Finally, these two companies get together…in China.

What Didi would bring to us and euro

This Monday Morning, Didi Chuxing (hereafter “Didi”) announced Didi has reached a strategic agreement with Uber, that Didi would acquire the brand, business, data and other assets of Uber China. From now on, there is no more Uber in China and Didi would officially step into America.

To this agreement, Uber and Didi would mutually hold each other’s shares, and become the other party’s minority shareholder. To Uber, it would hold 5.89% shares of Didi which equals to 17.7% economic rights. Other shareholders of Uber China would transfer their shares to 2.3% economic rights. As Uber China accepted investment from Baidu, Didi became the only company which accepted investments from Tencent, Alibaba, and Baidu, the three rivals.

The founder and president of Didi, Cheng Wei would join Uber’s global board of directors. Also, Travis Kalanick, founder of Uber would join DIdi’s board.

Finally, rumors settled down. A few weeks ago, investors of Didi and Uber China tried to merge this two companies together to stop burning money. But, to Uber China, who only hold less than a quarter market shares, has no reason to be acquired by Didi. For 5 years, Didi becomes the largest on-call car service company in China which holds over 75% of market share. Some early investors didn’t agree that merge.

But negotiation didn’t stop. Early investors and founders kept on meeting to reach an agreement. It was said Uber China will burn several billion of dollar this year in China. No investor want to see their money fly away, so Uber China’s investors want to finish the acquisition as quickly as possible. After months of negotiation, they reached an agreement which we saw today.

CC0 picture from Pixabay!

To Uber, there is no Chinese market anymore for it sold the hot potato to Didi. And if Uber goes listed in the public market, the balance sheet would be nice for investors to read, because Uber Global has already earned some money since 2015. Only in China, Uber is losing money. As a radical startup, Uber wanted the Chinese market to show its power and ambition. But in China, you got to follow Chinese rules. Didi did way better than Uber China. A public talk said by Cheng Wei, Didi has already made a profit in most of its cities. It’s not worthy to win a hard fight battle. Investors knew this truth.

Technologically speaking, Uber and Didi has the same competence which means Uber won’t bring any new technologies to Didi but money. But to Uber, Didi could help Uber understand how to earn more money in America. Didi has a dozen of business models on its platform, such as the second-hand car, new car test-drives, Didi bus, Didi shuttle bus, Pilot driver, mapping system, driver-service system, Destination-free ride and etc. All these models that Uber doesn’t have. But a lot of US startups are doing a part of the models to enjoy their niche market. As Didi became shareholders of Uber, Uber could kill all these small startups.

What is wake-startup

For years, I believed niche market under Internet startup is a fake concept.

Any app that has millions of users tried to add more functions to please their users. But the R&D is expensive, the best inexpensive way is to copy the concept from other apps to seize the market. In iPhone, we saw a lot of these examples. Apple killed Google Map to replace with Apple Map. Then Apple released its own music app to kill a lot streaming music apps. And then the Apple News and so on.

CC0 picture from Pixabay!

To startups, if you only have one idea and tried your best to win a market, but your threshold is too easy to surpass, your startup is the wake-startup. In recent years, many college students who think their skill could make a huge business tried their best to write an app, but finally found their idea is too easy to be developed by big companies. For some conscientious enterprises, they would directly buy this startup to block the market, such as Yahoo!. But to most startups, big companies could easily copy their idea to kill startups.

To many startups in America, they are wake-startups. Because Didi would kill them by adding one small function to its apps, no matter Uber or Lyft.

The power of China Innovation

China Innovation is a national slogan from the Chinese government. We all know we could buy tons of tons of goods MADE IN CHINA, but that’s not what Beijing thought about. The world factory is not a good foundation for China to grow quickly and stably, so Beijing issued many regulations to encourage innovation.

Though Didi copied from Uber, but Didi did a lot of innovation in business model and advertisement. And the innovation paid Didi back. Early this year, Didi reported finishing 10 million orders in only one day, equals 115 orders per second. Didi completed 1.4 billion order in 2015 which almost double the Taxi rides in United State ( about 0.8 billion).

Said by Zhu Xiaohu, an early investor of Didi, ” We won a peace market by heavy fight, not by negotiation. Last year, to reach a market peace (Uber China quit or merge), we have to pay 700 million dollars. But one year later, the price is 7 billion dollars. Uber even didn’t give us a bargain chance.” But now, under several financial group’s help, Didi get the voice to stop the market battle.

CC0 picture from Pixabay!

Uber’s win

Some reviewers in China said this is Uber’s investment return. By selling its most defective part, Uber could have a nice balance sheet this year which would help its listing.

As becomes a shareholder of Didi, Uber could ask Chinese team to provide some key technology to make more profit or get more market shares. Though lose the Chinese market, but Uber could still earn a lot by holding Didi’s economic rights.

oh, by the way, R.I.P. Lyft.