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Silicon Valley's LimeBike faces off against China's bike-sharing power players

  • California-based LimeBike has just snared $50 million in investment on top of $12 million in March to speed up its roll-out to reach 30 cities and campuses nationwide this year.
  • LimeBike is planning to surpass Ofo and Mobike, which invented the dockless bike-sharing market in China and are now on U.S. turf. They have billion-dollar coffers from China power players Tencent and Alibaba.
Mobike and ofo bikes lined up across the street from the old Beijing Railway Station near Tiananmen Square
Evelyn Cheng | CNBC
Mobike and ofo bikes lined up across the street from the old Beijing Railway Station near Tiananmen Square

A race to dominate the rapidly growing smart bike market is on: Pioneering, unicorn-financed Chinese start-ups Ofo and Mobike are facing off in the United States with pumped-up Silicon Valley-based rival LimeBike.

Freshly loaded with $50 million more in investment and geared up to launch in 10 more U.S. cities this year, LimeBike is pedaling fast in the United States to pass China's Ofo and Mobike with their big ambitions and billion-dollar coffers from China power players Tencent and Alibaba.

The United States is a new battleground for Ofo and Mobike, which invented and popularized the dockless bike-sharing market in China and have started to go international. Ofo kicked off operations in Seattle, Boston suburbs and Washington, D.C., in August, while Mobike launched in Washington, D.C., in September. Main U.S. competitor LimeBike kick-started its first U.S. market in June at the University of North Carolina at Greensboro and has quickly rolled out to 20 places.

Bike-sharing is growing exponentially in the U.S. In 2016, riders took 28 million trips, on par with the annual ridership of the entire Amtrak system, the National Association of City Transportation Officials reported. The five biggest systems are in New York, Greater Washington D.C., Miami, Chicago and Greater Boston. Analysts predict the boom will continue as popularity increases.

Sporting brightly colored bikes and logos — lime green for LimeBike, yellow canary for Ofo and bright orange and silver for Mobike — Chinese-style bike-sharing has arrived in America. The market winner will go to the first mover that can execute without bumping into numerous challenges that include regulations, pricing wars, maintenance issues, bike theft and vandalism.

The hot new transportation trend

Faced with the supercharged Chinese foes entering U.S. turf, the San Mateo, Ca.-based LimeBike has just snared $50 million in investment on top of $12 million in March to speed up its roll-out to reach 30 cities and campuses nationwide this year. The funding comes from technology sector hedge fund Coatue Management, Templeton Investments, GGV Capital, Jerry Yang's AME Cloud Ventures, ex-Google Ventures Bill Maris' Section 32, Stanford StartX Fund in addition to its Series A investors including Silicon Valley venture investors Andreessen Horowitz and DCM.

"Local players understand the market better. We are opening one market every week and hiring a team of 10 to 20 people to support local operations, and working with city officials closely to launch new markets," said LimeBike's CEO and co-founder Toby Sun, a Berkeley MBA graduate and US-China venture investor at Fosun-backed Kinzon Capital with ex-Tencent US general manager Brad Bao.

Growing an average 50 percent weekly, LimeBike has climbed to 250,000 users and 10,000 bikes nationwide in 12 American cities including Seattle, Washington, D.C., and Dallas, as well as eight university campuses. By year-end, LimeBike's ambitious goal is to top 1 million riders and add at least 50,000 more bikes and 10 new U.S. markets, among them possibly New York City, Los Angeles, San Diego and South Francisco.

LimeBikes caught on quickly in key markets, such as Seattle, which logged 10,000 trips the first week, according to Sun. In 2018, if the U.S. roll-out goes as well as expected, LimeBike plans the next bold stage of growth: Go global.

"LimeBike is taking the Chinese model of bike-sharing and localizing it for the U.S. market," said Connie Chan, a partner at Andreessen Horowitz and a lead, early investor in LimeBike. "The team has worked in the U.S. for a number of years and knows what will work."

Chinese powerhouses

The most global of the contenders and with the biggest pot of money, Ofo sports 10 million bikes and 20 million users across 15 countries and 180 cities. Founded in 2014 by CEO Dai Wei while a Peking University student and named to resemble a rider on a bike, Ofo is financed with $1.2 billion, mostly from China sources, including Alibaba, Hony Capital, DST Global, CITIC Private Equity and Chinese ride-hailing leader Didi Chuxing.

"We want to unlock every corner of the world and make bicycles accessible," said Grace Lin, vice president of Ofo North America, who oversees Ofo's four U.S. markets so far and leads a 50-person U.S. team, shuttling between Beijing and San Francisco. Ofo's goal is to exceed 1 million users in the United States by the end of this year, she said, noting that this week Ofo plans to add the Denver suburb of Aurora to its footprint.

The largest of the smart bike-sharing companies globally, Mobike is active in more than 100 cities internationally, runs more than 5 million bikes and claims 100 million users in China, Singapore, the U.K and the United States. Mobike was launched in early 2015 by CTO and former automaker executive Joe Xia and two Chinese co-founders. Its group of $1 billion backers include heavyweights Tencent, Sequoia Capital China, TPG, Hillhouse Capital, Singapore's investment power Temasek and major institutional investors. Mobike has leveraged the Tencent connection by integrating Tencent's WeChat popular service for cyclists to scan for and pay for bikes.

Ultimately, LimeBike could face a more powerful contender if rumors of a possible merger of the two leading Chinese bike-sharing entrants actually occurs. So far, such talk is dismissed and downplayed by the companies. If a merger does happen between Ofo and Mobike, it would parallel the joining of China's leading car-hailing services backed by Alibaba and Tencent into one major player, Didi Chuixing, which acquired Uber's China business in 2016.
In China, smart bikes – or Uber for bikes -- have become a popular, environmentally friendly and efficient way to travel short distances for commuting to work or running errands. The new biking craze in China has ironically brought biking back to Beijing, Shanghai and other congested Chinese cities.

With the dockless, bike-sharing model, cyclists can use a smartphone app, GPS technology and QR codes to find, unlock, rent, pay for and park bikes anywhere convenient. Riders don't have to park or pick up bikes at docking stations.

Docked bikes such as Citi Bike in New York City introduced bike-sharing but this new, more flexible dockless model could catch on quickly in the U.S., just like Uber did for cars. Free introductory rides are being offered as well as reasonable rates starting at $1 per half hour or one trip lasting up to one hour, with 50 percent discounts for students.

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The potential of the U.S. market has led other, smaller contenders to jump in, such as San Francisco-based Spin, which has rolled out to Seattle, Dallas and South San Francisco and is propped up by $8 million in funding by Grishin Robotics and several early stage technology investors.

LimeBike's CEO Sun said he welcomes the entry of competitors to the U.S. because together they can help the new Chinese-style biking go mainstream. Sun said he was inspired to start LimeBike after observing the popularity of dockless bike-sharing in China.

He pointed out that LimeBikes have been customized for the U.S. market, with extra-sturdy, longer-lasting aluminum frames, three gears in most markets and up to 8 for hillier cities, solar panels for battery charging, flat-proof tires, and special reflector lights. LimeBike also differentiates its model with a monthly subscription pricing of $29.95 for 100 rides per month.

With the market so young, profits are secondary to fast expansion and critical mass among the bike-sharing rivals. Even so, LimeBike is close to breaking even in one market already, according to Sun.

In the United States, local and city governments require the bike operators to have a permit or license. Not all cities welcome the new model, and pilots are being carried out in several markets. In China the problems have included vandalism and theft of bikes, as well as bikes randomly strewn along crowded city streets and pedestrian paths. The bike-rental companies have turned to offering incentives such as free rides to cyclists who leave their bikes in proper spots.

— Rebecca Fannin, special to CNBC.com

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