Deal focus: Oceanpine sees value amidst traffic

China's notoriously congested roads, while a headache for most of the country's 800 million urban residents, might prove a lucrative opportunity for Oceanpine Capital. The Hong Kong-based private equity firm recently led the $60 million first tranche of a Series D round for Shansong, a Chinese courier services start-up that prides itself on negotiating traffic faster than most.

"Shansong's inter-office document courier service is able to deliver within one hour anywhere in Beijing, that's very impressive," said Dave Chenn, managing partner and CEO of Oceanpine. The GP was established last year as an offshoot of China Century Group, which was founded by Chenn 12 years ago. It makes growth-stage investments in technology, entertainment and healthcare businesses, and at present, China Century Group is the sole LP.

Oceanpine led the round with N5 Capital and V Star Capital. Additional contributions came from SIG Asia, Shunwei Capital, BHG Long Hills Capital, SR Capital, Hearst Ventures China, and Lighthouse Venture Capital. Shansong is likely to have a post-money valuation of more than $600 million, he said.

Founded in 2014, Shansong provides regional and same-city delivery services to corporate and individual clients. Orders are placed through WeChat and the company's mobile app, and third-party couriers then bid for the jobs. To guarantee delivery within one hour to destinations no more than five kilometers from one of its warehouses, Shansong works with around 490,000 couriers across more than 200 cities. It tracks courier performance through a customer service rating system. 

Competition in the space is fierce. SF Express, China's second largest delivery company after state-owned China Post, offers a similar one-hour guarantee for courier services, while Meituan-Dianping launched its intra-city offering last year. It promises delivery within an hour for any location in a city. 

Chenn believes the company, which is said to have turned profitable in 2016, must move fast in order to build market share over the next few years. Shansong's goal is to grow its average number of daily delivers from the current level 32,000 to around three million by the end of 2019. 

Asked about the threat posed by SF Express and Meituan-Dianping, Chenn says he isn't that worried. SF Express has a higher cost base because it relies wholly on full-time employees, while Meituan-Dianping is currently more focused on food delivery. Competing with Alibaba Group's Ele.me is more of a priority than going head-to-head with Shansong in the courier services space.

"It's difficult for them to compete with Shansong in terms of both quality control and cost control," Chenn adds. "Also, Shansong has been in this business for many years and it had been through the learning curve, so it's hard for the others to catch up."   

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• Topics
• Greater China
• Expansion
• Support services
• Technology
• China
• TMT
• Logistics
• Oceanpine Capital
• Susquehanna Asia Investment
• Shunwei Capital Partners