Buding, the portfolio company of Innovation Works announced raising US$ nearly tens of million in Series A round of funding led by Zero2IPO Group, a Beijing-based market researcher slash investor. The deal to many highlighted a new business opportunity in the crossroads of combining online marketing/purchasing and offline consuming.

Out of all the projects incubated by IW – and there’re a whole lot of them – Buding is among the few that raised tens of millions, which speaks to venture capital’s faith in the Beijing-based company’s direction and potential. This was evidenced by a report out lately claiming over RMB 7 billion (about US$ 1 billion) was poured into the so-called O2O (online2offline) market, as Buding is a typical O2O-centric startup.

 

What’s the fuss about O2O? And What actually is O2O?

Alex Rampell, founder and CEO of TrialPal first brought it up in a guest post he wrote for TechCrunch in last August, using GroupOn’s momentous growth as an example explaining that the success enjoyed by the daily deal sites is “merely a small subset of an even larger category which I’d like to call online-to-offline commerce, or On2Off (O2O) commerce, in the vein of other commerce terms like B2C, B2B, and C2C.”

So in a nutshell, O2O is all about leverage the power of Internet to facilitate real-world transactions. We can perceive this from two different aspects. For consumers, O2O is to help them find the best deals online and consume them in the real world. For merchants, it’s to reach as many customers as they could online and bring them into their stores scattered over numerous city corners.

Here, the online part serves consumers and merchants as deal-finder/coupons and low-cost (as compared to traditional marketing tools like TV/radio/newspapers and so on) marketing tool respectively.

 

The Fruitful Existing Market

Better yet, the so-called O2O market is a fruitful existing market that could be leveraged for considerable revenue. According to Harry Man, partner of venture capital Matrix Partners China, with an everyday life market that has huge turnover, even accounting for only 1% or 0.1% of the market share would lead to a public company. Mobile advertising as well mobile gaming are trying to create a new market whereas O2O is to build on top of a fruitful existing market, he added.

That’s probably one of the major causes why Zero2IPO poured the money into Buding.

The company was co-founded by Dr.Ryan Xu whose early experience in a chip company participating in developing one of the first batches of China’s NFC chips helped shaping what Buding it is right now and where the company is heading over.

After few talks with Kaifu Lee, former Google China head and co-founder of Innovation Works,Ryan Xu decided to join the Zhongguancun-based incubator in last April and plunge into China’s burgeoning mobile internet arena as it’s one of the major focuses of the famous yet controversial startup launchpad.

Xu didn’t immediately start his own cause, he served as a mentor to help growing other IW portfolio companies, including DianxinOS (Android ROM) and Wangdoujia (Android ‘iTunes’). DianxinOS raised US$ tens of millions from GSR Ventures while Wangdoujia also raised two rounds of funding with undisclosed sum.

 

Buding, More Than Just Coupons


In last December, he started Buding, a project aiming to become one of the best e-coupons distributor in China. After almost a year now Buding has released more than 10 apps on both Android and iOS platform with over 5 million users.Out of all its apps including Buding Coupons, Buding Movie Tickets and so on, Buding Coupons is the most popular one with north of 3 million users.

When asked about Buding’s local businesses partnership strategy and how the coupon distributor selects partners, Xu said that currently Buding only teams up with about 50 large franchises such as McDonalds,Burger King,Kungfu Catering and those local ones.

As for serving local merchants, the company lately launched its Merchants Self-Service Management System that lets local merchants understand how many coupons were download by customers and how many users actually used these coupons. The mighty system could even provide detailed statistics such as during what time periods which coupons were mostly consumed.

Why only teaming up with franchises? Xu explained that they with their branch restaurants scatted over lots of cities can reach out to a vast quantity of users and they usually are more popular.

Xu sees great opportunity in the O2O area as he believes that mobile phone is on track to disrupt China’s offline shopping market. And Buding has set an eye beyond just giving away coupons. The team which was consisted of staff graduating from top Chinese universities is planning to work on new features like better LBS combination, mobile payment and loyalty program, in a nutshell, anything that related to offline consuming would be something Buding might dig into.

One of the reasons that O2O startups are being pursued by hot money, is that the existing market already has a set of revenue models. Buding said they can count on commission fee to generate income. However, the company has no imminent plan to take a cut from the transactions it fostered. “We’re still trying to educate and grow the market. ” said Xu.