Alibaba to lead $1b round into Chinese food delivery startup

Alibaba and its finance affiliate, Ant Financial, are in talks to lead a round of at least US$1 billion into Ele.me, one of China’s leading food delivery startups, according to anonymous sources that spoke to us.

The fresh boost in capital will value Ele.me at US$5.5 billion to US$6 billion, and will help the startup battle against Meituan-Dianping, a competing service backed by Tencent, citing people familiar with the matter.

“We do not comment on market speculation,” an Alibaba spokesman told us. Ant Financial declined to comment.

China’s food delivery industry reached a heyday of activity in 2015, the year that food delivery startup Meituan and daily deals service Dianping merged into one entity. That year, both startups employed cash-burning subsidies to win market share.

The industry quickly became a proxy war between Alibaba and Tencent, with the former backing Meituan and the latter investing in Dianping. However, after making peace over Meituan-Dianping, the fight has reignited – this time between Ele.me and Meituan-Dianping.

Both are cornerstones of Tencent and Alibaba’s empires. In particular, the two startups fit into Tencent and Ant Financial’s mobile payment strategy, where online services, peer-to-peer payments, and purchases at brick-and-mortar retailers are conducted through the phone. By investing in Meituan-Dianping and Ele.me, both tech giants can embed their digital wallets inside the food delivery apps – and gather transaction data about customers.