Did you know that the CEO of China’s ride-hailing giant, Cheng Wei is the youngest among Chinese unicorn startup founders? Here are 10 things you may not know about Uber China’s top rival.
1. The CEO of Didi Kuaidi is the youngest among unicorn startup CEOs and an exceptional first-timer
33-year-old Cheng Wei, founder and CEO of Didi Chuxing, is the youngest among the CEOs of China’s unicorn startups, according to a cover story from the business magazine China Entrepreneur in December. He has had great success as a first-time startup founder, leading Didi to dominate the Chinese ride-hailing market by occupying 80% of the market share in just three years. Started in June 2012 with only RMB 800,000 (USD 123,000) in investment, Didi has now grown into a company with a valuation of USD 16.5 billion.
2. Its CEO is from Alibaba while Tencent is a lead investor
Cheng Wei has eight years of work experience in Alibaba. He worked up to the position of vice general manager of Alipay’s B2C Division. However, Didi has received several rounds of funding from Alibaba’s long-term rival Tencent. At the beginning, Cheng excluded Tencent from the list of B-Series investor candidates, wanting to avoid taking sides between BAT giants too early, Didi’s angel investor Wang Gang told Forbes in an interview. But the CEO of Tencent Pony Ma personally approached Cheng and accepted all of the terms proposed by Cheng, including never seeking control of Didi Dache. Since Alibaba had already invested in its rival Kuaidi Dache, Cheng accepted and Tencent became the leader in Didi’s Series B financing.
3. Didi raised USD five billion in three years
In an internal email sent by Cheng Wei to his employees in July, he claims that Didi Kuaidi had become the Internet company that has raised the largest amount of money in the world. After the latest round of funding, it is estimated to have raised USD five billion in total, according to NetEase Tech. Tencent is benefiting hugely from its investment – as a major investor, it is holding more and more shares in Didi, and it has gained a huge group of users on its mobile payment platform since Didi Kuaidi adopted Wechat Wallet as the payment tool on its app. Here is a quick history of Didi’s financing:
- June 2012 RMB 800,000 (USD 123,360) angel fundraising
- September 2012 USD three million Series-A financing from GSR Ventures
- April 2013 USD 15 million Series-B financing from Tencent Group
- January 2014 USD 100 million Series-C financing led by CITIC Private Equity, followed by Tencent Group.
- December 2014 Over USD 700 million Series-D financing led by Singapore’s Temasek, Russia’s DST and Tencent Group.
- September 2015 USD three billion raised in September, including the previous USD two billion financing in July from investors including Alibaba, Tencent, Temasek and Coatue Management.
4. Unlike Uber, Didi Kuaidi started with taxi-hailing service and expanded to many others
Unlike Uber, which started with its premium car service, Didi Kuaidi launched taxi-hailing as its first type of service in Beijing. It works with about 66,000 taxis in Beijing serving 21 million local citizens. Didi only needs to provide a platform which can match taxi drivers and passengers more efficiently to tackle the transportation challenges in big cities. Apart from a premium car service like Uber’s, Didi introduced many more services including express car (economic rides), carpooling, Didi Bus and a designated driver service. Didi’s CEO Cheng Wei says Didi differs from Uber in business orientation due to China’s different market landscape, reports NetEase Tech. According to the State Council report in April 2015, Chinese people own less than 35 cars per 100 households, while Americans own over 200 cars per household. Since most Americans are driving their own cars, the additional premium car service appears to be more than enough for this market. But in China, a much more populated country, more travel options are needed to serve the larger user group. Here is a glimpse of Didi’s business expansion:
- September 2012 taxi-hailing business started in Beijing.
- August 2014 chauffeurs and premium car service launched.
- May 2015 express car service or economic car-hailing service launched.
- June 2015 carpooling service launched, then the cross-city carpooling option was introduced in late November, in time to ease travel during China’s Spring Festival.
- July 2015 Didi bus service launched in Beijing and Shenzhen.
- July 2015 designated driver service launched in late July in ten Chinese cities, then the option of hailing designated drivers for third parties was added to this service in late November.
- December 2015 Express Pool, a more economical carpool service launched.
- December 2015 “Didi Test Drive” and car sales service launched.
5. Didi spent RMB 1.5 billion (USD 238M) on subsidies in two years
The subsidy battle between former rivals Didi Dache and Kuaidi Dache lasted from January 2014 to May 2014. It was reported that Didi’s spent as much as RMB 100 million on subsidies during the peak period from March to April 2014. Then, within a month – shortly after mid May – the game was resumed by Cheng Wei, who created bonuses in red envelopes on Wechat to dispatch subsidies. Cheng disclosed in October 2014 that Didi Dache had spent a total of RMB 1.5 billion in two years on subsidies. The CEO of Kuaidi Dache Lv Chuanwei said although a staggering amount was spent on subsidies, it was worth it because Kuaidi grew from an app nobody knew about into a market leader, tech news site Hexun.com reported.
6. Co-founder and CTO Zhang Bo is Didi’s life-saver
In the beginning, Didi Dache struggled to develop its software. Cheng Wei, thinking it essential dominate the market as soon as possible, outsourced the development of the app to a software company in order to have the app launched in two months. However, this rush job, which later turned out to be finished by amateurs, received wide criticism from taxi drivers who installed the Didi app. The software was only improved when Zhang Bo, a R&D manager at Baidu, became the CTO of Didi at the end of 2012. The team led by Zhang took a year to fix the buggy app. There’s a story going around that Zhang and his team worked five days and nights to fix the server when it was overwhelmed by orders. Cheng Wei uses this as a lesson for startup founders, saying that “you’d better not rush to do anything unless you’ve got a solid team.” Cheng chose Zhang as his tech partner out of three CTO candidates, calling him “the best gift that God has given to Didi”.
7. Didi’s leaders complement each other: a grassroots CEO and blueblood President
Cheng Wei, the CEO of Didi, started his career as a salesman and has recognizable market sensitivity and frontline experience, while the president of Didi, Jean Liu, makes up for the qualities that Cheng lacks. Liu is the daughter of Liu Chuanzhi, founder of China’s PC giant Lenovo and the “enterprise godfather” of China. Liu gave Didi corporate alliances and other resources. Liu was the managing director at Goldman Sachs Asia, one of the youngest managing directors in Goldman Sachs’ history. Her network, expertise in the financial sector, and diligence contributed greatly to Didi’s fast development. Jean Liu was a big reason why Didi was able to raise its USD 700 million F-series funding in just three weeks and why Didi Dache and Kuaidi Dache were able to finalize their merger in just 22 days.
8. Didi formed a “counterattack against Uber alliance” with Lyft, Ola and GrabTaxi
Uber, the US ride-hailing giant with the most global users, which covers over 300 cities around the world, aggressively entered China in late 2013 to take on Didi Kuaidi. It plans to expand its business to 100 Chinese cities next year. In order to pin down its rival in China, Didi formed a partnership with Uber’s U.S. rival Lyft in September by investing USD 100 million. Three months later, Didi joined hands with two more members to compete with Uber in the Asian market: Ola, an Indian ride-hailing startup that operates in 102 cities, and GrabTaxi, a ride-hailing company headquartered in Singapore, which extends to six southeast Asian countries. Earlier, Didi Kuai invested in GrabTaxi’s USD 350 million financing round in August and in Ola’s USD 500 million round. Didi Kuaidi is extending its reach in an attempt to keep pace with Uber overseas.
9. Didi has an unstoppable offline marketing army
When the startup was founded, Cheng Wei presented his cooperation proposal to all 189 taxi companies in Beijing. After a month, more than 100 companies had rejected him. When Didi’s app was officially launched in September 2012, there were only 500 drivers who installed the app. That’s when Cheng decided to contact the taxi drivers directly. The offline marketing team was scattered throughout the railway stations of Beijing, approaching taxi drivers with the app. With a business promotion center set in the Beijing South Railway Station in February 2014, the team worked from 7:00 a.m. to 10:00 p.m., answering questions from taxi drivers and teaching them to install the app. They were able to recruit around 600 drivers per day. The Chief Development Officer of Didi Kuaidi claims that there are 1.35 million taxi drivers, four million drivers providing premium car services, and 5.5 million drivers providing carpooling services registered on their platform as of December 2015.
10. The Didi Dache-Kuaidi Dache merger was not a one-time deal
It is hard to imagine that two rivals who have been competing for over two years would abruptly agree to merge. It took several rounds of negotiations before Tencent-backed Didi Dache and Alibaba-backed Kuaidi Dache agreed on a deal. Didi Dache proposed negotiations for the first time in late 2013. At the time, the two companies were competing to acquire another Shanghai-based ride-hailing company. Both sides were deadlocked, with the third party raising the acquisition price higher and higher. That’s when Didi put forward a proposal to merge with Kuaidi. CEOs and investors on both sides assembled several times. When they were unable to reach a consensus on things including the distribution of equities, the two companies entered a one-year long subsidy battle. The final negotiation finally took place in January 2015. 22 days later, they announced their merger, the first big tech merger in 2015. Read more on why this merger happened.