China Center Quick Note: What's Powering this Ride?

Amidst a flurry of new e-commerce offerings in China today, one of the hottest business stories is undoubtedly bike sharing. Every commercial sidewalk corner across China now seems to be lined with a rainbow of inelegant but durable-looking bicycles featuring some form of locking device and a QR code. In the short two-year history of the sector, tens of millions of users have been added each year, and, of course, company estimates are that growth will only accelerate. Bikes are being produced for the bike-share companies at such a clip that traditional part makers are unable to keep up. Valuations of the market share leaders in the business are soaring through seemingly regularly scheduled rounds of new investment. Market leaders Mobike and Ofo are said by their founders to be worth between US$2B and US$3B. Ofo was valued at less than US$10 million at the end of January 2016, so it has soared over twentyfold in just 18 months.

But is the business model sustainable? And what does the explosive rise of bike sharing tell us about the current investment ecosystem?