Hong Kong has been busy celebrating the city’s “first unicorn” since the news came out last Tuesday reporting GoGoVan, the intra-city logistics and freight online platform, entered into a merger with 58 Suyun, the freight business unit of China’s largest online marketplace 58 Home. The merger serves as exciting news to the city, which has yet to see an official unicorn. We understand that the city’s startup ecosystem is desperate for some successful exit stories, unfortunately, as much as we love GoGoVan, we’re here to tell you that indeed, GoGoVan is NOT a unicorn.
Above shows some of many examples of news articles that purport GoGoVan as Hong Kong’s first unicorn.
First things first, GoGoVan is NOT a unicorn; the newly merged entity is
GoGoVan is far from claiming unicorn status. Prior to the merger, GoGoVan was valued at USD$130mn with its USD$13 Series C funding round. According to people familiar with the matter, GoGoVan received USD$150mn to USD$160mn of shares in the newly merged entity. As such, the valuation of GoGoVan falls noticeably short of theUSD $1bn needed in order to claim unicorn status.
The merged entity, however, is valued at USD$1bn as suggested by Steven Lam, co-founder and chief executive of GoGoVan. If the newly merged company can raise $200m as they suggest, then the company can confidently say it’s worthy of the unicorn status.
But the merged entity is not a Hong Kong startup either
In a technical sense, GoGoVan as a corporate entity has ceased to exist after the merger and have now become a part of the 58 Home Group. According to the companies’ press release, 58 Suyun will hold the majority stake in the combined company. And as mentioned above, GoGoVan’s shares represent less than 18% of the new entity’s total market capitalization; hence, it is only fair to say that the merged entity is in fact a Chinese, but not Hong Kong startup.
It is still worth a celebration
It’s now clear that the startup is not a unicorn. It is however, still worth celebrating as the company’s exit marks the largest exit of a Hong Kong startup in the past 32 months according to Oddup Database. The record exit of a Hong Kong startup is contributed by Pacnet’s USD$697mn acquisition from Australian telecoms giant Telstra in December 2014.
The intentional or unintentional misrepresentation
So why are media outlets alluding to the fact that GoGoVan is Hong Kong’s first unicorn? Is it a harmless marketing play in order to generate more digital traffic or were the authors of said articles just unaware of the true numbers of the deal?
Take for example, the South China Morning Post. In their article titled “Way to go, GoGoVan! Unicorn reveals global goals after merger with 58 Suyun” published on Wednesday, 30 August, 2017, 8:30am with an update on Friday, 01 September, 2017, 3:36pm; the headline suggests that GoGoVan had achieved the critically acclaimed Unicorn status prior to the merger.
On the flip side
If expansion into other Asian (non-chinese speaking) markets is what 58 Suyun hopes to derive from this merger, we believe that it would not be easy. We are of the opinion that the language barrier will pose a substantial threat to the expansion plans of the company. Whilst GoGoVan already has existing operations in South East Asia, their services are rendered only in English. This would reduce their market reach to only the English literate population of those countries.
Unlike China, South East Asia comprises of many different nations with distinct cultures and consumer preferences. This would lead to a decentralized form of corporate structure and ultimately, higher administrative expenses. While China may have many different dialects across their many provinces, the writing system is unified and therefore, operations can be kept lean.
The largest market in South East Asia is undoubtedly Indonesia. Indonesia’s population makes up approximately 40% of the ASEAN region’s total population and around 37% of its total GDP. The topography of this country will however, set a monumental task for last mile delivery administrators as it consists of thousands of archipelagos. As GoGoVan has only tapped into Singapore in the South East Asian region, they would bring little to no value to 58 Sunyun. The newly formed entity will need to make up a lot of ground on LaLaMove which is already dominating the South East Asian markets.
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