In what is so far the biggest and most dramatic implosion yet in the new global free-floating bike share boom, China-based Bluegogo has reportedly gone bankrupt with big bills, staff salaries and user deposits still outstanding.
Bluegogo was one of the first companies to try to operate in Seattle. They even got as far as bringing a bike to town, which Seattle Bike Blog had a chance to ride around downtown in May. The company planned 3,000 bikes for Seattle, but then abandoned its U.S. expansion plans before ever launching.
The company has barely been operating for a year, but in that time it raised about $90 million in funding and deployed 700,000 bikes across China before abruptly closing shop, the Guardian reports:
But as reports emerged Bluegogo was in trouble, Chinese social media erupted with users complaining they were unable to get their deposits back, and rumours that [CEO Li Gang] had fled the country.
Bluegogo claimed it had 20m users across China at its height in an open letter written by Li this week. That would mean the company at one point had at least 1.98bn yuan (£226m) in deposits, although it is unclear how much the company is currently holding.
Rumors have also spread on Chinese social media saying Li had left China, prompting him to post on his profile: “I have always been in the country, fighting on the front lines for redemption”.
The company’s operations will be taken over by another bike sharing startup, Li said in the letter. Visits by Chinese journalists to Bluegogo’s offices found the doors locked and office space abandoned.
Perhaps the wildest part of the story has to do with a promo campaign the company launched around the anniversary of the Tiananmen Square Massacre. It didn’t go well:
In the open letter, Li said the company’s problems began in June, “first with an advertising accident that affected a large investment and possible acquisition”.
The ad campaign ran over 4 June replaced the icons for some bikes with tanks, with users encouraged to take those bike to win prizes. The promotion coincided with the 28th anniversary of the 1989 Tiananmen Square massacre, when Chinese soldiers killed thousands in an effort to suppress democracy protests, and tanks rolled through the streets of Beijing.
But tank promos aside, the dramatic collapse of what was once the third-largest private bike share company in China (behind Mobike and ofo) is sure to send waves through an industry that has been growing at amazing speed, fueled by an enormous amount of investment capital. The state of bike share in Chinese cities is far, far ahead of Seattle and the U.S. in terms of bikes in action and the number of companies competing.
Li said in his open letter that Bluegogo had been sold to Green Bike-Transit, according to Technode. So is this an outlier case of egregious mismanagement or the start of what would seem to be an inevitable period of consolidation within the bike share industry in China? Or worse, is it a warning sign of much worse problems yet to come as a bike share bubble bursts? And what effect will any of this have on operations and expansions on this side of the Pacific?
Learning from what happens in China is vital for companies trying to establish successful services here. One good bit of news for Seattle bike share users is that none of the companies operating here require a deposit to access their bikes. That’s an important consumer protection, and Bluegogo users are a perfect example of why. I hope as more details emerge, there are more lessons for other companies.