All you need to know about Brazil's first tech unicorn

Brazilian ride-hailing app 99 gets acquired by Chinese firm Didi Chuxing and reaches valuation of $1 billion.
Written by Angelica Mari, Contributing Writer

Chinese mobility firm Didi Chuxing has acquired the majority of Brazilian ride-hailing company 99, placing it on the list of global tech unicorns.

The announcement of the acquisition last Wednesday follows the acquisition of a minority stake in 99 by Didi a year ago.

The purchase of the majority stake by Didi in 99 encompassed shares in the company previously owned by other investors including Riverwood Capital, Qualcomm Ventures, Tiger Global, Monashees and Softbank.

"This investment consolidates a deep partnership between Didi and 99 to accelerate even further the app-based ride market in Latin America, ensuring more transport options to users," the companies said in a statement.

Didi's latest investment gives the Brazilian startup unicorn status, as a deal values 99 at $1 billion, according to several local reports.

Recent background

As well as opportunities to expand outside Brazil, 99 had been looking for a buyer for a few months before Didi's first investment - reports at the time suggested that Spanish mobility firm Cabify, also operating in Brazil, tried to buy it at one point.

Didi initially invested $100 million in 99 in January 2017, in a round that involved other backers such as Riverwood Capital. In return, the Chinese firm got a minority stake and management rights in the Brazilian app.

99 operates in 550 cities across Brazil and, as well as Didi, started out focusing on the taxi market - it has a user base of over 160,000 drivers and 20 million users across Brazil. Both companies then started to target the ridesharing segment to follow changes in customer demand.

As part of the initial deal, the Chinese company got involved in decision-making the technology, product development and operations aspects of the Brazilian company.

In addition, Didi shared its "data-driven algorithmic capabilities", to enable the Brazilian firm to better target its service offering to local users.

Global expansion

Cheng Wei, founder and chief executive of Didi, said in a statement that "globalization is a top strategic priority" for the company. Other similar companies that Didi has invested in include Grab in Southeast Asia, and Careem in the Middle East.

The acquisition of 99 will up the competition between other ride-hailing apps operating in Brazil, such as Uber and Cabify. But the threat to competitors will extend across the region, as Reuters reports suggest that Didi plans to enter Mexico this year.

Didi is already a leader in the ride-hailing market in its home country, after buying out Uber's local China business in 2016.

The firm has so far raised $4 billion from investors, following on from a $5.5 billion fundraising round in April - the resources will partly go towards funding international expansion.

Challenges ahead

Just as in other markets, the operation of ride-hailing companies in Brazil is far from plain sailing, as the debate between the startups, taxi driver unions and politicians continues.

Unions have put pressure on lawmakers to regulate operations of ride-hailing apps and a ban was so likely at one point that Uber, 99 and Cabify united in a single campaign to get user support.

Last November, the debate came to a head with Uber chief executive Dara Khosrowshahi coming to Brazil to meet ministers and senior politicians ahead of a Senate vote of the proposed regulations.

Khosrowshahi argued that if the original text of the bill was approved, it would become impossible for Uber and other companies including 99 and Cabify to operate in Brazil and asked for more dialogue.

As a result, the Senate passed a watered down version of the bill, which has returned to the Congress' Lower House for final approval.

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