Chapter 53: ofo Shared Bicycles

"Hello, Professor Liang. My name is Lu Liang, and I am from Tianxing Capital..."

Lu Liang arrived at the exhibition management office, introduced himself, and inquired whether the ofo bike-sharing startup team was participating in this exhibition.

"ofo?"

Liang Juntao followed his gaze, instantly enlightened. "Mr. Lu, that is the ofo shared bicycle startup team from Peking University. They are also participating in our university's startup exhibition, but their exhibition schedule is set for tomorrow."

Shanghai University of Finance and Economics' startup exhibition was originally planned to last for one day, but due to the large number of registered teams this year, it was extended to two days and divided into two batches.

Liang Juntao asked again, "Mr. Lu, are you interested in this project? We can help introduce you."

The family background of ofo's founders was quite extraordinary. Yesterday, superiors called to ask him to pay special attention and ideally help introduce a few investors.

He hadn't expected someone to inquire proactively before he even started introducing anyone. If he could facilitate an investment, it would be a free favor earned.

Liang Juntao had never heard of Tianxing Capital, but the invitations were tiered, and the gold-rimmed invitation was of the highest grade.

Presumably, their financial strength should not be underestimated.

"Then I'll have to trouble you, Teacher Meng."

"Mr. Lu, please wait a moment. This is their business plan. Have a look first, and I'll go contact classmate Dai Wei."

Lu Liang was invited to the lounge. A female student working part-time gently asked, "Sir, what kind of tea would you like?"

"Just iced water."

Lu Liang flipped through the business plan absent-mindedly.

ofo's entrepreneurial concept was to use the sharing economy combined with smart hardware to solve people's "last mile" travel problems.

Established last December with a registered capital of 1 million, they had a total of 1,800 shared bicycles across four campuses of Peking University and Tsinghua University.

To participate in this college student startup exhibition, they had successively deployed 300 shared bicycles in Shanghai University of Finance and Economics since last week.

The monetization model was hourly billing at 0.5 yuan per hour, with any fraction under an hour counted as a full hour, and a maximum daily charge not exceeding 2 yuan.

Currently, they had over 20,000 paying users, with an average daily usage of around 8,000 trips. The company valuation was 5 million, and they were willing to offer a 10% equity stake for angel round financing.

Lu Liang walked over to the window, opened it for ventilation, lit a cigarette, exhaled a cloud of smoke, and wore a thoughtful expression.

ofo's business concept was excellent and held promising prospects, but its biggest challenge was failing to move beyond the campus.

Over the past six months, a total of 1,800 shared bicycles had been deployed, with a loss and damage rate of only 1.7%.

The main reason was that operations were restricted to campus grounds, specifically China's top institutions like Peking University and Tsinghua University.

The faculty and students possessed high standards of integrity, or perhaps their prestigious alma mater compelled them to maintain high standards of conduct.

If deployed off-campus, they would be extremely fortunate if the theft and loss rate remained below 20%.

The manufacturing cost of a single ofo bike was 330 yuan. Increasing production volume or self-manufacturing and self-using could reduce costs.

However, the damage and loss rates still could not be too high; otherwise, sooner or later, the company would crash due to expenditures exceeding revenues.

Lu Liang searched for related information online.

It wasn't until a knock on the door sounded that he put away his phone.

"Classmate Dai, this is General Manager Lu from Tianxing Capital..."

Liang Juntao smiled warmly, leading in several young men in their twenties. They were the co-founders of ofo, as well as students and classmates at Peking University.

Lu Liang smiled and shook hands with everyone one by one.

Finally, his gaze settled on Dai Wei, who was the proposer of the concept and the largest shareholder, holding 70% of the individual shares.

Lu Liang said, "Classmate Dai, I just read your business plan and am very interested in this project. Would you mind telling me more about it?"

Dai Wei, being just a young man in his twenties, immediately grew extremely excited, launching into an explanation of ofo's advantages and future market prospects.

Lu Liang smiled politely without interrupting his presentation, nodding occasionally and falling into deep thought from time to time.

Until Dai Wei finished his explanation.

Lu Liang gradually收敛 his smile. "Classmate Dai, I have a doubt, and I wonder if you could help me resolve it."

"General Manager Lu, please go ahead." Dai Wei replied with a full smile, still basking in the joy of being recognized.

Lu Liang asked, "If ofo expands its deployment off-campus, how do you plan to reduce the loss and damage rate?"

"Although your current loss and damage rate is only 1.7%, that is mainly due to deploying exclusively on the Qingbei campuses."

"The students and faculty on campus have high integrity and would not engage in theft, but off-campus is a different story. You should be well aware of this."

"I am aware." Dai Wei's smile gradually stiffened.

He answered, "We have given this serious consideration and plan to reduce risk by collecting a deposit."

Dai Wei couldn't help glancing at Liang Juntao. Didn't he say the investor seemed easy to talk to? Why did his attitude change so abruptly?

Liang Juntao observed his own nose and heart, maintaining silence.

After all, he had seen investors far more difficult than this; they always needed to be satisfied before they were willing to invest money.

Of course, it might also be a compliance test. Lu Liang wanted to find out Dai Wei's tolerance threshold to facilitate future dealings.

However, none of this concerned Liang Juntao. His task was completed, and what he should do now was remain silent.

Lu Liang nodded slightly and asked again, "How much deposit do you plan to collect?"

"99 yuan," Dai Wei replied.

"Less than one-third of the total manufacturing cost of a bicycle."

Lu Liang stated calmly before asking another question, "Why should people trust you and be willing to put down a 99 yuan deposit?"

Dai Wei pondered for a long time. "We plan to expand the market first, then promote our brand and gain customer trust."

Lu Liang suddenly laughed. "A valuation of five million, financing 10%, with fifty thousand in funds—just how large of a market can you possibly capture?"

With a manufacturing cost of 330 yuan per bicycle, even without operating costs, 500,000 yuan could only purchase 1,515 bicycles.

Even if 300 bikes were deployed per university, it would only cover five more schools before plunging right back into a financial crisis.

Dai Wei and the others looked at each other, all seeing the bitterness in the depths of each other's eyes.

They had considered this issue previously, but dared not delve too deeply into it.

At 330 yuan per bike and 0.5 yuan per hour, they had no idea when they would break even and become profitable.

The corners of Lu Liang's mouth curled upward. Seeing that the time was ripe, he praised approvingly, "Your train of thought is actually sound."

He paused, then added, "However, execution lacks clarity, and the initial positioning of this project was flawed from the start."

"General Manager Lu, please enlighten us." Dai Wei felt somewhat indignant and wanted to hear what brilliant insights Lu Liang possessed.

"Bike-sharing can be traced back to Amsterdam in 1965, with the free bicycle system led by the authorities..."

Lu Liang had just done his homework; the concept of shared bicycles had existed for a long time and should now be considered the fourth generation.

In his view, rather than being an Internet-plus product, the shared bicycle project was more appropriately classified as a financial product.

Because the initial investment was enormous, if they relied solely on a few investors, they could never fill this financial black hole.

However, if it were treated as a financial derivative, there would be tremendous room for maneuver.

The characteristic of a financial product is that it can be leveraged. The multiple of leverage depends on how large of a blueprint can be painted.

"Given time, when daily usage nationwide exceeds 100 million trips, the net daily revenue will be 50 million."

"Furthermore, assuming your company is the only player in the market, the hourly rate can be raised to 1 yuan or 2 yuan."

"One hundred million trips would translate to 100 million or 200 million yuan."

Lu Liang possessed a formidable talent for painting grand blueprints, leaving Dai Wei and his peers completely entranced, as if reaching 100 million daily trips was right around the corner.

Just as the group was still daydreaming about a wonderful future life,

Lu Liang instantly shattered this grand illusion himself.

He said coldly, "However, your project has a fatal flaw."

"General Manager Lu, please tell us." Dai Wei's expression turned solemn, having long since discarded any feelings of contempt.

"A lack of core technology, making it extremely easy to replicate."

Lu Liang spoke clearly, every word striking like a pearl, piercing straight to the core of Dai Wei's anxieties—how could he not know this?

Because in the middle of last month, a friend in Hangzhou had informed him that "little red bikes" named Mobike had already appeared in Hangzhou.

Their development trajectory was identical to theirs, and they had already been strategically deployed across university towns rather than being restricted to campus grounds.

The emergence of homogenous competing products in the market filled them with an acute sense of urgency. This market had always been a winner-takes-all game.

That was why they were willing to give up 10% equity for financing at a low valuation, simply to occupy the market as quickly as possible.