Big Deal: Cainiao picks up $1.5bn

The logistics service, backed by Alibaba and a host of other corporates, has reportedly raised funding at a $7.7bn valuation from a consortium including Temasek and Khazanah Nasional.

Cainiao, the China-based logistics affiliate of e-commerce group Alibaba, received funding from a range of investors today in a round reported by Caixin to be sized at more than RMB10bn ($1.54bn), indicating the increasing sums being injected into the logistics VC space.

The funding, raised at a $7.7bn valuation according to Caixin, was provided by Singaporean state-owned funds Temasek Holdings and GIC, Malaysia’s Khazanah Nasional, which acts as Malaysians sovereign investment fund, and China-based investment firm Primavera Capital.

The round represents the first external funding to be raised by Cainiao, which was founded by Alibaba, conglomerate Fosun and department store chain Intime Retail Group in 2013. Alibaba held a 48% stake in the company at the time of its formation, and its other shareholders include domestic couriers Shentong, Yuantong, Zhong Tong and Yunda.

Cainiao oversees an e-commerce logistics system that spans more than 120 warehouses and 180,000 express delivery stations across more than 600 Chinese cities, with the company’s big data-powered IT system linking its services to improve efficiency. It will reach 224 countries and regions by the end of this month.

The company has not disclosed specific plans for the funding, but Cainiao CEO Judy Tong Wenhong told Freight Week in May 2015 it planned to invest $16bn in the next five to eight years in order to bolster its delivery network.

Alibaba’s presence in the country’s e-commerce sector is obviously a considerable boost for Cainiao’s business, but it goes both ways. Alibaba is also still a substantial shareholder in financial services affiliate Ant Financial, which is reported to be raising money at a valuation of up to $60bn, and both Cainiao and Ant are reportedly exploring the possibility of an initial public offering in future, which would represent a huge return for Alibaba.

However, the bigger story may well be the growth of a logistics sector that has been buoyed by e-commerce. Logistics providers such as UPS, SingPost and La Poste have operated corporate venturing units for some time and have been present in funding startups, but the explosion in e-commerce in Asia, and China and India in particular, have increased the stakes considerably.

Cainiao may be the most valuable player in China’s logistics VC space but it is far from alone. Best Logistics, a warehousing and delivery services provider for the e-commerce sector that counts Alibaba and contract manufacturer Foxconn as investors, is reported to be raising up to $700m, while rural-focused service Huitongda has reportedly secured upwards of $150m in funding over the past year.

The e-commerce startup space in India is more nascent, but Delhivery has raised $125m at an $850m valuation in a round yet to close and Grofers raised $120m in November, while the likes of Holisol, KartRocket and Xpressbees have all raised early-stage funding so far in 2016. Flipkart, the most widely used e-commerce company in the country, has meanwhile made strategic investments in digital mapping technology provider MapMyIndia and delivery storage provider QikPod.

In contrast, the US e-commerce sector has largely been serviced by existing logistics providers, though it should be noted that last-mile delivery service Deliv raised $28m two weeks ago while Amazon is reportedly planning to establish its own logistics network. Much of the activity is instead centred on food-related delivery, with DoorDash and PostMates have both raised significant sums.

Nevertheless, activity in Asia continues unabated, with Wenhong declaring in a statement today that the logistics sector will have the same impact in China’s economy as e-commerce has in the last decade. If the likes of Cainiao can reproduce its domestic presence worldwide she may turn out to be right.

– This article first appeared on our sister site Global Corporate Venturing.

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