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What made a unicorn hunter invest in ofo?

ofo bikes on campus. Photo from Baidu Images.

Last September, Zhu Xiaohu (Allen Zhu), one of ofo’s investors and GSR Ventures’ Partner and Managing Director, shared a moment on his WeChat that he estimated the battle between ofo and Mobike would end within nine months. Now, as the battle continues, Zhu still has strong confidence in ofo with his understanding of business – it is the same secret to all kinds of businesses.

Zhu Xiaohu was called a unicorn hunter in an online article back in 2015 because of his outstanding investment moves in the hottest startups in China including Didi Chuxing, and ofo. Recently, he shared some interesting investment opinions on an online course app called Hundun.

Data shapes your profit

The key to traditional retail business is only one word: location, location, location. Location helps players to gain users. This is the same business truth to the internet model as well. A simple business formula, Profit = Revenue – Cost, runs well for all business models regardless of it being traditional enterprises or internet companies.

With the exception of very few user-generated driven business models such as WeChat, most business models now spend a lot on buying users which is why venture funds invest in them, according to Zhu. It is easy to buy users, but it is difficult to keep them.

“Another essential factor is how to generate gross profits while those users are visiting your website or app. All data is very important. Cost figures such as customer generated cost, operation cost, and so on. In other words, it is essential how long you will take to cover the user costs from customer contributions, and then make real money,” said Zhu.

Clear business logic

Zhu think ofo’s business model is quite clear since the first day he invested it. Investors prefer a business model which allows a startup to break even within one year, though breaking even after six months is better. However, ofo’s business model looks like it can even make money only after three months.

Campus markets for ofo may not be big. However, if we can have 2 or 3 million rentals per day in a campus, it may make it as a listed company. This means the risk is under control, while markets outside campuses and downtown markets are totally underestimated which could possibly bring in extra benefits. There is a chance to become a unicorn company soon if all markets are included.

Zhu Xiaohu, an ofo investor. Photo from InvestorsCN

Founder must be a founder

There are no standard rules in choosing a right founder. However, Zhu thinks that a founder should fulfill some of the following criteria – confident, experienced and modest.

A good CEO must be able to persuade his investor, partner and employees. In addition, the CEO is supposed to face all challenges and provide solutions with strong confidence.

Expertise is normally ignored by those founders who have just graduated from college. They may tend to look over most webpages and apps which may look very simple and that have already been tested and run well with deep logic. Fresh graduate CEOs were once a hit after Chinese Prime Minister Li Keiqiang’s endorsement of them in 2014.

Zhu believes that it is better if fresh graduates work in BAT(Baidu, Alibaba, Tencent) companies for five or six years first before setting up their own startups with the acquired experience. Zhu has only invested in two startups by fresh graduates in the past ten years – one is Zhang Xuhao, the founder and CEO of, and the other is ofo which was founded by Dai Wei. He thinks that both of them are truly born with business sense.

Zhu dislikes those people who are too defensive. He thinks those people are normally overly self-protective by deflecting all the challenging questions. If a modest person who accepts different opinions and is always asking for challenges to improve, then he is a true wise man, said Zhu.

In 2012, Zhu made a quick decision to invest USD 2 million on Didi Chuxing after a half-hour talk with Cheng Wei, the founder of Didi Chuxing. Now, Cheng Wei is still asking his investors questions such as “I met a problem, what do you think about it and how do you do it? ” This is what the unicorn hunter is happy to see, because he is honest.

(Top photo from Baidu Images)

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