Mobike and Ofo are both involved in corruption rumors. Are they playing the game of sharing bikes or sharing money?

“The bike-sharing pill!”

“So this is shared money.”

On the same day, the shared bicycle "comrades" ofo and Mobike were both exposed in corruption scandals.

In this regard, ofo and Mobike successively issued statements.

Interestingly, both companies stated that this was fake news.

Regarding the corruption rumors, Ant Financial, one of ofo's investors, told the International Financial News reporter that it "has no comment."

"These are just leaks and there is no factual proof that they are true. We suggest contacting the relevant companies directly." This was the response from an investment institution of Mobike.

Regarding Mobike's statement, Liu Yiran, partner of Yuanjing Capital and investor of ofo, told the International Financial News reporter, "We support the company's approach. A company that grows rapidly will always have various problems to overcome. But it is not enough to rely on self-awareness and sentiment alone. It must be supported by a sound system."

Money, burning non-stop

Although both ofo and Mobike have denied allegations of corruption, one fact is that these two companies have been burning a lot of money recently.

It is understood that ofo has currently raised more than US$650 million (approximately RMB 4.478 billion) in financing, with a valuation of US$2 billion (approximately RMB 13.776 billion). Mobike is not far behind, having raised more than US$600 million from investors including Tencent, Foxconn, Ctrip, and Sequoia Capital.

With so much capital invested, where did ofo and Mobike spend the money?

As it is not a listed company, the financial information of shared bicycle companies is not made public. When interviewed by the reporter of the International Financial News, Mobike did not give a direct answer to this question.

A relevant person in charge of ofo said that the funds will mainly be used to expand vehicle coverage, which is expected to cover 200 cities across the country and 20 countries overseas this year.

Let’s do some calculations.

On April 22, Mobike announced that it had put more than 3.65 million smart shared bikes into service, with a daily production capacity of more than 100,000 bikes. If the revelations on Zhihu are true, then the amount of corruption involved in Mobike's 3.65 million bikes would reach 360 million! And the revelations involved Mobike's core management.

Ofo said that it has currently put nearly 5 million bicycles on the market.

Industry insiders said that the high damage rate of shared bicycles can easily become a breeding ground for corruption.

A legal expert believes that if there is serious corruption, it is likely that the investors have not done a good job of supervision and have not participated in management.

A venture capitalist said that Mobike and ofo have basically brought on board all the domestic first-tier funds. It is impossible for these investors not to do the math and take precautions. There should be clear provisions on the use of funds when signing the investment agreement.

The aftermath of crazy expansion

An industry insider told the International Financial News reporter that he believed internal corruption existed, and that the hotbed of corruption was the "bad debts" of shared bicycles and the aftermath of the shared bicycle companies' aggressive expansion.

According to a previous survey by Penguin Intelligence, the proportion of ofo and Mobike users reporting vehicle failures was 39.3% and 26.2% respectively (some users believe that this number is too low, and the damage rate of shared bicycles is enough to rejuvenate bicycle manufacturers).

The popularity of shared bikes soared almost overnight. The two companies fought fiercely for the market, neither giving in. They raised rounds of financing, and the bikes were constantly upgraded. The popularity of shared bikes soared almost overnight. The two companies fought fiercely for the market, neither giving in. They raised rounds of financing, and the bikes were constantly upgraded.

Dai Wei, CEO of ofo, told the media that as the company grew bigger, the pace was very stressful, and all departments and systems were rushed to build. "Today I thought the bikes were ready for production, but two days later I discovered there was no risk control or quality inspection."

Industry insiders questioned how efficient the risk control department would be if it was built in such a hurry. With such rapid expansion and market competition, is it really difficult for Ofo and Mobike to keep internal management and risk control in good order?

Legal consequences

"Assuming this situation exists, investors have two choices: one is to ask for damages as agreed in the investment agreement, and the other is to call the police and arrest the people if they have squandered all the money." Xu Feng, a lawyer at Shanghai Huarong Law Firm, told the International Financial News reporter that if the revelations are true, they may be suspected of crimes such as bribery of non-state officials.

"If the relevant personnel constitute a crime, they should bear corresponding criminal responsibility according to the law." Another lawyer who declined to be named said that if personnel of a company, enterprise or other unit use their position to illegally take the property of the unit for their own use, if the amount is large, they shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention; if the amount is huge, they shall be sentenced to fixed-term imprisonment of not less than five years, and confiscation of property may also be imposed.

According to the revelations, the people involved in corruption at ofo and Mobike are the entire companies from grassroots to senior management, and even the founders are involved (Hu Weiwei is the founder and president of Mobike, Wang Xiaofeng is the co-founder and CEO, and Xia Yiping is the co-founder and CTO. The three are the top management of Mobike). If they are really involved in the corruption scandal, then where will the companies and the industry go?

Nothing to do?

An investor said that companies generally dismiss corrupt executives and grassroots employees, but when it comes to founders, it is more awkward and most cases are left unresolved. Without the founder, the business cannot be operated, and investors cannot run the business on their behalf.

In fact, many investors have been cheated by entrepreneurs. The failure rate of entrepreneurship itself is high, so we are mentally prepared.

"Venture capital requires extraordinary vision." Zhang Jie, chairman and CEO of Baojie Holding Group, also said that corruption is one of the risks.

An e-commerce analyst revealed to the reporter of the International Financial News that corruption is actually not uncommon in e-commerce companies. Even if there is corruption in ofo, Mobike and others, it would not be more exaggerated. There is no need to criticize them without confirming the source of the information.

An institution involved in ofo's investment said that it was just a rumor on the website and could not be used as proof. They were willing to give entrepreneurs more time and opportunities.

Another bicycle user also said that everyone now knows that the funding sources of Mobike and ofo are not only from investors, but also from user deposits... He has already withdrawn them.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.