Writer: Yang Lin
Now, the landscape may be about to change again amid the prospect of new financing.
Kr-Asia has learned from people briefed on the matter that Ofo will soon close a decent new funding round, joined by existing investors Alibaba and Ant Financial.
That means the long-rumored merger between Ofo and Mobike may not happen anytime soon.
The financing is expected to further complicate the bike-sharing scene.
According to people in the investment and bike-sharing sectors, Ofo had been close to completing a $1 billion financing round led by SoftBank, but the deal was later canceled. Kr-Asia has yet to confirm the matter with SoftBank.
“The good news is that Alibaba, one of the main investors in Ofo, has chosen to side with the company again,” an insider told Kr-Asia. The financing will have a major impact on the future of the two companies, someone in the investment business told Kr-Asia.
That means this December will be a crucial time for Ofo and Mobike. “If both companies receive new capital injection, the fight will continue,” said the investor, “but if they fail to secure new funds, their founders will have much fewer options.”
The thing is, in a constantly changing industry, anything can be a game changer. The clashing interests of Ofo and Mobike’s founding teams, their investors and even external forces have rendered it impossible to predict the ending of the bike-sharing race.
A hard choice amid constant pressure
“The steering wheel of the whole game is actually at the hands of those investors. The whole thing including the direction the bike-sharing startups are heading to is orchestrated by the investors.
It’s much more complicated than it seems,” an insider told Kr-Asia. “Some investors have already started to press Ofo and Mobike for a merger,” a person close to the matter told Kr-Asia.
“We didn’t think that a merger would come sooner than next summer. But, some compelling news has kept surfacing recently,” some employees from Ofo and Mobike told Kr-Asia. Zhu Xiaohu, an investor from the merger camp, called out for a merger back in September, arguing that it is the only way for them to earn a profit. The opinion is shared by many other investors.
But, NOT the founders of Ofo and Mobike. Both of them seem determined to go on their separate ways, at least for now. Currently, they are upping their efforts to locate generous investors, hoping that they will take out more money to support their expansion.
Alibaba could make an ideal backer. Well, in fact, it has constantly made its presence in the media about the latest development in the bike-sharing arena. Alibaba reportedly will lead the new financing round of Ofo. But, don’t forget that Alibaba also intends to invest in Hellobike, which has already been taken over by Youon.
According to Yicai, Hellobike, which has just closed a $350 million series D1 financing round, is currently busy facilitating its series D2 financing round. It is reported that the investment from its series D2 financing round will exceed that in series D1 financing round. Guess who will lead the new financing round? Most likely, Ant Financial.
Sounds a bit confusing, huh? But it makes sense. “Alibaba knows very well that its influence over Ofo will be undermined once Ofo is merged with Mobike. Therefore, it has laid out a plan to invest both in Ofo (in the name of Alibaba) and the other smaller players (in the name of Ant Financial),” a person close to the matter told Kr-Asia.
Alibaba led Ofo’s last financing round and injected $700 million investment, but this didn’t help tip the scale. DiDi is still the largest shareholder in Ofo. But, Alibaba isn’t the type that gives up easily. An investor from the Tencent camp told Caijing that Alibaba has been approaching some smaller players. It also pushed the merger of Youon and Hellobike.
“Alibaba’s ambition goes beyond a few shares in bike-sharing startups, its ultimate goal is to dominate the bike-sharing world. If the result goes against Alibaba’s expectation (Ofo and Mobike enter into a merger agreement and Alibaba loses its control.), Alibaba will probably go all in to help Hellobike work its way up the bike-sharing rank,” a person close to the matter told Kr-Asia.
Jack Ma shared his views on the bike-sharing sector in an interview after the World Internet Conference. He said that he knew Tencent was pushing for the merger of Ofo and Mobike. But, bike-sharing is not just about profit, it also concerns the greater good. He made it clear that “the purpose should not be to monopolize the market or reap profits as soon as possible.”
“No” to merger – that seems to be Alibaba’s message.
Meanwhile, Pony Ma, founder and CEO of Tencent, has pointed out in a WeChat comment under an article about Hellobike’s financing: “(Hellobike) has been reduced to a tool to promote mobile payment, something the small shareholders do not wish to see but could do little about.”
He was apparently suggesting that Ofo and Hellobike have been exploited by Alibaba to push for wider adoption of its payment service. It also means that once Ofo and Mobike merge, Alibaba will lose an important offline customer acquisition channel.
It should be noted that Mobike also serves as an offline traffic gateway for Tencent. “That may explain Tencent’s ambiguous attitude towards the merger,” the source said.
Negotiations
As Alibaba puts its foot down while Tencent hesitates in decision making, the situation seems a little unbalanced.
According to an Ofo insider, Mobike contacted Ofo through DiDi last month and a focus of the negotiation came to the merger, but there were no more details disclosed.
In fact, the two companies did talk more often in the last two or three months, but it is not explicit that who is leading. Ofo’s investors said that Mobike is more active in seeking contacts and it has invited DiDi as the middleman for more than once. However, a Mobike insider told Kr-Asia that “it is Ofo who has been coming to us.”
Employees of both Ofo and Mobike have admitted to Kr-Asia that although independent operation would be the best, they have prepared mentally for the possible merger. The leadership is the focus of the game now. According to an Ofo insider close to the top, the founding team of Ofo can accept the merger at the condition of being the leader itself. And Wang Xiaofeng and Hu Weiwei will leave the management after that.
Mobike is probably holding an opposite opinion. Although both companies have claimed their edge in such key indicators as order volume and DAU, public data haven’t shown any overwhelming advantage of either party so far.
Moreover, this does not respond to their ambitions. “Dai Wei is a gentle person, but with a firm hand. Also, given the age of Wang Xiaofeng, Mobike may be the best and last chance in his business career,” said a person familiar with both founding teams.
The role of DiDi is turning subtle now. One clue appeared at the end of November when the senior executives it sent to Ofo left for “vacation” at the same time. As an insider of DiDi said, it happened all of a sudden without easing you in. The trigger is most likely the rift between the two sides, and Ofo has officially taken back the initiative.
“Still, for common interests, they are on the same side and will speak with one voice, at least for now,” said the insider of DiDi.
This seems to be hard for DiDi. If the merger happens, its controlling ratio of share in Ofo will suffer a big slide; if it doesn’t, DiDi will be rivaled by Mobike, which is teaming up with Shouqi Limousine & Chauffeur, Didapinche, and even Meituan. Moreover, Tencent, a major investor of Mobike and Meituan, is also a main investor of DiDi. Perhaps, it is the intricacies of the capital relations that make DiDi a ready and willing middleman.
The uncertainty of Meituan
“Even if they are bound to end with a merger, both sides will put on a good fight before that happens,” said an insider from Ofo. He reckons that it (the merger) won’t become reality for now, at least not in this month.
The fight could be about investors’ opinions or funding. Either way, both Ofo and Mobike will make an all-out push to run the other into the ground in the one last round of competition.
If the investments by Alibaba and Ant Financial into Ofo are a done deal, it seems that Mobike is one step behind Ofo in the intense rivalry. In addition to continually win over favor with shareholders including Tencent, Mobike should also keep an especially close eye on the emerging uncertainty of Meituan.
Several well-informed sources told Kr-Asia that, Meituan is in close talks with Mobike. “Despite the fact that both investment and acquisition (or merger) are available options, the former stands a greater chance”. Both parties have officially denied the possibility of an acquisition recently.
The reason behind this isn’t hard to understand. Not only do they have great backing from Tencent, but they are also grappling with the same enemy, DiDi. Teaming up is not completely off the table. “Besides, Tencent, the patriarch, also has a say in this,” a Meituan insider told Kr-Asia.
Speaking of Meituan, ever since it rolled out its ride-hailing service in Nanjing this February, it has been inching its way into the travel industry and announced recently to elevate its travel business to a business division. “During the process, it’s wrestling with DiDi, on the stage or behind the curtain, never stops,” said the Meituan insider.
In a bid to grow its travel business, its car-hailing service in Nanjing and pilot short-time rental service in Chengdu might not be enough. Bike sharing could be a way out. In fact, Meituan has been quite persistent in its efforts to crack the bike-sharing market. According to an exclusive Kr-Asia report, Meituan was once in frequent contact with Bluegogo and close to becoming a major investor in the latter.
Mobike is another offline traffic magnet worth vying for. “Currently, Meituan’s traffic mainly comes from online. It would be extremely helpful for Meituan’s travel business if Mobike can direct extra traffic to its ride-hailing and rental services,” said a person close to the matter.
“Meituan might not be a leading potential investor. If seeing Mobike’s search for funding as a bid, Meituan might be one of the bidders,” according to the Meituan insider.
This is a bit jaw-dropping. Be it Ofo or Mobike, they were both smash-hit projects which raised whopping funding from a range of investors as recent as over six months ago. The situation, however, is changing drastically, as the offseason for bike riding arrives, terrifically hard conditions for making money remains unchanged and the once-hot sharing economy cools off.