These aren’t the startups of the week, they’re features rolled out by ride-hailing companies as they barrel toward becoming the “super app” of their respective regions. To combat persistent losses from their core business, ride-hailing companies are expanding to other verticals in hopes of grabbing some extra revenue. And news this week reminds us that expansion requires a ton of capital across the world,
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Back to back, Singapore’s Go-Jek and Indonesia’s Grab kept adding cash to their seemingly never-ending funding rounds. That apparent snowball effect is good for China’s Didi, which yesterday reportedly made plans to raise $2 billion from investors, according to the Wall Street Journal.
Both in terms of timing their press releases and targeting customers, Go-Jek and Grab overlap often. Grab, the larger of the two ride-hailing companies, recently got money from credit-rating company Experian to add onto its Series H.
All this news, mind you, was on the heels of that earlier Grab announcement.
And amidst those two news items, the WSJ reported that Didi is eyeing a $2 billion round, which would bring its valuation up to $62 billion.
A Super App Future
In some ways, these companies are all aiming to become the “super app” of the region they dominate. Go-Jek and Grab’s investor pool includes credit lenders and other software companies, and partnerships derived from those investments are commonplace.
Plus, Didi is expanding to help its customers not just get from point A to point B, but to aid in vehicle maintenance and leasing as well.
While we can’t predict the outcome of what it means to spend money to expand into different verticals, we can point to anecdotal evidence.
To pick on Uber we can see that even for a global market leader, ride-hailing is an expensive path.
Uber started Uber Eats as an experiment, and now works with more than 80,000 restaurants. Uber Eats had revenue growth of 149 percent compared to the year prior. That still only accounted for 13 percent of the overall company’s total 2018 revenue. It shows that in some cases branching out will help, but may not be a saving grace. Beyond that it’s jumping into freight, and autonomous vehicles. As for the wealth of that latter point, TechCrunch reported that Uber’s self-driving car unit burned $20 million a month.
According to the company’s S-1, Uber’s 2018 operating loss came to $3.03 billion. That’s down from the year before, but remains a staggering deficit.
So it makes sense that in a crowd with significant losses, all racing towards diversification, private ride-hailing companies are looking to raise as much as they can.
Illustration: Li-Anne Dias.
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