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Bicycle-sharing startups pedal into India on a wing and a prayer

A mit Gupta co-founded India’s first unicorn InMobi in 2006. A Kanpur boy at heart, he admitted he was ruffled when the city he grew up in topped the WHO’s list of world’s most polluted cities in June. Gupta launched the bicycle-sharing company Yulu in Bengaluru in November 2017 and is doing his bit to “indirectly limit the pollution level”.

Yulu charges users Rs 10 for the first half-an-hour and Rs 5 for every 30 minutes after that. Yulu riders can end the trip using the app and park the bicycle at one of the 500 parking zones closest to their destination.

Companies such as Yulu, Pedl (by Zoomcar), Mobycy, Bounce and Mobike (Chinese company acquired by Meituan Dianping) are the major first movers in the USD 1.2 billion bicycle-sharing industry in India.

“There is momentum and interest in the sector. As evidenced by the success of Ola and Uber, transportation and mobile phone has gelled well,” said Sajith Pai, director at Blume Ventures.

Scooter-sharing company Bounce is the most recent entrant in the sector after acquiring the India assets of Alibaba-backed ofo (the Beijing-based bicycle-sharing company shut shop in India in June). The company did not reveal the deal size or the number of bicycles it acquired from ofo. Bounce has been piloting in Bengaluru with 500 electric bicycles even before the acquisition.

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“Last mile transportation from the bus stand or the metro station to office or home is a pain as neither rickshaws nor cabs want to go for such short distances,” Vivekananda HR, co-founder of Bounce, said.

“The bicycles we acquired from ofo will leverage our ongoing pilot,” he said. Bounce app will have electric and non-electric options in the next 45-60 days, he added.

In Pune and Bengaluru, blue (Yulu) and green (Pedl) bicycles have become a common sighting. Yulu has set up designated zones to park the cycles after the initial ‘park-anywhere’ model became a huge traffic and logistical issue. The users would literally park anywhere- in the middle of the road, obstructing pathways etc- and Yulu had to send teams to collect the bicycles and deal with the parking ‘troubles’. In China and San Francisco, a similar strategy resulted in streets, bicycle lanes and footways getting clogged up. Indian companies have learnt their lesson and locked into the designated parking model.

The experience of using the bicycle-sharing service is not smooth

User experience

The experience of using the bicycle-sharing service is not as smooth as the companies’ project. Yulu and Pedl have their fair share of hassles including broken brakes, faulty locks, missing bell and flat tyres. More often than not, the parking zones are far from the destination. The reporter came to the conclusion after using both services over the last three months and also sounding out other users.

Vivek Kumar, 22, is a software professional from Delhi. He moved to Bengaluru recently and has been using the bicycle-sharing service to travel in and around the city to scout for jobs. He faced a snag when he realised the chain of the cycle he picked up from a random location was broken. The app wouldn’t allow him to book a new cycle unless he parks it in the designated zone.

“I had to drag the cycle half kilometer to the nearest Pedl station. Even then it took me a while to lock the cycle,” Kumar said.

Both Yulu and Pedl have on-ground teams who do once-overs once in four days to keep the bicycles in good condition. Gupta said hiccups occur when the company starts services in a new location, “as the rhythm is still not set.”

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“You will find our bicycles in good condition in old clusters. Most of them would be running just fine. We launched recently in Electronic city, which has big IT companies such as Infosys, Wipro, etc. It will take four to six weeks to settle in,” Gupta said.

India is a country with next to nothing bicycle lanes. Add to that the status problem of bicycle being seen as a poor man’s mode of transportation, and the companies have their tasks cut out.

“We got into bike sharing in the quest to become a multi-modal transport company. Urban mobility has been a challenge for government as well as citizens and we want to solve that at a large scale and aid public infrastructure,” said Rakshak N, head of operations and growth at Pedl.

While Gupta claims to have 6,000 bicycles in four cities, Rakshak said Pedl has 15,000 bicycles spread across eight cities. Lately, Yulu was launched in Mumbai and Bhubaneswar. Both companies get an average of four to five rides per bicycle every day.

Infographic by Sujith Sukumar/The Passage
Infographic by Sujith Sukumar/The Passage

Public-private partnership

On November 26, Orissa Chief Minister Naveen Patnaik inaugurated MO Cycles to encourage city dwellers to use bicycles in Bhubaneswar. Orissa government has partnered with Yulu, Yaana and Hexi to put 2,000 bicycles on road.

The initiative is part of the Public Bicycle Sharing (PBS) system launched last year in cities such as Mysuru, Pune and Chandigarh to build infrastructure including GPS enabled docks and cycling tracks.

A few investors who The Passage spoke to think, once the initial momentum slows down, elements like infrastructure, cycle condition, parking and revenue models would decide the fate of these startups.

Gupta, who has been to China umpteen times over the past decade or so, said although China had dedicated bicycle lanes in many cities, cycles were not a common sight in Chinese roads until the arrival of ofo and Mobike.

“In India, road conditions are a deterrent but not a show stopper. No doubt we want the infrastructure to be rock solid. But then again, we don’t want it to be an excuse for us to not get started. The government will build infrastructure when it sees some real demand,” Gupta said.

Rakshak and Gupta said they continuously work with local government bodies to make PBS system a seamless reality.

“Local government bodies are actively seeking our inputs in terms of customer feedback, user base etc. Although, penetration is high, it is not at the level us or the government expected. The government is interested in getting the infrastructure up. But it will take time, given the bureaucratic delays in India,” Rakshak said.

Karnataka’s ‘Trin Trin’ bicycle-sharing service under PBS is delayed in Bengaluru as the funds to create a 125-kilometre dedicated bicycle track are held up.

“I don’t think cycling works well beyond 500 meters as a mode of transportation. Bengaluru has the best climate in the country. In cities like Mumbai or Delhi, you will struggle to ride cycle even for 15 minutes,” said Rahul Chowdhri, investment professional at Stellaris Venture Partners, which has invested in scooter-sharing company, Vogo.

Vivekananda of Bounce echoes similar sentiment.

“It boils down to use case in different cities. Only time will tell how big this business can be for us. We still think scooters will have a larger market share,” he said.

Many bicycle-sharing companies offer services in cities with high tourist footfall like Varanasi apart from partnering with the local authorities in the ‘smart cities’.

Bicycle business is capital intensive

Revenue model

B icycle-sharing business is an investment heavy business. Yulu and Pedl said each bicycle cost them Rs 10,000 and Rs 13,000 respectively. Yulu has 10,000 bicycles (6,000 on road), while Pedl has 15,000.

Vandalism is also a dilemma. “Generally, when we launch in a new locality, we send our old bicycles so even if it gets broken, we don’t lose much. It’s a business strategy,” Gupta revealed.

The revenue model of bicycle-sharing companies is not airtight.

“The challenge here is, we can’t raise debt for these assets. It is a capital-intensive business. If you look at Pedl as a standalone business, the break-even might be sometime away. Since we are a multi-modal service company, we want to leverage one user for another business,” said Rakshak.

“We will push our other products like self-drive cars and Zap subscription to Pedl users at a later point,” Rakshak said.

Along the same lines, Meituan Dianping, which acquired Mobike in April, intends to take advantage of the bike sharing service to boost its core businesses such as food delivery and hotel booking.

However, the IPO documents show Mobike’s deficit at USD 58.6 million in April alone. One of the reasons bicycle-sharing companies (once seen as a sunshine sector) went sideways in China, is due to the amount of money the startups poured in without having a rock-solid revenue model to boot.

Gupta said advertisement can be a steady source of revenue and the proposal is already on the table.

“We will advertise on bicycles, mobile app and parking zones,” Gupta said. He said he is already in talks with advertisers and the deals could materialise next fiscal year once the user base reaches “critical mass”.

According to a Forbes India report, China’s vice-minister of the ministry of transportation, Liu Xiaoming, said over 20 out of 77 bike-sharing start-ups drew shutters in China by February this year. Grab Cycle and oBike shut shop in Singapore in November.

Be that as it may, Hellobike CEO Yang Lei in October said they broke even in more than 100 cities. The company is backed by Alipay.

Money rolling in

Yulu, incubated in InMobi office in Bengaluru, has raised an undisclosed funding from a clutch of investors such as Blume Ventures, WaveMaker Singapore, 3one4 Capital, Incubate Fund, AET Fund Japan and Tracxn Labs. It has also received funding from Flipkart co-founder Binny Bansal and Amit Singhal, former VP at Google.

Bounce has raised a total of USD15.2 million from Sequoia India, Accel Partners, InnoVen Capital and Omidyar Network.

Gurugram-based Mobycy raised seed funding of USD 500,000 in December last year and an undisclosed angel funding from an incubation platform Venture Catalysts in November this year.

“The value of solving the last mile transportation is huge. How we earn money is something only time can tell,” he added.

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(Avanish Tiwary is a Bangalore-based tech journalist. He focuses on emerging Indian startups and unicorns. He can be reached at avanish.tiwary@thepassage.cc. Mengjuan Li, an intern at The Passage contributed to this story.)