China's bicycle rental sharing start-up Ofo has achieved the coveted unicorn status with its latest fund raising exercise that was led by the Russia's DST. Ofo raised $ 450 million in its Series D round of funding to hit a valuation of $1 billion.        

Ofo has been closely chased by its close rival Mobike in the fund raising exercise. The start-up company raised $300 million a month earlier and may very well become the second unicorn in this upcoming industry.  While Mobike may be currently second in the valuation game, it can certainly take a lot of pride for being the world's largest bicycle operator.   

Like Us on Facebook

Ofo and Mobike's fund raising frenzy makes us believe that the bicycle rental industry is heating up, but many analysts are still unconvinced about the long-term profitability of the entire industry. Analysts argue that start-up companies in this space are bound to struggle due to the wafer thin margin and the unpredictability surrounding the sustainable business model.     

To give an idea of how thin the profit margin is, Ofo and Mobike currently charge as less as 1 CNY ($0.15) per hour per bike to gain significant traction in the market. Clearly, both companies are busy in building a business scale through discounts and promotions. But most industry experts argue that this so called scale would be useless, unless companies have a proper model in place to bring continuous profit.  

"It's like a trophy to own a big sharing internet company in China," said Mark Tanner, founder of China Skinny, a Shanghai-based consultancy. "From a business point of view, it makes no sense."

Despite all the uncertainties, Ofo and Mobike have some really big investors backing their nascent business.  China's largest car riding company Didi Chuxing has invested a huge sum of money in Ofo, while Tencent is one of the high-profile investors in Mobike.

Other high-profile investors in these companies include Citic Private Equity, Matrix Partners Warburg Pincus, and Coatue Management.     

TagsOFO, mobike, Bicycle Rental Industry, china, Ofo China