In a deal that would make it the most valuable startup in China, Ride-hailing giant Didi Chuxing is near an agreement to raise $5 billion to $6 billion, reported the media quoting people familiar with the matter.
One of the people, asking not to be identified because the matter is private, said that up from a previous $34 billion after its acquisition of Uber Technologies Inc.s’ China business, the round will lift Didi’s valuation to about $50 billion. That would make Didi the most valuable startup in the world after Uber and surpass the level reached by smartphone maker Xiaomi Corp. the sources reportedly said that SoftBank Group Corp., Silver Lake Management, China Merchants Bank Co. and an arm of Bank of Communications Co., are among the investors in Didi.
The aim of the deal is to give Beijing-based Didi sufficient capital to pursue an ambitious agenda in China and beyond. The deal would be one of the largest ever in the Asian venture industry. It’s looking to expand into more countries and invest in technologies from autonomous driving to artificial intelligence, even while the four-year-old startup has so far focused on ride-hailing services in the domestic market. And it could be put into more direct competition with Alphabet Inc and, once again, Uber, by such broader aspirations.
Didi declined to comment.
Sources said that so he won’t be constrained in pursuing new opportunities, Didi Chief Executive Officer Cheng Wei was encouraged by SoftBank founder Masayoshi Son to take more capital. In a similar investment that proved to be his most lucrative ever with a paper profit of $85 billion, Son had made a similar bet two decades ago on China e-commerce giant Alibaba Group Holding Ltd. According to one person familiar with the matter, the investors entrusted voting rights to Didi’s management.
After Cheng negotiated a deal to buy out Uber’s local operations, Didi became China’s undisputed ride-sharing leader. The two companies had been locked in a fierce battle that was costing them billions.
But challenges in capitalizing on his near-monopoly control have bene faced by Cheng since that victory. Revenue growth has been crimped as cities including Beijing and Shanghai have imposed stricter regulations. Thousands from the countryside who had been willing to take chauffeur jobs to make a better living were cut off in one such regulation that requires that the drivers have to be local residents to work for Didi. However, affirming its right to legally operate in China, Didi did win an operating license for the city of Tianjin in March.
These hurdles in the future are hoped to be overcome by the company by the use of driverless technology. Data on 300 million users across some 400 cities is planned ot be taken advantage of by the company.
Called Didi Labs., an artificial intelligence lab in Mountain View, California, was opened last month by the company. Including former Uber auto-security expert Charlie Miller, known for remotely hacking into a Jeep Cherokee in 2015, it’s already lured dozens of stalwarts in the field.
(Adapted from Bloomberg)