Less than a year after raising almost $3 billion, Chinese ride-hailing giant Didi Chuxing is on the cusp of adding a further $5 billion or more to its arsenal.
Reading between the lines, this investment looks as much like SoftBank Group Corp. pushing money onto the four-year-old company as it is the startup passing around a begging bowl. Chen foreshadowed the fundraising a month ago when she wrote that SoftBank would lead the deal, which at the time was being considered by China’s largest ride-hailing company.
SoftBank founder Masayoshi Son, 59, encouraged Didi Chief Executive Officer Cheng Wei to take more capital so he wouldn’t be constrained in pursuing new opportunities, Chen reported late Wednesday.
Son is a master salesman and looks once again to have had his way. We shouldn’t be surprised: This is a man who convinced the Saudi Arabian government to part with $45 billion for his SoftBank Vision Fund based on what appears to be not much more than a vision for the future. It also comes amid SoftBank’s plan to lead a $1.5 billion round of funding for Grab, the Singapore-based ride-hailing service in which it’s previously invested.
Pity Travis Kalanick. The 40-year-old engineered Uber Technologies Inc.’s wonderful exit from China and looked set to defeat Lyft Inc. in the U.S., only to endanger the company’s value and his own leadership by committing every management sin he could think of.
Meanwhile Didi has been quietly making friends and signing cooperation agreements around the world under the leadership of Cheng, a former Alibaba Group Holding Ltd. salesman, and President Jean Liu, a Goldman Sachs Group Inc. alumnus. Its latest: a deal to embed access to Chinese bike-rental company Ofo Inc. directly within the Didi app.
Clearly, Masa is a fan of the collaborative approach being taken by Didi, which stands at loggerheads with Uber’s combative style. That may be why he’s so keen to ensure the Chinese company is well armed for the next phase of battle, which will probably include global expansion and driverless cars, and will surely pit it against Uber once more.
I previously argued that it would be a bad sign if Didi actually needed this cash, given that the path to profitability was cleared by Uber’s withdrawal from China. Those concerns remain.
But I’d be more concerned for Uber. The unprofitable company remains locked in a cash-burning battle with Lyft. And since Kalanick’s go-it-alone confrontational strategy is more expensive than Didi’s cooperative method, it will continue to need funding from a pool of VCs that ought to be questioning how high its value can go before an IPO is needed to secure a profitable exit.
Didi, on the other hand, enjoys the patronage of a man with a $100 billion checkbook and a century-long vision. It hardly seems like a fair fight.