China-based food delivery app developer Ele.me raised $350m last week, indicating that the online food ordering sector is continuing to grow, boosted by geographic diversification that is expanding the business model to new markets.
Ele.me received the series E funding from internet portal Tencent, e-commerce company JD.com, restaurant listings service Dianping, Citic PE, which acts as the private equity arm of financial services provider Citic Capital, and venture capital firm Sequoia Capital.
The investment meant Ele.me has now raised $455m from its last three rounds, with its past backers including Matrix Partners and GSR Ventures. It has not disclosed its current valuation.
Ele.me, which translates as ‘are you hungry now?’ in Mandarin, runs an online service enabling users to order food to be delivered by local restaurants or fast food providers. Founded in 2009 by students in Shanghai, it now operates in up to 250 Chinese cities and its restaurant base numbers around 200,000.
The company maintained that it will continue to operate independently following the transaction but the investors in its latest round are thought to be significant as their identity points to possible tie-ups in the future.
The link between Dianping, which invested $80m in the company in 2014, and Ele.me is clear, as Ele.me can benefit from Dianping’s data and existing connections to the industry, which would prove invaluable as it expands, while Dianping accesses a part of the sector that has already been efficiently monetised.
Tencent and JD on the other hand get to strengthen their links to an important offline sector, in the food industry. China has recently seen considerable growth in the ‘online-to-offline’ sector, with taxi hailing apps Kuaidi Dache and Didi Dache closing huge funding rounds and several online companies making steps in the brick and mortar world, the most prominent example of which was e-commerce company Alibaba’s $692m investment in department store chain Intime Retail Group last year.
These deals enable businesses such as Tencent and JD, which invested $50m in Ele.me rival Daojia in September 2014, to diversify their businesses into more steady industries while also attracting additional customers to their individual platforms, which would be enhanced by a food ordering service. Tencent owns about 18% of Diaping, and led a $30m series B round for food delivery service Line0 three weeks ago.
Ele.me’s series E round also shows that the sector, which has become established in the US, where GrubHub went public in April, the UK, where Just Eat floated the same month, and Europe, where Germany-based Delivery Hero raised $350m last year, is still growing considerably in other markets.
India-based Zomato revealed it is chasing $100m for its latest funding round earlier this month, at the same time as it entered the US market by acquiring Urbanspoon for up to $60m. Foodpanda, formed in 2012 by incubator Rocket Internet, has since expanded to 40 countries, targeting markets in Africa, Asia and the Middle East where its older rivals have not yet set foot.
China’s vast population however makes it the largest market in which a clear leader is yet to emerge, which is part of why investors have been keen to heavily fund Ele.me. Competitors such as Line0, which is more fast food-oriented, and Yes, I Deliver are newer and less developed. Meituan operates a food delivery service but it is only one of several offered by the company, which operates as a group buying site.
Ele.me’s funding was raised in the wake of the company recently beginning to expand its target audience from students to more affluent professionals, and is clearly attempting to stake a claim on the overall Chinese market. Dianping’s resources will help it in this aim, as will Tencent’s hugely popular WeChat messaging app, showing the strategic value that can be brought by corporate investors along with their financial provision.