When an Internet Company Makes Bicycles, "Smart" Needn't Be the Selling Point | Founders Speak

Ten months after announcing it would make bikes, 700BIKE has launched four models, starting at 2,499 yuan

When did you last hear of a bicycle launch?

As internet companies move in, many traditional industries that once released new products quietly, often without even advertising them, have started promoting themselves loudly. Bicycles are the latest.

On Sunday evening in Beijing, in a creative-industry park next to the National Art Museum of China, 700BIKE (Qibai) unveiled its first generation of bicycles.

700BIKE is probably the most closely watched bicycle startup of recent months. Zhang Xiangdong, co-founder of the Nasdaq-listed Jiubang Digital, joined the company as CEO at the end of last year and announced it would make bicycles. On June 1, before showing any product, 700BIKE opened an online "blind pre-order" for bikes no one had seen. The names lending it support came from well beyond cycling: Han Han, Li Wanqiang, Hu Haiquan, Xu Zhiyuan and Xu Xiaoping were among the pre-orderers.

What kind of bicycle would an internet entrepreneur who made his name with the GO series of Android launchers build? Fifty days later, the 700BIKE bicycles are here:

Back Street, urban sport

• Price: 2,499 yuan
• Frame of Reynolds 725 steel tubing; the complete bike weighs 11 kg
• Automatic gear shifting, with the shifter built into the rear wheel
• Five colors: blue, red, yellow, brown and gray

Art Museum, men's retro

• Price: 3,299 yuan
• Complete bike weighs 13-15 kg
• A belt drive replaces the chain, for less noise
• Flat aluminum-alloy fenders replace the traditional domed design
• Optional basket with an 80 kg load capacity
• Round display
• Three colors: black, green and gray

Hundred Flowers, women's retro

• Price: 3,299 yuan
• Complete bike weighs 13-15 kg
• A belt drive replaces the chain, for less noise
• Flat bamboo fenders replace the traditional domed design
• Optional basket with an 80 kg load capacity
• Round display
• Two colors: red and white

Galaxy, portable folding bike

Galaxy

• No further details yet

Release dates

• From July 19 to August 10, pre-order customers decide whether to buy and which model to choose (Back Street, Art Museum, Hundred Flowers)
• Public sales begin August 11 (Back Street, Art Museum, Hundred Flowers)

A Better Bicycle

When LeEco and Baidu announced their smart-bicycle projects, they released 3D renderings. 700BIKE's bicycles look neither smart nor futuristic. They look like traditional bicycles, only better.

700BIKE CEO Zhang Xiangdong was quite proud of this when he spoke to QDaily. He believes design should start from respect for tradition, and says 700BIKE's main changes are to appearance, comfort and performance.

Now that a bicycle is part of how riders show off their way of life, looks have become a main way to win customers. The real bikes do look very clean, and you rarely see a design like this at the same price.

Many design choices serve that clean look. The "Back Street," for example, uses stronger Reynolds 725 steel, so the frame can be slimmer for the same strength.

The automatic shifter built into the "Back Street" rear hub

Or take gears. On a traditional bicycle the shift controls sit above the stem and run to the wheels by cable, which makes the bike look complicated, and not everyone knows how to use them anyway.

"When I ride in the city, I often look at other people's gears. Many have a dozen or more speeds, but almost nobody uses them, because most people don't know how to shift," Zhang said. 700BIKE's answer is to build the shifter into the frame and make shifting automatic, adjusting to how fast the rider is accelerating on the pedals.

Another detail is where the brakes sit. The front and rear forks happen to hide them, so from the front or back you see no complicated brake calipers.

Every 700BIKE bicycle has a display set into the stem. When the rider pedals, it shows the time, speed and distance.

The built-in screen on the "Back Street"

The frames of all four models carry a mobile chip like a phone's, with GSM, GPS and Bluetooth. GPS locates the bicycle; GSM connects to a carrier network, just as your phone does. If the bike is stolen, it can send its location to your phone.

The built-in processor is charged by electricity the front wheel generates as it turns past magnetic coils. 700BIKE says that for a week after being lost, the bicycle can keep sending its location to your phone even if no one rides it. Speed is also calculated from how often the wheel passes the coils.

700BIKE has also made designing for Chinese body types a priority. "I've ridden so many good bikes, but never felt comfortable," Zhang said. "Then someone custom-built a bike for me and I saw the problem: most bicycles in China are designed by contract manufacturers on generic frames originally designed for overseas riders."

To fit riders better, Zhang said, 700BIKE analyzed data from statistics agencies in big cities to work out suitable saddle and frame sizes, and its designers then chose the sizes that best fit its customers.

The "Back Street" also uses an asymmetric h-shaped tube in its rear frame.

The "Back Street" h-tube design

This too is meant to improve comfort: 700BIKE claims it helps absorb vibration from the rear wheel. The jolts a rider feels in the backside usually travel up the seat post to the saddle.

At the launch and in interviews, Zhang also described many design points that only cycling enthusiasts would follow, such as a dual-transmission structure, a bottom bracket designed to stop the chain from dropping, flattened oval crossbars, and Kevlar inside the tires to make punctures less likely.

Still, a bicycle touches your body directly, and you only know whether it suits you by trying it. For now 700BIKE sells only online, to avoid paying dealers a cut, but it will later offer test rides at some partner bike shops.

A Startup That Began as a Hobby

700BIKE, which has just launched four bicycles, began as a cycling-culture community set up by enthusiasts, which since 2012 had shared all kinds of bicycles and cycling gear. It first drew attention outside cycling circles around last November, when Zhang Xiangdong, formerly president of Jiubang Digital, joined as CEO. Since then the company has settled on a business model: designing and selling its own bicycles.

"700BIKE used to be a community. I rode with them and went to some community events. Later they told me their problem was money, so I put some in and became a shareholder. Then I told them that running a media outfit on advertising was too hard, and that they could make a product instead: bicycles." A few days before the launch, at a café below 700BIKE's office, Zhang told QDaily how he came to make bicycles.

Rain was forecast that day, but Zhang still suggested sitting outside. It is a habit from years of riding: good bikes often have no lock, so when he meets people he usually picks somewhere with outdoor seating and keeps his bicycle in view.

Like most people, Zhang hardly rode after graduating from Peking University in 1999. Then, in 2007, on a long trip to France, he borrowed a friend's bicycle to get around and fell in love with riding. He has since ridden several hundred kilometers at a time at Qinghai Lake and in Australia, South Africa and Argentina, across four continents, and is fairly well known in cycling circles.

The idea of making bicycles himself took shape in 2013, as Jiubang Digital, the mobile-internet software company he had co-founded ten years earlier with Deng Yuqiang and Chang Yingming, was preparing to list in the US. From 2010 Jiubang had focused on the then-young Android system, and by 2013 its main product, GO Launcher, had 268 million users, and the company had made 234 million in profit.

"I did most of the roadshow for the Nasdaq listing, so I was flying to the US often, more than ten hours each way. I can't sit idle, so I wrote Brief Flight on the plane," Zhang said. "The book is hardly about business at all. It's mostly a look back at my life, and that's when I realized how much bicycles mattered to me."

At the end of 2013, Jiubang Digital rang the bell on Nasdaq, and the three co-founders embraced. By then Zhang had already told the other two he planned to leave. He remembers that the tie he wore to ring the bell was printed with bicycles.

In November 2014, Zhang announced he was joining 700BIKE to make bicycles. After March this year, 700BIKE, having set up a VIE structure, announced US$15 million (about 93 million yuan) in funding from Huachuang, Gaorong and IDG.

In 700BIKE's office, a different bicycle leans against the end of each row of desks: fixed-gear bikes, an antique Forever from the 1970s, expensive handmade bicycles, and a road bike ridden in this year's Tour de France.

Why City Bikes?

"City bike" was probably the phrase heard most often at the 700BIKE launch.

Over the past year, 25 million bicycles were sold in China. Market leader Giant sold 2.66 million of them in China last year, up 44% from 2010; Merida sold 1 million in China last year, 3.5 times its 2010 figure.

Besides people commuting by bike, it is easy to spot enthusiasts out on night rides every evening, or heading to the suburbs at weekends on road and mountain bikes. More and more people choose cycling as a way of life rather than just a way to get around.

The "Hundred Flowers" and "Art Museum" have built-in round displays

"The products in this industry are badly suited to the city. After Flying Pigeon and Forever, there was a gap, and now 90% of mid- to high-priced bicycles are mountain bikes. Give a beginner gears and cushioned tires and they think it's a premium bike." China's bicycle market is large, but Zhang believes city bikes are a very big gap in it.

He blames the lack of good, affordable city bikes on how bicycles are sold. Big-brand sales are controlled by dealers. Between factory and customer, a bike usually passes through three or four levels of distributors, each taking a cut. The biggest dealers each cover several provinces, and makers dare not sell cheaply online for fear of offending them. And when small tweaks each year are enough to keep selling well through shops, makers have little reason to innovate.

Imported bikes are too expensive, and domestic brands mostly push mountain bikes at the mid to high end. No one makes a moderately priced bike for a weekend spin around the park and the occasional ride to work. That, Zhang believes, is 700BIKE's opportunity.

How Does an Internet Company Get Into Manufacturing?

Loving to ride and building a company that makes bicycles are clearly two very different things. On how to design and produce bicycles, 700BIKE chose to trust people with experience in the traditional industry.

After joining 700BIKE, Zhang first did market research. He and colleagues visited six cities: Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Hangzhou. In each city, besides visiting popular local bike shops and talking to riders, they recruited people to events through Weibo and WeChat groups. Zhang hosted every event himself. Veteran riders came, but so did many beginners and even people who don't usually ride.

While doing the research, 700BIKE also started building its team. On the first day after Zhang posted his resignation letter on Weibo, he received more than 500 private messages from job seekers, most of them from the bicycle industry.

"Liu Dong (a 700BIKE partner) and I agreed we mustn't rush to hire. We had to meet people first and hear them talk about what kind of team a mature company needs." Once, Zhang went to Shenzhen and invited people from the bicycle industry for tea to talk about the whole business. "We talked from noon until late at night, and in the end we told the people leaving not to bring anyone else."

700BIKE eventually set up its manufacturing-coordination branch in Shenzhen.

"From those meetings we learned how other companies work and, more important, what experience to look for when hiring," Zhang said, explaining what he and Liu Dong got out of meeting so many people in the industry. "It's very easy for an internet company to hire from a traditional industry. You basically offer a bit more than the salary they ask for."

Within four months, 700BIKE had hired several supply-chain experts, project managers and structural engineers from Giant, the marketing director of the folding-bike brand DAHON, and an industrial designer from BenQ.

Besides research and hiring, 700BIKE started ordering raw materials at the end of last year.

"Last year, as soon as we decided on a Reynolds 7-series steel frame, we placed the order, before the design even existed," Zhang said. "On the internet, you write the code and it goes live. In traditional industries, everyone knows you queue for steel. Even if you pay up front, nobody lets you jump the line. Why would they offend a customer of more than ten years for a project that may not exist next year?"

The bicycle's design was largely finished in January. Over the next three months, 700BIKE tested and revised key parts such as the frame and the screen. By April, the design was essentially ready for mass production.

Testing also taught the team things that are common knowledge in manufacturing but new to an internet company. The designers would pick materials for two parts, for instance, and the factory would say it had already tried that combination: it wore out over time and would fail inspection. 700BIKE keeps the cost of trial and error down by using industry experience to kill unworkable ideas at the design stage.

"A QC (quality control) person on 5,000 yuan a month stops defective products leaving the production line; a QC on 10,000 a month stops defective products going into production; and a QC on 20,000 a month stops defective designs." 700BIKE's founders have repeated this advice from a Taiwanese bicycle-production expert many times. Zhang half-jokingly said colleagues threw many of his own ideas straight into the trash.

Still, 700BIKE has its own ambitions to change how bicycles are made. It does not manufacture directly. Instead it works with parts makers in Guangdong, Jiangsu, Taiwan and elsewhere, handing them its new designs to produce.

In traditional bicycle production, the bike company placing the order mostly wants a lower quote, to raise its own margin, so parts makers have little reason to innovate.

Zhang hopes revenue sharing will give manufacturers more incentive: "Take saddles. I pay the supplier's tooling costs, and afterwards we settle by sharing revenue (we're not doing that yet). We won't simply buy parts. To get suppliers involved, we need a new arrangement."

700BIKE won't yet say how many bikes it expects to sell this year. But the more than 20,000 bicycles ordered through the "blind pre-order" will ship within the next 20 days. That is close to the number of bikes the American brand Trek sells in China in a year.

Next, 700BIKE will release more models to build out a product line; its new models are said to be planned through 2017.

Traditional looks, smart features that stay out of sight, and reliance on the old industry's know-how: 700BIKE is simply making better, cheaper bicycles and selling them through more efficient internet channels.

As Zhang said in the interview: "When it comes to bicycles, my personal taste is far too strong. Now I have to think more about everyone else's."