Early Ofo Investor Talks Up Quick Returns on Investments in Sharing Business Models
Zhou Hongda
DATE:  Aug 21 2017
/ SOURCE:  Yicai
Early Ofo Investor Talks Up Quick Returns on Investments in Sharing Business Models Early Ofo Investor Talks Up Quick Returns on Investments in Sharing Business Models

(Yicai Global) Aug. 21 -- Interest among investors in bike-sharing start-ups remains strong, thanks to their fast returns and strong cash flow replenishment through guaranteed user deposit fees, says Zhu Xiaohu, a famous Chinese investor and founder of GSR Ventures, an early investor in bike-sharing giant Ofo, formally known as Beijing Bikelock Technology Co.

The bike-sharing business represents a huge market that has grown significantly over the past two years, with the two biggest companies, Ofo and Beijing Mobike Technology Co., receiving more than 50 million transactions a day, Zhu said at a forum held by Chinese independent investment bank China Renaissance on Aug. 18.

In contrast with the bike-sharing sector, Chinese ride-sharing company Didi Chuxing was in business for five years before reaching 20 million transactions per day.

GSR Ventures also invested in power bank sharing start-up Xiaodian earlier this year, which boasts a relatively quick return on investment, Zhu added. It is easy to recover the costs of a power bank as it's a comparably cheap product. Xiaodian is already receiving significant orders daily in places like restaurants and entertainment venues.

YCloset, a Chinese startup engaged in the rental of women's clothing, also represents a sound sharing business model, Zu said. "Now our young people, especially girls born in the 1990s who just entered the workforce, will need quality clothes for their jobs, but their salaries are unable to cover these expenses. A service that enables them to enjoy quality clothes every day by paying only hundreds of yuan each month will be quite attractive. So clothing is a good business choice indeed. In the future, we will also consider accessory sharing and other new businesses with higher profit margins, like bags and suitcases."

Market opportunities for some sharing models, such as those for massage armchair and juicers, may remain limited due to these products having highly specific applications, he said.

For example, if a business operates outside a metro station and therefore depends highly on their specific condition, this business project might only bring profits for metro companies as they can mark up their rents significantly.

He said that, a good startup project should feature certain defensive capability, and the key is not to depend excessively on specific conditions.

"A promising project should be one that expands quickly, and is able to take advantage of opportunities online. If a business model depends highly on investments, it will no doubt need over a year to see returns, which means this project falls short of expanding fast and depends highly on further investments for its expansion. This process will be quite tough, and brings massive costs to both the entrepreneurs and investors. Therefore, we expect models with faster returns on investment."

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Keywords:   Venture Capital,OFO,Mobike,BIKE-SHARING