Big Deal: Didi Dache picks up $700m

The $700m in series D funding received by China-based taxi ordering app Didi Dache indicates that activity in the ride sharing sector is not just a one-horse race, and that it is set for significant growth in 2015.

Founded in 2012, Didi Dache operates a mobile application through which users can hail taxis.

A big factor in its growth over the past two years has been its partnership with internet company Tencent. Didi Dache has integrated its service with Tencent’s WeChat app and a total of 21 million rides were booked through WeChat in the first month of the partnership in January 2014.

Tencent has been one of Didi Dache’s backers since May 2013 when it invested $15m, and it returned for the $100m series C round at the start of this year. It was also one of the investors in the series D round, along with Singaporean state-backed fund Temasek and investment firm DST Global.

The fundraising was completed shortly after Uber, the US-based company that is currently the worldwide market leader in the sector, raised $1.2bn at a $40bn valuation. Uber CEO Travis Kalanick stated at the time of the investment that the company planned to expand into Southeast Asia, but it has also taken tentative steps into the Chinese market.

Reports emerged at the end of last week that China-based search engine operator Baidu is set to invest a further $600m in Uber, confirming not only that the sector is the latest front in the market war between internet companies Tencent, Baidu and Alibaba, which has invested heavily in US-based Lyft, but that also indicating that Uber could well be set to make sizeable inroads into the Chinese market.

Uber established a non-profit service in Beijing in the summer called People’s Uber, which operates through its app, but through which the company takes no commission. Having already got its toes wet, Uber would be expected to make a full frontal assault on the Chinese online taxi ordering market next year.

Much like the vast amounts of funding recently secured by India-based e-commerce companies Snapdeal and Flipkart in anticipation of US-based Amazon’s entry into the market, Didi Dache’s funding could well have been provided as ammunition to fend off Uber’s arrival in China.

Didi Dache and Kuaidi Dache, which is backed by Alibaba and car rental service eHi, had taken a 99% share of the Chinese market between them as of last month and will be reluctant to cede any ground to their well-funded US counterpart. Nevertheless, the market stands at only 150 million users right now and the potential there is huge.

Despite, or perhaps because of the regulatory difficulties it is encountering in countries such as India and France, Uber can be expected to invest heavily in China. Lyft, which secured $250m in April, could also be set to enter the market and may well look to raise another big round in the upcoming months.

The funding secured by Didi Dache however shows that it is willing to fight its corner, and Kuaidi Dache may well follow suit. Neither has shown a significant inclination to expand to other territories, but telecommunications company SoftBank’s recent $200m+ investments in Olacabs and GrabTaxi indicate that they would face stiff competition elsewhere in Asia regardless.

In general, the online taxi ordering sector has heated up considerably over the past year. Uber may have plans, and potentially the funds, for world domination but Didi Dache and others are showing that it will be an uphill battle all the way.