The Top 25: #1 Stephen Zhu, Didi Chuxing

Stephen Zhu, vice-president of strategy at Didi Chuxing, has had an impressive few years since joining the China-based ride-hailing service in 2014 from Goldman Sachs’s principal investment area arranging private equity deals using the investment bank’s money.

Didi Chuxing was formed out of the merger in 2015 of two Chinese ride-hailing platforms – Tencent-backed Didi Dache, and Kuadi Dache, which had received early-stage funding from Alibaba. Didi is now the world’s largest online transportation platform with more than 450 million users and 21 million drivers and has a traffic management system to reduce congestion through machine learning.

With Zhu on board and after its merger, Didi set out a clear strategy in 2015 in an interview with Tech In Asia: “From the lowest price point – the bus – to Hitch, to Didi Express, to taxis, to Didi Black and our then upcoming luxury brand, all of these product lines can already solve 70% of consumer transportation within cities.

“So a lot of the focus now is vertically. How can we make the service cheaper, more efficient, faster, and better?”

Didi’s meteoric rise has been fuelled by nearly $20bn of funding since it was founded, including $9.5bn across two rounds last year, led by Japan’s SoftBank.

Alongside SoftBank, Didi’s backers include Chinese tech giants Alibaba, Baidu and Tencent, as well as corporations Apple and Foxconn and state investor Mubadala. The company said the latest round of funding would be used to invest in artificial intelligence technology as well as expansion into new territories under a strategy set by Zhu, Didi’s president Jean Liu and its founders.

But perhaps the most significant piece of business Didi has carried out was the acquisition in August 2016 of Uber’s China operations. The deal meant that Didi would control the Uber brand in China, while becoming a minority stakeholder in the US firm. In return, Uber and its Chinese investors – among them, web services company Baidu – received an “economic interest” in Didi worth 20% of the business.

The crossholdings between Didi and Uber could prove influential if it leads to consolidation as the two also share external shareholders. Last month, SoftBank completed its acquisition of up to 20% of Uber at about $48bn in value, down from $68bn in its previous round and less than Didi in its latest round, which could encourage consolidation around one global champion.

SoftBank had earlier taken a stake in Brazil-based ride-hailing service 99, which helped Didi turn its minority shareholding into a majority position last month.

Didi itself won Global Corporate Venturing’s large deal of the year 2017 award for its own fundraising and in its profile Jeffrey Li, managing partner of Tencent Investment, said it had had a strong association with Didi since his company put money into Didi Dache in 2012 and helped it develop its network effects through the WeChat application.

Li said the merger of Didi Dache and Kuadi Dache, and the more recent acquisition of Uber, had put Didi Chuxing in an excellent position in both domestic and international markets. “We helped them a lot with those two merger transactions and that has released Didi from the competition in China and given them freedom into other verticals,” Li explained.

To develop its international strategy, Zhu used corporate venturing. In his Tech in Asia interview in November 2015 he said: “In each region, you have different users, different drivers, a different regulatory regime. So, we go with a local champion that knows the market much better.”

Didi had invested in Uber’s main US peer, Lyft, through a series of corporate venturing rounds from 2015, and also, often alongside Tencent or SoftBank or both, has investments in Taxify which operates in Europe and Africa, Careem in the Middle East, Ola in India, Grab in southeast Asia and Brazil’s 99 before turning it into a majority stake at an about $1bn valuation.

Didi’s investments in these companies involve sharing technological and logistical data between the companies rather than private user data.

Zhu told Tech In Asia: “We work together and we can share experiences in terms of technology, deep learning, product innovation, and operations. We can speed each other up.

“We are thinking about sharing a lot of the learnings we have in China to other markets like southeast Asia and India.

“When you think of the dynamics of the cities, it is quite similar – you have high population density, and you have various price points.

“The bus service we have could potentially work out in southeast Asia or India as well. We think collaboration works perfectly.”

But with market share in China and billions in the bank allowing it to develop its service and pricing strategy, Didi has indicated its move into the next stage of its strategy – direct operations in overseas countries, after its acquisition of 99, and said it would set up operations in Mexico this year in competition to Uber in the region.

Didi has also continued to use corporate venturing to expand after investing in China-based bike-sharing service Ofo, while its most recent corporate venturing deal was in Renrenche, a China-based peer-to-peer second-hand car trading platform’s, $200m round in September.

Didi is also setting up vehicle management companies and partnering automakers to design and build cars for ridesharing purposes, according to Zhu in an interview with Abu Dhabi-based newspaper National in November last year.

Through its operations in China and its investment portfolio, Didi reaches 60% of the global population in 1,000 cities across the world, the National reported. Zhu’s strategy is talking it towards 100% and once you can move all the people around you can start on moving all the things around, too.