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Coffee start-up Luckin continues its fundraising frenzy to become an alternative to Starbucks in China.
The one-and-a-half year-old company announced Thursday it has closed an increase in the B-plus series totaling $ 150 million. The new proceeds from the sale put Luckin at $ 2.9 billion after tax, up from $ 2.2 billion just four months ago.
Blackrock, which holds a 6.58% stake in Starbucks, demonstrates its confidence in the Chinese start-up by injecting $ 125 million through its private equity fund into the new Luckin cycle.
The New York-based investment firm is betting on two different models for coffee consumption in China. While Starbucks focuses on brick-and-mortar experience, Luckin is a network of last-mile coffee delivery centers, offering gathering places for coffee orders and plates targeting busy white-collar workers.
In order to give Luckin a boost, Starbucks teamed up with Alibaba's food distribution unit, Ele.me, last August to bring hot and cold drinks to the public.
Luckin did not reveal how he would spend the new capital injection, but the rate at which it has risen indicates that the startup is in dire need of cash. The new series came less than a year after getting a $ 200 million Series A in July and another $ 200 million from a Series B in December.
Indeed, Qian Zhiya, founder of Luckin, former leader of car rental company Car Inc., admitted that the company had lost $ 150 million in just six months from its launch. Much of the money was spent putting in substantial discounts for consumers, while the offline extension of the coffee challenger was a major source of cash.
Luckin recently opened 2,000 outlets with small prep kitchens, collection stations and cafes in 22 Chinese cities, up from 1,700 in December. This gives Luckin less than eight months to realize its ambition to become "the largest coffee chain in China in terms of the number of managed outlets and cups sold." The goal is to exceed 4,500 points of sale by the end of 2019.
Starbucks, which made its debut in China 20 years ago, also acted aggressively in the window. It currently manages 3,600 stores in 150 cities in China, compared to 3,300 in May.
As for the actual users of the service, Starbucks still enjoys a considerable lead. The Luckin app, which allows for ordering and paying, contains 650,000 unique downloads in March, according to data from research firm iResearch. The Starbucks app is over four times larger than its size with 2.81 million unique downloads from the same period.
Other investors who participated in Luckin's last tour included existing lenders, such as the Singapore GIC sovereign wealth fund. China International Capital Corporation, Dazheng Capital and Joy Capital, controlled by the Chinese government, whose founding partner, Liu Erhai, sits on the Luckin board of directors.
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