附近上门

D (Didi) is a company that is making its mark in global business. The Beijing-based ridesharing company has a valuation of $56 billion and has more than $20 billion since its inception, making it the second most valuable private Chinese company in history, according to 附近上门. It鈥檚 backed by notable investors and companies like Singapore鈥檚 , China鈥檚 and , Japan鈥檚 , and .

However, Didi hasn鈥檛 just raised massive amounts of capital for itself. The company has also directed its capital toward global ridesharing startups like in Southeast Asia and in Brazil. With ambitious domestic and global ambitions, the company may be in an IPO that could raise its valuation to $80 billion.

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Didi is indeed a large company, and like any other industry powerhouse, a deep dive into its history can inform the outcome of future developments. But recent reports of tensions between the U.S. and China over trade have raised the stakes for companies operating inside of China. Knowledge of how Didi came to be, particularly its experience rivaling Uber, can offer insight into the dynamics of competition and venture in China, as well as the intertwined relationship of politics and business in the country.

Didi鈥檚 Early Funding and Chinese Competitors

Didi Dache (now Didi Chuxing) was founded in 2012 by Cheng Wei, a of Alibaba financial services affiliate Alipay. The company began as a service for individuals to reserve taxis from their smartphones.

Its early rise was representative of the heated competition between Tencent and Alibaba which has persisted into current global technology endeavors. Didi Dache was initially funded with a by GSR Ventures. It then scored a investment by Tencent in July 2013. At the time of Tencent鈥檚 injection of capital, Didi Dache was competing with the Alibaba-backed, Hangzhou-based along with a few other smaller competitors.

From 2012 to 2014, Didi Dache and Kuaidi Dache engaged in a familiar price war, offering fee reductions and subsidies to attract drivers to their platforms. Not surprisingly, Tencent and Alibaba funded the expensive war with their deep pockets. Kuaidi Dache announced a by Alibaba and others in 2013, which was followed by a from Tencent and others into Didi Dache in January 2014.

By the end of that year, both companies had earned enough funding to be considered two of . Didi managed to take control of a 55 percent of the available Chinese domestic market in 2015, and it also passed an estimated 150 million monthly users that year.

But looking to capitalize on the opportunity apparent on China鈥檚 congested streets, San Francisco-based Uber set its eyes on the East Asian country鈥檚 market as well.

Uber Competition Breeds Unlikely Alliance

Uber had expressed initial interest in investing in Didi before Tencent did in 2013, but the company held off until it decided to enter the country with its platform. Uber CEO Travis Kalanick pursued China鈥檚 vast market despite historical for foreign companies to establish themselves in the country.

In February 2014, Uber its licensed car and limousine (UberX) service in Shanghai. The company maintained those services, while also launching a non-profit called 鈥溾�� in August 2014.

Wary of government regulation, Kalanick鈥檚 regional strategy was far more cautious than it had been in other regions where Uber was facing considerable government . A week after raise in December 2014, Uber accepted an investment by China-based search engine . Its partnership not only allowed Uber to integrate with Baidu鈥檚 map service and search engine, but it was also an apparent effort to and avoid government scrutiny.

Even with that effort, government regulation loomed over the ridesharing industry. City governments to address . Uber鈥檚 headquarters in Guangzhou were over apparent concerns that Uber was allowing private drivers without qualifications to operate on its platform. In 2015, municipal governments and cities required ridesharing companies to obtain licenses for operation.

Despite these challenges, startups invested heavily in customer and driver acquisition. In February 2015, with the stakes and costs to gain market control very high, Tencent-backed Didi and Alibaba-backed Kuaidi initiated a strategic (and ) merger of their two companies. This brought their combined market share to more than and their .

In mid-2015, the newly formed entity Didi Kuaidi raised $150 million from Weibo. A week later, it announced and its own non-profit, peer-to-peer carpooling project Didi Shun Feng Che (Hitch). The service competed directly with the 鈥淧eople鈥檚 Uber鈥� service. Registration and payments for the app were facilitated by Tencent鈥檚 super app WeChat, potentially driving more Chinese users to the product.

Didi Kuaidi then rebranded to Didi Chuxing in September 2015, and it went on to raise $7 billion in funding (including a $1 billion investment by Apple) in 2016, boosting the conglomerate鈥檚 valuation from $6 to $28 billion in less than a year.

Uber鈥檚 efforts to fundraise were met with billions of dollars in 2015 and 2016. However, Uber could not keep up with Didi Chuxing鈥檚 high cash burning strategy solidified by its deep-pocketed investors. In the end concerns over long-term sustainability compelled it to admit defeat.

Uber Admits Defeat

In August 2016, less than one week after Didi Chuxing, Uber and other smaller competing ride hailing platforms were made in China.

Didi Chuxing then acquired Uber China, which would continue to operate under that name, for $7 billion. Uber maintained a 17.7 percent stake in the company, making it the company鈥檚 largest shareholder. 聽Baidu and other Uber China investors reserved a 2.3 percent stake.

Uber had lost more than $2 billion in its two years fighting for dominance in the country. With investors betting on Uber鈥檚 sustainability in its most successful market– the U.S. — and other regions, the company stepped back from its project to end the consistent and significant cash burn.

鈥淪ustainably serving china鈥檚 cities, and the riders and drivers who live in them, is only possible with profitability.鈥� Kalanick stated in his publicly acknowledging the deal.

But Didi Chuxing鈥檚 acquisition of its fierce competitor wasn鈥檛 the end of challenges to ridesharing in China.

Future Challenges

The end of the competition with Uber meant that the high cash burning Didi Chuxing could refocus its efforts on future profitability. Unfortunately for drivers and riders, that meant the end of and the beginning of price increases.

And though the central government had ensured the general legality of the company, its specific requirements鈥攍eft up to the decisions of city governments鈥攎ade the status of many of the company鈥檚 drivers unclear.

Later in 2016, governments in Shanghai, Beijing, and Guangzhou to both appeal to taxi companies that face a monopoly over ridesharing and curb the influx of rural Chinese migrant workers (those without urban residency, or hukou) from operating on the company鈥檚 platform. To put that into perspective, according to , at the time less than 3 percent of Didi鈥檚 drivers in Shanghai had a local hukou, and more than 80 percent of the cars registered on the platform did not meet Shanghai鈥檚 regulatory requirements.

Political and regulatory considerations were also married to strategies regarding competition and brand loyalty. With more regulation, the company is forced to return to significant subsidies to attract qualified drivers.

Recently, these considerations have become more pressing as the company ramps up again for a ride hailing battle with the well-funded, online services provider Meituan-Dianping. Its continued fundraising efforts to battle Uber abroad (despite Uber鈥檚 stake in the company) and launch its own services in other regions have defined the company鈥檚 recent vision. In any case, Didi鈥檚 experience battling Uber and other competitors in China, and the company鈥檚 resilience despite regulatory and other challenges, will certainly constitute a competitive advantage both in its home and abroad.

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Editorial Update: A previous version of this article stated that Didi Dache and Didi Kuaidi merged in August 2015, it has since been updated.聽Reference to Alibaba backing online services provider Meituan Dianping has been removed pending further exploration of the merger.