Chapter 53: OFO Shared Bikes “Hello, Professor Liang. My name is Lu Liang, from Tianxing Investments...” At the expo’s management office, Lu Liang introduced himself and inquired about the entrepreneurial team behind the yellow bikes. Following Lu Liang’s gaze, Liang Juntao suddenly understood. “Mr. Lu, that’s OFO, a shared bike startup team from Peking University. They’re participating in our entrepreneurship expo, but their slot is scheduled for tomorrow.” This year, the expo had been extended to two days due to an overwhelming number of applications, with teams split across two sessions. “Are you interested in their project, Mr. Lu? We could arrange an introduction for you,” Liang offered. OFO’s founder came from a distinguished background, and Liang had received instructions from his superiors to pay special attention to their team and connect them with potential investors. It was a rare opportunity to earn goodwill effortlessly. While Liang hadn’t heard of Tianxing Investments, the gold-trimmed invitation Lu Liang carried signified high status. “How will you address the issue of high loss rates if OFO expands beyond campus?” Lu Liang’s tone sharpened. “Your current loss rate of 1.7% is only because your bikes are restricted to Peking and Tsinghua, where students and faculty are highly disciplined. Outside, this would be a very different story, wouldn’t it?”   Ŕ𝘼𝐍ỒＢƐ𝘴 Dai’s smile stiffened. “We’ve considered this issue seriously. We plan to mitigate risks by collecting deposits from users.” Dai glanced nervously at Liang Juntao, who had assured him earlier that Lu Liang seemed easygoing. Why the sudden turn? Liang remained silent, observing quietly. Investors, after all, could be demanding, and their satisfaction was essential for securing funding. Lu Liang’s probing might also be a test of Dai’s resilience, a common tactic to gauge compatibility. “And how much will you charge as a deposit?” Lu Liang pressed on. “99 yuan,” Dai answered. “Less than a third of a bike’s cost,” Lu Liang remarked nonchalantly before asking, “What will convince users to trust you with their 99 yuan?” Dai hesitated before replying, “We’ll focus on building a larger market and promoting our brand to earn customer trust.” Lu Liang chuckled. “Your valuation is 5 million yuan, and you’re seeking 500,000 yuan in funding. How much of the market can you possibly capture with that?” With each bike costing 330 yuan, even without factoring in operational costs, 500,000 yuan would only purchase 1,515 bikes—enough to deploy at just five more universities before running out of funds. Dai and his team exchanged uneasy glances, bitterness evident in their expressions. This issue wasn’t new to them but was something they avoided examining too closely. With a production cost of 330 yuan per bike and a revenue model charging 0.5 yuan per hour, profitability remained an elusive goal. Sensing the right moment, Lu Liang shifted gears. “Your concept is sound,” he said with a faint smile. “But your execution lacks precision, and your project’s initial positioning is flawed.” “Mr. Lu, could you elaborate?” Dai asked, clearly upset but eager to hear Lu Liang’s insights. “The idea of shared bikes dates back to 1965 in Amsterdam with a government-led free bicycle system...” Lu Liang had just researched the history of shared bikes, which had evolved through four generations. In his view, OFO was less an internet product and more a financial one. Its success hinged on significant upfront investment, far beyond what a few investors could cover. However, if positioned as a financial derivative, the project had vast potential. Financial products allowed for leverage, with the extent of leverage depending on how big the vision could be sold. “In time, if daily national usage exceeds 100 million rides, net earnings could reach 50 million yuan a day,” Lu Liang explained. “And if you’re the only player in the market, pricing could rise to 1 or even 2 yuan per ride, yielding daily revenues of 100 million or 200 million yuan.” Lu Liang painted a grand vision, captivating Dai and his team, who began envisioning this prosperous future. But just as they were lost in the dream, Lu Liang punctured it with a cold dose of reality. “But your project has a fatal flaw,” he said bluntly.