Investors are shunning the country’s crowded IT scene. Some companies are now burning through cash to win market share.
From Xiamen to Shanghai mass graveyards of dirty bikes, all twisted frames and busted axles and handlebars, have become an unwanted emblem for hundreds of Chinese start-ups that once thrived on the back of easy money, hard graft and a light regulatory touch.
When the idea took hold in 2015, the bike rental companies’ promise to attract China’s booming middle class pulled in billions of dollars from investors even if they often charged cyclists very little or in some cases nothing to use their services. Some, such as Mobike and Ofo, quickly expanded abroad.
However, both have subsequently slashed their overseas presence. Ofo’s founder, Dai Wei, warned that it was teetering on the brink of bankruptcy, Wukong and Bluegogo have already folded.
They have now come to symbolise much of what has gone wrong across a swath of Chinese tech companies, especially those built around the idea of the sharing economy. The companies in trouble range from food delivery and shopping websites to transport apps.
“The transaction-oriented model is more or less done,” says Jason Ding, partner with Bain & Company in Beijing. “The bubble burst on the shared economy . . . It was pumped up by money on steroids. That’s all gone.”