It's interesting to see another of the high-powered Chinese startups I wrote about in Startup Asia -- Shanghai-based eHi Car Rental Services -- go public in New York. The leading Chinese car rental service eHi debuted on the NYSE on November 18, raising $120 million, the first IPO to tap into the China economy since Alibaba in September.
I remember meeting the founder and CEO of eHi, Ray Zhang, a classic returnee to China with Silicon Valley entrepreneurial experience and computer science smarts, at his Shanghai office in 2010. At that time, the operation he founded in 2006 was small but was on an exceptionally fast-growth track, expanding by 200 percent annually but still unprofitable. It still is losing money, by the way, despite taking in loads of venture capital and strategic investment while chasing the growth opportunity in China.
The son of a schoolteacher and scholar on Sino-US relations at the Hoover Institute on the campus of Stanford University, business didn’t seem to be a natural path for Zhang. But then again, how many opportunities come along to be in the driver’s seat on a fast-growth, still largely undeveloped market in the world’s fastest-growing economy? Zhang, an executive MBA graduate from the highly regarded CEBIS in Shanghai, knows eHi's success depends on precise execution, timing and plenty of financing and strategic deals.
Zhang raised $5 million from Qiming Venture Partners and its then-U.S. affiliate, Ignition Partners in 2008. He brought in $19 million more in 2009 from CDH and JAFCO Asia, plus the two prior investors, and picked up a $70 million investment from Goldman Sachs as it geared up to go public. It was GGV Capital venture capitalist and eHi board member Hans Tung (then at Qiming) who introduced me to Ray in 2009, and in 2010, I invited Ray to be a featured speaker at a Silicon Dragon forum in Shanghai.
Gathering momentum, in 2012,
Fast forward to today, it has not been the smoothest path to an IPO for eHi, but then few from China are without bumps. eHi's NYSE listing was postponed for two days while allegations of misrepresenting financial performance and car fleet size were reviewed, and later discredited, according to Xinhua news reports. The stock traded down 2.5% at $11.70 for the initial day of trading and has stayed in that range to close at $11.64 five days later (today).
eHi, which provides car rentals and chauffer-driven cars in dozens of cities across China, booked $111 million in sales for the twelve-month period ending June 30, 2014. Revenues were up 48 percent to $62 million while losses checked in at $3.3 million for the last six month period ending June.
The car rental market in China has been growing by 30 percent annually from 2009 to 2013, and is expected to double to $8.2 billion by 2017. It remains a fragmented market, a further signal of opportunity for eHi.