The best success stories often begin with failures. What we see are the hefty funding rounds, skyrocketing valuations; what we overlook are the embarrassing first efforts, setbacks and radical change of directions. Ofo, the first company bike rental company to gain unicorn status in the emerging sector, meets nearly every definition we have for a successful startup now. However, they too had their own growing pains.
Dai Wei, the 26-year-old CEO and co-founder of ofo, shared at the MTA Festival a few of their first clumsy steps on its road to success as well as the lessons he learned from those first failures.
Ofo started as a student project by alumnus of China’s prestigious Peking University. Sharing a common passion for cycling, Dai Wei and fellow students decided to found their own project in 2014. But how to achieve this goal was not clear
The now-household name “ofo” was born on February 15, 2014 when Dai was working as a volunteer teacher at Qinghai Province. The team thought of several options and finally named the firm ofo as the letters look like a bike. (Finally, we understand why the company’s name is all in lowercase).
Having a good name in place is a good beginning, but for the one year and seven months after that, ofo’s team suffered the growing pains that most startups have encountered in pushing past the initial launch. In retrospect, bike rental was the right path to take, but entrepreneurship is not only about finding the right road but also the right direction.
1. Ele.me for bikes
2014 saw the online food delivery industry take off. Based on Ele.me’s model, ofo’s founding team developed a platform where bike stores can rent out their bikes to travelers. “It was a total failure. Not a single order was received in five months,” Dai said.
2. Second-hand bike trading for students
The startup’s second try was a second-hand bike-trading platform targeting university students. This direction didn’t gain much traction either.
3. Microloan platform for higher-end bikes
In the wake of the surge in student microloan sites like Fenqile and Qufenqi, ofo shifted to micro-loan platform for higher-end bikes and scooters. “We sold out a dozen bikes, but six of them were purchased by our friends,” Dai recalled. Fortunately, Peking University alumni injected around RMB1.5 million funding gradually, which gains them enough time to try out new directions.
4. Buying users
“We seemingly found a possible exploration point in cycle tourism at the beginning of 2015. The whole online tourism industry was taking off, backed by a whopping RMB 3 trillion market size. We thought it was a trend we can capitalize on,” Dai said. This direction witnessed an uptake, allowing the company to book profits for the first time.
“When we had RMB 1 million in our account, we made a terrible mistake. When the subsidy war in the ride-hailing industry was getting started, we decided to buy customers by burning money,” he said. Ofo managed to record remarkable user growth at first, but their model failed to gain further support from VCs and the money they have soon burned out.
In April 2015, the team only had RMB 400 in their account. The impasse forced ofo to rethink what’s the key problem that leads to previous failures. “We found that all our previous efforts want to link bicycle with some hot market and overlooked whether the product is addressing real pain points of the users,” said Dai. “Then we tried to solve the bike theft problem of college students by offering shared bikes.”
Everyone knows the story that follows this shift. In around two years, ofo has grown into a leading bike-rental company, which operates in nearly 100 cities globally. The company is rising at a dizzying speed with valuation that has hit more than US$2 billion.
Lesssons to remember
Few entrepreneurs can go against the trend and resist the temptation to follow the herd into an emerging hot market. However, those who resist this pressure and reflect deeply on whether their product fits the market are most likely to succeed.