India-based Ola secures an additional $2B in funding as SoftBank pours billions into the ride-hailing industry.
Ola (fka Olacabs), the Indian ride-hailing unicorn, is having a busy year after receiving its fifth funding round in 2017 this week, a massive $2B Series J from Tencent, Ratan Tata and returning investor SoftBank among others. With $4.7B in total funding, Ola becomes the third most well-funded ride-hailing company globally, with aims to further expand its supply of vehicles, invest in technology, and increase its competition against Uber, according to reports.
This deal is the latest in a series of major funding rounds to Uber‘s top competitors, as these companies looks to capitalize on the woes of the once-unstoppable ride-hailing company. For a deeper look at where Uber stands now and how it is shifting its strategy, check out our Uber teardown.
While the world’s most valuable private venture-backed company remains formidable and well-financed, the company’s deepening struggles have opened an opportunity for its many rivals. We used CB Insights data to compare the war chest of Uber against other players within the ride-hailing space. These companies are also sometimes referred to as transportation network companies (TNCs), and some provide logistical services beyond passenger transport.
Ride-hailing unicorn funding
As recently as two years ago, it seemed that Uber was poised to dominate ride-hailing markets across the globe, flush with cash and riding the peak of the unicorn craze. The company stayed true to Kalanick’s aggressive growth philosophies, venturing into countries from China to Brazil.
With Uber’s retrenchment in China and Eastern Europe, the company has reversed course from indiscriminately pouring resources across the globe. Although the company’s war chest remains formidable, its competitors now sport impressive arsenals of their own. All of Uber’s well-capitalized rivals, both domestically and internationally, have raised significant new financing in 2017 as Uber itself has stumbled from crisis to crisis.
QUARTERLY FUNDING TRENDS (EX-UBER)
Deal activity in the ride-hailing space (excluding Uber) had fallen for four consecutive quarters prior to Q2’17, mirroring the cooling of investor interest in the broader on-demand space. However, as Uber’s challenges mounted in Q2’17 and continued in Q3’17, ex-Uber players received over $10B in funding over the past two quarters. Of course, discussions for some of these deals would have begun well before Uber’s most recent developments, but there’s no doubt that the giant’s struggles have opened an opportunity for its smaller rivals and their investors.
The largest deals so far this year include Chinese ride-hailing company Didi Chuxing‘s mammoth $5.5B raise in May 2017, as well as the previously mentioned $2B Series J to the India-based Ola (in Q4’17, not pictured). A host of others also saw $100M+ mega-rounds in Q2’17, such as Lyft, Go-Jek, Careem, Cabify, and 99 (fka 99Taxis). SoftBank had already committed fresh capital to Ola earlier this year, though it wrote down its investment in a significant downround.
Note that this trend analysis includes equity financings only, as opposed to the total funding comparison below (which includes debt and other financing instruments).
COMPARING WAR CHESTS OF RIDE-HAILING COMPANIES
Didi Chuxing has secured a massive pool of capital that now rivals that of its US counterpart (as depicted Didi Chuxing’s war chest includes financings to its pre-merger constituents, as well as the Uber China unit Didi acquired in August 2016). Didi’s most recent raise was the aforementioned $5.5B round, which dwarfed the amount raised by many public offerings.
Note: the analysis in the chart below excludes funding to dead companies, and includes all sources of disclosed funding including debt and other instruments.
This is a noticeable shift from the picture two years ago, when Uber’s war chest was still ahead of the collective funding secured by all of its competitors, to say nothing of any single rival. The rest of the market has now collectively received well over double the amount of capital committed to the San Francisco-based company. Nevertheless, Uber still has access to deep capital reserves and alternative sources of funding, such as the $1.15B leveraged loan it raised in July 2016.
Beyond these two behemoths, other players have also secured over multiple billions in funding, including US competitor Lyft and Indian startup Ola which now comes second, after Didi Chuxing, with $4.7B in total funding after its latest $2B mega-round.
It’s notable, however, that unlike Uber, these other players have only gained meaningful traction within a specific country or limited geographic region. Of course, this also means that they are able to focus their resources and efforts, while Uber has had to contend with many regional competitors at once. Incidentally, Didi Chuxing’s most recent mega-round was said to go towards fueling its international expansion.
And as deal sizes have risen and more investors have piled in, the web of investors backing top ride-hailing companies has become extremely complex, with several investors holding several complementary (and in some cases competitive) efforts in a single portfolio. The largest players have also become active startup investors and acquirers in their own right.