RM127b startup you may have never heard of

Meituan raises RM16.9b in the latest round from Tencent, Sequoia and Priceline

By BLOOMBERG

HONG KONG • China’s Meituan Dianping just became the world’s fourth-most valuable startup, reaching a US$30 billion (RM126.6 billion) valuation that puts it ahead of high-fliers like Airbnb Inc and Space X.

Never heard of Meituan? You’re not alone. The Beijing-based company, led by Wang Xing, is almost unknown beyond its home country.

It delivers food to people’s homes, sells groceries and movie tickets, provides reviews of restaurants, and markets discounts to consumers who buy in groups. It’s a sort of mashup of Groupon, Yelp, Foodpanda and Uber Eats.

Meituan’s appeal for investors is its dominant position in a market of more than a billion people. It was formed through the 2015 merger of Meituan.com and Dianping.com, creating the leading player for Internet-based services ordered via smartphone apps.

It raised US$4 billion in the latest round from Tencent Holdings Ltd, Sequoia Capital and US travel giant Priceline Group Inc.

“It’s a quasi-monopoly built on the stomachs of 1.4 billion people,” said Keith Pogson, global assurance leader for banking and capital markets in Hong Kong at consultant EY.

Wang started Meituan.com in 2010 as a group-buying site similar to Groupon Inc, where people can get discounts by buying electronics or restaurant meals together.

Dianping was founded in 2003 in Shanghai with reviews of restaurants and other local businesses, then diversified into group discounts.

The companies were valued at US$15 billion when they merged two years ago.

Meituan has expanded well beyond its original businesses. With a few taps to navigate its smartphone apps, Chinese customers can order up hot meals, groceries, massages, haircuts and manicures at home or in the office. Meituan says it now has 280 million annual active users and works with five million merchants.

The offerings, collectively known as online-to-offline or O2O services, may ultimately prove more successful in China than in the US. Labour costs are lower in China, cities are more densely populated and there are more people. The country’s O2O market surged 72% to 762 billion yuan (RM487.68 billion) last year, according to estimates from consultant IResearch.

In the latest funding, Meituan also received money from Canada Pension Plan Investment Board, Trustbridge Partners, Tiger Global Management, Coatue Management and the Singaporean sovereign wealth fund GIC Pte Ltd.

Meituan said it would use the cash to expand in artificial intelligence and drone-delivery technology.