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Ola raises $1.1B led by Tencent to fuel battle with Uber in India

It’s been a long while coming but Uber’s chief rival in India is finally raising a big round, and joining the billion-dollar round club at the same time.

Ola today announced that it has closed $1.1 billion in fresh financing. That’s the largest funding round in the company’s six-year history and its first major raise since November 2015 when it closed $500 million from investors.

The company has since raised smaller, undisclosed amounts provided by existing investors, but it is fair to say that this new round has been much expected — and needed. It’s look like there’s more to come, too, with Ola telling media it is close to finalizing an additional $1 billion that would take the round’s final close to $2.1 billion.

Ola has had its valuation clipped as low as $3.5 billion this year, but a source with knowledge of the new deal told TechCrunch that the company is on track for a post-money valuation of $7 billion once the full $2.1 billion raise is finalized. That’s a slight bump (pre-money) on that 2015 fundraise when Ola was valued at $5 billion post-money which is notable given recent devaluations.

Perhaps even more interesting that the valuation is the investors.

Media leaks have spoiled the surprise somewhat — Ola has been obligated to report some of its funding to regulators in India, ensuring a drip-drip of news — but China’s Tencent is a new backer and the lead investor of the round. SoftBank, an existing Ola investor (and an investor in Grab, Lyft, Didi AND seemingly soon Uber), is also in, but Ola isn’t disclosing which “U.S.-based financial investors” joined them. Media reports suggested one is Coatue, which has backed Grab and Didi, but Didi — which made a previous Ola investment and has reinvested in Grab and widened its investment network worldwide — appears to have sat this round out.

Make of that what you will.

But Tencent’s participation is particularly intriguing and further proof that the Chinese giant — valued at more than $300 billion — is upping its game in India through local tech firms that are battling global rivals. Tencent backed Flipkart via a $3 billion funding round this summer — which provided long-overdue ammunition for its battle with Amazon — it led a critical raise for WhatsApp rival Hike, which valued the Indian upstart at $1 billion, and it invested in healthcare firm Practo which harbors bold international expansion plans.

Didi fits that mold perfectly, being that it is the local fighter that is taking on a global giant, Uber.

That’s really been Ola’s focus all along: to out localize its foe. And on paper it has done that with a number of initiatives that include:

However, on the business side of things Ola’s losses have mounted. According to filings reported by Business Standard, parent company Ani Technologies saw losses triple to reach $360 million for the 2016 financial year despite revenue jumping seven-fold to $160 million.

That led to a series of smaller investments from backers such as SoftBank, which is reported to have put $250 million in at a lower valuation of $3.5 billion in April of this year, to keep the house in order. More broadly, a renewed focus on more sustainable spending led one market research firm to conclude that the number of rides from Uber and Ola in India actually decreased in the first quarter of 2017 due to a cutback in previously generous subsidies for drivers and passengers.

Uber doesn’t reveal numbers for India, while Ola declined to give its figures. However, a source close to Ola told TechCrunch that it is currently handling more than two million completed rides per day across its services, which it claims includes 800,000 drivers.

One thing that is more certain behind the hazy numbers guessing game is that this round finally gives Ola some stability. Uber has been busy fighting its own fires and attending pressing concerns in the U.S. this year but now, with a new CEO in place, there’s no reason it wouldn’t double down on India to avoid a repeat of its demise in China, where it was forced to sell to Didi after losing the market.

India is equal in promise, with over a billion people and a growing economy, and it remains Uber’s most important overseas market as evidenced by its dedicated tech center and past investment of over $1 billion. Now, with new funding in place, Ola has a level of war chest assurance at its disposal should Uber go pedal to the floor in India.

The company didn’t say too much about how it plans to spend this new money, other than the usual favorites of increasing supply of drivers — so more efforts on leasing and affordable car finance — and developing technology. The latter focuses on the use of artificial intelligence and machine learning to solve issues like which side of the road a passenger is waiting on. That might sound trivial but in the megacities of Asia it is a factor can cost you an additional 20 minutes if you get it wrong.

One area where Ola is not actively investing is self-driving cars, it has said that congestion and pollution are more critical in India. That said, it has made progress with a fleet of electric cars and rickshaws which have operated in the city of Nagpur since earlier this year. That’s a model the company is hopeful it can replace in other parts of the country with the right support from government agencies and other stakeholders.

For now though, this much-needed financing will give Ola stability. While Grab is actively trying to beat Uber out of Southeast Asia after raising $2 billion, its India peer might now be able to realistically dream that it too can take the initiative against its U.S. rival.

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India’s budget hotel network unicorn OYO expands into China

The tech world sees plenty of Chinese companies move into India — including the likes of Alibaba and Xiaomi — but few expand the other way. OYO Rooms, the billion-dollar Indian startup that pioneered budget hotel networks, is looking to buck the trend, however, after it launched operations in China.

Today the company officially announced its arrival in China, where it says it covers 11,000 (exclusive) rooms across 26 cities, including Hangzhou, Xian, Nanjing, Guangzhou, Chengdu, Shenzhen, Xiamen and Kunming. That selection includes a combination of franchises and managed hotels. OYO is initially launching its ‘hotels’ product, and it isn’t saying whether others — which include ‘rooms’ and ‘townhouses’ — will also expand to China.

Interestingly, an OYO representative confirmed that this expansion wasn’t conducted in partnership with China Lodgings, the Nasdaq-listed hotel firm that invested $10 million in the startup last year. OYO said China Lodgings is assisting with the overall strategy in China, however. Make of that what you will.

OYO — which stands for On Your Own — was founded in 2013 by then-teenager Ritesh Agarwal, a Thiel Fellow who got the idea for the business after a stint backpacking across India staying budget hotels. The service helps bring the long-tail of small hotels online to generate bookings whilst also ensuring (often absent) minimum standards for travelers, such as hot water, clean towels and linen and Wi-Fi.

The company counts SoftBank among its backers and it has raised over $450 million in capital to date, including a $250 million round led by SoftBank’s Vision Fund last year.

OYO founder and CEO Ritesh Agarwal [image via OYO, Facebook]

OYO claims over 100,000 rooms in Inda, and it has been busy investigating new growth opportunities. The China launch is the third overseas foray from OYO, coming after expansions to Nepal and Malaysia. Given the size of the Chinese market and strong competition, this is a daunting challenge for OYO.

Just ask Airbnb .

While the two don’t compete directly on product, they target a similar consumer bracket — consumers seeking an alternative to conventional hotels and lodgings. In China, Airbnb’s big rival is Tujia, which is valued at $1.5 billion and pushing the U.S. company hard. Tujia and Airbnb were one final signature away from calling off their war and merging, Bloomberg recently reported, but ultimately Airbnb opted to go it alone in China. Tujia is determined to battle it so hard that it returns to the negotiation table.

So, how then, will OYO — which is well-funded but lacking the capitalization and experience of Airbnb — navigate the Chinese market? Time will tell but you’d suspect it will need to call on some local allies if it is to make an impact.

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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.

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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.

Sea share price, via Yahoo Finance

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.

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