Many of the world’s greatest companies have compelling origin stories. Passionate founders subsisting on maxed-out credit cards and sleepless nights struggling to bring their businesses to life (for more of these tales, download our book profiling 150 of China’s leading tycoons from our website).
GoGoVan can now add a chapter of its own to the anthology of business beginnings, after last month’s merger with mainland Chinese firm 58 Suyun valued the delivery provider as Hong Kong’s first billion-dollar start-up.
The story goes that CEO and co-founder Steven Lam had embarked on an entirely different venture, selling advertising space on takeaway food boxes. But he found that getting a van to deliver the boxes was peculiarly difficult. Having found a weak spot, his team set about remedying it and launched on-demand service GoGoVan in 2013.
With just $2,500 in seed capital the three co-founders rented an industrial space barely big enough for them all to work in. Lam started going to McDonald’s to save money, which the company was burning through quickly. But salvation came in 2014, with $6.5 million from a funding round led by Centurion Private Equity. GoGoVan was able to expand to Singapore. The next year it entered Taiwan, South Korea and some major Chinese cities. From such austere origins, it is now being described as Hong Kong’s first unicorn.
However that part of the story is stretching the truth. In fact, it is the merged entity that is valued at more than $1 billion and, as the Financial Times points out, the investors in 58 Suyun will have control over the combined group.
The new combination will be called GoGoVan, TechCrunch reports, and Lam will be chief executive but the two companies will maintain their separate brand names in their local markets.
58 Suyun was spun out of 58 Home, which the Financial Times describes as a Chinese version of Craigslist. The logistics unit operates in 100 Chinese cities and mainly works with individual consmers as customers, as compared to GoGoVan, which has more of a focus on B2B deliveries.
Customers, both merchants and consumers, use the companies’ apps to book transport for a range of goods. The apps then allocate the orders across a network of truck drivers based on location data.
“This deal makes perfect sense for both sides. We have Southeast Asia and China with a B2B focus, and that’s completely different from 58 Suyun, which is in the consumer market,” Lam said.
The merger will allow both firms to expand their reach, which will be of particular interest to one of their investors, Alibaba. It put money into GoGoVan through its fund for Hong Kong entrepreneurs in 2016, and is also an investor in 58 Suyun’s parent company 58 Home.
“As Chinese e-commerce goes overseas, they will need this type of delivery,” argues Chen Xiaohua, the boss of 58 Home, who is now chairman of the merged firm. 58.com, the NYSE-listed parent of 58 Home, also includes Tencent amongst its backers, but Chen says that it was Alibaba that “provided a lot of support and actively facilitated the merger”.
According to the South China Morning Post, China’s intracity logistics market is worth about Rmb800 billion ($121 billion) in the B2B segment and Rmb400 billion for B2C, citing data from Deloitte China. The two sectors are expected to grow 20% and 15% over the next year. “The goal of our merged company is to become the world’s largest short-distance logistics platform,” Lam said.
The merged entity is already the largest in Asia, CNBC reports.
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