KKR, Alibaba, Ping An commit $300m to 58.com's O2O unit

The deal takes 58 Daojia into unicorn territory with a valuation of more than $1 billion on a fully-diluted basis post-investment. It also represents the latest large-ticket foray into China's O2O space, which recently saw the merger of rivals Dianping and Meituan - a move partly intended to reduce the quantum of commissions the companies offer to service providers in order to build up market share.

Founded in September 2014, 58 Daojia provides information on and access to offline services such as cleaning, moving, babysitting, beauty care, and many other categories in approximately 30 cities in China. The idea is that customers can connect directly with nearby independent service providers who can travel to their homes.

The platform represents an extension of 58.com's existing business as the largest online marketplace in China that connects local merchants to consumers. Revenue - primarily derived from memberships and online marketing services - came to $264.9 million in 2014, up from $145.7 million in 2013. 58.com turned profitable in 2013 and posted a net income of $22.6 million in 2014.

Eight months after going public in late 2013 - and creating a liquidity event for several VC investors - 58.com agreed to sell a 19.9% stake to Tencent Holdings for $736 million, and the two companies said they would use each other as the preferred partner in local services and work on building out O2O services.

Since the start of this year, 58.com has also become acquisitive in order to diversify its offerings. It agreed to buy a 43.2% stake in domestic rival Ganji.com in a deal worth around $1.61 billion - at the same time Tencent pumped in a further $400 million, taking its holding to 25.1% - acquired online real estate listing platform Anjuke for about $267 million, and picked up recruitment site ChinaHR.com.

Given the alignment with Tencent, Alibaba's participation in the 58 Daojia deal is interesting. However, recent activity suggests competitive instincts are being put aside in order to create larger, more sustainable businesses. Alibaba was an early backer of Meitun, while Tencent invested in Dianping; they were also on opposite sides of the Didi Dache-Kuaidi Dache battle, which has since resulted in a merger.

58.com will retain majority ownership of 58 Daojia following the investment by KKR, Alibaba and Ping An. The proceeds will be used go towards marketing, research and development, and other operating initiatives. The company also wants to explore investment opportunities in new start-ups in the rapidly expanding Chinese home services market.

"The 300 million and growing population of digitally literate middle class consumers in China has created a huge but still nearly untapped market for online-to-offline home services. There is a strong need for experienced, trustworthy and effective home service professionals in China, and 58 Daojia is in a unique position to lead this local services revolution," Michael Yao, chairman and CEO of 58.com, said in a statement.

While Alibaba has backed companies throughout China's internet industry, KKR has made just two previous investments in the space - online used car auction platform Uxin and education and training provide Tarena. Ping An also has a venture capital unit that has participated in numerous tech-related deals.

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• Topics
• Technology
• Consumer
• Greater China
• Expansion
• China
• Growth capital
• TMT
• Consumer
• KKR
• Alibaba Group
• Ping An