China: Food delivery startup Ele.me to gain $1b investment from Alibaba
THE online food delivery space has been oversaturated for quite some time now, but one lucky startup has just gotten a considerable boost from a top investor.
As reported by Bloomberg, Alibaba and its financial services affiliate Ant Financial have announced plans to invest around US$1 billion into Chinese food delivery startup Ele.me. The startup is reportedly one of the “largest players” in China’s overcrowded food delivery services space and the investment will value the company at around US$6 billion.
The deal will put Ele.me into the spotlight as China’s second-largest funding announcement this year, only overshadowed by Didi Chuxing’s US$5.5 billion round. It ultimately comes down to the battle between B.A.T (Baidu, Alibaba and Tencent – the three biggest companies in China) as Alibaba’s Ele.me investment is to compete directly with Tencent-backed Meituan Dianping.
— Red Pulse (@red_pulse_china) May 26, 2017
Meituan is, of course, operating in the fast-growing local services industry, catering to the many people who are now relying on their smartphones to do things like order food and book beauty appointments. Bloomberg notes sales in the space are likely to reach US$1.1 trillion in 2017.
Tencent is also an investor in Ele.me, although Alibaba’s latest investment currently outbids it as the company’s largest shareholder. And on the flipside, Alibaba used to own shares of Meituan Dianping, although it sold them for US$900 million last year. Competition between China’s tech greats, it would seem, actually boils down to the size of the stake it holds in the companies they all invest in.
Tech in Asia calls this a “proxy war”, sparked between Alibaba and Tencent in 2015. While Alibaba was an investor in Meituan, Tencent was a backer of Dianping, but there was a bit of conflict as the two startups joined hands in a merger to create Meituan Dianping. The saga continues on a similar playing field today with the battle of Ele.me versus Meituan Dianping.
Beyond the race to back the country’s most successful local services platforms, Alibaba and Tencent are actually peddling their mobile wallets – Alipay and WeChat Pay – as fast as they can. And it’s through these local services booking apps they’re able to implement their payment services and gather data on customers.