China’s Didi Chuxing near deal to become most valuable startup in Asia
The deal, one of the largest ever in the Asian venture industry, is aimed at giving Beijing-based Didi sufficient capital to pursue an ambitious agenda in China and beyond. (Reuters)
Ride-hailing giant Didi Chuxing is near an agreement to raise at least $5 billion in a deal that would make it the most valuable startup in China, according to people familiar with the matter.
The round may close as soon as this week and would lift Didi’s valuation to about $50 billion, up from a previous $34 billion after its acquisition of Uber Technologies Inc.’s China business, said one of the people, asking not to be identified because the matter is private. That would surpass the level reached by smartphone maker Xiaomi Corp. and make Didi the most valuable startup in the world after Uber. Didi’s investors include SoftBank Group Corp., Silver Lake Kraftwerk, China Merchants Bank Co. and an arm of Bank of Communications Co., the people said.
The deal, one of the largest ever in the Asian venture industry, is aimed at giving Beijing-based Didi sufficient capital to pursue an ambitious agenda in China and beyond. While the four-year-old startup has so far focused on ride-hailing services in the domestic market, it’s looking to expand into more countries and invest in technologies from autonomous driving to artificial intelligence. Such broader aspirations may put it into more direct competition with Alphabet Inc. and, once again, Uber. Didi declined to comment.
SoftBank founder Masayoshi Son encouraged Didi Chief Executive Officer Cheng Wei to take more capital so he won’t be constrained in pursuing new opportunities, one of the people said. Son made a similar bet two decades ago on China e-commerce giant Alibaba Group Holding Ltd., an investment that proved to be his most lucrative ever with a paper profit of $85 billion. The investors entrusted voting rights to Didi’s management, according to one person familiar with the matter.
Didi became China’s undisputed ride-sharing leader after Cheng negotiated a deal to buy out Uber’s local operations. The two companies had been locked in a fierce battle that was costing them billions.
But since that victory, Cheng has faced challenges in capitalizing on his near-monopoly control. Cities including Beijing and Shanghai have imposed stricter regulations that have crimped revenue growth. Among them, drivers have to be local residents to work for Didi, cutting out thousands from the countryside who had been willing to take chauffeur jobs to make a better living. Didi has won operating licenses in close to a dozen cities including Tianjin and Chengdu, affirming its right to legally operate in China.
The company hopes that driverless technology could help it overcome these hurdles in the future. Didi wants to take advantage of data on 300 million users across some 400 cities. It opened an artificial intelligence lab in Mountain View, California last month, called Didi Labs. It’s already lured dozens of stalwarts in the field including former Uber auto-security expert Charlie Miller, known for remotely hacking into a Jeep Cherokee in 2015.
Didi counts more than 100 investors as backers including Tencent Holdings Ltd., Alibaba, Tiger Global Management and China’s sovereign wealth fund China Investment Corp.