bankruptcy; a warning for backers who poured tens of billions into loss-making bike sharing, ride hailing and food delivery)
- Wikipedia — Ofo (company) (Beijing-based dockless bicycle-sharing company founded 2014 at Peking University; by 2017 had deployed over 10 million bicycles in 250 cities and 20 countries, valued up to US$2 billion, with over 62.7 million monthly active users)
- People's Daily, 2018 — Ofo faces flak on refunds of deposits (thousands of angry users queued at Ofo's Beijing HQ; as of Wednesday afternoon Ofo had received more than 10 million online applications for deposit refunds)
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