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The Background

Name any Chinese bike-sharing company that you know of and chances are that ofo and Mobike are among your top choices. There is however, another bike-sharing company worth talking about.

Founded as early as November of last year, Bluegogo is a Tianjin-based bike-sharing firm and has quickly become the third largest company of its kind in China, following, of course, ofo and Mobike.

Similar to its competitors, the dockless bike-sharing brand is equipped with a GPS tracker and users book the bikes through the Bluegogo app.

Because the bikes are station-less, they are scattered random spots throughout the city. In the first half of 2017 alone, Bluegogo already has 70,000 bikes in three Chinese cities: 35,000 in Shenzhen, 25,000 bikes in Guangzhou, and 10,000 in Chengdu.

Source: Mashable

Bluegogo has drawn several investors to fund its business and was valued at $140 million after pocketing a Series A round of $21 million in November last year and $58 million earlier this year.

With two large funds raised within a single year, the company seemed to be performing well in China that it began looking into overseas expansion to leverage the hype surrounding the share economy. What could possibly go wrong?

The Challenge

Like other share-economy startups, think Uber, ofo, etc., Bluegogo needed to find a way to become profitable.

One way to prove its worth to investors is its ability to expand.

“Bluegogo, being a latecomer to the bike-share game, needs to be aggressive” – Mashable

Bluegogo has not only been aggressive in expansion at home but also reaching as far as the US. The Chinese company chose San Francisco, the second most bike-friendly city in the States as its first venture into North America.

In January this year, the company was the first smartphone-enabled bike-sharing platform to launch some 20,000 dockless bikes in San Francisco, USA.

However, Bluegogo’s American Dream was not smooth sailing. Instead of a warm welcome by SF city dwellers accustomed to miles of bike lanes and high quality cycling facilities, Bluegogo faced angry lawmakers.

The company having achieved rapid success in China, implemented the same strategy in the US by placing dockless bikes everywhere on the streets of San Francisco. The problem was that the city ended up with large, messy and unsightly piles of bikes.

Leftover bikes from bike-sharing firms such as Bluegogo pile up in China. Source: Mashable

San Francisco has historically been known for its welcome mat, but in recent years we’ve let ourselves become a doormat. It’s time to put the public’s interests first, even if that means disrupting the disruptors,” said Aaron Peskin, Supervisor of the San Francisco Board.

Peskin even called the bikes a “public nuisance,” and vowed to destroy or even sell the bikes if they clogged up city streets.

In Bluegogo’s defense,

There was a problem in communicating,” said Ilya Movshovich, BlueGoGo‘s North America VP of Operations. “The people we reached out to initially were not the people we needed to get to. We didn’t quickly enough communicate with the appropriate heads.”

Until even now, San Francisco has yet to approve Bluegogo’s presence and even imposed a new law to increase the penalty for Chinese bike-sharing companies planning to litter its city.

If expansion wasn’t success, monetization would have to come from deposits provided by Bluegogo’s claimed 20 million cumulative users. If only 10 million users paid a $14.96 deposit, it would mean the company has collected around $149 million in deposits, in addition to the $0.08 per half hour charge to ride.

So why was the company owing roughly $30 million in total outstanding payables to vendors, unpaid rent and overdue salaries?

Bluegogo’s empty Beijing office. Source: China Money Network

It also owed users $15 million worth of deposits as of November 2017.

To make things even worse, Bluegogo’s CEO Li Gang went missing early November 2017 and was later discovered to have fled the country. What was this once promising company going to do?

Li Gang, Bluegogo’s CEO. Source: Linkedin

The Strategy

In attempt to explain the disastrous situation, Li released an open apology letter. As cliché as it sounded, he blamed the company’s state on lack of financial support, claiming that Bluegogo was ‘on thin ice in the face of two well-funded players’, pointing fingers at ofo and Mobike backed by Tencent and Ant Financial, respectively.

The bike-sharing market is full of challenges, and my mind is too childish and naive to succeed in the sector.” – Li Gang

But there could be some light at the end of the tunnel. Li took the opportunity to announce a partnership with another small bike-sharing startup called Biker, who would be in charge of operating Bluegogo as usual under its management.  

The Future

The merger of small startups like Bluegogo and Biker is considered to be a typical one for competitive and costly markets. Li admitted that he will use the revenue generated from the partnership with Biker to pay off its debt.

Bike-sharing is an asset-heavy industry. As investors become increasingly cautious and reasonable about their bet, a timely merger or acquisition may be the only chance for second-tier players to survive,” – said Shi Rui, Analyst with consulting firm iResearch

Despite a promising partnership with Biker, there has been no word from the company itself to confirm the partnership.

The fall of Bluegogo has spurred the question, has the bike-share economy bubble finally burst?

There have already been three Chinese bike-sharing startups – Xiaoming Bike, Mingbike, and Coolqi – collapsing within a span of one year; the latter actually teaming up with Biker.

Even ofo and Mobike investors are said to be in talks for a possible merger to survive in China’s bike-sharing market, which was estimated to be worth $1.5 billion this year. Is the future of bike-sharing M&A and endless funds?

Without support from a wide range of investors and good financial planning capabilities, even the best bike product is powerless,” wrote Li Gang.

We beg to differ. A company that relies on solely on funding in the long run needs to rethink its business model. Good luck Bluegogo/Biker/Coolqi.

Here’s what you should know:

1. Fighting counterfeit products, Shell Malaysia goes online with Lazada

Shell partnered with Lazada in Malaysia to launch an official store to sell motor oil products online.

Customers from throughout the country can now order the motor oil products on the Lazada Malaysia store. The company hopes the access will help deter the sale of counterfeit products.

Shell will also provide engine oil service packages in its online store for customers at selected authorised workshops in the Klang Valley and Johor.

Read the full story here.

2. Ofo launches its bike-sharing service in Malaysia and Thailand

Ofo introduced its service in Malaysia after lowkey launched its service in Thailand earlier this week.

In Malaysia, the company is running a trial phase in Melaka city center, where during the period each ride will cost $0.23 per hour, and users will not have to pay a deposit as would usually be the case. The trial will last until August 20.

Ofo already has 500 cycles in the downtown area, with a plan of deploying another 1,500 set by the end of this month.

The company will compete with Singapore’s Obike who also has presence in Malaysia and Thailand.

Read the full story here

3. Financial statements reveal EMTEK’s minority shares in Grab

One of Indonesia’s largest media conglomerat EMTEK is said to have a minority investment in Grab as revealed in the recently released company’s quarterly financial statement.

The financial statements mentioned that EMTEK owns 1.684.445 (0.003%) shares in the ride-hailing app that was made through its subsidiary KMK.

The company is also confirmed to have sold 25% of its stakes in Kudo following the company’s acquisition by Grab.

Read the full story here.

Here’s what you should know today.

1.  Thailand’s Omise acquires Paysbuy payments business, raises $25m in token sale

Thailand’s Omise announced today that it will acquire the online payments business of Paysbuy from local telco Total Access Communication (DTAC). The value of the deal was not disclosed.

Under the terms of the agreement, Paysbuy’s payments facility will be merged into Omise’s. The rest of Paysbuy’s assets will remain with DTAC.

One year ago, Omise closed a $17.5 million series B round – led by Japanese venture capital firm SBI Investment – to take its payments gateway beyond Thailand to neighboring markets. More recently, the company has turned to crowdfunding in the form of a digital token sale in order to raise more capital.

The acquisition of Paysbuy’s payments business will make the company’s existing services accessible to a greater number of Thai consumers, while also laying the groundwork for the introduction of new products such as its OmiseGO ewallet, slated for launch later this year.

Read the rest of the story here.

 

2. Chinese bike-sharing startup Ofo raises $700M led by Alibaba

Ofo, one of China’s two billion-dollar-valued bike-sharing companies, has announced that it raised a $700 million Series E funding round which is led by Alibaba.

This is the first time Alibaba has officially thrown its lot into China’s fast-growing bike sharing space, has risen to replace replace taxis, ride-hailing apps and other transportation options for many people taking short journeys across China.

Users simply scan the QR code on a bicycle to start their ride and, with each bike carrying a GPS chip, they can be left anywhere when finished.

 This new round is the largest that the bike-sharing industry has seen to date, just edging ahead of the $600 million round that Ofo’s close rival Mobike raised last month. Notably, Mobike counts Alibaba’s arch enemy Tencent among its financial backers.

Going forward, the company said it plans to grow its fleet to over 20 million bikes. It recently expanded overseas into the UK, having already added the U.S. and Singapore, and it plans to grow to cover 200 cities before the end of 2017.

Read the rest of the story here.

 

3. Analyst: Amazon poised to enter drugstore market

Amazon already sells medical devices and employs executives to deal with health care-related regulatory issues, and is said to be exploring how to ramp up its efforts in the pharmacy space. Walgreens Boots Alliance’s CEO Stefano Pessina on Thursday shrugged off the idea that Amazon might get into the drugstore business, saying the ecommerce giant was more likely to focus on less complicated retail areas.

Despite reservations, Pessina did say that Walgreens would be open to partnering with Amazon if it came to that.

It’s not just Walgreens, Rite Aid or CVS that would be challenged by such a move; Amazon in the pharmacy space would also challenge Walmart, a major pharmacy player with the advantage of a huge physical store fleet that is increasingly willing to go head-to-head with Amazon in ecommerce.

Watch this space.

Read the rest of the story here

Here’s what you should know today.

1. Financial comparison site Moneysmart raises $10m series B to grow into new markets

Singapore-based financial products and services comparison site Moneysmart has raised US$10 million for its series B round.

The round is led by Japanese web group Kakaku, which operates a number of consumer websites in sectors like shopping, travel, lifestyle, and real estate.

Moneysmart helps users compare 17 different personal finance products including credit cards, insurance, and loans. Site visitors can also read about various financial topics on the accompanying blog, maintained by full-time staff.

The startup competes with fellow Singaporean company GoBear, which also offers insurance, credit card, and loan comparison, and is present in six markets in Southeast Asia. Kakaku, a prominent Japanese online brand, sees Moneysmart as an opportunity to tap into consumer markets in Southeast Asia. “Our missions are very similar – help with people’s decision-making,” says Genta Sugihara, senior executive officer for Kakaku’s corporate development division.

Read the rest of the story here.

 

2. For retailers, Amazon is a true frenemy

“They buy from us, but they want to sell advertising to us as well,” said one brand marketer. “When you talk to them, you don’t know what their interest is.”

Amazon could be poised, according to Forrester analyst Collin Colburn, who published research on this in January, to take over search — a market Google almost wholly controls.

As consumer behavior shifts to be more specific, people will start searching on Amazon for specific needs. Amazon has created product display ads and other types of search products already.

At the same time, if brands want to be Amazon for the purpose of using only its marketing (which buyers and brands both say is good), then they also have to be on its marketplace. “Amazon is two-way relationship,” said one marketer.

Read the rest of the story here.

 

3. Recommended Reading: Why Bike-Sharing (Ofo, MoBike) Is Nothing Like Didi and Uber (i.e., Ride-Sharing)

Basically, bike-sharing is nothing like Didi, Grab, Ola, Uber, AirBnb and the others. Its economics are far more like an on-demand rental business or a vending machine business (at this point. It could evolve).

But much of the current excitement seems to be because people think this business is like Didi. It’s just not. It’s a different thing.

Bike sharing is basically a traditional, vertically integrated b2c rental service. It is a traditional merchant business. Being bigger helps somewhat but it is still fairly easy for a new entrant to enter. All you would need is about 30,000 bicycles. That would cost about $2.5M. So this is a cheap and fairly easy business to enter, which will probably limit long-term profitability.

However, in the short-term companies like Ofo and Mobike should do really well. They are offering an innovative new service and are first-movers in a wide-open and massive market.

Read the rest of the story here.