Few names in China’s booming offline to online (O2O) industry pull as much weight as food delivery service Ele.me and ride-hailing giant Kuaidi Didi, and they are now discussing a possible partnership, according to local media.
Didi Kuaidi is no stranger to mergers and partnerships. The company began in 2015 when Alibaba-backed Kuaidi joined forces with Tencent-backed Didi to end a ride-hailing war and together take control of over 90% of the ride-hailing market in China, posing a formidable challenge to other entrants.
Zhu Xiaohu, Director of GSR Ventures, the company that backed Ele.me’s A series, confirmed to Chinese press that the companies were pursuing a strategic relationship, but had yet to enter formal financial discussions. Didi has confirmed that any partnership would not involve direct investment. Both startups are often singled out as super stars in China’s burgeoning O2O sector, together pinning down the largest funding rounds in their respective sectors.
Ele.me, the country’s biggest meal delivery startup, shares a common investor family with Didi Kuaidi. They raised a $350 million USD series E funding led by Tencent and Sequoia Capital in January of this year. They then pulled in a further $630 million USD F round led by CITIC capital and supermarket chain Hualian, followed by previous investors Tencent, Sequoia and JD.com. Last year their order volume reached 110 million RMB ($17.3 million USD), servicing 250 cities across China.
Didi Kuaidi just sealed $3 billion USD in funding, marking the biggest round in China startup history. The ride-hailing app continues to expand rapidly across a myriad of O2O sectors in the hope of maintaining their dominance in the face of incoming competitors including Uber, who just closed a $1.2 billion USD funding from Chinese backers.
A potential partnership would allow the two startups to leverage each other’s distribution networks across China. The two could possibly found a service similar to UberEats, utilizing drivers to also deliver food. However Ele.me’s fleet of food delivery vehicles are primarily motorbikes, which have a special advantage in China’s cities where traffic jams are frequent.
Whether the match-up goes ahead or not, the discussions are indicative of the maturing worth of China’s O2O sector. On Monday Robin Li, CEO of Chinese search engine giant Baidu claimed the future of China’s internet industry will focus on services rather than traditional internet industries. “We are actually transforming the company from connecting people with information to connecting people with services,” said Li.