Uber’s India Rival Said in Talks to Raise About $600 MillionBy and
Uber has stepped up its efforts in India after exiting China
Ola was last valued at $5 billion; Uber at $69 billion
India’s largest ride-hailing startup, Ola, is in talks to raise about $600 million and may close the deal by year end, as it seeks to counter an increasingly aggressive Uber Technologies Inc. in the coveted India market, according to a person familiar with the matter.
The funds are coming from new and existing investors and would give six-year-old Ola enough capital for at least 18 months, said the person, asking not to be named because the talks are private. Negotiations are ongoing and the amount raised or timing may still change. SoftBank Group Corp., a current investor, plans to participate and may lead the funding round, the person said.
The fundraising would be a record for India this year and intensify the fight between ANI Technologies Pvt’s Ola, last valued at $5 billion, and Uber, the world’s best-funded technology startup, with a valuation of $69 billion. Ola, backed by SoftBank and Tiger Global Management, could use the funds to speed up its spending on recruiting drivers and helping them lease vehicles. It would also allow Ola to expand geographically as it tries to maintain its lead over Uber, which says India is now a “strategic priority,” and has increased investments in the country after agreeing to sell its money-losing China operation.
“Funding is critical for Ola to keep its momentum and maintain its market leadership in the $10 billion ride-hailing market, which is readying for its next phase of expansion,” said Jaspal Singh, a partner at Delhi-based transportation consultancy, Valoriser Consultants. “Uber has even deeper pockets now that it is out of China, which was a big drain on its resources, and it will now focus on India in a big way,” he said.
Ola says its mission is to build mobility for a billion Indians. The company currently covers 102 cities in the country compared with Uber’s 28, and has 450,000 vehicles. The Bangalore-based startup, founded in 2011, also offers a wider range of vehicle options than its San Francisco competitor. Choices on Ola’s app range from affordable two-wheeled motorcycles to three-wheeled auto-rickshaws and street cabs. Displaying the ingenuity typical of small Indian businesses, Ola even deployed boats in several flooded Indian cities during the monsoon rains a few months ago.
Dilapidated public transport infrastructure in Indian cities and the lack of convenient transport options have helped Ola and Uber expand at a rapid pace. They are now vying with each other to woo customers from government offices and train stations, as well as making it easier to bring new drivers on to their platforms. Recently, Ola said it would collaborate with the government to train and recruit 5 million drivers in the next five years. Both companies have tied up with automakers like BMW, Tata Motors and Maruti Suzuki to lease cars with attractive and affordable financing options for drivers.
The funding round comes during a long dry spell in the world’s third-largest startup market. India’s technology startups raised $4.23 billion in the first three quarters of this year, less than half the total for the same period of 2015, according to researcher Preqin. Ola’s other investors include DST Global, Accel Partners and Sequoia Capital.
As smartphone usage soars in India, both are burning cash to attract drivers and riders with incentives -- making funding a key component in the battle.
Ola’s founder and Chief Executive Officer Bhavish Aggarwal said in an interview this summer that Ola, with a million rides daily, is ahead of its competitor. Ola has unveiled several new features to try and one-up its rival, such as allowing customers to book Ola rides offline, a boon in a country with poor Wi-Fi connectivity and expensive data plans, and its Just in Time feature that sends alerts to users when a cab is available or peak pricing ends.
Aggarwal did not respond to an e-mail about the upcoming funding round. A spokeswoman for SoftBank responded saying they are “unable to comment on speculation on fund-raising efforts.”
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