The “dockless” bike sharing start-up OFO recently made the largest single round of financing in China’s bicycle-sharing industry, navigating regulatory risks associated with its innovative business model, according to legal counsel involved.
“Bike sharing is a new business innovation that originated in China,” Rocky Lee, an international partner and head of US corporate practice at King & Wood Mallesons, told China Business Law Journal. “While there have been ample examples of docked shared bikes around the world in major metropolitan cities – Beijing has its own docked bike sharing programme – China is the first to come up with the innovation of a ‘dockless’ bike sharing business.”
OFO, based in Beijing, is reportedly the world’s earliest start-up of its kind. In its recent series D round of preferred equity financing, the company raised approximately US$450 million, with the largest investment from DST, followed by a number of other renowned PRC and overseas institutions, including Didi, CITIC Private Equity Funds, Atomico, Macrolink Group and Coatue Management.
“There are indeed regulatory and legal risks associated with dockless shared bikes because it is a new business model,” said Lee. “There is the issue of urban and municipal order (avoiding excessive bikes lining up sidewalks) and there is the issue of people not caring for the bikes and leaving the bikes in a disorderly state because there is no sense of personal ownership of the shared bikes. However, none of the issues are any more complicated or challenging than those facing taxi/ride sharing.”
Lee expected the business to develop rapidly to complement existing urban transportation infrastructures. “What is most interesting about this business innovation is that China is the first mover and other countries are following China’s innovative lead,” he said.
For example, “the LimeBike in Northern California, recently invested in by Andreessen Horowitz, is essentially a local US business looking to replicate the same business model invented in China with incremental improvements to address the local market needs”, added Lee.
King & Wood Mallesons acted for Coatue, with a team led by Rocky Lee. Other law firms involved in this round of financing included Han Kun Law Offices, Goodwin Procter, Fangda Partners, and Travers Thorp Alberga.