This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 11, 2017).
While Uber Technologies Inc. is trying to dig out from scandals and curtail losses, its former China rival, Didi Chuxing Technology Co., is spending billions of dollars on other startups around the world.
Didi recently announced investments in three ride-sharing apps in as many weeks: Careem in the Middle East and North Africa, Taxify in Europe and Africa and Grab in Southeast Asia. Early this year, Didi invested in 99, a ride-sharing company in Brazil. It’s also put money into Lyft Inc. in the U.S. and Ola in India. Didi has reached beyond car services, investing in Ofo Inc., one of China’s top bike-sharing apps, and in Ele.me, a major app-based food delivery service.
To some venture capitalists, Didi seems to be doing what they usually do — raising money from investors and betting on startups they see as having growth potential. To others, Didi is following the playbook of internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd, both of which have invested in a wide range of domestic and foreign startups, including Didi.
In either case, analysts and members of the investment community say Didi isn’t behaving like a startup — even if it is the second most-valuable startup in the world with a $50 billion valuation — just behind Uber.
“It’s not normal for an unprofitable company to do this,” says Wang Cong, a finance professor at China Europe International Business School. “Unprofitable startups should use the capital they raise on operations.”
In the year since it vanquished Uber after a depleting, subsidy-fueled battle for the China market, Didi is still unprofitable and has become more of an investor in other startups than a cutting-edge disrupter.
It now represents a new kind of startup, a fast-growing phenom that rises to the status of an industry giant due to its scale and capital. Abetting this is a winner-takes-all trend in the internet…