Joy Capital, the venture capital firm that’s backed Luckin, NIO, Mobike and other investor darlings in China, just raised $700 million for a new fund focusing on early-to-growth stage startups.
Launched in 2015 by a team of former investors at Legend Capital, the investment arm of PC maker Lenovo’s parent company, Joy Capital made the news official (in Chinese) on Monday. It didn’t identify the limited partners in this new corpus of funding but said they include “top” public pension funds and insurance companies. Its existing pool of investors counts those from sovereign wealth funds, education-focused endowment funds, family funds and parent funds.
The fresh money boosted Joy’s total tally to over 10 billion yuan ($1.45 billion) under management, with a focus on backing cutting edge technologies and companies involved in the digital upgrade of China’s traditional sectors, or what Joy’s founding partner Liu Erhai (pictured above) dubbed the “new infrastructure” in an op-ed for the China Securities Journal. Targets can include the likes of logistics companies, online car rental platforms or bike-sharing apps.
As a relatively young fund, Joy Capital has so far achieved a few large outcomes. One of its portfolio companies NIO became China’s first electric vehicle startup to go public in the U.S. as a rival to Tesla. It’s also funded Luckin, the Starbucks nemesis from China that floated in the U.S. only 18 months after inception. The fund’s other big wins include Mobike, the bike-sharing pioneer that was sold to Meituan Dianping for $2.7 billion and fast-growing house-sharing unicorn Danke Apartment.
Joy Capital’s new raise arrived at a time when Chinese venture investors are coping with a cash crunch amid a cooling economy exacerbated by the expansion of U.S. tariffs. We reported that private equity and venture capital firms in the country raised 30% less in the first six months of 2019 compared to a year earlier, and the number of investors that managed to attract fundings was down 52% in the same period.
Just two years ago, investors were heavily pouring money into China’s dockless bike-sharing startups. Now that boom has busted with derelict bikes littering the streets of cities.
Meanwhile, a new race has started for two-wheelers with motors — and one of the main players is a survivor from the bike-sharing craze. Blessed with fundings from the world’s most valuable fintech company Ant Financial through its Series D to F funding rounds, Hellobike provides a range of mobility services such as shared e-bikes and rented electric scooters to its 230 million registered users.
Hellobike first launched in 2016 by deploying shared bikes in smaller cities and towns — where Ofo and Mobike were largely absent early on — rather than large urban centers like Beijing and Shanghai. This allowed Hellobike to largely avoid the cash splurging competition against Ofo and Mobike.
“When the two major powers were at war, neither of them went after electric bikes. They were fighting over bicycles,” Hellobike’s chief financial officer Fischer Chen (pictured above) recently told TechCrunch at Rise conference in Hong Kong, referring to the feud between Mobike and Ofo. “As such, there was no price war for e-bikes from the outset. The competition is rational.”
Electric two-wheeled vehicles are in high demand in the country where nearly 1.4 billion people live. According to data collected by Hellobike, nearly 300 million rides are completed on analog bikes every day in China. What many don’t realize is that pedal-assist electric bikes and pedal-free scooters together more than double that number, generating 700 million rides per day.
As with bicycles, there are benefits to rent rather than buy an electric bike in China. For one, users don’t need to worry about getting their assets stolen. Second — and, this is specific to electric vehicles — finding a safe, convenient charging spot can be a challenge in China.
That’s why Hellobike put up charging stations as it went about offering shared ebikes in 2017. At these kiosks, riders swap their battery out for a new one without having to plug in and wait. They then have the option to pay with Alipay, Ant’s mobile wallet with a one-billion user base.
Of all the monthly two-wheeler electric bikes activity in China, Hellobike has captured 80% of the market share, Chen claims. For bike-sharing, it accounts for 60-70%. It’s hard to verify the share by looking at data compiled by third-party app trackers, for they don’t usually break out the user number for individual features. The Hellobike app is a one-stop-shop for bicycles, e-bikes, e-scooters as well as carpooling, a service complementary to its main two-wheeler business intended to “capture price-sensitive small-town consumers” according to Chen.
Similarly, Mobike has been folded into Meituan’s all-in-one service app. What further complicates the inquiry is some of Hellobike’s rides are accessed directly on Alipay rather than its own app.
When it comes to competition in electric two-wheelers, Chen maintained that other challengers are “relatively small” and that acquiring online users has become “very difficult.” For Hellobike, getting existing customers to try out new features takes as much effort as “adding a new tab to its app,” Chen suggested.
What’s for certain is that Hellobike has big ambitions for electric micromobility. While shared bikes and e-bikes are meant for one-off uses, Hellobike plans to rent out e-scooters for longer swathes of time as many people might want the powered-up vehicles for their daily commute.
Hellobike’s electric scooter. Caption: “App-enabled lock. Smart anti-theft. Real-time location tracking for checking the vehicle’s status.” / Photo: Hellobike homepage
Hellobike founded a new joint venture last month to fulfill that demand. Joining forces with Ant — which is controlled by Alibaba founder Jack Ma — and China’s top battery manufacturer CATL, Hellobike is launching a rental marketplace for its 25 km/h e-scooters targeted at millions of migrant workers in Chinese cities.
“People might be able to afford an e-scooter that costs several thousand yuan [$1 = 6.88yuan], but they might be leaving the city after a year, so why would they buy it? So we come in as a third-party partner with a new rental model through which people pay about 200 yuan a month to use the scooter,” explained Chen. “By doing so, we convert people from buying vehicles to paying for services, renting the vehicles.”
The three shareholders will also work to install more battery-swapping stations nationwide that not only recharge Hellobike’s shared e-bikes but also its e-scooters, that will be made by manufacturing partners.
“We function as a platform and won’t compete with traditional scooter manufacturers,” suggested Chen. “They still get to use their own designs and SKUs [stock keeping units], but we will put smart hardware into their models… so users know where their vehicles are… and they can unlock the scooters with a QR code just like they do with a shared bike or e-bike.”
Hellboke has raised at least $1.8 billion to date, according to public data compiled by Crunchbase. Bloomberg reported in April that it was seeking to raise at least $500 million in a new funding round. The company declined to comment on its fundraising progress.
When it comes to financial metrics, Chen, a veteran investment banker, declined to disclose whether Hellobike overall is profitable but said the company “performs much better than its competitors” financially. The most profitable segment, according to the executive, is the electric bike business.
As for bicycles, Chen noted that China’s main bike-sharing companies are “no longer burning money” since they’ve raised prices in recent times. Hellobike’s bike unit has achieved cash-flow positive during the warmer, peak seasons, Chen added.
Hellobike, currently the country’s third-largest bike-sharing app according to Analysys data, announced this week that it raised “billions of yuan” ($1 = 6.88 yuan) in a new round. The company declined to reveal details on the funding amount and use of the proceeds when inquired by TechCrunch.
Leading the round were Ant Financial, the financial affiliate of Alibaba and maker behind digital wallet Alipay, and Primavera Capital, a Chinese investment firm that’s backed other mobility startups including electric automaker Xpeng and car trading platform Souche. The fledgling startup also got SoftBank interested in shelling out an investment, The Information reported in November. The fresh capital arrived about a year after it secured $350 million from investors including Ant Financial.
It’s interesting to note that while both Ofo and Hellobike fall under the Alibaba camp, they began with different geographic targets. By May, only 5 percent of Hellobike’s users were in China’s Tier 1 cities, while that ratio was over 30 percent for both Mobike and Ofo, a report by Trustdata shows.
This small-town strategy gives Hellobike an edge. As the bike-sharing markets in China’s major cities become crowded, operators began turning to lower-tier cities in 2017, a report from the China Academy of Information and Communications Technology points out.
Hellobike’s ambition doesn’t stop at two-wheelers. In September, it rebranded its Chinese name to HelloTransTech to signify an extension into other transportation means. Aside from bikes, the startup also offers shared electric bikes, ride-hailing and carpooling, a category that became much contested following high-profile passenger murders on Didi Chuxing .
In May and August, two female customers were killed separately when they used the Hitch service on Didi, China’s biggest ride-hailing platform that took over Uber’s China business. The incidents sparked a huge public and regulatory backlash, forcing Didi to suspend its carpooling service up to this day. But this week, its newly minted rival Hellobike decides to forge ahead with a campaign to recruit carpooling drivers. Time will tell whether the latecomer can grapple with heightened security measures and fading customer confidence in riding with strangers.
Meituan Dianping, the fast-growing Chinese firm valued at $30 billion, is buying Mobike, a Chinese startup that helped pioneer bike-sharing services worldwide, in a major piece of consolidation.
The deal was heavy rumored yesterday and TechCrunch has today confirmed with two sources that it has been concluded at a price of $2.7 billion.
TechCrunch understands that the deal will be officially announced today, but already key personnel have let the cat out of the bag on social media. Mobike President and co-founder Hu Weiwei posted a cryptic WeChat message about “a new beginning,” as our Chinese partner Technode noted, while SCMP reported that Meituan CEO Wang Xing said the company will “build a new future with Mobike.”
Representatives from Meituan Dianping and Mobike did not respond to requests for comment.
These new forays might lead to an IPO. A host of Chinese firms have jumped into the public markets lately, and Bloomberg recently reported that Meituan Dianping hopes to join them with a listing that could value it as high as $60 billion.
The deal will also be a major win for Tencent against its long-time foe Alibaba.
Mobike has been an investment and acquisition target for many.
Last year, a deal to merge with close rival Ofo was widely speculated. Ultimately, reports suggest that it fell through out of fear that Didi Chuxing, the ride-hailing giant that invested in Ofo, would become too powerful if the two bike-sharing firms tied up. That theory seemed to have its merits after Didi rolled out a hostile bike-sharing platform that sits inside its hugely popular ride-hailing app and is aimed at extinguishing the threat of Ofo, Mobike and others by simply turning them into features rather than fully-fledged rivals.
Editor’s note: This post originally appeared on TechNode, an editorial partner of TechCrunch based in China. China’s bike rental startups have hogged the startup limelight and investor dollars this year. The trend has been impossible to ignore, both on the ground and in reporting. Ofo became the industry’s first unicorn, while Mobike has pulled in over $300 million in… Read More
There can be no hype without a unicorn. China’s newest startup money pit — bicycle rentals on-demand — now has its first billion-dollar valued company.
The industry has sucked in more than $300 million from investors this year alone — that’s counting just one company — and now Ofo has become the first in the space to reach the much-coveted $1 billion… Read More