KEY TAKEAWAYS
  • Bike sharing businesses are competing for geographical expansion in a growing market characterized by urbanization and congestion.
  • Recent shifts in the bike sharing experience, such as the move from docked to deckles bikes and motorization, suggest we may have not yet seen the final product.
  • Bike sharing is data sharing. Opportunities for bike-linked data to solve internal problems (such as optimal bike allocation) and find new partnerships and applications still abound.

The extraordinary growth of bike-sharing operators, especially Chinese and U.S. firms, has been fueled by a wall of venture capital (see table below) investment. The top companies have reached unicorn valuations and have attracted the interest of strategic acquirers. M&A has been particularly frenzied in China with Ofo and Mobike being acquired by large financial conglomerates. Uber and Lyft have also entered the space through acquisition of some large U.S. operators. Uber acquired Jump for $200 million and Lyft took over Motivate for about $250 million.

Most companies claim to be able to break even on the cost of the bikes within a few months. None of the companies are profitable since they are ploughing all their capital into global expansion – a land grab while the market is nascent. However, it seems that on an operating basis, the most profitable segment may be e-scooters because they can command higher prices such as $20 per day in California. Pricing on docked city schemes tends to be about $2 to $4 per ride to cover the cost of the docking stations. Dockless bikes appear to be operating on the thinnest margins due to much lower pricing driven by intense competition.

What makes this market exciting, however, is that most of the upside is yet to be realized. Even the top companies have barely monetized their customer eyeballs with digital advertising and promotions, layers of digitally-enabled gig businesses, not to mention the value of the data the bikes could eventually render.

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