Bicycle sharing services are primed to be a major focus for China’s startup scene this year. Now today, only the fourth day of 2017, comes the first mega-round for the space after Mobike announced its $215 million Series D funding.
The investment is led by internet giant Tencent, which took part in previous funding, and Warburg Pincus with participation from a range of top names. Those include new (and potentially highly strategic) backers online travel giant Ctrip and Huazhu Hotels Group, which runs over 3,000 hotels in China, and existing investors Sequoia China and Hillhouse Capital. The company did not disclose its valuation.
“What we can say is that our business continues to expand rapidly and we believe we are the largest player in our market by a considerable margin,” a spokesperson said.
Mobike said it will collaborate with Huazhu Hotels and Ctrip, which recently acquired Europe-based Skycanner for $1.7 billion and has invested in a Chinese airline, to help “travellers to get around cities more easily” and grow its userbase. Tencent, it added, would help with resources and know-how.
Founded in 2015, Mobike began offering its service in Shanghai in April 2016. Today it operates in nine cities across China. It is founded on the idea that bicycles can provide a cheap, easy and environmentally-friendly way to navigate China’s urban areas and that the proliferation of smartphones should allow people to use bikes as and when they want.
Unlike government-backed bike sharing services in other pars of the world that use fixed locations to store cycles, Mobike makes use of GPS to allow its bikes to left anywhere in a city. The company’s mobile app helps locate available bikes, which can be unlocked by scanning a QR code that is present on each bike.
Its closest competitor is Ofo, which is backed by Xiaomi and recently raised money from ride-sharing giant Didi Chuxing and others at a reported $500 million valuation. Ofo claims to have deployed over 70,000 bikes across 20 cities in China, with its 1.5 million registered users taking 500,000 rides per day. Mobike, meanwhile, claims 30,000 cycles overall but is aiming to reach 100,000 in each city by the end of this year.
Fast-growing and ambitious, Mobike is already looking to overseas, too. It plans to launch in Singapore, its first expansion, in the first quarter of 2017 while a spokesman added that it is “actively looking at opportunities in other international cities.” Not doubt, then, $215 million in additional money will come in handy.
“Our investment in Mobike demonstrates our commitment to supporting the development of the sharing economy and smart cities in China,” Tencent chairman and CEO Pony Ma said in a statement. “We hope that by combining this with Tencent’s deep understanding of user behavior in China, we will create unique value for our users in their daily transportation.”
Despite the big name involvement and large sums, it remains unclear whether these companies can turn a profit when they charge just 1 CNY (approximately $0.15) per hour. Consider that Didi is not profitable despite dominating China’s taxi on-demand industry with 10 million rides per day, and that Uber was burning $1 billion per year in China before agreeing to sell its business there, and the longterm viability of the cycle businesses is unclear.