$1.1B was invested into the Online Rental space during 2015, with Yongche raising $700M
Online Rental startups garnered a lot of popularity from investors during 2015, according to our latest Tracxn Report on the sector. The sector includes companies that provide an online platform to rent as well as rent out products to/from consumers and businesses. According to the report, over $2.4B has been invested in this sector since 2011, with Sequoia Capital and 500 Startups being among the sector’s most active startups.
The report finds that the sector has seen a surge in investments during 2015, with startups in the space raising a total of $1.1B in 57 deals. This surge, however, can be largely attributed to a single deal wherein transport startup, Yongche raised $700M in a round lead by LeTV. If this deal was not to be included, funding activity in the space, would be at pace with the funding volumes raised in the previous years.
But when we do consider Yongche’s funding round, the resultant average funding per round in 2015 increases to $20M, a considerable increase over the previous year. This massive spike is indicative of the sector beginning to see signs of market consolidation.
Another indicative factor to this theory is the fact that the sector is seeing maturity. This is evident as the number of late stage deals has seen a year to year increase of close to 200% since 2013.
The number of early stage deals, however, seems to be stabilizing, another factor which indicates maturity in the sector. But this trend has not seemed to deter new startups from emerging in the space, with a total of 254 companies being formed in the last three years alone.
2015 witnessed the highest number of companies being founded, albeit, by a small margin, with a majority of them coming from the Horizontal Rental and Transport Rental sectors. Also, with the evolution of the sharing economy a number of new companies are being formed in the peer to peer space.
Business Models in Online Rental
Startups in the Online Transport Rental space have, by far, raised the most funding, at $2.3B. This is not surprising, especially when we consider that individual raises by some of the startups in the space are more than the total raised by other segments as a whole. For instance, Yongche has raised a total of $790M, and eHi Car Rentals has raised $420M.
The cars sub-segment dominates funding in the transport sector, and, looking deeper, the B2C model in the cars segment has picked up more than 75% of the total funding for cars. On the other hand, the P2P car sharing model failed to garner traction as it involves a risk of insurance coverage dispute incase an accident occurs.
Funding in the Transport sector rose approximately by 300% in 2015, despite a drop in the number of funding rounds indicating market consolidation, where large companies continue to raise large amounts of money.
The next most popular segments have been Books, which has raised close to $300M, and Fashion which has raised around $230M.
Note: The Tracxn Online Rentals report covers companies that provide an online platform to rent as well as rent out products to/from consumers and businesses. It excludes online and offline real estate rental companies such as Zillow or Re/max. Companies providing SaaS services to the online rental companies are also excluded from the report.
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