Starbucks challenger Luckin’s fundraising spree continues with $150M investment

Coffee startup Luckin is continuing its fundraising spree as it sets its sight on becoming an alternative to Starbucks in China.

The a-year-and-a-half old company announced on Thursday that it closed a Series B-plus raise totaling $150 million. The fresh proceeds valued Luckin at $2.9 billion post-money, up from $2.2 billion just four months ago.

While many question Luckin’s cash-fueled expansion, Blackrock, which owns a 6.58 percent stake in Starbucks, shows its confidence in the Chinese startup by pumping $125 million through its private equity fund into Luckin’s new round.

With that, the New York-based investment firm has its bet on two contrasting models for China’s coffee consumption. While Starbucks zeroes in on the brick-and-mortar experience, Luckin is a network of last-mile coffee delivery centers plus places for people to pick up orders and sit down targeting busy white-collar workers.

In a move that would amp up its battle with Luckin, Starbucks teamed up with Alibaba’s food delivery unit Ele.me last August to put hot and cold drinks in people’s hands.

Luckin did not disclose how it will spend the fresh capital infusion, but the pace at which it’s raising suggests the startup is in dire need of cash. The new round arrived less than a year after it secured a $200 million Series A in July and another $200 million from a Series B in December.

Indeed, Luckin founder Qian Zhiya, a former executive at auto rental firm Car Inc, confessed the company burned through $150 million within just six months from launching. A big chunk of money had gone to shelling out deep discounts for consumers, while the coffee challenger’s offline expansion was as cash-intensive.

As of late, Luckin has opened 2,000 outlets consisting of small prep kitchens, pickup stations and cafes in 22 Chinese cities, up from 1,700 locations reached in December. That gives Luckin less than eight months to fulfill its ambition of becoming the “biggest coffee chain in China by the number of outlets run and cups sold.” The goal is to top 4,500 outlets by the end of 2019.

Starbucks, which made its foray into China 20 years ago, has also been aggressively putting up storefronts. It currently runs 3,600 stores across 150 cities in China, up from 3,300 last May.

When it comes to actual people using the service, Starbucks still enjoys a huge lead. The Luckin app that allows one to order and pay has 650 thousand unique downloads in March, data from research firm iResearch shows. Starbucks’s app is more than four times its size with 2.81 million unique downloads from the same period.

Other investors who joined in on Luckin’s latest round included existing backers such as Singapore’s sovereign wealth fund GIC, Chinese government-controlled China International Capital Corporation, Dazheng Capital and Joy Capital, whose founding partner Liu Erhai sits on Luckin’s board.

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Peter Kraus dishes on the market

During my recent conversation with Peter Kraus, which was supposed to be focused on Aperture and its launch of the Aperture New World Opportunities Fund, I couldn’t help veering off into tangents about the market in general. Below is Kraus’ take on the availability of alpha generation, the Fed, inflation vs. Amazon, housing, the cross-ownership of US equities by a few huge funds and high-frequency trading.

Gregg Schoenberg: Will alpha be more available over the next five years than it has been over the last five?

To think that at some point equities won’t become more volatile and decline 20% to 30%… I think it’s crazy.

Peter Kraus: Do I think it’s more available in the next five years than it was in the last five years? No. Do I think people will pay more attention to it? Yes, because when markets are up to 30%, if you get another five, it doesn’t matter. When markets are down 30% and I save you five by being 25% down, you care.

GS: Is the Fed’s next move up or down?

PK: I think the Fed does zero, nothing. In terms of its next interest rate move, in my judgment, there’s a higher probability that it’s down versus up.

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Startups Weekly: Will Trump ruin the unicorn IPOs of our dreams?

The government shutdown entered its 21st day on Friday, upping concerns of potentially long-lasting impacts on the U.S. stock market. Private market investors around the country applauded when Uber finally filed documents with the SEC to go public. Others were giddy to hear Lyft, Pinterest, Postmates and Slack (via a direct listing, according to the latest reports) were likely to IPO in 2019, too.

Unfortunately, floats that seemed imminent may not actually surface until the second half of 2019 — that is unless President Donald Trump and other political leaders are able to reach an agreement on the federal budget ASAP.  This week, we explored the government’s shutdown’s connection to tech IPOs, recounted the demise of a well-funded AR project and introduced readers to an AI-enabled self-checkout shopping cart.

1. Postmates gets pre-IPO cash

The company, an early entrant to the billion-dollar food delivery wars, raised what will likely be its last round of private capital. The $100 million cash infusion was led by BlackRock and valued Postmates at $1.85 billion, up from the $1.2 billion valuation it garnered with its unicorn round in 2018.

2. Uber’s IPO may not be as eye-popping as we expected

To be fair, I don’t think many of us really believed the ride-hailing giant could debut with a $120 billion initial market cap. And can speculate on Uber’s valuation for days (the latest reports estimate a $90 billion IPO), but ultimately Wall Street will determine just how high Uber will fly. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.

3. Deal of the week

N26, a German fintech startup, raised $300 million in a round led by Insight Venture Partners at a $2.7 billion valuation. TechCrunch’s Romain Dillet spoke with co-founder and CEO Valentin Stalf about the company’s global investors, financials and what the future holds for N26.

4. On the market

Bird is in the process of raising an additional $300 million on a flat pre-money valuation of $2 billion. The e-scooter startup has already raised a ton of capital in a very short time and a fresh financing would come at a time when many investors are losing faith in scooter startups’ claims to be the solution to the problem of last-mile transportation, as companies in the space display poor unit economics, faulty batteries and a general air of undependability. Plus, Aurora, the developer of a full-stack self-driving software system for automobile manufacturers, is raising at least $500 million in equity funding at more than a $2 billion valuation in a round expected to be led by new investor Sequoia Capital.


Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets


5. A unicorn’s deal downsizes

WeWork, a co-working giant backed with billions, had planned on securing a $16 billion investment from existing backer SoftBank . Well, that’s not exactly what happened. And, oh yeah, they rebranded.

6. A startup collapses

After 20 long years, augmented reality glasses pioneer ODG has been left with just a skeleton crew after acquisition deals from Facebook and Magic Leap fell through. Here’s a story of a startup with $58 million in venture capital backing that failed to deliver on its promises.

7. Data point

Seed activity for U.S. startups has declined for the fourth straight year, as median deal sizes increased at every stage of venture capital.

8. Meanwhile, in startup land…

This week edtech startup Emeritus, a U.S.-Indian company that partners with universities to offer digital courses, landed a $40 million Series C round led by Sequoia India. Badi, which uses an algorithm to help millennials find roommates, brought in a $30 million Series B led by Goodwater Capital. And Mr Jeff, an on-demand laundry service startup, bagged a $12 million Series A.

9. Finally, Meet Caper, the AI self-checkout shopping cart

The startup, which makes a shopping cart with a built-in barcode scanner and credit card swiper, has revealed a total of $3 million, including a $2.15 million seed round led by First Round Capital .

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Postmates lines up another $100M ahead of IPO

Postmates, one of the earlier entrants to the billion-dollar food delivery wars, has raised an additional $100 million in equity funding at a $1.85 billion valuation, as first reported by Recode and confirmed to TechCrunch by Postmates. The round comes four months after the eight-year-old startup drove home a $300 million investment that finally knocked it into “unicorn” territory.

New investor BlackRock has joined the funding round alongside Tiger Global, which served as the lead investor of Postmates’ September financing. Led by co-founder and chief executive officer Bastian Lehmann, the company has garnered a total of $681 million in venture capital funding from investors, including Spark Capital, Founders Fund, Uncork Capital and Slow Ventures.

In line with several other tech unicorns, Postmates has begun prep for an initial public offering that could come this year, including tapping JPMorgan to advise the float. As Recode pointed out, the $100 million capital infusion was probably less of a necessary funding event but rather an opportunity for existing investors to liquidate stock ahead of an exit.

Postmates, which completes 3.5 million deliveries per month, reportedly expected to record $400 million in revenue in 2018 on food sales of $1.2 billion. The company has not confirmed that figure nor disclosed any other 2018 revenue numbers. The company currently operates in more than 500 cities, recently tacking on another 100 markets to reach an additional 50 million customers.

It will be interesting to see how Wall Street responds to a Postmates public listing. Though it was an early player in what has become an extremely crowded market, Postmates never emerged as the leader in food delivery. Now, with supergiants like Uber dominating via Uber Eats and SoftBank funneling loads of capital into Postmates competitor DoorDash, it shouldn’t count on an oversubscribed IPO.

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Women-only co-working space The Wing is launching an app to help its members stay connected

The Wing is bringing the physical world it’s created for professional women to the digital world with the launch of a social networking app, slated to become available later this month.

The co-working company created the app to connect its members and keep them up to date on The Wing’s programming. For now, the app will only be available to paying Wing members.

“Our team has been hard at work on ways for members to carry the connections they make with them wherever they go,” The Wing co-founder and CEO Audrey Gelman told TechCrunch. “Through the app, members will have access to features that make The Wing experience even more valuable and efficient and will have access to thousands of incredible women at their fingertips.”

Founded in 2016, The Wing provides co-working and community space to women. It’s raised $40 million in venture capital backing from top-tier investors like Kleiner Perkins and NEA. WeWork has also noticed the value in The Wing’s female-first model; the co-working behemoth led its $32 million Series B last November. As it stands, the company has just four locations in two states: New York and Washington, DC. A San Francisco location is expected this October, and West Hollywood, London, Toronto, Seattle and Chicago locations are all in the pipeline.

To enjoy The Wing’s many perks—brass & millennial pink decor, shelves of color-coordinated books and exclusive access to events featuring Hillary Clinton or New York Senator Kirsten Gillibrand, for example—it’s not cheap. Wing members pay $215 per month for access to a single location. But compare that to the price of a desk at a San Francisco WeWork, about $400, and it’s not so bad.

The Wing also provides lactation rooms, “beauty rooms,” a library, food and drinks, and more.

In addition to being founded by two women, Gelman and Lauren Kassan, the company also boasts an all-female staffa rarity for a company backed by venture capitalists. That includes Lina Dorkhman, who The Wing hired six months ago to lead development on the app. She’d spent the last 3.5 years at BlackRock as an associate.

“I was actually a member first and when I saw that they were hiring a product manager I thought it was a perfect fit,” Dorkhman told me.

She says The Wing wanted to create a product that recognized women as not only professionals, or parents or friends or siblings, but all of those things.

“With products like Linkedin, there is this separation of this is my personal self and my professional self,” Dorkhman said. “What we see at The Wing is there isn’t necessarily a separation of your personal self and your professional self. We want to acknowledge that—that is the future of work. You bring your whole self to work.”

The idea for the app stemmed from member feedback, which asked that the company provide more digital components.

“We hear from our members that there is this really special feeling of entering The Wing,” Dorkhman added. “That feeling that you get in the physical space is something we really wanted to translate into the product.”

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