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According to an insider of meituan.com's financing move, the company recently initiated a new round of financing, in which its major shareholder Tencent refused to take the lead and other domestic investors were less inclined to support. Under this condition, meituan.com might consider overseas financing as its next move.
Major shareholders usually endorse the company that they have invested in, hoping to solicit more investors for the next round of financing, so it is rather rare for a deep-pocketed company like Tencent to voluntarily give up on the next round of financing. What accounts for this? The underlying reasons might lie in meituan.com's own operation conditions and its subtle relationship with Tencent.
**Making too many enemies compromises meituan.com's business, leading to Tencent's pessimist attitude **
Since capital always follows profits, the fundamental reason for Tencent's withdrawal is that it thinks of this as a losing cause where no profits can be generated.
After the merger with dianping.com, meituan.com has undergone a downturn. By spreading its focus from a single point to various fields, the company entered a vicious cycle of constantly developing new business and confronting aggressive rivals. Originally focusing on group purchasing, meituan.com has now extended its business to food delivery, hotel & travel, payment, taxi hailing, short rent, among others.
All these fields share a common feature: massive investments and fierce competition. Its rivals include ele.me and Baidu Takeaway in food delivery; ctrip.com, qunar.com and elong.com in hotel & travel; the unshakable duopoly of Alipay and WeChat Pay in payment; Didi Chuxing and Yongche in taxi hailing; and tujia.com, airbnb, mayi.com and xiaozhu.com in short rent.
Meituan.com is facing enemies from both inside and outside. On the one hand, the company hasn't still managed to profit up to now, as a large amount of money is burned in its main business – take-out delivery. Wang Puzhong, Vice President of Meituan-Dianpin and General Manager of the Take-out and Delivery Department, said recently that the company would not profit in the coming one to two years. What's worse, its new business is facing even more fierce competition and can hardly scramble for any decent market share. It is under constant internal restructuring, suffering from the frequent loss of senior executives – it was reported that seven of the eight company's pillars have left. Wang Xing, Founder and CEO of meituan.com, who once claimed that talents were the company's biggest assets, now seems to have lost a huge chunk of his assets.
Toutiao.com, meituan.com and Didi Chuxing, dubbed as the "little BAT", all have shares owned by Tencent. During the two sessions this year, the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), Tencent chairman Ma Huateng, known as Pony Ma, was bullish about the promising future of Didi Chuxing and toutiao.com, but gave no comments on meituan.com. This suggested that he was pessimist about the latter and worried about adopting the cash burning method to run an internet firm.
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Offending Alibaba and Tencent repelled other potential investors in China **
The second reason for Tencent's withdrawal is meituan.com's ignorant move to the payment field, which is partially dominated by Tencent.
For other start-ups, the availability of the investments by Alibaba and Tencent signifies a guarantee for funds and traffic. However, meituan.com's intention for independent development has led it to betray both Alibaba and Tencent, the two most deep-pocketed investors in China. This brings little hope for the company to obtain a new round of funds in China.
Meituan.com betrayed Alibaba and Tencent in almost exactly the same way.
As an investor in meituan.com's second and third rounds of financing, Alibaba devoted funds, talents (Alibaba's vice president Gan Jiawei joined meituan.com to help it build a strong army for offline promotion) and payment support. Yet this did not last for long. In order to get out of the control by Alibaba, meituan.com leaned towards Tencent during its cooperation with dianping.com. Tencent devoted everything it could, from the USD 3.3 billion leading investments and talents (Tencent's vice president Zheng Zhihao joined China Internet Plus to serve as CEO of maoyan.com) to payment support.
What provoked Tencent most was that meituan.com spent RMB 1.3 billion on the third-party payment license in merely eight months. This suggested that it officially became a rival of WeChat Payment, which severely disappointed Pony Ma. One of the senior investors revealed that Tencent was very unhappy about meituan.com's acquisition of a third-party payment license company. Tencent even planned to withdraw all its support, ranging from mobile payment and funds to resources.
Due to the large market share of WeChat Pay and Alipay, meituan.com had to drop its independence in less than 100 days and went back to WeChat Pay. However, distrust has emerged between the two.
Tencent's refusal to participate in meituan.com's next round of financing is probably just the beginning. Should it copy Alibaba's vengeance and support ele.me and koubei.com, the competitors of meituan.com, life will be much tougher for meituan.com in the future.
With Alibaba and Tencent's negative view on meituan.com, the company is unlikely to raise money in China. Similarly, its ambition for overseas financing might also be far-fetching, as illustrated by what happened to Groupon.
(ASIA PACIFIC DAILY)
