The Future of Bike Sharing with Ofo Cofounder Yanqi Zhang and Anu Hariharan

by Y Combinator11/17/2017

Yanqi Zhang is a cofounder and COO of Ofo.

Anu Hariharan is a Partner at YC.



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Transcript

Craig Cannon [00:00] – Hey, this is Craig Cannon and you’re listening to Y Combinator’s podcast. Today’s episode is with Yanqi Zhang and Anu Hariharan. Yanqi is the co-founder and COO of Ofo, and Anu is a partner here at YC. So before we get going, if you haven’t yet reviewed the show wherever you get your podcast, it would be awesome if you did. Alright, here we go.

Anu Hariharan [00:21] – Hi, I’m Anu Hariharan, a parter at YC, and thank you Yanqi for being here with us for our global growth event, and for doing this interview with us. Yanqi is the co-founder and COO of Ofo. Can you describe what Ofo is for our audience?

Yanqi Zhang [00:41] – Absolutely. First of all Anu, thanks very much for having us. I’m very excited to be here, to share our story. Ofo is the first smart station-free bike sharing program in the world. What we do is that we provide station-free bikes and for people to use to unlock with their smartphones. It’s very easy, accessible, it’s very green, and it’s a very smart way of getting around the city, especially for the last mile.

Anu Hariharan [01:06] – Great, can you talk about the scale as well? How many cities are you in, how many trips do you cover?

Yanqi Zhang [01:10] – Yeah, absolutely. As of today, we are in 180 cities. We are doing over 25,000,000 trips a day, and we have deployed over 10,000,000 bikes already, and we’re in right now, globally, 13 countries. The goal here is that by the end of this year, we are going to go to at least 20 countries.

Anu Hariharan [01:28] – That’s phenomenal. It’s truly unique for a Chinese company to really go international this fast. Now before I touch onto how you did the international expansion, I wanted to hear your story on year one. What was the motivation to launch Ofo, and how did you guys go about doing that?

Yanqi Zhang [01:47] – Basically the company was founded by a group of passionate cyclists. It was founded in university, when we were in university, so the very natural thing is that you have your bike in the university, but I think this is probably something everybody has experienced, is that your bike being stolen.

Anu Hariharan [02:06] – A lot in San Francisco, actually. Unfortunately.

Yanqi Zhang [02:10] – Yeah, so our founder himself, like he lost four bikes during his university period of time. We came up with this idea of what if we have a shared bike system, people don’t need to worry about bike being stolen, be like when you go at a station, there’s still like 1.5 miles to go, but you don’t have any transportation methods, you have to walk or something like that. What if we could solve that problem? That’s where the idea came about. This kind of last mile commuting problem is, we feel that in China, but right now we know it’s actually universal, it’s everywhere. Right, there is not a, before us, there is not a very good solution for that, right. So yeah, that’s where we came from, and very natural, like any other startup in the world, we came up from wanting to solve a very simple pinpoint of people’s regular daily life. We started in 2014 in university, right.

Anu Hariharan [03:13] – Which university was it?

Yanqi Zhang [03:14] – Beijing University.

Anu Hariharan [03:15] – Okay.

Yanqi Zhang [03:16] – Yeah, so that’s basically where the founding team studied, so basically we started from there and we spent some time to expand to 200 universities at the beginning. And starting from 2016, end of 2016, we expanded to the cities. In the city markets, because we had the experience of running operations and all the systems, like within the university, so in the city, it’s a different scenario, but there are a lot of things we can borrow, so we scaled really quickly. We spent eight months to expand to over 170 cities.

Anu Hariharan [03:53] – Oh wow.

Yanqi Zhang [03:54] – And tried to also include some international cities, right now mainly in China. And the trips grew from, at the beginning it was 200,000 trips last year. Right now it’s over 25,000,000, so there’s a big growth there.

Anu Hariharan [04:06] – Yeah.

Yanqi Zhang [04:07] – Yeah, so that’s sort of like our story and our trajectory.

Anu Hariharan [04:10] – Yeah, so I’m also, I wanted to go back a little bit on the first year when you launched at the university. How did you launch? Did you make your own bikes? Because you obviously wanted to move from dockless stations to something that people could access anywhere, so how did you, what was the supply in the first year?

Yanqi Zhang [04:25] – Yeah, so it’s very interesting because, at the beginning, the idea was to use like what we call the 100% sharing model, it’s like we use the existing bike as a supply source. In China, China is called the king of bicycles. We have a lot of bicycles.

Anu Hariharan [04:44] – Yeah.

Yanqi Zhang [04:45] – When we started the business, we looked at the statistics, the annual sales of bike and the existing stock of bike. Actually in China, we have 400,000,000 bikes, so it’s very natural thoughts, what if we activate that existing supply, right?

Anu Hariharan [04:56] – Just like Uber or Didi.

Yanqi Zhang [04:57] – Yeah, like this huge amount out there, so that’s what we did at the beginning. Basically what we do is that we go out there and telling people through different channels, we’re doing this shared bike program, and everybody is welcome to donate their bike to our system. We start something like, we call it, exchange 1 for N, which means like you donate your bike, and then you have access to all the Ofo bikes in the system. Right, so we thought that people would love it, and a lot of bikes would be donated, but what actually happened is that, it’s a very new idea, first of all, and second is that, not actually many people are willing to give up their personal possessions, like share. In the beginning it’s hard for people to quite understand that idea, so at the beginning, the supply growth was actually quite slow. Like, every day, I think we collect 30, 40 bikes, that’s a number. At the same time, the demand actually grew very fast. Like, when we went to put the first batch of bike on the street, at the university, people just love it, explosive, like people talk about it, different forums, everything, people love it. Only thing is that people complain is that they cannot find the bikes. The people like, they saw people, students, riding bikes, but they cannot get one for them, because there’s not enough bikes.

Anu Hariharan [06:13] – Right.

Yanqi Zhang [06:14] – That was the moment really we started to think the supply growth is very bottoming for us, so how do we solve this? So I think back in 2015, we came up with this idea of going to the largest manufacturers in China, which is in Tianjin, which is a city very close to Beijing. That’s where most of the largest bike manufacturers are in China and in the world. So we go talk to them, basically we start to expand the idea of sharing, bike sharing, so it’s not just about sharing the existing stocks, but also about bringing the new bikes that the manufacturers plan to sell to the individual buyers to our platform to be shared by people. On average, our bikes are 20 times more efficient than the private bike. On our platform, on average, one bike serves over 20 users, compared to a private bike, which serve one people, right. We came up with this idea, and we approached them, and then we start to have a small trial in the beginning, because we do not have much funding in the beginning, so we buy some bikes and then we put it in the university, and while, also, when you have your own suppliers, it’s very easy to control the qualities and also the colors, and the bike itself. Right, so we have 100% control of your supply, and that’s when what we call the small yellow bike was born. We have that, back then, it’s like, we have the bikes, and we paint the bike, and it’s not very good, so when we have our own supply,

Anu Hariharan [07:46] – Oh so you painted the existing bikes.

Yanqi Zhang [07:48] – Yeah.

Anu Hariharan [07:48] – So back then

Yanqi Zhang [07:49] – Which you were sourcing from others.

Anu Hariharan [07:51] – We don’t paint, we just use the bike and add our lock, so when you walk in university, you see our lock, that means that’s Ofo bike. So it’s not very easy to identify sometimes, and also they’re different bike types, does not look very identical. Basically the new model works better, so that’s the solution we find to scale our supply, and it works out pretty well. And very quickly we expand to ten universities, 50 universities, and we spent a year to expand to 200 universities, which is quite a lot.

Yanqi Zhang [08:23] – Yeah.

Anu Hariharan [08:24] – In China, 100% bike share, profitable, and people love it, students love it, and that’s how our story begins.

Yanqi Zhang [08:33] – You expanded to 200 universities by the end of first year?

Anu Hariharan [08:36] – Yeah, but then so basically we started while, gradually picking up, we started in 2015 with this new model of purchasing the bikes, and we spent a year from 2015 to 2016 and we focusing on expanding to different universities, because universities, it’s a closed area. In China, most universities have the walls, so it’s sort of like a natural closed area, where you don’t need to worry about bike being taken out of the university, because we hire people, our staff, like at the gate, like people cannot go out.

Yanqi Zhang [09:16] – Got it.

Anu Hariharan [09:17] – They see the bike and then they block it, so it’s very easy, and also it’s a much simpler environment in terms of the user behavior. Students, where they live, where they go, the libraries, refectories, the gyms, the football fields, dorms, it’s very easy to do rebalancing. It’s very simple, I would say, the scenario. That one year actually gave us a lot of insights, a lot of practice about how to organize the operation, even back when we do not have a very smart system, we use like Excel sheets, we use like sometimes just write down the different universities. But that gave us a very good experience on how to manage a ground team. Right, so how many people we need, how many bikes? And how to maintain the bikes, and what bikes we need, because we see one bike is broken, and how do we do rebalancing? And how much time do we need, and what scenarios? Actually we have a lot of experience at being playbooked into our operation model in that year, which worked broadly for the city expansion.

Yanqi Zhang [10:25] – Yeah.

Anu Hariharan [10:26] – That’s one of the most important reasons why we can expand so fast, scale so fast, in the city. Because when you figure something out in a smaller scale

Yanqi Zhang [10:35] – Right.

Anu Hariharan [10:36] – So like a natural…

Yanqi Zhang [10:37] – Like a closed network

Anu Hariharan [10:37] – Business development

Yanqi Zhang [10:39] – Yeah

Anu Hariharan [10:39] – Yeah

Yanqi Zhang [10:40] – Like a trajectory, when you figure something out in a small environment, and then you gradually take it out, and also at the beginning when we do city expansion, we do not just go to like a lot of cities, we go to two districts in Beijing and Shanghai, and like we try to sort of have a managed expansion, and sort of say, okay this is how it feels like in the city and how people use it, this is like how we should use the rebalancing, because university, it’s very easy, we use certain type of vehicles to do the shifting and rebalancing and stuff, but in the city, it’s different, it has different regulations. So for example, in Beijing we can use this three-wheel electric vehicle to sort of move bikes, which is very efficient, but in a lot of southern cities in China, other cities, like Shenzhen and Guangzhou, these vehicles are banned, so we have to find different vehicles, sometimes we need to modify some of the small vans to do the rebalancing. All of these kind of challenges specifically in the city, we need to tackle.

Anu Hariharan [11:41] – It’s an interesting observation here, even though you’re very different from a social network, I think Facebook often talks about that. The learnings for them was the fact that they did a university and university roll-out first. They figured out Harvard and then Stanford, and then before they opened it up to the, basically to everyone, they had 80% penetration in universities in the U.S. And they talk about how they figured how to build the product such that there was high engagement in universities, so it’s a very interesting parallel. And so I wanted to ask you, when you were in 200 universities, how did you decide when to switch to the city, and what motivated you to switch to the city, and how did you think about, because as you said, for all the elements why the university is so different from city, how did you tackle that first city that you went to?

Yanqi Zhang [12:28] – There had been discussions of going to the city very early, right, so probably like from day one. I think there are a lot of conditions of going to the city, so we need a lot more bikes in the university, and the bike itself needed to be operated, because in the university we used simple bikes, regular bikes. In the city, probably we’d need to use bikes with gears, bikes with much more, a lot of anti-theft features being implemented which will increase the cost everything. We spent a lot of time first of all researching, developing the bikes that we need for the city and do test a very small area. We developed the bike for the city and we expand operationally to the universities, that’s what we do in the first year. And a certain point, we think that, first of all, we’re ready on the product side, and also we’re ready on the operations side, and third is also the market. In China, I think there are 2,000 universities, but the best ones are the top 10%, so we have a quite good coverage of the good quality universities, like which has the best, I would say, campus construction, and also the university, students’ quality and everything. In the U.S., you have all the Ivy League or the UC system, right, so when you have all that, we think that okay, next stage is probably like, we can go to the city. And also like in terms of the team. In the beginning, the company was created by, founded by, like a student project,

Yanqi Zhang [14:05] – but later we upgraded the team, and at a certain point, we have a city management, city operation management team set up, we think that’s the time because when we go to the city, we want to make sure that it’s a win. This is sort of a bet we take, so we did make sure we have the necessary resources, the necessary team and product ready before we go to the city. That was the moment last year, I think November, October, November, was the moment like we think, we’re ready.

Anu Hariharan [14:37] – Yeah, got it.

Yanqi Zhang [14:38] – We’ll start expanding.

Anu Hariharan [14:41] – Can you also talk about the playbook for each city? When you’re desiring to launch in a new city, what’s the first step? Is it hiring a city GM, is it putting up a wait list? Like, what is it?

Yanqi Zhang [14:51] – Yeah, so how do we launch cities, both domestically and internationally, is first, we do a research, we do like a city list digging into which cities are the target cities. Right, so we look at a lot of metrics, I think there are over 20 of them, including the population density and the credit card penetration, the smartphone ownership, how the city is planned, and also the price for public transportation, for taxi, how much money, how much percentage of money the average household spend every month on transportation and stuff, all this stuff like metrics, et cetera, et cetera. Like we come up, there’s a formula, we come up with the city list, market size, and also what’s the history of the local authorities, like about what the new technology is, new companies, and all these, we quantify it and they we have a list of cities out there in China and internationally. Right, so we find the cities, so that’s sort of like, what we call air force approach.

Anu Hariharan [15:52] – Air force

Yanqi Zhang [15:53] – And then we look at the marine approach, so we send people, we send people on the ground, sort of like the launchers, or, basically the launchers, sometimes we send operations managers as launchers, but some people on the ground.

Anu Hariharan [16:06] – How many people do you send?

Yanqi Zhang [16:07] – In China actually, because we are already in 200 universities to start with, so we have teams of 200, not 200 cities, but I think 50 cities, right so we have very good resources, so we just have some people go to the city, to do some tests and stuff, so it’s easy to start. But for international markets we do, we need to hire launchers and send them. The hiring process start a few months before we, the launch date of the international business, so hiring people, like most of them, like Chinese at the beginning, they have experience of leaving the international market, the international countries, or doing business there, so we send the first batch of launchers, landing team on the ground.

Anu Hariharan [16:47] – Is it like five or ten people?

Yanqi Zhang [16:48] – Something like that, yeah, I think it’s like ten plus.

Anu Hariharan [16:51] – Ten plus, okay.

Yanqi Zhang [16:52] – So different, like one people to one country.

Anu Hariharan [16:54] – Okay.

Yanqi Zhang [16:55] – And then they go there, and they launch the, do the basic set-ups. And first of all, what they need to do is actually the market research, the green light process. They go there and spend like a week or two, actually to crosscheck with what the air force has found, so all these metrics, what it’s really like, and how people think about everything, and talk to people, actually try out the local public transportation and feel that experience and everything. The green light process will take one week or so, one or two weeks, and then we have the, have them start to establish the basic foundations for the company. Right, so we will start to initiate contact with the local authorities, we start to, the recruiting process, well, like I said, we need a local team to run the business in the long term. We start to recruit the local people.

Anu Hariharan [17:47] – What’s the team composition initially for a local team? Like, what are you looking for? Is it GM, with few support, like what’s the structure?

Yanqi Zhang [17:55] – Yeah, so the ideal structure would be a GM, a city GM, and with operation because we’re quite heavy on operation, so maybe one or two operations, one in terms of managing the operation and stuff, and one is managing the bike. It’s like operation, and also like on the marketing side, we also need people to do the user acquisition, the PR, like the things, in terms of hiring orders, so it’s the city GM, and the operation team, and the marketing team. But sometimes, like, to find the city GM it’s slower, it’s not very fast, so we probably start with the operation team. Every city is different. Most of the cities are run by launchers, so launchers everybody, right, so launchers are doing everything, so it’s like that. And that’s very similar to most of the expansion models by other internet companies, I would say. Only one difference is that we are operation heavy, so basically we would put more attention, I would say, on the operations side. That’s how we do it. So yeah, so basically that’s the basic structure.

Anu Hariharan [18:59] – Yeah, can you talk a little bit about the operations, because it’s a little different from ride sharing, right? Ride sharing, you have someone who is driving their own car, and you’re requesting by the app, and it helps you take point A to point B. At Ofo, you have your supply of bikes, and people can drop it anywhere and pick it up anywhere. Can you talk about what does the operations entail?

Yanqi Zhang [19:20] – Yeah, so the operations is, there is different categories, so most important ones are the bike deployment, the bike rebalancing, the bike maintenance. Alright, so these are the key things. In the beginning, obviously, we have the bike in the city, and we ship bike from China or some factories in Europe in different parts of the world. When we have the bike, when the bike enter the city, it’s the operation team’s responsibility to maximize efficiency of the bike. Basically deployment, so where to put the bike to begin with. For example, in small cities, it’s easier, so just put it in the city, the transportation hub, but for big cities like London, maybe like San Francisco, well we’re not in San Francisco yet, but if we do, probably like start with one district instead of going to the whole city. We will ind either the most bike-friendly or the most dense city in terms of population. There are some criteria you can use to find those locations and then you start to deploy bikes. And also there’s another criteria that, other thing you can look at is like where are the areas in the city where people open our apps most frequently, before we’re in the city, so we see that heat map, maybe it’s a student area, like a lot of Chinese students.

Anu Hariharan [20:46] – That’s how you found out about Singapore, right?

Yanqi Zhang [20:49] – Yes, so in Singapore, we see that heat map, we said like okay, when we tried to decide what was the first national city to go, we see the global map, where we have the most usage, the most user activity, before we are in the city. We see Singapore is obviously the most popular one, and we go there and yeah, the business took off very quickly. There must be some areas in the city that has that affect, but that’s only one thing to consider. There are different things, and also in some places, we talk to the government, and there are some areas, the local authorities need us to provide assistance. For example, in Austria, we have a very good relationship with local authorities. We started with district two, and the second district we go is district 21, which is, I would say, in that city is kind of far away from the center and less mobility options for the citizens. And if we go there, it’s actually adapt to the mobility, that people can have there. So yeah, these type of things are all into our considerations, so basically our principle is that we go to the city we want to help the city solve their mobility problems. We want to listen to the city what they need, and we provide our solution, so that’s our way to work with the cities. Whenever we go, we make sure we have that conversation, we be transparent, we are transparent with the local people, local authorities on what we are and what we can do to make sure it’s a win-win situation.

Anu Hariharan [22:27] – Yeah, and you’re present in the US now, right?

Yanqi Zhang [22:29] – Yes, so we launched in Seattle and I think we launched two cities in the east coast in the greater Boston area as well and more cities to come.

Anu Hariharan [22:39] – Great. So many people are skeptical about the US from bike sharing and I know you have often told me that even in China, you changed the behavior of the people who used bike sharing. So what’s your view of the US? Do you think that there’s enough demand for the bikes and do you think there will be a change?

Yanqi Zhang [22:58] – Yeah, so I think we can take one step back and ask the question of what a city needs. No matter it’s a Chinese city, US city. Like, what city needs, what do people who live in the city need? To get around the city smarter, greener, like, more affordable, and like, more accessible way. I think it’s always better. If there’s something you can use like, match all this criteria and above, people must use it. So that’s our basic assumption. If that assumption stands, I would say they’re actually not quite a big difference between city to city in terms of like, what a city needs. That’s where we start to think. Secondly, obviously there are different characteristics of different cities. Some cities are more dense, some cities are, I would say, hilly than the others. Some cities are more like, the transportation, public transportation development stage is different. People in different cities are willing to spend different money on transportation. For example, in Brazil, like, people, the average household spending on the transportation is 30% of their income, so that’s super high. But in US, it’s much lower. And also, what people’s habit. Like, existing behavior. For example, in Paris, the percentage of transportation by bike is only like, single digit. Like, three or 5%, but Amsterdam is 30%. It’s 10 times higher. Every city is different, right?

Anu Hariharan [24:39] – Different.

Yanqi Zhang [24:39] – The thing is that first all, the last mile commuting problem is universal. Number two is that I think most of the cities, people need, I think, well, most cities, people don’t have very convenient, like, a smarter and a cheap way of getting around the last mile. That’s where we are and where we kick in. US cities also have that, have that sort of problems or like, characteristics. Obviously I think in San Francisco, in Los Angeles, in New York, it’s like, the cities are very different. But I think we’re very confident. Our solutions will be something like people have never experienced before. And we are here to solve the problem. Probably we need to make some product upgrades or adjustments, probably we need to make some operation adjustments. But in terms of making adjustment or adapt to a local markets, I wouldn’t say a US market is very different from, I would say, Japan, or France, or UK. We make adjustments all the time, that’s what we do.

Anu Hariharan [25:47] – Got it, great, yeah. And a few adjustments are obviously needed to cater to the local markets. Let’s talk about electric bikes because I know you briefly mentioned that. What’s the vision for Ofo going forward?

Yanqi Zhang [25:58] – If you look at the trip distance right now, first of all, in the city. Right, so it’s actually, most distance are short, so short trips in the city and you can see what we do as bike sharing company, regular bike, mechanic bike. Normally the trip distance ranges from 300 meters to 3 kilometers. That’s where like, the bike people, the distance bike can help. And that is like, for every city. That’s good, all right? Obviously I think the natural next step is that we want to extend on both ends. Well, on the short ends like, we’re see that happening already. People are getting lazier and so it’s like, before that people are willing to walk three meters, but right now, with bikes, even like 100 meter, I can ride. And on the, I probably would only do things on there, just improving the ride experience. On the far end, probably like, there are a lot of things to do. So with mechanic bikes, we are constantly improving our ride experience. Right now, we see a very steady like, a growth of the trip distance. From three kilometers right now is close to four kilometers. People tend to ride more, ride longer when it’s an easier ride. But I think with electric bike, that far end of the distance can be extended significantly, probably to three kilometers to like, 10 kilometers. That can actually cover most of the trips that are done in the city. Just imagine, like in the city, people ride electric bikes and there will be a lot less cars in the city. The pollutions, the congestions, like all those things

Yanqi Zhang [27:39] – we’ll be.

Anu Hariharan [27:39] – Much better for the environment.

Yanqi Zhang [27:40] – You’ll see the city is getting better. The people are also liking it in terms of price. You can get the cars, it’s expensive. So owning a car is expensive. If you think about how people get from point A to point B in a city, regardless of what like, vehicles we use, we always think about what is the most economic way, safe way, green way, easy way to get around, to complete that distance? We try and find like, more advanced vehicles to satisfy that demand. I think an e-bike is very natural option of that. And then also, I saw there is companies here like Scoot, like, similar things to do that. We are very optimistic and actually, we have e-bikes in China being tested in different cities and we very promising results on them. Obviously they’re different economic metrics. There are different models, so how to change the batteries, how to sort of charge the batteries, and how to do the operations will be different. But I think e-bikes is one of the things we are going to put efforts on in the future.

Anu Hariharan [28:54] – Got it, great. And how big is the team right now?

Yanqi Zhang [28:57] – In China, we have 2,000 plus employees. It’s a big team and for international, we have a bit more than 100, so it’s still very early stage and yeah, so I think the principles of the company in terms of hiring people is that well, obviously we are a very lean team. We hire the best of the best and we also love to have people onboard who share the same passion with us. So we want to really make changes of the world, of the city like, on how people get around and provide more options, more choices to the people. So yeah, that’s us.

Anu Hariharan [29:38] – How do you think of your product when self-driving cars are pretty much dominant everywhere in the world? Today there’s obviously more challenges they need to solve to get to level 5 automation with computer version problems and solving the last mile. But in a world where you have pretty much self-driving cars, how do you see Ofo a bike sharing or electric bikes sharing a role?

Yanqi Zhang [30:01] – Yeah, yeah, yeah. First of all, like, I love to see that day. I’d love to experience that. Even if people have choices like autonomous driving cars everywhere, still there will be a very huge demand in terms of the bike trade. I’m not sure whether we’re going to rule out self-driving bikes . But even if you consider the car and product, all right, so I think there are lot of advantages here. Number one, I would say is the density. So you look at how the city is planned. Maybe in San Francisco, the car can go to almost everywhere because the city is like, blocks and everything. But in many cities, like in southeast Asia and developing countries like in China, there are a lot of small roads a car cannot get in. Obviously there are arguments, like you can probably like, put their travels car. When you take the driver out of the car, you can change the shape of the car, like it looks like a Batman, like a motorbike or something like that. You can do that. So yeah, but with that being said, still, I think density is something like, the shared bike has advantage on. Number two is cost. Autonomous driving car is a beautiful product, but my thinking is that to manufacturing that, to put in the scale is going to require a lot of investment to operating that system and to use that system is going to be very costly. If you think about it, especially at the beginning of that, you still need a lot to maintain the system. At the same time, I would say how much?

Yanqi Zhang [31:42] – What is the price of taking an autonomous driving car? Like, I don’t know a pricing, but I in imagination, this feels like a fancy service and could be like, could be kind of.

Anu Hariharan [31:54] – Well, the cost of making cars is significant, but the driver cost and the ride sharing should go away ideally.

Yanqi Zhang [31:58] – For the bike itself right now, we do not have a driver, we do not have a cost of energy, we don’t have electricity so it’s all man-powered. Cost-wise, we’re going to be much lower in terms of.

Anu Hariharan [32:13] – Can you compare the cost of a trip today on an Ofo versus a Didi?

Yanqi Zhang [32:21] – Yeah, so I mean, well, Didi is not self-driving yet.

Anu Hariharan [32:23] – No, just based on today because that’s an interesting observation.

Yanqi Zhang [32:27] – Yeah, so I think there is, I feel like, an interesting, I feel like many categories. Number one is the driver, opportunity cost. So basically, for a model, you need to pay the driver. When he gets online, there’s always like, charge, prices you need to pay for him like, the hourly rate or whatever rate. There’s a cost there. And that is a variable cost. You do one more trip, there’s always a driver’s take on that. All right, so that is number one. Number two is on the energy cost because basically right now, most of the cars are running on gasoline. Maybe some are on electricity, but still. Like, most of them are on gasoline, so there is a huge cost there. And also, that one is variable cost. For every trip, more distance you travel, the more you pay for the gasoline and for the driver. These costs are not going to go away, but for bikes, most of the costs that we have are a fixed cost. The cost does not go up as we scale, as we do more trips. So at the beginning, when we have less users, like the bike or maybe the bike used twice a day, so that’s how the structure is. But later, when we had more users, the biker used like five times and universities will go on to sometimes 10 times. When that comes and the cost does not go up when we increase the number of trips. Sill, we pay the same amount of salaries to the maintenance workers. And with our smart system, actually, their working load does not increase. Still, like, when we they manage like 200 bikes, they maintain, they spend time to repair

Yanqi Zhang [34:06] – maybe 30 bikes a day and we will have them manage 1,000 bikes a day. What we do is that still, maybe repair 35 bikes a day.

Anu Hariharan [34:14] – Got it.

Yanqi Zhang [34:14] – That doesn’t go. But the efficiency, the operation cost per bike is that it actually goes down a lot.

Anu Hariharan [34:20] – Because you get more leverage.

Yanqi Zhang [34:22] – Yeah.

Anu Hariharan [34:22] – 20, you said like, you get 20 rides a bike, right?

Yanqi Zhang [34:26] – In some universities, we can get to 20 and our record is over 100 times a day.

Anu Hariharan [34:31] – Oh, 100.

Yanqi Zhang [34:32] – That is one, I saw that once. But normally, it’s like 10, around in the university.

Anu Hariharan [34:37] – Around 10, got it.

Yanqi Zhang [34:39] – It’s quite different model. For us, it’s more like a rental model. For ride sharing model. And well, you can think about like, autonomous driving. Obviously you take the driver out, so there is no cost for the driver. That’s a massive increase of the efficiency, but still, like I said, there is a maintenance cost of the car. I think that would be, possibly, would be higher than the maintenance cost for a bike. Also, there is density issues and there is also the system management. I don’t know too much about the autonomous driving, but my guess is that the total cost of operation and management will not be cheap.

Anu Hariharan [35:24] – Cheap, and maybe higher than what it takes to do a bike.

Yanqi Zhang [35:27] – Yeah, maybe. I don’t know, like, maybe the total cost is even higher than the current system, the car system.

Anu Hariharan [35:32] – Yeah, probably, yeah. Only time will tell us, that’s true.

Yanqi Zhang [35:34] – Yeah, we will see, we will see. Yeah, but I’m pretty, I’m a big fan of timeless driving.

Anu Hariharan [35:37] – Got it.

Yanqi Zhang [35:37] – Yeah, I’m supporting it there.

Anu Hariharan [35:38] – Well thank you so much, Yanqi. Thank you so much for taking the time to speak with us.

Yanqi Zhang [35:42] – Thanks for having me, thank you.

Anu Hariharan [35:43] – Yeah, thank you.

Yanqi Zhang [35:43] – Thanks so much.

Craig Cannon [35:45] – Alright, thanks for listening. So as always, the video and transcript are at blog.ycombinator.com and if you have a second, please subscribe and review the show. Alright, see you next week.

Author

  • Y Combinator

    Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon