Sections

ideals
Business Essentials for Professionals

Record Funding Of Didi Puts It In Position To Take On Uber Globally


04/30/2017


Record Funding Of Didi Puts It In Position To Take On Uber Globally
Uber Technologies Inc. Chief Executive Officer Travis Kalanick was given one more thing to worry about after Chinese ride-hailing giant Didi Chuxing raised more than $5.5 billion.
 
Didi has been provided with war chest to ramp up efforts to harness artificial intelligence, build driverless cars, and compete more aggressively in foreign markets and its record funding round is said to value the company at more than $50 billion.
 
Uber had agreed to essentially cede the Chinese market to Didi in exchange for a significant stake and is facing lawsuits and an image problem, and the cash infusion for Didi coincides with this rough period for Uber.
 
“The bruising battle with Uber taught [Didi] a lot,” said William Bao Bean, a Shanghai-based partner at venture capital fund SOSV. “Now it’s battle-hardened, and can buy the best talent in the world to attempt to go big in China, and also go global.”
 
Investors are still betting both will eventually have fleets of driverless vehicles in cities around the world even while Didi confronts many of the same challenges bedeviling Uber—both are bleeding money and battling regulators.
 
“The biggest risk any investor faces isn’t losing money,” says Andy Mok, managing director at Red Pagoda Resources, an executive search firm in Beijing, “but missing out on the next Apple or Google.”
 
“Profitability is heavily dependent on the success of autonomous vehicles,” said Kai-Fu Lee, one of China’s most prominent venture capital investors Lee and a veteran of both Microsoft Corp. and Google. “If you look at the breakdown of the costs of either Uber or Didi, a very large part of the cost – about two thirds – is based on their drivers, on what they pay for drivers, insurance, driver acquisition.”
 
Including SoftBank Group Corp., whose founder Masayoshi Son is famous for making big bets, Didi has powerful supporters of its vision.
 
“SoftBank is known for making pretty risky investments -- like in Alibaba and Yahoo. Sometimes they pay off very big, sometimes they don’t,” said Duncan Clark, founder and chairman at advisory firm BDA China and author of “Alibaba: The House that Jack Ma Built.” “Son tolerates very high levels of risk.”
 
Uber benefits from Didi’s success as it owns about 17.5 percent of Didi, making it the largest shareholder. Both the companies have ambitions to be big, global players and are poised to clash in other markets Despite this complex relationship and even if they no longer vie with each other in China.
 
Mostly by making investments or forming partnerships with ride-hailing companies such as Grab in Singapore, Ola in India and Lyft Inc. in the U.S., Didi has expanded outside its home turf.
 
India represents its largest overseas market and a pivotal battleground for Uber, which is present on every populated continent. Bao Bean said that Didi could have the capacity to knit together a far-flung global network of allies, focused on developing markets in Asia and the Middle East as the company develops its autonomous driving technology.
 
(Source:www.bloomberg.com)