“As a CEO, I’ve made mistakes,” wrote Bluegogo chief executive Li Gang in a public letter on Thursday night. “I was filled with arrogance.”
Analysts have described the bike-sharing boom as just the latest in a string of Chinese tech bubbles. Like other fads, it has seen rapid expansion fuelled by venture capital money, winning market share with lossmaking prices followed by a collapse in funding that kills off firms and leaves a monopoly.
China’s city streets are now packed with shared bikes. Over the past year, at least 11 start-ups began aggressively fundraising and wheeling out GPS-enabled dockless sharing bikes that can be unlocked using a smartphone app.
“Bluegogo’s failure represents the funding bubble collapsing [for shared bikes],” said Xue Yu, analyst at market research firm IDC.
After launching in January, Bluegogo rolled out 600,000 bicycles in just six months, winning 20m riders. Those users will now be looking for the return of their Rmb99 deposit.
“I hope the Bluegogo team can leave with their heads held high,” Mr Li said, promising to repay wages owed to employees.
The sector now has two dominant players, Mobike and Ofo, which raised almost $2bn in total in 2017 alone. In comparison, Bluegogo raised Rmb400m ($58m) this year.
“The winner-takes-all outcome is what happens to almost all internet companies in China,” said Chen Lin, assistant professor at China-Europe International Business School in Shanghai. “The size of China’s market means that the benefits of creating a large network are even more important here, and that gives bigger companies an advantage.”
Many have compared Bluegogo’s collapse to the fate of Uber China, which was bought out by its local competitor Didi Chuxing after a battle of subsidies that cost Uber $1bn in a year.
“I think in [China’s] internet sectors there can only be one giant. There’s nothing you can do without funding, as we saw with Uber China and Didi,” said an ex-employee of Bluegogo, who requested anonymity.
The importance of China’s biggest tech companies, Alibaba and Tencent, in the domestic venture capital industry has also been demonstrated by the fact that the remaining giants — Mobike and Ofo — are Tencent and Alibaba-backed, respectively.
“What Tencent and Alibaba say counts, because it’s the capital that counts. It’s all about growing fastest, and that means fundraising the most,” said Xie Pu, a Changsha-based technology columnist. “Mobike and ofo will eventually merge.”