{"id":338473,"date":"2017-04-16T01:44:12","date_gmt":"2017-04-15T17:44:12","guid":{"rendered":"http:\/\/techcrunch.com\/?p=1477261"},"modified":"2017-04-16T01:44:12","modified_gmt":"2017-04-15T17:44:12","slug":"a-new-on-demand-battle-is-speeding-toward-the-us-and-vcs-are-seeing-dollar-signs","status":"publish","type":"post","link":"https:\/\/people.utm.my\/asmawisham\/a-new-on-demand-battle-is-speeding-toward-the-us-and-vcs-are-seeing-dollar-signs\/","title":{"rendered":"A new on-demand battle is speeding toward the US, and VCs are seeing dollar signs"},"content":{"rendered":"

<\/p>\n

While Uber\u2019s woes take center stage in the U.S., a different on-demand battle that\u2019s been playing out in China is coming to the states.<\/p>\n

The battle isn\u2019t over car sharing. It\u2019s not over bus sharing, either, though that, too, is a growing focus for investors<\/a> and automotive companies<\/a> that are desperate to understand how cities and transportation are changing. This clash is over the latest wrinkle in urban bike-sharing \u2013 dockless bike sharing. And it has founders and VCs around the globe seeing dollar signs, while regulators are wrestling \u2013 again \u2014 with how to ensure they\u2019re not victims of a trend that seemed to emerge nearly overnight.<\/p>\n

\u201cDockless bike sharing is something that people worry about until they realize it\u2019s a benefit\u201d to society, says Atomico<\/a> cofounder Mattias Ljungman, who calls the ability to leave one\u2019s bicycle where a trip ends\u00a0\u201cthe real revolution here.\u201d Docking stations are\u00a0\u201cvery complicated,\u201d he says. \u201cNot only do riders need to know where to park\u00a0their bikes, but sometimes the stations are full. It\u2019s a pain.\u201d<\/p>\n

Atomico has already placed a big bet on Ofo<\/a>, a Beijing-based dockless bike-share company\u00a0that has so far raised roughly $580 million from VCs at a post-money valuation of north of $1 billion. China-based investors are looking to pour even more into the three-year-old company given its current momentum, suggests Ljungman, citing the more than one\u00a0million connected bikes it has already placed on city streets in China, and customers who are\u00a0taking an astonishing 10 million rides per day, compared with the roughly 10 million rides per year that\u00a0London\u2019s public bike-sharing service<\/a>\u00a0powers.<\/p>\n

The story is much the same for 16-month-old, Shanghai-based Mobike<\/a>, which also claims to have more than a million bikes in its fleet\u00a0and has raised $410\u00a0million from investors at a valuation that the WSJ reports<\/a> is north of $1 billion.<\/p>\n

Another Beijing-based bike-share company, Bluegogo<\/a>, is drafting behind both. Founded a mere six months ago, it has already raised at least $65 million<\/a> from investors.<\/p>\n

Still,\u00a0China is not the U.S; it remains to be seen if a variation of the model will work here. \u201cJust as China will tell you that things that work in the rest of the world won\u2019t work in China because of its 5,000-year-long cultural history, things in China don\u2019t necessarily work [in the U.S.] either,\u201d says Sean O\u2019Sullivan, the founder and managing director of the venture firm SOSV<\/a>.<\/p>\n

Friend or foe<\/strong><\/p>\n

O\u2019Sullivan has been watching dockless bike sharing as closely as anyone. Like a growing number of VCs, he has a horse in this race: New York-based Social Bicycles<\/a>, or SoBi, which says it was first in producing a dockless bike that features a trackable GPS system and an integrated lock that allows it\u00a0to be parked at any bike rack in a city.<\/p>\n

SoBi founder Ryan Rzepecki launched company in 2011 after serving two years as a project manager at the New York Department of Transportation. There, he says, he was witness to the city\u2019s negotiations with Motivate<\/a>, parent company of Citi Bike, which has become the largest bike-share program in the U.S. It was a years-long planning process that Rzepecki says gave him \u201cgreat appreciation for how cities work and the things that concern them.\u201d<\/p>\n

Among them were \u201censuring the bikes would be inspected and maintained, that their docking stations would be kept clean, that bikes would be evenly distributed throughout the city, and that there was data sharing,\u201d says Rzepecki\u2019s then-boss, former New York DOT Commissioner Janette Sadik-Khan, who now advises mayors<\/a> on urban planning. \u201cIt was pretty basic stuff\u201d that had New Yorkers\u2019 best-interest in mind, she adds. \u201cRogue bike systems,\u201d she complains, don\u2019t necessarily have the same priorities.<\/p>\n

\u201cThese new companies seem to be using [the bikes] more like marketing vehicles and using the streets for their private gain,\u201d Sadik-Khan says of Ofo and Mobike, which are giving citydwellers more freedom to zip around congested cities like Shanghai, but attracting bad press around\u00a0bike-strewn pedestrian walkways and bikes piled sky high<\/a>\u00a0in the process. \u201cYou can create dangerous situations by inviting this tsunami of bikes that could wind up anywhere and everywhere.\u201d<\/p>\n

Rzepecki certainly believes\u00a0they\u2019ve\u00a0been less thoughtful in their approach than\u00a0SoBi, which has more than\u00a0a thousand of its own bikes in Santa Monica, Ca., and Portland, Ore., among\u00a0other places in the U.S., Canada, and Europe.<\/p>\n

Most importantly, he says, SoBi has \u201centered into a partnership with every city where we\u2019re operating,\u201d he says. \u201cHaving been on the other side, we understood the importance of being good partners.\u201d<\/p>\n

SoBi also uses incentives to manage its fleet of bikes so that \u201cinstead of a scavenger hunt to find a bike each day, a user knows that there\u2019s a bunch of bikes three blocks away.\u201d How it works: Users pay per minute, with pro-rated prices ranging from $3 per hour to $8 per hour depending on the city. Most rides last 15 minutes on average, with most trips costing $2 apiece. But riders face extra fees if they\u00a0lock up a bike outside an area that\u2019s been geofenced by SoBi. Conversely,\u00a0if a\u00a0user parks a bike in a\u00a0particular area at SoBi\u2019s request, that rider\u00a0is given a credit.<\/p>\n

One might think the difference too nominal to pack a punch but it\u2019s \u201creally effective\u201d in ensuring equal distribution of the bikes, says Rzepecki. Meanwhile, Ofo and Mobike have no such incentives program in place, counting instead on the market to self-regulate.\u00a0They also barreled into the many Chinese cities in which they operate without consulting first with local regulators, a move that investors \u2013 which include China-based heavyweights Xiaomi and Tencent Holdings \u2014 seemed to sanction.<\/p>\n

That\u2019s begun to change more recently. \u201cOfo is working with government,\u201d insists Ljungman. \u201cIt\u2019s always looking for solutions.\u201d Rzepecki hints that they have no choice. \u201cShenzhen and Shanghai are starting to put in service standards to prevent chaos in the streets.\u201d<\/p>\n

\"\"Good or evil<\/strong><\/p>\n

Certainly, cities have plenty of reason to want bike-share programs to work, dockless or otherwise. Bikes don\u2019t produce carbon emissions, they take up less space than cars, and riding a bicycle is a heart-healthy activity.<\/p>\n

San Francisco, which was caught off guard by plans by\u00a0Ofo and Bluegogo to enter the U.S., recently proposed legislation<\/a> around how to obtain and maintain a\u00a0stationless bike share permit. (Bluegogo,\u00a0which initially aimed to park its bicycles in public bike racks, says now it will use\u00a0bike stations in private parking spaces.)<\/p>\n

NACTO, an association of 51 major North American cities, issued a statement<\/a> earlier this week saying it also welcomes bike share systems of all stripes, as long as they\u2019re\u00a0\u201cpart of a city\u2019s overall transportation network and vision.\u201d (Companies that have \u201cshown that they are not serious about providing bikes as a real mobility option for people\u00a0. \u00a0. . [but] more interested in media attention and a quick buyout\u00a0. . . put the public at risk,\u201d it added.)<\/p>\n

Dockless bikes make a lot of sense as a complement as a last-mile option for commuters, too. Even now,\u00a0Rzepecki sees a day when SoBi\u2019s bikes are electric and work with fleets of autonomous cars and shuttles to get people to their office doors. Ofo has the same ambitions, says Ljungman, not least because China\u2019s ride-hailing giant Didi is among its investors. In fact, Didi\u2019s customers can already reserve an Ofo bike through Didi\u2019s\u00a0app.<\/p>\n

Not last, as\u00a0with Uber\u00a0\u2014 which envisioned itself as a logistics company from the start\u00a0\u2014 the\u00a0potential exists for the bikes to carry more than people. Ljungman says that making deliveries, for example, is \u201cnot something [Ofo] has on its radar, but given they\u2019re building a really interesting network and distribution capability . . . the amount of products and services you can attach to that is pretty large.\u201d<\/p>\n

Still, it\u2019s easy\u00a0to conclude that investors \u2014 and founders \u2014\u00a0are getting ahead of themselves in a race to\u00a0create the next so-called decacorn<\/a>.<\/p>\n

Though Ofo has global ambitions \u2014 it reportedly wants to introduce 50,000 bikes<\/a> in roughly 10 U.S. cities by July \u2013 Ljungman acknowledges that the U.S. market will be a tough nut to crack.<\/p>\n

\u201cYou need the right kind of cities. In many places in the world, cities weren\u2019t built around cars. They were built around people walking or cycling or even riding horses,\u201d he notes. \u201cThere\u2019s a cultural aspect, too. In Amsterdam, you see lots of bicycles all over the place. They rule the city.\u201d That\u2019s not so in many American cities where bikers represent fewer than 1 percent<\/a> of all commuters.<\/p>\n

The economics of the business appear\u00a0challenged, too. While bike share companies insist that they\u2019re making the bikes as efficiently and cost effectively as possible in partnership with China-based manufacturers, it hasn\u2019t proven a lucrative\u00a0business to date. For example, Motivate, which oversees more than 10,000 bikes across bike-sharing programs in 10 U.S. cities and recorded 14 million rides last year, still isn\u2019t profitable, says a source close to the company.\u00a0Presumably, making electric bikes will be even more costly.<\/p>\n

And there are shenanigans. According to O\u2019Sullivan, the founders of one dockless bike share startup met earlier with\u00a0Rzepecki under the guise of wanting to fund SoBi, which has reached profitability off\u00a0$7 million in funding to date and is now looking to raise substantially more. They then used their findings to raise money for a new startup of their own.<\/p>\n

Asked about the claim, Rzepecki declines to confirm it, saying instead, \u201cA lot of people are entering the market and maybe being a bit more opportunistic in trying to compete. For me, it\u2019s generally a good sign that we have an environment now that\u2019s being capitalized, even if not\u00a0everyone has same intentions that we have.\u201d<\/p>\n

It\u2019s like the second coming of Uber. At least, people seem to hope that\u2019s the case.<\/p>\n

\u201cI do think Uber\u2019s bad boy behavior has\u00a0emboldened some to\u00a0also break laws and charge ahead of social consequences,\u201d says\u00a0O\u2019Sullivan. \u201cThey got away with it, and they got rewarded for it financially, despite hundreds of millions of dollars in settlements to state regulators and elsewhere.<\/p>\n

\u201cUntil Uber came along, I never thought it could possibly have worked.\u00a0Now others may see it as a model worth copying.\u201d<\/p>\n

Additional reporting by (and valuable insights\u00a0from) Lora Kolodny.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

\"\" The battle isn’t over car sharing. It’s not over bus sharing, either, though that, too, is a growing focus for investors and automotive companies that are desperate to understand how cities and transportation are changing. This clash is over the latest wrinkle in urban bike-sharing – dockless bike sharing. And it has founders and VCs around the globe seeing dollar signs,… Read More<\/a><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

\"\"\/ <\/p>\n","protected":false},"author":5817,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[25],"tags":[59,66,26],"class_list":["post-338473","post","type-post","status-publish","format-standard","hentry","category-technology","tag-media","tag-techcrunch","tag-technology"],"_links":{"self":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts\/338473","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/users\/5817"}],"replies":[{"embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/comments?post=338473"}],"version-history":[{"count":0,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/posts\/338473\/revisions"}],"wp:attachment":[{"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/media?parent=338473"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/categories?post=338473"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/people.utm.my\/asmawisham\/wp-json\/wp\/v2\/tags?post=338473"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}