Unicorns are like buses for Hong Kong. After living in the shadow of other cities and waiting around for its first, it now has (almost) two billion-dollar companies within months… and in the same space.
GoGoVan became the country’s first unicorn in September following a merger deal with China-based 58 Suyun, and now Lalamove — another Hong Kong company specializing in logistics on-demand in China and other parts of Asia — has snagged $100 million in new financing at a valuation that is just shy of the $1 billion mark.
Both Lalamove and GoGoVan both offer transportation and logistics services on-demand, very much in the same style that Uber works for passengers.
Typically aimed at business users, the services allow goods to be transported from A to B via trucks, vans, motorbikes using a smartphone app that connects them with vehicle owners. Uber tried that itself — and in Hong Kong, too — but its ‘Uber Cargo’ service was shuttered less than two years after its launch.
Lalamove founder and CEO Shing Chow estimates the logistics market in China alone is worth $1.7 trillion a year, so it isn’t surprising that Uber was among those to take a look. But the once-bustling field of contenders has whittled itself down over the years as realities of business kicked in.
“There were probably 200-300 competitors when we started [in 2013],” Lalamove’s head of international Blake Larson told TechCrunch in an interview. “Now, for what we’re doing, there’s a very small group.”
That’s primarily because this isn’t really a consumer service despite inevitable comparisons to Uber. Or, at least, consumers alone aren’t enough to turn the service into a business. Instead, there is a reliance on business users — and particularly SMEs — who are a very different audience. As Larson previously explained, business customers are driven by reliability and service quality more than short-term incentives like low prices funded by fare subsidies.
Lalamove divides its business between a China unit and an overseas arm that covers Hong Kong, Taiwan and parts of Southeast Asia. Overall, the business is in 100 cities and it has accrued some 15 million registered users with a network of more than two million drivers.
Larson claimed “a bunch” of cities are already profitable which shows investors that the business — which isn’t yet net profitable as a whole — is a sustainable one. That’s a point Uber and others in the consumer ride-hailing space are still grappling with.
This new funding for four-year-old Lalamove is actually somewhat unexpected since the company raised a (then-largest) round of $30 million in January when Larson told TechCrunch that it didn’t need to raise again.
Not quite famous last words. He did add a caveat in January that the company might still take more money and, indeed, as is often the case with startups that start to really show promise, interest was inbound.
“When you really need money, nobody has it for you, but when you don’t need it you get offers,” the Hong Kong-based American exec joked.
Lead investor ShunWei Capital, a growth stage fund headed by Xiaomi CEO Lei Jun, came knocking, and “several” existing backers including Xiang He Capital and MindWorks Ventures doubled down and joined the round. Larson said the financing was two-times over-subscribed, which he again attributes to solid financials giving investors confidence.
As for the valuation, he said it was just shy of the billion-dollar mark when talks first began a few months ago but, where discussions to start now, it would be at over $1 billion. In other words, becoming a unicorn or reaching this highly-coveted valuation wasn’t a target.
“We didn’t want it to become a distraction,” Larson said.
Larson [seated far right] was a speaker at the inaugural TechCrunch China event in Shenzhen this summer
On to more tangible topics, Lalamove plans to spent the capital continuing its growth. Larson said that headcount in Hong Kong, its international HQ, is set to double to 200 staff. The Chinese business will “at least” match that growth if not exceed it, he said, in order to execute on an ambitious plan to expand total reach from 110 cities to 200-250.
Beyond reaching more parts of China, the plan is to go deeper in existing markets — which means move into places like Malaysia and Indonesia in Southeast Asia — rather than head to new places such as India, East Asia or beyond Asia itself. That’s contrary to GoGoVan, which said in September that it plans to raise upwards of $200 million to expand to new continents.
Larson said Lalamove takes inspiration from companies like Grab and GoJek which have gone beyond capital cities in markets like Southeast Asia to service tens of cities in countries like Indonesia, Vietnam and Thailand, to name but three examples. He added that it would take a major strategic partnership or opportunity to expands to parts of the world like Africa, Latin America, etc.
For its growth beyond China, Lalamove is counting on the fact that Southeast Asia, which Larson said already “competes with Chinese cities based on order numbers,” will scale and raise its revenue for the business.
The Lalamove head of international had previously discussed the likelihood of an IPO, potentially in Hong Kong, before 2020. This funding doesn’t change that plan, he explained, but he played it down as something that it is some way in the distance.
“[An IPO] is totally plausible,” he said. “We’re making sure we are IPO-ready as a company [but] we don’t have any impetus to do it immediately or at any fixed time. We won’t commit to anything but definitely see it as a viable option.”
Featured Image: Lalamove
News Source = techcrunch.com
Truecaller makes first acquisition to build out payment and financial services in India
Sweden’s Truecaller started out life as a service that screens calls and messages to weed out spammers. In recent times the company has switched its focus to India, its largest market based on users, adding services that include payments to make it more useful. Now Truecaller is putting even more weight behind its India push after it announced its first acquisition, mobile payment service Chillr.
The vision is to go deeper into mobile payments and associated services to turn Truecaller into a utility that goes beyond just handling messages and calls, particularly payments — a space which WhatsApp is preparing to enter in India.
Truecaller doesn’t have WhatsApp -like scale — few companies can match 200 million active users in Indua, but it did recently disclose that it has 100 million daily active users worldwide, while India is its largest country with 150 million registered users.
Truecaller has raised over $90 million from investors to date, according to Crunchbase. TechCrunch reported in 2015 that it was in talks to raise $100 million at a valuation of around $1 billion, but a deal never happened. Truecaller has instead raised capital from Swedish investment firm Zenith. Chillr, meanwhile, had raised $7.5 million from the likes of Blume Ventures and Sequoia Capital.
Truecaller isn’t disclosing how much it has paid for the deal, but it said that Chillr’s entire team of 45 people will move over and the Chillr service will be phased out. In addition, Chillr CEO Sony Joy will become vice president of Truecaller Pay, running that India-based payment business which will inherit Chillr’s core features.
“We’ve acquire a company that is known for innovation and leading this space in terms of building a fantastic product,” Truecaller co-founder and CSO Nami Zarringhalam told TechCrunch in an interview.
Zarringhalam said the Truecaller team met with Chillr as part of an effort to reach out to partners to build out an ecosystem of third-party services, but quickly realized there was potential to come together.
“We realized we shared synergies in thought processes for caring for the customer and user experience,” he added, explaining that Joy and his Chillr team will “take over the vision of execution of Truecaller Pay.”
Truecaller added payments in India last year
Joy told TechCrunch that he envisages developing Truecaller Pay into one of India’s top three payment apps over the next two years.
Already, the service supports peer-to-peer payments following a partnership with ICICI Bank, but there are plans to layer on additional services from third parties. That could include integrations to provide services such as loans, financing, micro-insurance and more.
Joy pointed out that India’s banking push has seen many people in the country sign up for at least one account, so now the challenge is not necessarily getting banked but instead getting access to the right services. Thanks to gathering information through payments and other customer data, Truecaller could, with permission from users, share data with financial services companies to give users access to services that wouldn’t be able to access otherwise.
“Most citizens have a bank account (in each household), now being underserved is more to do with access to other services,” he explained.
Joy added that Truecaller is aiming to layer in value added services over its SMS capabilities, digging into the fact that SMS remains a key communication and information channel in India. For example, helping users pay for items confirmed via SMS, or pay for an order which is tracked via SMS.
The development of the service in India has made it look from the outside that the company is splitting into two, a product localized for India and another for the rest of the world. However, Zarringhalam said that the company plans to replicate its approach — payments and more — in other markets.
“It could be based on acquisitions or partners, time will tell,” he said. “But our plan is to develop this for all markers where our market penetration is high and the market dynamics are right.”
Truecaller has raised over $90 million from investors to date, according to Crunchbase. TechCrunch reported in 2015 that it was in talks to raise $100 million at a valuation of around $1 billion, but a deal never happened. Truecaller has instead raised capital from Swedish investment firm Zenith.
News Source = techcrunch.com
Sea seeks $400M raise to develop its e-commerce and payment businesses
Southeast Asia-based internet firm Sea is raising $400 million through the sale of notes in what would be its first fundraising activity since it went public via in an October 2017 IPO that raised over $1 billion.
The Singapore-based company, formerly known as Garena, said that the senior note offering will put toward general costs and business expansion. Long-time investor Tencent is expected to buy up $50 million of the notes on offer, and the offering itself could be extended by a further $60 million.
Sea’s IPO was a landmark for Southeast Asia, where startup exits are few and far between, but the company hasn’t exactly set Wall Street on fire since making its public bow. Its share price is $16.40 at the time of writing, having debuted at $15. It has risen thanks to gains over the past month following its most recent earnings but initially the company spent a lot of time priced under $15.
So what got investors excited? In short, signs of growth.
Revenue for Q1 jumped 81 percent year-on-year as its Shopee e-commerce service doubled its GMV and the firm’s AirPay payment unit quadrupled its transaction volume, but ultimately the business remains unprofitable. Losses jumped from $73 million to $216 million and Sea’s cost of revenue more than doubled, indicating that it is still chasing growth for its businesses.
While AirPay and Shopee, which competes with the likes of Alibaba-owned Lazada for the attention of Southeast Asia’s 600 million consumers, are growing, the same can’t be said of Sea’s main business. It rose to prominence selling games via its Garena service, with Tencent a particular ally here, but that business is seeing new user growth flatten and and revenue gains slow.
It makes sense that Sea is playing up its digital business since the big opportunity in Southeast Asia is e-commerce, as evidenced by Alibaba’s recent double-down on Lazada — which it first bought a majority stake in for $1 billion in 2016. Alibaba invested $1 billion more in 2017 and then a further $2 billion in March to increase its ownership. It also installed a number of its own executives in a bid to help Lazada grow its business and the overall e-commerce industry in Southeast Asia, too.
A much-cited report co-authored by Google forecasts that e-commerce in Southeast Asia will surpass $88 billion by 2025. That’s up from an estimated $10.9 billion in 2017.
Sea said previously that it expects Shopee to reach $8.2-$8.7 billion in GMV in 2018, a increase that’s potentially as high as 112 percent year-on-year. That’s up on its previous guidance of $7.5-$8 billion but, since it is GMV, it doesn’t translate to direct revenue for the company itself. Sea had previously boosted Shopee by allowing a high burn rate to fund merchant and buyer promotions. It only began to monetize the service last year.
News Source = techcrunch.com
M17 delays IPO debut after pricing this morning on NYSE
M17 Entertainment, a Taipei-based live streaming and dating app group, priced its IPO this morning on the NYSE and was expected to open trading today according to their final press release. But with just a little more than two hours to go before market closing, it’s still not trading, and no one seems to know why.
An interview I had scheduled with the CEO earlier this afternoon was canceled at the last minute, with the company’s representative saying that M17 couldn’t comment since its shares were not yet actively trading, and thus the company remains under an SEC-mandated quiet period.
M17 has had a rocky non-debut so far. Originally targeting a fundraise of $115 million of American Depository Receipts (shares of foreign companies listed domestically on the NYSE), the company concluded its roadshow raising less than half of its target, for a final investment of $60.1 million. The company priced its ADR shares at $8 each, with each ADR representing 8 shares of the stock’s Class A security.
My colleague Jon Russell has covered the company’s rapid growth over the past three years. It was formed from the merger of dating app company Paktor and live streaming business 17 Media. Joseph Phua, who was CEO of Paktor, became CEO of the joint M17 company following the merger. Together, the two halves have raised tens of millions in venture capital.
The company’s main product is a live streaming product where creators can build their fanbases and brands. Fans can purchase virtual gifts to send to their favorite artists, and those points are proving to be extraordinarily lucrative for the company. The company, according to its amended F-1 statement, has seen tremendous revenue growth, netting $37.9 million of revenue in the first three months of this year. The company has also been able to attract more live streaming talent, increasing its contracted artists from 999 at the end of December 2016 to 7,719 at the end of March this year.
That’s where the good news ends for the company though. Despite that revenue growth, operating losses are torrential, with the company losing $24.8 million in the first three months of this year. The company in its statement says that it has $31.4 million in cash and cash equivalents, giving it limited runway to continue operations without a strong IPO debut.
User growth has been mostly stagnant. Active monthly users has increased from 1.5 million to 1.7 million between March 31 of 2017 and 2018. What the company has succeeded in doing is monetizing those users much better. The percentage of users paying on the platform has more than doubled over the same time period, and the value of those users has increased more than 40% to $355 per user per month.
The big challenge for M17 is revenue quality. Live streaming represents 91.4% of the company’s revenues, but those revenues are concentrated on a handful of “whales” who buy a freakishly high number of virtual gifts. The company’s top ten users represent 11.8% of all revenues (that’s $447,220 a user in the first three months this year!), and its top 500 users accounted for almost a majority of total revenues. That concentration on the demand side is just as heavy on the supply side. M17’s top 100 artists accounted for more than a third of the company’s revenue.
That concentration has improved over the past few months, according to the company’s filing. But Wall Street investors have learned after Zynga and other whale-based revenue models that the sustainability of these businesses can be tough.
Finally, one complication for many investors wary of the increasing use of dual-class stock issues is the governance of the company. Phua, the CEO, will have 56.3% of the voting rights of the company, and M17 will be a controlled company under NYSE rules according to the company’s amended filing. Class B shares vote at a 20:1 ratio with Class A share voting rights.
All of this is to say that while the company has had some dizzying growth in its revenue numbers over the past 24 months, that success is moderated by some significant challenges in revenue concentration that will have to be a top priority for M17 going forward. Why the company priced and hasn’t traded though remains a mystery, and we have reached out for more comments.
News Source = techcrunch.com
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