Deal focus: Warburg Pincus backs intercity logistics

When Yunniao Distribution was created two years ago, Xiaodong He, co-founder and COO of the Chinese start-up, wanted to address the unmet demand for logistics and delivery services that has arisen as shoppers spend more time and money online. His ambition was to build a business of similar scale to ride-hailing app operator Didi Dache.

Much like Didi Dache - now known as Didi Kuaidi, following a merger with its direct competitor - Yunniao is a platform that connects customers with drivers or couriers. But the two companies' business models and client bases are totally different. While Didi Kuaidi targets individual passengers, Yunniao targets the enterprise market, providing regional and same-city delivery services to chain stores, distributors, brands and manufacturers. Corporates place their orders on the Yunniao platform, together with their specific vehicle requirements, and third-party couriers then bid for the jobs.

The company has secured three rounds of funding over the past 12 months. Matrix Partners, GSR Ventures and Shanda Capital contributed a $10 million Series A round in January 2015. Six months later, Sequoia Capital led a further round, with existing investors also re-upping. Last week, Yunnaio completed a $100 million Series C round led by Warburg Pincus.

"Delivery services is a huge market in China, worth hundreds of billions of renminbi," says Allen Zhu, a managing director at GSR. "In the big cities of Beijing and Shanghai, tons of consumer goods are being transported from the small towns to downtowns every day."

The Yunnaio platform covers 16 first-tier Chinese cities including Beijing, Shanghai, Guangzhou and Shenzhen, serving more than 2,000 clients in different industry supply chains. They include online grocery platform Fruitday, Chinese food delivery service Ele.me and home appliance distributor Suning Commerce.

The company claims to generate daily revenue of RMB1 million ($152,000) and it is targeting RMB30 million by the end of this year. The platform has 100,000 registered drivers, although this expected to reach one million, also by the end of 2016. "The management team has a clear roadmap on how to roll out the business. Investors in the firm won't bother too much on altering their development plan," Zhu says.

The latest round will be used to develop new technology, enhance risk control systems and expand services into more Chinese cities. A public listing is likely in the future, with Zhu predicting that Yunnaio will stand out as one of few leaders in the delivery category.

For Warburg Pincus, this is the latest in a string of investments in Chinese logistics, with meeting the fast-growing needs of e-commerce companies the unifying theme. In 2014, the firm re-upped in China ANE Logistics, committing $50 million, and then last year it participated in a funding round for ZTO Express, one of Alibaba Group's logistics partners.

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• Topics
• Greater China
• Expansion
• Technology
• Venture
• China
• Growth capital
• TMT
• Venture
• Warburg Pincus Asia
• Logistics
• GSR Ventures