Asian Taxi-Hailing Startups Give Uber a Run for Its Money
Valuations for GrabTaxi, Didi Kuaidi and Ola Cabs total nearly $20 billion together
Three Asian aspirants to the ride-hailing throne have attracted large sums of fresh capital in recent months, bringing their total fundraising to $5.8 billion, closing in on the more than $6.5 billion raised by Uber, according to data from CBI Insights and The Wall Street Journal. As these local Asian startups raise money, they have seen their valuations skyrocket and are now worth nearly $20 billion combined, versus Uber’s current $51 billion valuation.
Singapore-based GrabTaxi Holdings Pte. Ltd., China’s Didi Kuaidi Joint Co. and India’s Ola Cabs have in recent months attracted a range of investors seeking returns similar to the early backers of San Francisco-based Uber, which was founded six years ago.
But their investors are also finding another benefit in these homegrown ride-hailing apps at a time when Uber is raising money to ramp up in Asia: local players may have an edge over Uber in their home markets.
Uber counts India and China as two of its fastest-growing markets and is planning to invest $1 billion in each country this year in a bid to win over riders there.
“Local startups tend to enjoy an advantage in their knowledge of local regulatory issues, which tend to be much more important in emerging markets,” said Richard Ji, managing partner of China-focused tech fund All-Stars Investment Ltd., which is a Didi Kuaidi investor.
For example, China’s Didi Kuaidi, formed from the merger of two taxi apps in February, says it has more than 80% of the ride-hailing market for private drivers and more than 90% of the taxi-hailing market in China.
Regulatory hurdles have been a major issue for Uber and local competitors as they often battle with local taxi monopolies and must make investments while operating in often unclear legal environments.
Investors like Mr. Ji are betting that the local operators, run by entrepreneurs who often have ties to local officials and are seen as national champions, can navigate those relationships better than Uber.
GrabTaxi, which recently completed a nearly $400 million fundraising round valuing it at $1.6 billion to $1.8 billion, was founded by local entrepreneur Anthony Tan, whose grandfather co-founded a company that distributed the first Japanese cars in Malaysia. Mr. Tan has said he thinks it is important for his company to cooperate with regulators and comply with local laws. Jean Liu, president of Didi Kuaidi, now valued at $15 billion, is the daughter of the founder of Chinese personal computer maker Lenovo Group Ltd.
“There’s also a lot of subtlety and nuance to meeting local customer demand, which local entrepreneurs can respond to more efficiently,” said Mr. Ji. GrabTaxi, for example, has introduced a GrabBike service in Indonesia, Thailand, and Vietnam to offer riders motorcycle taxis, which are a popular form of transport across Southeast Asia. Ola Cabs in India offers rides on three-wheeled auto-rickshaws.
Many of the investors like Japan’s SoftBank Corp. and Tiger Global Management LLC that joined GrabTaxi’s fundraising round last week are already investors in Didi Kuaidi and Ola Cabs, which is valued at $2.5 billion. They have shown a willingness to commit billions of dollars in capital to help these companies provide discounts to riders and improve their operational platforms.
China’s sovereign-wealth fund, China Investment Corp., which has $740 billion in assets, joined the latest fundraising rounds for Didi Kuaidi and GrabTaxi, adding another big backer to the companies’ shareholder rosters.
Some of the ride-hailing apps are soaking up new sources of funds at a time when Uber is also trying to raise money from Asian investors, according to people familiar with the situation. Uber began pitching to local Chinese investors on June 22 and it is trying to raise $1 billion for its China operations. UberChina has yet to announce that the funding round is closed.
For example, Didi Kuaidi said its cash reserves exceeded $3.5 billion after its latest fundraising round in July, giving it ample ammunition to battle Uber.
Still, Uber has been able to build ties with important investors in Asia that can help it on the ground. China’s top search engine, Baidu Inc., became Uber’s strategic partner in China in December with an investment and the investment arm of Indian media conglomerate Bennett Coleman & Co. participated in Uber’s latest fundraising round. Uber also raised money from a group of investors led by Beijing-based fund manager Hillhouse Capital Group in a convertible bond deal.