E-commerce company Rakuten’s substantial investment in Spain-based ride hailing platform Cabify last week highlights the firm’s expansion of its corporate venturing activities as it looks to grow into a more diversified online services provider.
Cabify raised $120m in a series C round led by Rakuten that valued it at $320m post-money. It took the company’s overall funding to approximately $147m, $12m of which was secured in October 2015, when Cabify closed a $12m round also led by Rakuten and backed by VC firm Seaya Ventures.
Founded in 2011, Cabify operates an app-based ride ordering service that currently operates across 14 cities in five countries. Although headquartered in Europe, the company is focusing its growth on Latin America and it is planning to expand its presence in Chile, Peru, Mexico and Colombia to other markets across the continent, with Brazil and Argentina first on the agenda.
A significant element of Cabify’s growth plans will involve strategic partnerships with automotive manufacturers and international counterparts operating in other markets. Daimler and General Motors have both injected funds into the market relatively recently, with GM acquiring Sidecar in January this year and investing heavily in US-based ride hailing service Lyft as part of the $1bn series F round it closed in December 2015.
As an investor in Lyft, Rakuten may well be able to assist Cabify with the second portion of that strategy. It provided $300m of the $680m Lyft raised in its series E round last year, returning for the subsequent series F a few months later.
Lyft has a partnership in place with China-based Didi Kuaidi, India-based Ola and Singapore-based Grab that involves them linking their platforms across borders in order to share customers, so if a Chinese Didi Kuaidi customer were to visit the US they would be able to order a Lyft ride from their existing app. Cabify competes against the likes of Easy Taxi in Latin America, but hooking up with four unicorns could give it a huge push as it looks to expand across the continent.
On the other hand, the deal gives Rakuten a stronger stake in the ride hailing industry as well as boosting its international holdings. Founded in Japan in 1997 as a pure-play e-commerce website, it has since used a series of investments to diversify into a more expansive internet company, beginning with a $100m investment in visual social network Pinterest.
Rakuten’s largest investment outside of e-commerce was the $900m it spent to acquire messaging platform Viber in early 2014, but it has also funded several internet services companies, most notably in the financial technology sector where it has backed online payment technology developers Currency Cloud and WePay, small business finance provider BlueVine and automated investment service Acorns. These investments appear to only be the start.
More significantly, Rakuten has launched two corporate venturing funds over the past few months: a $100m fintech fund that will target companies with technology that could boost its Rakuten Card, Rakuten Securities, Rakuten Bank and Rakuten Life Insurance subsidiaries; and the $85m Rakuten Ventures Japan Fund, which will focus on investments in its home country. It also doubled the size of its Global Investment Fund to $200m.
The evolution is logical at a time when the internet’s big players are finding it necessary to expand in order to keep pace.
Google has evolved into Alphabet, a diversified conglomerate with a range of satellite, genomics and media holdings, while e-commerce company Alibaba has used a series of high-profile investments to build an ecosystem centred on its services, and even Amazon is now seen as one of the world’s leading cloud service providers. It is no longer enough to just be an e-commerce business, and for a company like Rakuten, VC investments are a logical way to bridge the gap.