In China, investors are committing a lot of capital right now to a new twist on an old form of transportation: the bicycle.
Specifically, bike-sharing start-ups in China are enjoying surging growth with a simple concept: Users download an app on their smartphones, which allows them to locate and unlock a nearby bike. It's a cheap service, with providers charging as little as 15 cents for every 30 minutes.
When the trip is completed, riders are encouraged to park at any public bike rack or public location that does not interfere with pedestrians or traffic. It's a very different model than traditional bike-sharing programs, where users must pick up and drop off bikes at fixed, designated racks.
Investors are piling in. Mobike and Ofo — two of the biggest players in the market — recently raised a combined $1.3 billion in new funding. The companies hope to one day bring this popular business to the United States, as they try to disrupt traditional bike-sharing programs and outmaneuver American-based start-ups now launching their own such services.
It's easy to understand investor excitement about these companies, given their massive scale. Mobike and Ofo can now complete a combined 50 million rides per day. They each boast 100 million registered users, offer their services in more than 100 cities and operate a combined fleet of more than 12 million bicycles.
"Right now, we are transporting more people than taxis in China in many cities," Mobike CEO Davis Wang said recently at Fortune's Brainstorm Tech conference. "And in some cities, for example in Chengdu, we are transporting more people than the subway. So MoBike is becoming one of the major transportation platforms in many of the cities in which we operate."
Mobike recently raised $600 million in new funding from investors including Tencent, TPG and Sequoia. Neil Shen, the managing partner of Sequoia Capital China, told CNBC his firm is optimistic about the company in part because of the flexibility it provides customers.
"Bike sharing allows users to park their bikes anywhere they want, unlike previous city-bikes where riders had to look for designated dock stations," Shen said. "The ability to use a bike whenever and wherever without having to worry about losing or maintaining the bike offers great flexibility that cannot be imitated with public transit options."
Not to be outdone, Ofo recently announced its own mega round of $700 million in new funding, from a group of investors that included Alibaba, Chinese ride-hailing company Didi Chuxing and DST Global.