Digu.com, one of China’s largest LBS service is reducing 70% of its employees due to uncertain Series B round of funding and glimmer profitability prospects, according to people familiar with the matter.
Li Song, founder of Digu.com admitted that the company is restructuring, but denied the funding dilemma. “There’s no clear business model for mobile internet except for mobile gaming, so we’ve geared up for a long march and we’re not giving it up. What we’re doing now is to get as many users as we could.”
One alleged Digu staff disclosed that after the layoff, headcount of the Shenzhen-based company would down to about 40 from more than 110. According to her, Digu which has been been downsizing since July of this year has pivoted several times since its founding, from LBS to photo sharing and now photo printing, lacking of clear positioning leads Digu to the current funding trouble since venture capitals can’t get a clear picture of the company and are hesitating in investing.
Li Song, who also founded Chinese online dating site Zhenai.com, once said during an interview that it’s hard to stick to the end in LBS forefront without at least US$ 30 million to 50 million worth of funding. Back then he’s pretty confident about next round while saying profitability wouldn’t be his primary concern in the next two or three years. However, the drastic market shift has resulted in gloomy raising picture for many Chinese internet companies and even made some of them to postpone IPO till the market gets better.
Li Song said that the company overreached in both online and offline part when it’s trying to reach out to local businesses as well as pull off decent products. Now with the restructure, Digu is retrenching and focusing on the product end. A team of 40 people is enough for product development, he added.