What Killed ofo — The Fall of a Unicorn

ofo

“It will take 3.6 years to get my deposit back,” a reporter from Sina wrote.

Ofo users have been seen waiting in line in front of the company’s headquarters at Zhongguancun in Beijing for the past few days. The harsh winds of the Beijing winter didn’t stop them from getting their deposit back.

“It is hard to believe that 40 years after reform and opening up, people would still stand in the biting cold just for a 99-yuan refund,” a Weibo KOL stated. At least, 99 yuan is enough for a decent meal.

Ofo users are waiting in line for refunds (source: sina.com.cn)

Ofo, the bike-sharing startup is now struggling at the brink of bankruptcy. On Dec. 17, the company issued a refund policy, saying they would process refunds for users according to the order of refund applications.

SEE ALSO: Ep. 15: Bike-sharing in China Part 1: Ofo’s Wild Ride

At 7:20 p.m. Dec. 18, nearly 24 hours after releasing the policy, people waiting in line for the refund in the online system had exceeded 10 million yuan in total. If everyone were to get their 99 yuan back, ofo has to pay back 1 billion yuan in total. And that does not include those who paid an even higher deposit of 199 yuan yet.

According to a reporter from Sina, after waiting for four hours in line, they finally had a chance to have face-to-face negotiations with the ofo staff. “We will proceed to refund you,” they insisted without clarifying the exact time or date for the refund.

Should things continue at this pace, it will take years for some to get their deposits back.

Back in the second half of 2017, there has been constant media coverage of capital chain ruptures of ofo. Frequent withdrawals of its overseas business is also an indication that the company is facing serious adversities.

In August this year, the ride-sharing giant Didi-Chuxing proposed an acquisition of $2 billion yuan. In October, the legal representative of ofo’s operating company has been altered to Chen Zhengjiang, from its founder and CEO Dai Wei.

In 2018, China has witnessed the rise and fall of many bike-sharing companies. Influx of huge capital resulted in the waste of public resources as we see piles of shared bikes left unattended like garbage along streets. Born out of an idealist vision that later had to face reality, the concept of bike sharing cannot survive without strong financial backing and orderly operations.

ofo bikes left unattended along the streets (source: hq100.com)

On Dec. 20, insiders from Tencent reposted an article named Who Killed Ofo, quoting “if ofo’s success is based on an illusion that the power of capital in China is invincible in the past few years, then its failure marks the disillusion.” According to leaked photos of wechat moments, Pony Ma, CEO of Tencent and early investor of ofo’s competitor Mobike commented under the post that ofo’s failure is actually a matter of veto right.

Snapshot of Tencent insider’s wechat moments

Insiders say that the founding team led by Dai Wei, as well as investors including Alibaba, Didi-Chuxing and Matrix Partners all have veto rights, which stands as barriers to every new decision of the company.

On Dec. 19, Dai Wei issued an internal letter addressing the urgent refund matter.

“Due to failures in making correct judgements towards external changes from the end of last year to the beginning of this year, ofo has shouldered immense cash flow pressure. We need to process refunds for users, pay back the suppliers’ debts while maintaining the company’s daily operations. Every penny is spent cautiously.”

“In the past six months, cash flow and media pressure have rendered us powerless and discouraged, especially after failing to get funding. I’ve thought about using all the operating capital to pay back the deposits and debts from the suppliers. I’ve even thought about dissolving the company and filing for bankruptcy, so that we wouldn’t have to feel pressured anymore.”

He ended the letter with seemingly encouraging remarks. “I hope that every ofo employee can agree to and firmly believe that we will carry on with courage and will not be dodging our responsibilities. We will be responsible for every penny we owe, and for every user who has once supported us!”

After all, group mockery by users is a disgraceful way to retreat from the market.

Featured photo credit to sina.com.cn