Didi immediately one-ups Uber’s $3.5b funding round

Photoshop by TiA. Original image from Wikimedia

Lessons we learned yesterday: the Uber-Didi cash burning battle doesn’t seem set to slow down in 2016, and investors are still willing to come along for the ride.

First, Uber announced a new US$3.5 billion round of funding from Saudi Arabia’s Public Investment Fund. That brings the total sum the company has raised in what is now its series G round to US$5 billion, the largest venture round ever.

But Uber’s China rival, Didi Kuaidi, didn’t even wait a day to fire back. Onstage at Code Conference, Didi president Jean Liu announced that Didi is currently raising an even bigger round, although she didn’t share a specific sum or name investors.

“We have raised probably close to US$5 billion before this round, and Didi is one of the best capitalized private companies. As for that Uber news, I have to say our industry is actually in a very early stage, so the more capital that comes into it the faster it grows. So it benefits every one of us,” she said.

“The current round we are raising is actually bigger than the number they just announced. Fundraising can go on forever and ever; but at the end of the day, if you really want to win the market you have to win the hearts of the users. That’s what we are focused on.” (Updated three hours after publishing: Added in direct quote.)

Apple’s Tim Cook with Didi’s Jean Liu, pictured in Beijing shortly after Apple’s investment was announced. Photo credit: Tim Cook on Twitter.

Last month, Didi announced that it had secured US$1 billion in funding from Apple.

Money to burn

Both Didi and Uber have been raising so much money because they have to. Instead of worrying about profits, both companies have targeted user acquisition, focusing on rapid expansion and using generous subsidies and discounts designed to attract drivers and passengers to their platforms.

They’re both spending aggressively to get users and drivers.

There certainly seems to be a little bit of one-upsmanship when it comes to the funding totals – and these latest announcements do nothing to lessen that impression – but neither company has been sitting on stacks of cash in China. They’re spending aggressively to get users and drivers.

Liu says that her company’s focus on subsidies is lessening, though. Didi has already reduced driver subsidies quite a bit, and this latest round isn’t meant to be used as just a way to fund more subsidies, she told the Code Conference audience. Didi is now doing 14 million rides a day, and at that scale, Liu says, the subsidies just aren’t needed anymore. This latest massive investment will instead be used on improving the Didi user experience.

Uber’s US$3.5 billion round was raised by Uber global rather than Uber China, so it’s not clear how much of that money will end up in the Chinese market. But Uber certainly doesn’t seem ready to concede China to Didi, despite Didi being the clear market leader. That means that if Didi continues to raise and burn cash at this rate, Uber is probably going to have to follow suit.