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Bike-sharing firm Ofo’s dramatic fall a warning to China’s tech investors

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BEIJING/SHANGHAI (Reuters) – On the sidewalks of Shanghai and Beijing, once bright-yellow Ofo bicycles lie in varying states of disrepair – chains unhooked, wheels buckled and paint starting to fade – reflecting the quick rise and sharp fall of the Chinese bike-sharing startup.

An Ofo bike-sharing bicycle is locked for personal use outside a dwelling in a village on the outskirts of Beijing, China December 22, 2018. REUTERS/Jason Lee

Millions of Ofo users are clamoring for their deposits to be returned and the firm’s founder has admitted considering bankruptcy.

Ofo’s plight is a warning for China’s tech investors, who have plowed tens of billions of dollars into loss-making businesses such as bike sharing, ride hailing and food delivery. Not long ago, Ofo was racing into markets overseas and raising billions from backers including Alibaba Group Holding Ltd (BABA.N) and Didi Chuxing.

“It now appears bike sharing is the stupidest business, but the smartest brains of China all tried to get in,” Wu Shenghua, founder of now bankrupted bike-sharing company 3Vbike, told Reuters. “It really now seems ridiculous.”

Ofo was a phenomenon. Its dock-less bicycles, which could be picked up by scanning a QR code and left anywhere, grew from Beijing campuses to become an icon of young, urban cool. The firm garnered a valuation of $2 billion.

Its bicycles – and those of main rival Mobike – could be found on almost every city street corner, often in staggering numbers. Ofo’s advertisements featured major Chinese popstars and showed trendy youngsters pedaling around the hippest areas of town.

Dozens of smaller rivals emerged in China over the last two years, only to go out of business, leaving Ofo, fellow Alibaba-backed Hellobike, and Mobike, backed by Chinese social media and gaming giant Tencent Holdings (0700.HK), as the major players.

But costly battles for market share have meant Ofo and its rivals have struggled to turn popularity into profit. Ofo’s very survival is now at risk as debts to suppliers have come due and user demands for deposits have mounted.

“It’s a very tricky business, all the profits are eaten away by competition. It’s something that really needs to be part of a bigger business,” said Maxwell Zhou, founder of tech startup metaapp.cn and a former employee of Mobike in China.

“It’s very similar to email in that way. It has a lot of benefits for society, but none of the email providers were able to create a barrier to entry, so anybody could host emails, and eventually nobody could make any money.”

GLOBAL EXPANSION

At its peak, Ofo had bike fleets in more than 20 countries, from France to Australia and the United States. Company insiders, however, said it tried to grow too fast, and found itself facing a wide array of hurdles, from traffic regulations to vandalism, as well as spiraling costs.

“In retrospect of course there was problem with management, and we were expanding too rapidly,” said a former Ofo executive who worked on international expansion, asking not to be named.

The firm has pulled back from markets like Israel, Germany and the United States, and has been forced to sell assets, including some bikes for as little as $2, the person said.

Ofo and Alibaba did not respond to requests for comment.

The former executive pointed to an unsuccessful push into Japan, where the firm had looked to expand in a partnership with SoftBank Group Corp (9984.T). That plan went sour after a breakdown in takeover talks with SoftBank-backed Didi Chuxing, said the executive.

With bikes sitting in storage, fees piled up. “We lost a lot of money, and now the bikes are still stuck in warehouses,” said the executive.

Didi declined to comment but pointed to earlier statements saying it had never intended to buy Ofo and promised to keep supporting its “independent development” in the future.

CREDIT BLACKLIST

In China, once-loyal users have turned on Ofo, lining up at its offices in Beijing to demand the return of deposits paid up-front to use the service. Over 12 million people have so far requested repayment online.

Jiang Zhe, 21, a university student in Beijing, said he usually bought a month pass for Ofo bikes, but has lately struggled because so many are broken. “I haven’t used Ofo recently because I can’t find any working bikes,” he said.

He is now one of the many seeking a refund.

In a letter to employees last week, Ofo CEO Dai Wei said the company was struggling to resolve a cash shortage, in part because of user refunds as well as payments to suppliers. He said the firm was battling on amid “pain and hopelessness”.

A court in Beijing has placed Dai on a credit blacklist that restricts him from going to fancy hotels, traveling first class or sending his children to expensive schools, according to the court’s Dec. 4 order seen by Reuters.

The rare near-implosion of a wildly popular and innovative firm in China has spooked some authorities. The transportation ministry said on Friday it was asking Ofo to optimize its refund procedure, but also called on the public to be more “tolerant” to allow domestic innovation to thrive.

Many weren’t convinced, including the former Ofo executive.

“It would be tough for the company to get back to its golden days, I don’t think it can be like before. I think most people are really just waiting for the final days,” he said.

Reporting by Pei Li in Beijing and Josh Horwitz in Shanghai; Editing by Adam Jourdan and Muralikumar Anantharaman

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Future of Ottawa: Coffee with Francis Bueckert

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Francis Bueckert: When it comes to the current landscape of coffee-roasting companies and independent cafes in Ottawa, I think we are at a really interesting moment in time. There are more local roasters that are doing artisanal small-batch production—with more attention to the quality and origin of the beans.

With larger corporations such as Starbucks closing locations, it has opened a bit of space for local players to grow. We have been lucky to work with many folks in the coffee-roasting community, and we have found that there is a willingness to collaborate among different coffee roasters. For example, when Cloudforest started back in 2014, we were roasting our coffee at Happy Goat and it was the expertise of their head roaster Hans that helped me learn how to roast. Other companies such as Brown Bag Coffee have also lent a hand when we needed extra roasting capacity. There are others, such as Lulo, Mighty Valley Coffee, Bluebarn, The Artery, and Little Victories that are also part of the growing local coffee community. It’s small roasters like these who have shown me what a coffee community can look like, and that we can help to elevate each other, rather than being locked in competition.

If you care to make a prediction… What’s happening to the local café industry in 2021?

We believe that there is hope and that 2021 can be a big pivot year for small roasters and cafes.

This year will not be ideal from a business point of view. However, it could create a shift in people’s attitude toward where they get their coffee. We are holding out hope that people will support the roasters and cafes that are local to help them economically survive what is in all reality a very difficult time.

It all depends on where consumers decide to go this year. People are starting to recognize that supporting large corporations at this moment will be at the cost of the local roasters and cafes. There is the growing realization that a future where there is only Amazon, Walmart, and Starbucks would be pretty bleak. So we have an opportunity this year to support the kind of local businesses that we want to see thrive.

In your wildest dreams, what will the landscape for local coffee roasters and cafés look like in your lifetime?

In my wildest dreams, all of the coffee roasters and cafés would be locally owned and independent. They would all be focused on direct trade and artisanal coffee. Each different coffee roaster and café would know exactly where their coffee came from. Ideally, each company would be a partnership between the farmers who grow the beans and the people here selling them. There would be a focus on how to cooperate and collaborate with the farmers in the countries of origin to share the benefits around. We would all work together and share orders of cups, lids, and other packaging so that we could get better bulk pricing. In this way, we would make our local coffee community so efficient that the large corporate coffee companies wouldn’t even be able to compete.

We would also like to see people use coffee as a way to create social good. For example, we started Cloudforest as a way of helping support farmers in Ecuador who were taking a stand against large mining companies. This remote community stood up to protect their environment, so that they could have clean drinking water and soil for the next generation. They started an organic coffee cooperative to help show that there are other models of development, and we are doing our part year after year to help support their vision. They have a vision of development that does not include mass deforestation and contamination, and organic coffee is a key (among others) to show that another way forward is possible.

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Special events in the Ottawa Valley dominate annual OVTA tourism awards

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The Ottawa Valley Tourist Association hopes that its annual tourism awards will provide a little sunshine during what is a dark time for local tourism operators because of the pandemic.

The Ottawa Valley Tourism Awards are presented annually by the Ottawa Valley Tourist Association (OVTA) to individuals, businesses, and events that recognize the importance of working together for the growth of the local tourism industry, as well as offering exceptional visitor experiences.

“After a year that saw a lot of businesses in the hospitality and tourism industry being challenged like never before, the annual Ottawa Valley Tourism Awards represent a bit of light on the horizon” said Chris Hinsperger, co-owner of the Bonnechere Caves.

The Ottawa Valley Tourist Association’s (OVTA) Awards Committee co-chairpersons, Meghan James and Chris Hinsperger, said they were very pleased with the recent nominations received, especially in the Special Events category. Submissions were received for The Farm to Fork Dinner Series at the Whitewater Inn; Light up the Valley; The Eganville Curling Clubs’ Rock the Rings; The Ontario Festival of Small Halls ; The Bonnechere Caves On-line Underground Concert Series; The Opeongo Nordic Ski Clubs’ Ski Loppet; The Tour de Bonnechere — Ghost de Tour 2020; and The Bonnechere Caves Rock ‘n Roll Parking Lot Picnic.

“During a time when communities were challenged, it is nice to see that people still made an effort to get together and celebrate, albeit under certain conditions. It just shows the creativity and resiliency of our tourism Community here in the valley” said Meghan James, director of sales at the Pembroke Best Western.

There are three Award categories: The Marilyn Alexander Tourism Champion Award, The Business of Distinction and The Special Event of the Year.

Hinsperger, is excited about this year’s awards.

“During this pandemic the hospitality and tourism industry was the first to be hit, was the hardest hit and will be the last of our industries to fully recover. As Valley entrepreneurs we owe it to ourselves, to our businesses and to our communities to be an active part of that recovery. Our livelihood and economic recovery depends on our efforts. And we will get back to welcoming people from all over the world to share a little bit of the place we are privileged to call home. This awards process leaves myself and others fully optimistic about our positive outcomes.”

Award winners will be announced at the Ottawa Valley Tourist Association’s virtual annual general meeting on Monday, May 31.

The OVTA is the destination marketing organization for the Upper Ottawa Valley and proudly represents more than 200 tourism businesses, comprised of attractions and outfitters, accommodation, food, beverage and retail establishments, artists and galleries, municipalities, as well as media and industry suppliers. The OVTA is supported by the County of Renfrew, Renfrew County municipalities and the City of Pembroke.

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Future of Ottawa: Farming with Jeremy Colbeck

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Jeremy Colbeck: Well first, let’s talk about what we mean by farming. Although farms, and farming as an occupation, are in decline across Canada, they are still a major part of our rural landscape. That’s even more true for a strange city like Ottawa which includes a LOT of rural areas and whose urban boundary takes, what, three hours to cross? About 40 per cent of the rural land in Ottawa is farmland. Most of that farming is corn and soybean cash-crop, as well as some dairy and livestock farming. That’s mostly conventional farming (the kind that is profitable but not exactly where you take your kids on a Saturday).

There are also a lot of agri-tourism businesses in Ottawa, which give you that oh-so-good Saturday spot for family donkey-petting and apple-picking. And it’s totally understandable from a business perspective, but sometimes surprising to find out, that even though they grow some of the Christmas trees they sell, they might also be reselling some that come from much larger farms far away. The farmland around Ottawa is also inflated in price because of its proximity to the city, where it is in demand by would-be hobby farmers—folks who want to do some farming on their property in their spare time but make their money (to subsidize their small-scale farming habit) elsewhere. Unfortunately, many of these properties will have large mansions built on them, which will then make them completely unaffordable for the average farmer

There’s also a segment of small-to-medium-sized Ottawa farms that grow “premium” (artisanal, unique, extra-fresh, ecologically- or organically-grown etc…) products that they sell directly to local eaters via farmers’ markets or other direct marketing channels, including on-farm stores and farm stands. That’s where BeetBox fits in.

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