A star-studded consortium involving Softbank, Alphabet, and Tencent is set to invest $1.9 billion in truck-hailing platform Manbang Group, marking the Chinese logistics sector's second billion-dollar private fundraising in three months.
The joint investment, announced on Tuesday, follows JD Logistics’ $2.5 billion capital-raising in February, which is China's largest private funding deal so far this year. This is also Chinese logistics industry's largest private funding deal to date, although dwarfed by 2017's Chinese $11.6 billion private buyout of Global Logistic Properties (GLP), a business with a portfolio of warehouse assets in China but also across Asia, the Americas, and Europe.
The Manbang and JD Logistics transactions underline the growing potential of China’s logistics sector but they also focus on different technological trends within the red-hot industry.
Investors behind JD Logistics are betting on increased demand for warehouse and storage facilities as China’s e-commerce and trading activities accelerate. In the case of Manbang, investors are buying into a growing virtual network that connects trucks, drivers, and delivery firms.
Manbang’s fundraising also stands out more broadly because it involves a number of high-profile overseas investors, underscoring the growing foreign interest in Chinese logistics even before they go public, like Singapore-listed GLP, before it was taken back into the private sector.
Manbang’s latest funding round is led by state-backed China Reform Fund and Softbank’s Vision Fund. Alphabet, the parent of Google, invested through its growth equity investment fund CapitalG. Other foreign investors include American investment firm Farallon Capital, British asset manager Baillie Gifford, and Hong Kong-based Ward Ferry Management.
They are joined by a group of Chinese corporate and private equity investors including Tencent, Sequoia Capital, Hillhouse Capital, GSR Ventures, Riverhead Capital, Genesis Capital, and Xianghe Capital.
Manbang is often referred to as the trucking equivalent of Didi Chuxing. While the Chinese taxi-hailing app matches commuters with commercial cars and taxis, Manbang connects delivery firms with lorry drivers looking for a job, and thus helps reduce their idle time.
These two car-hailing applications were both created after fierce competition within their respective sectors.
Manbang was created in November last year through a merger between China’s two leading truck-hailing apps, Yunmanman (left) and Huochebang (right).
That is similar to the experience of Didi Chuxing, which brought together Didi Dache and Kuaidi Dache – China's top-two taxi-hailing apps, which had been in the throes of a cut-throat discount-offering battle before the merger.
Headquartered in southwest China’s Guizhou province, Manbang charges about 40 to 70 Rmb cents for every message posted by delivery companies for finding empty lorries.
On a broader industry perspective, the truck-hailing app is perhaps more important in solving the mismatch between the demand and supply of transportation services.
Since lorries often deliver goods across cities or even provinces, it is common for lorry drivers to return to base with empty loads after getting a one-way order. This is the root of a long-standing problem in China – the uneven distribution of its transportation resources, which can result in a lot of idle trucks at one place and a lot of urgent merchant shippers looking for services at another.
Taxis and commercial cars do not have the same problem since they are mostly operated within a city or town, and thus they are more likely to get new riders after a one-way trip.
Manbang said its app connects to as many as 5.2 million of the country’s current stock of 7 million trucks. Some 13.6 billion ton-kilometres of goods were delivered via its app every day, equivalent to roughly 75% of the country’s daily freight turnover of 18.3 billion ton-kilometers.
In addition, the app offers value-added services such as lorry-purchase financing, insurance, fuelling, and electronic toll collections.
Institutional investors in Manbang will have every reason to expect a similar success story to Didi Chuxing, since it is run by an early-stage investor in the taxi-hailing app.
Wang Gang, Manbang’s chairman and chief executive, was an angel investor in Didi Dache. His Rmb700,000 initial investment is now believed to be worth over Rmb1 billion. A former senior executive of Alibaba, Wang is also an angel investor in bike-sharing app Ofo.
It is worth noting that Manbang joins the growing list of large private funding deals in China, suggesting that companies are no longer confined to the public market for raising huge capital.
At $1.9 billion, Manbang’s latest fundraising is the third largest single-funding round in China year-to-date behind JD Logistics’ $2.5 billion and JD Finance’s $2 billion deals in February and March respectively.
By comparison, the largest IPO in China this year by Huaxi Securities raised about $790 million.