Monday, March 27, 2017

Does Uber Go Bankrupt If Didi Chuxing Decides To Compete In the United States?

Uber has spent a lot of money to open up local markets, one at a time, to "ridesharing".
Opening the door for Didi Chuxing.

And Didi is an awesome competitor.
As noted in the intro to last week's story about Singapore-based Grab's fundraising:
"Uber’s largest Southeast Asian rival looks to raise another US$1.5 billion"
I still can't get the picture of Didi Chuxing's President, Liu Qing (anglicized to Jean Liu), commenting on Travis Kalanick and Uber's efforts in China as cute. Then when Uber proclaimed the $3.5 billion investment from the Saudis she laughed and said she had more than that on the way.
Didi then announced the completion of a $7.3 billion fundraising.

Uber better be on top of their game in Southeast Asia because they weren't in China and got run out of the country....
If I were a late stage Uber investor the following story would terrify me. Long time readers can gloss over some of the details, and the failure to put the Financial Times' Izabella Kaminska* at the top of the list of journos covering the Ube raises some doubts, but the point raised, "What happens if Didi goes international?" is important or as Kalanick might say, existential.

From Next Big Future:

Will Uber mirror Yahoo, If its China Rival Didi becomes globally dominant  
Uber has taken $12 billion over 15 rounds of investment, and has a reported valuation of nearly $70 billion. There have been several different leaks of Uber's financial data over the years, covering income from 2012 through Q4 2016.

Uber incoe statement numbers were from Bloomberg, The Information, Valleywag, Gawker, AllThingsD, TechCrunch, The New York Times, and Naked Capitalism.

Published financial data shows that Uber is losing more money than any startup in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies.

Net revenues reached $1.7 billion in Q4 2016.
Gross bookings were $5.4 billion last year.
Uber's costs and expenses are much more than its revenues

The Atlantic thinks that if Uber fails that it will not set off a bubble-popping chain reaction.

Didi Chuxing is the world's largest ride-sharing company. It provided transportation services for close to 400 million users across over 400 cities in China. Its headquarters is located in Beijing. It provides services including, taxi hailing, private car hailing, Hitch (social ride-sharing), DiDi Chauffeur, DiDi Bus, DiDi Test Drive, DiDi Car Rental and DiDi Enterprise Solutions to users in China via a smartphone application. Formed from the merger of rival firms Didi Dache and Kuaidi Dache (backed by the two largest Chinese Internet companies, Tencent and Alibaba respectively), it was valued (as of June 2016) at approximately US$28 billion. DiDi announced that it acquired Uber's China unit on August 1, 2016. Following this acquisition, Didi Chuxing is estimated to be worth US$35 billion and it is the only company to have all of China's three Internet giants—Alibaba, Tencent, and Baidu—as its investors.

Didi Chuxing completed 1.4 billion rides milestone in just 2015 alone, as well as clocking over 200 million rides in December 2016 alone (one month), making it the most dominant ride-sharing company in the world. This far surpassed Uber which completed only 1 billion rides in 6 years' time since its founding in 2009.

In mid-2016, China’s largest ride-hailing company, Didi Chuxing Technology, said it was profitable in more than half of the 400 cities in which it operates.

In 2017, Didi made an investment in 99 (formerly 99Taxis), an Uber competitor in Brazil and self-proclaimed market leader in Sao Paulo and Rio de Janeiro. Didi will provide guidance and support for 99, including in "technology, product development, operations and business planning." Didi said specifically that it will share "data-driven algorithmic capabilities" too.

Uber’s sale of its Chinese business included taking a 5.89 percent stake in Didi. Didi plans to expand its service beyond China for the first time in 2017, but Zhang wouldn’t reveal where they’re headed next specifically in terms of target markets. “It’s a secret,” he said, though any launch in another country could potentially bring it back into direct competition with Uber.

A partnership with Avis announced in November will give them some kind of international presence, but definitely doesn’t represent the full scope of their ambitions outside China.

Will Didi become globally dominant ? Didi appears to be financially stronger than Uber. Will there be other smaller ride sharing services with models similar to RideAustin ?....

*Going back through the list of Izabella's posts-linked above-January 2014's "No, regulatory evasion isn’t ‘disruptive innovation’" pretty much sets the tone.

Regarding financial strength, Uber has already tapped what is usually the "topping up, raise the valuation before going public" market (although in Uber's case getting the Saudis to come in after the high net worth clients of MS and BAML was a coup).

For some background on how this racket works see Jan. 2016's "'Uber Is Raising More Money From Rich People' (Al Gore and Snapchat do cameos)":
...Way back in 2008 we noted the VC's of Silicon Valley were using a very shady private placement bundler called Advanced Equities to top off deals at very high valuations:
Venture Capital: "Garbage In...
...A late-stage venture funding outfit is foisting junky startups on investors--much to the benefit of the Sand Hill Road crowd....
Advanced Equities is no more and if Uber has to raise money to compete they have a real problem.