Ofo Burns $2 Billion in VC, Leaves 15 Million Users Waiting for Deposit Refunds
What happened
Ofo deployed 10 million dockless bikes across 250 cities in 20 countries, backed by $2.2 billion from Alibaba, DST Global, and Sequoia Capital China. By late 2018 it could not pay suppliers, bikes were piling up in graveyards of bent metal, and the deposit refund queue exceeded 15 million users. The company had burned through its capital competing with Mobike in a subsidy war that neither could sustain.[1]
What went wrong
Dockless bike-sharing unit economics collapse in competitive markets: bikes last roughly one year under heavy use; theft and vandalism are unrecoverable losses; competing operators in the same cities subsidise rides below cost simultaneously. User deposits — collected from tens of millions of customers — were used as working capital rather than held in trust. When Alibaba attempted to acquire Ofo to consolidate with its own bike investment, founder Dai Wei refused to sell, prioritising founder control over a rescue merger. That decision burned remaining capital without producing profitability.[1]
Lesson learned
Hardware-intensive sharing businesses funded by VC are extremely sensitive to competitive dynamics. Customer deposits are liabilities, not revenue — treating them as working capital is legally and practically dangerous. Founder control clauses that allow a CEO to refuse a rescue acquisition can convert a difficult situation into a total collapse.