The Beijing offices of Shequ001, a start-up delivering supermarket goods booked via smartphone, stand almost deserted. Leaflets lie scattered on the floor.
Nearly 400 former employees, of a workforce that in March topped 2,000, have joined a social network clamouring to get their unpaid wages. Zhang, who gave only his family name, is one of fewer than three dozen workers left at a company that last year was worth 2 billion yuan ($312 million).
“We just wanted to build the market, so we burned through our money,” he said, adding he hasn’t seen the firm’s CEO since March.
In China’s hottest tech sector, hundreds of “online to offline” (O2O) start-ups like Shequ001, which draw mobile users to local physical stores and services, have failed as skyrocketing valuations deter investors and put the brakes on fresh funding. Many more are expected to fall by the wayside, or be driven into mergers in what executives and investors say is a market bubble.
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Lured by a potential 10 trillion yuan (US$1.57 trillion) market for app-based, on-demand, logistics-heavy businesses, venture capitalists and others piled in, throwing billions of dollars at firms that often need only cash and a working app to enter the fray.
China now boasts 21 ‘unicorns’ - private start-ups valued at over US$1 billion - says CB Insights. But now, those inflated valuations - for companies that rarely make any money - are proving too much for investors and new funding is drying up.