Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Group buying is still hip in China. Or that's what Meituan Dianping and its investors must believe.

Backed by Tencent Holdings Ltd., the buying-cum-restaurant-review service is back in fundraising mode and may secure as much as $5 billion, Bloomberg News's Lulu Chen reported Wednesday. If the round comes in at the top of the valuation range, Meituan Dianping would leapfrog Airbnb Inc. to become the world's fourth-largest unicorn, according to CB Insights.

What's important to note is that this new cash will probably feed more of the same kind of war chest that drove up valuations of the world's two biggest startups -- Uber Inc. and Didi Chuxing. 

Founders, and their backers, like to convince themselves that funding is buying customer signups, driving habits and cementing loyalty, and that this is the moat within which they can defend their territory.

Yet Uber shows this isn't always the case. A torrid series of scandals turned users over to Lyft Inc. in a way that proved Uber's supposed moat was little more than a shallow ditch.

You don't even need a scandal to undo those defenses. Snap Inc. has learned that all it takes to erase loyalty is a smart and attentive competitor who's willing to copy your every move. Silicon Valley now jokes that Facebook Inc.'s Instagram is better at Snap than even Los Angeles-based Snap itself.

Snap's shares have declined post-IPO, evidence that investors no longer believe its moat around users and advertisers is particularly deep
Source: Bloomberg

Meituan Dianping is one of the biggest players in the online to offline (O2O) market pioneered by Baidu Inc., Alibaba Group Holding Ltd. and Tencent -- and the startups they back. The theory is that consumer spending in China will continue to grow, and e-commerce and O2O will be a huge part of the market, thus the BAT triumvirate's investments are driven as much by FOMO as any rational belief in the businesses' earnings potential.

Water Pipe
China's biggest internet players have more than $60 billion in cash and equivalents available to keep funding investments
Source: Bloomberg

But as Chen writes, Baidu looks ready to retreat, with the possible sale of its Waimai food delivery service at a discount. That would leave Alibaba and Tencent to battle it out, turning to VCs and others to help pump the moat with more cash.

They should pause, though. That moat might not be as deep as they first thought.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Katrina Nicholas at