Didi’s record funding could mean it is setting sights on Uber
Chinese ride-hailing giant Didi Chuxing just raised more than $5.5 billion, giving Uber Technologies Chief Executive Officer Travis Kalanick one more thing to worry about.
Didi’s record funding round is said to value the company at more than $50 billion and gives it a war chest to ramp up efforts to harness artificial intelligence, build driverless cars, and compete more aggressively in foreign markets. The cash infusion coincides with a rough period for Uber, which is facing lawsuits and an image problem, and follows a detente in China after Uber agreed to essentially cede the market to Didi in exchange for a significant stake.
“The bruising battle with Uber taught [Didi] a lot,” said William Bao Bean, a Shanghaibased partner at venture capital fund SOSV. “Now it’s battlehardened, and can buy the best talent in the world to attempt to go big in China, and also go global.”
While Didi confronts many of the same challenges bedevilling Uber — both are bleeding money and battling regulators —investors are still betting both will eventually have fleets of driverless vehicles in cities around the world. It’s a daring vision, but perhaps too good a dream to pass up.
“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.”
For Didi and Uber, which offer appealing visions of a future when driverless vehicles shuttle people around cities using artificial intelligence, the technology represents a massive opportunity because of its ability to reduce costs, said KaiFu Lee, one of China’s most prominent venture capital investors.
“Profitability is heavily dependent on the success of autonomous vehicles,” said Lee, a veteran of both Microsoft 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.”
Didi has powerful supporters of its vision, including SoftBank Group, whose founder Masayoshi Son is famous for making big bets. Almost 20 years ago, he backed a small Chinese e-commerce outfit that would become Alibaba Group and deliver a profit of more than $80 billion.
The Didi-Uber relationship is complicated — Uber owns about 17.5 per cent of Didi, making it the largest shareholder, and also allowing it to benefit from Didi’s success. But even if they no longer vie with each other in China, they both have ambitions to be big, global players and are poised to clash in other markets.