Issue 6 | October 9, 2017

A Big Deal
Bloomberg reported that investors in Mobike and Ofo are talking about a potential merger between China’s two largest bike-sharing companies, aimed at ending a costly battle in the fast-growing business. The pair’s pro forma combined valuation could exceed $4 billion.

Mobike is backed by Tencent, and Ofo is backed by Didi, where Alibaba is a shareholder. The two tech giants have a history of using startups as proxy battlefields. In two situations, the startups joined forces (see the Didi-Kuaidi merger and the Meituan-Dianping merger). But thereafter Alibaba re-started Koubei with its affiliate Ant Financial Group to compete against Meituan in food delivery.

There are at least two dozen bike-sharing companies in China, making it one of the hottest startup genres. The largest players in the market include Mobike, Ofo, and Hellobike (a GGV portfolio company).

We at GGV Capital are no stranger to M&A and merger discussions. Led by managing partner Jixun Foo, GGV has played a critical role in several key strategic mergers and acquisitions in China, such as those of Youku-Tudou (first ever multi-billion dollar tech merger in China), Baidu-Qunar, Ctrip-Qunar, and Mogujie-Meilishuo.

A Number
710 million – Number of Chinese people who were travelling during the “Golden Week” national holiday. Last week, half of China was travelling during an 8-day holiday that combined China’s National Day and the Mid-Autumn Festival (akin to China’s equivalent of Thanksgiving). Thanks to the army of Chinese tourists that descended upon foreign destinations, last week seemed to have been golden for the global tourism industry as well. Shopping overseas is now more convenient than ever before, as more and more stores outside China (especially in popular destinations like Japan and Thailand) accept Alipay and WeChat Pay.

A Picture

Yonghui Super Species

Yonghui Super Species 2

One of China’s largest supermarket chains, Yonghui, opened a new avant-garde supermarket in Beijing called “Super Species” (超级物种). Yonghui is one of the many traditional retailers who have opened offline stores that integrate grocery-shopping and on-site dining experiences in an effort to expand into “New Retail” (新零售). Read our explanation here on what is New Retail.

Pioneering the concept of “workshops” within the supermarket, Super Species features various stations, each serving a different type of food, including Boston lobster, salmon, beef, fruits, and wheat, among others. Food can be purchased, cooked, and consumed on the spot. Customers pay with their smartphones through Alipay, WeChat Pay, or the Yonghui app (if they have none of those, cash is also reluctantly accepted). The average order value is 100 yuan on weekdays and 250 yuan on weekends.

Just two miles away from Super Species’ Beijing location, you can find one of its biggest competitors, Alibaba’s Hema supermarket. Hema offers a similar dine-and-shop experience and also serves as a fulfillment center for Alibaba’s grocery delivery business.

A Quote

Xiaomi wants to be the Muji of the tech industry. We use the approach of an Internet company to do offline retail. “Consumption Upgrade” doesn’t mean buying more expensive things – it means being able to buy higher-quality products with the same amount of money.
–  Lei Jun, founder and CEO of Xiaomi, during a speech at a conference in July
A Commentary
If you want to become the next unicorn, going global is no longer a “maybe” – it’s a “must.” Here, we explain why this is the case, and how startups can learn from global companies like Priceline, Airbnb, and Wish.
– Zara Zhang & Hans Tung at GGV Capital