The founder of Chinese ride-hailing service now eyes e-logistics business nationwide
While senior executives of Chinese ride-hailing service Didi Chuxing were celebrating a US$1 billion capital injection from technology giant Apple into the company on May 13, one man, who co-founded the original business, was reading the news with mixed feelings.
“Four years ago when Kuaidi was preparing for launch, we faced a lot of questions from people. That kept me awake for many nights. Now, almost every query has been answered. However, things came and went so rapidly it seems that it all happened ages ago,” said Chen Weixing in a WeChat posting on the day of the news.
Chen was the founder of Kuaidi Dache, a ride-hailing service company in China that merged with rival Didi Dache in February last year and eventually became Didi Chuxing. But Chen lost his position in the reorganised entity, and he left after the merger.
“When we developed the Kuaidi app, we were questioned by many people. My friends teased me and the core team members of my company gradually left me ... I am pleased as the [Apple] news vindicates the business model of ride-hailing services in China,” Chen said in an interview with the South China Morning Post.
“However, I also feel lost,” he said. “I had made a lot of mistakes during the time [referring to his days in Kuaidi] ... I would have been more popular, more wealthy and would own a bigger company.”
Chen, an executive director and the single largest shareholder of Hong Kong-listed NetMind Financial Holdings, a company shifting from mining to e-logistics, said the lessons learned from his Kuaidi business equipped him better for his new dream – turning his company into one of the most comprehensive logistics networks nationwide.
Like thousands of young people in China, Chen pursued a dream of being an entrepreneur. He established his first company when he was a university student and made a fortune through his web game Funcity on Web in 2008. Four years later, he founded Hangzhou Kuaizhi Technology, working on the development of smartphone taxi app Kuaidi Dache because he felt upset about the time he spent on the street trying to get a taxi.
The app primarily provided mobile-based car-booking services and became a major competitor to traditional taxi services while making Chen a well-known figure in the ride-hailing business at the age of only 29.
His business drew capital from some big investors such as Alibaba Group, now the owner of the South China Morning Post. But Chinese venture-capital firm GSR Ventures was one company that favoured rival Didi Dache, founded by Cheng Wei, a former employee of Alibaba, and co-run by Jean Liu, the daughter of Lenovo Group founder Liu Chuanzhi. Didi Dache was supported by Tencent Holdings, which took part in a US$100 million fundraising round in 2014.
Zhu Xiaohu, general manager at GSR, said that while the ride-hailing business became huge, at the time the company was cautious because Chen had no experience in the sector and had only worked on developing web games.
Today, Chen is moving into another new market and says he feels better-equipped for the challenge.
“I do not freak out so easily nowadays even when I am being questioned over whether my business model works,” said Chen, recalling the days when he also often questioned himself over whether what he was pursuing was correct.
“Some people are always confident in themselves. But I am not that kind of person,’ he said.
In August 2014, Chen together with a number of partners formed Kuaichi, which developed a mobile phone app, Kuaihuoyun, through which logistics and road-freight transportation services are provided.
The following year, he was appointed executive director of CST Mining Group, a Hong Kong-listed firm whose assets include a copper mine in Australia. CST also took a 20 per cent stake in Kuaichi. In March this year, Chen bought a roughly 10 per cent stake in CST, becoming its single largest shareholder. This month, the company was renamed NetMind and will focus on the e-logistics business.
NetMind already owned a 92 per cent interest in First Cargo, an e-logistics platform that allows real-time matching of owners of freight vehicles with spare capacity and customers.
“The logistics market in China is huge. The turnover of road freight in the country was 2.1 trillion yuan in 2014 and is expected to reach 4.4 trillion yuan in 2020 with compound annual growth of 12 per cent,” said Chen.
However, the market is still inefficient, costly and unreliable.
“I believe every company has, at least once, suspected that their logistics firms are unreliable and are cheating them in terms of the fees they are charging,” said Chen.
His plan is to build a transparent nationwide e-logistics platform that creates better cooperation in the delivery, production and distribution processes through a system of information flows and computerisation.
Next to this, the platform aims to provide financial services including insurance and road-freight-related lending.
But the new venture may still need to overcome some investor scepticism because of past issues at G-Resources, a gold-mining company in which NetMind has a majority stake.
NetMind was drawn into a spat with G-Resources’ minority shareholders, which include investment firm BlackRock, over the mining firm’s agreement to sell its profitable Indonesian gold-mining business to a consortium led by a fund partly owned by its vice-chairman.
Emotions were further stirred by the decision to allocate the proceeds of that sale to investments in property and financial businesses instead of paying a special dividend or initiating a share buy-back.
Both NetMind and G-Resources are chaired by Hong Kong businessman Chiu Tao, a known corporate raider in Hong Kong.
Chen said both shared the view that they wanted NetMind to succeed.
“I worry that NetMind will become a speculative stock. I do not want to see the stock price rise simply because of the e-logistics business concept,” said Chen. “I want it to be a respected company.”
This story has been corrected in the 14th paragraph to say that Chen bought a roughly 10 per cent stake in CST.