Alibaba-Backed Souche Raises $578 Million in New Financing
(Bloomberg) -- Souche.com, operator of a used car trading website, raised $578 million to fund its research and development and expand its leasing program.
The round was led by Primavera Capital and Morningside Venture Capital. Other investors include Alibaba Group Holding Ltd., Dreamfly Capital and ClearVue Partners, the company said in an emailed statement.
Founder and Chief Executive Yao Junhong said the company’s valuation this round was almost $3 billion, rising from between $1 billion and $2 billion after its last financing in November 2017. It will invest in improving the back-end technology needed to better analyze data from across the car industry.
While China was once known largely as a market for new vehicles, demand for used cars has increased as the quality improves and allows them to last longer. This has led to a rise in internet marketplaces such as Souche selling hundreds of different makes and models. While the company technically has inventory in the form of vehicles, these are only purchased when a client makes an order so that Souche’s risk is reduced, he said in an interview.
“We’ve raised about $1.2 billion in total,” Yao said, arguing its relatively asset-light model made it more cost-effective compared to rivals. “We’ve consumed about $200 million, repurchased less than $200 million in shares from existing shareholders and have the rest in our pocket.”
The Hangzhou-based startup has been gradually acquiring companies that handle car industry data and software before bolting them into its own solutions. The goal is for Souche to provide data-driven products and services for the entire car sales market. These can then be integrated into Souche’s software as a service packages, attracting more dealers and car-makers to its Alibaba-style marketplace model.
Souche has almost 100,000 dealers connected to its software platform, which feeds data back to the company. Eventually it will offer advertising on the platform.
Souche raised $335 million in November in a round led by Alibaba. It’s pulled in $913 million of funding in under a year. Rival RenRenChe raised $300 million from backers including Goldman Sachs earlier this year while Uxin Ltd. listed on the Nasdaq in June. Guazi, also known as Chehaoduo, is one of its biggest competitors and is backed by Tencent Holdings Ltd.
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