Ele.me, the food delivery platform acquired by Alibaba Group, is looking for $2 billion in new financing to help it take on rival Meituan Dianping. According to Bloomberg, Ele.me wants to expand a business that’s burning enormous amounts of cash, according to anonymous sources.
It is unknown how big of a stake is available in Ele.me (which means “hungry yet?”). The company was acquired earlier this year by Alibaba for $9.5 billion as part of Alibaba’s efforts to expand into China’s local delivery market. Alibaba paid all cash in the deal and acquired all the shares formerly held by Baidu. As part of the deal, Ele.me Co-founder Zhang Xuhao became chairman of the company, and Vice President Wang Lei of Alibaba was named chief executive officer of Ele.me.
“As one of the most frequently-used applications, food delivery is the single most important entry point in the local-services sector. We can already see that a vast, multi-dimensional, local instant-delivery network formed through a food delivery service will be an essential piece of the commerce infrastructure,” said Daniel Zhang, chief executive officer of Alibaba Group.
The company has people delivering food on motorbikes across China. Its main competition, Meituan Dianping, is a startup backed by Alibaba rival Tencent. Both Ele.me and Meituan are incurring massive losses as they offer steep discounts to attract customers. But while Meituan, the world’s third most-valuable tech startup, revealed a net loss of 19 billion yuan ($2.8 billion) last year, it also showed that it more than doubled revenue to 33.9 billion yuan when it filed for its Hong Kong initial public offering (IPO).
It makes sense for Alibaba and Tencent to invest in food delivery startups, as the market for on-demand services in China is surging. More people are using their smartphones to order meals, schedule beauty treatments and hire domestic helpers.
Alibaba declined to comment on behalf of Ele.me.