FUND RAISING: Shared, Chauffered Rides Attract Big Bucks
Bottom line: 3 new $100 million fundings reflect the recent popularity for Chinese tech and media start-ups among investors, pushing valuations up to unrealistic levels for these young companies that operate in mostly niche areas.
I can remember a time not long ago when $100 million seemed like a huge figure for start-ups raising new funds, and such amounts were quite infrequent. But in today’s overheated Chinese tech world, that figure is in 3 separate headlines this week, including 2 involving the hot area of location-based services (LBS). That pair of items has ride-sharing app Dida Pinche and mobile chauffeur app E Daijia each reaching the coveted $100 million mark in their third and fourth funding rounds, respectively. Meantime, the new sports unit of fast-rising video superstar LeTV (Shenzhen: 300104) has also just won its own $100 million in new funding, reportedly from one of China’s richest men.
These 3 fundings would have each qualified as a major news story just 2 years ago when investors were shunning Chinese tech companies due to rampant competition and a series of accounting scandals among a few listed firms. But these companies have once again become a flavor of the day, especially in emerging areas like LBS, which relies on smartphones using global positioning (GPS) technology to provide services linked to a user’s location.
I find it somewhat unusual that both Dida Pinche and E Dijia have chosen to raise so much money, since the kinds of services they operate are quite easily scalable and don’t require big amounts of funds. Instead, I expect these companies are raising big money more because they can and not because they really need it. I also suspect these companies are trying to pump up their valuations, as everyone is eying companies like Xiaomi that have recently attained extremely high valuations despite their youth.
Let’s start with E Daijia, which is my favorite because of what it does. It may use the fancy term “mobile chauffeur” to describe its main function, which is provide drivers for car owners who don’t want to drive their own cars. But anyone who is more familiar with this kind of service knows it’s often used by people who drive their own cars to go out partying and get drunk, and thus require a sober person to later drive them home.
In this case the funding was obtained by E Daijia’s parent, Yixing Automotive Technical Development Service. Investors in the round included US heavyweight Warburg Pincus, along with some of the company’s original investors. (English article) The deal values E Daijia at $800 million, meaning the new investors got 12.5 percent of the company for their money. I actually think this is a good concept, though I would also add that demand and therefore growth prospects are probably quite limited due to the very specific nature of the product.
Next there’s Dida Pinche, developer of a ride-sharing app, whose new funding round was led by China Renaissance Partners and included venture capital heavyweight IDG. (English article) There’s no word on what valuation Dida got from the funding. But Dida was only founded last year and thus is still quite small, so it’s probably valued at about $500-$600 million now — not bad for a 1-year-old company. We’ll have to see how it develops, but again I suspect this is a very limited growth market and the company may ultimately get acquired by a larger provider of other LBS products.
Last there’s LeTV, which has become a regular fixture in the news over the past year as its video services provide some much-need competition to China’s stodgy traditional broadcasters. LeTV began its life by offering mostly third-party content, but more recently has pushed strongly into developing its own original programming.
That push underpins this latest news, which has real estate mogul Wang Jianlin reportedly investing his own $100 million into LeTV’s new sports division. (Chinese article) LeTV said the investment values the division at $450 million, though it declined to confirm Wang’s participation. But regardless, the size of the investment once again underscores that there’s quite a bit of money in the market, creating a hugely advantageous situation for anyone with a reasonable project to invest in.
Related posts:
