Mobike and ofo: Dancing with Titans (A)

This case address pacing issues – how fast does a company need to scale? It also examines the role of investors in determining company strategy and exit.
Mobike and ofo were two dominant players in China’s emerging dockless bike-sharing market, that allowed users to unlock bikes using a mobile app, ride the bikes at any time to any place without having to tie them to a stationary dock, and pay on a per-ride basis. From 2016 to 2018, the industry raised billions of dollars in investor capital (including from China’s powerful strategic investors), supplied hundreds of cities with a total of more than 20 million bikes, and expanded aggressively into international markets.
However, oversupply and poor maintenance of bikes led to increasing public criticism and calls for government regulation. Low barriers to entry coupled with fierce competition through user subsidies made investors increasingly skeptical of the industry’s potential for profitability. The winter months from 2018-2019 created a significant decrease in user activity and caution on part of capital providers. Mobike and ofo’s founders (Hu Weiwei and Dai Wei) had to decide the future direction of their companies. Was it time to pursue a merger and put an end to unsustainable competition on user subsidies? Should they sell their companies to strategic players and become part of a larger technology ecosystem? Alternatively, was there a way to remain independent and retain control in an age dominated by incumbent technology titans?