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.

Consumers get another digital home health offering as Tyto Care and Best Buy launch TytoHome

Best Buy is partnering with the Israeli technology Tyto Care to become the official retailer for the company’s all-in-one digital diagnostics kit through its physical stores in California, the Dakotas, Ohio and Minnesota and through its online store.

Tyto previously sold its technology through healthcare plans, making its handheld examination device with attachments that act as a thermometer, a stethoscope, an otoscope and a tongue depressor available to families with insurance that wanted to reduce the cost of checkups through remote monitoring. The company’s handheld device comes with an exam camera so it can prompt users on where to position the device to get the most accurate readings.

Now, through Best Buy, consumers can buy the company’s kit for $299.99. Through a partnership with American Well, users of the TytoHome kit have access to the company’s LiveHealth Online consultation service (if they live outside of Minnesota or the Dakotas). Which means patients can use the device to perform a medical exam and send the information to a physician for a diagnosis any time of the day or night.

As part of the deal, Tyto Care is partnering with additional regional health care systems to provide medical care to consumers throughout the country. The first is Sanford Health, a Minnesota-based not-for-profit health system operating in Minnesota, North Dakota and South Dakota. 

For Best Buy the move builds on the company’s attempts to move quickly into providing digital healthcare services just like it provides technical support through its Geek Squad.

Last year the company bought GreatCall, which sells connected health and emergency response services to the AARP crowd.

“We’re excited to partner with Best Buy, LiveHealth Online, American Well and regional health systems to extend our on-demand telehealth platform across the U.S., enhancing primary care delivery,” said Dedi Gilad, the chief executive and co-founder of Tyto Care, in a statement.

The company, based in Herzliya, Israel, has raised $56.7 million to date from investors including Sanford Health, the Japanese Itochu Corp., Shenzhen Capital Group, Ping An, LionBird, Fosun Group, Orbimed and Walgreens.

The company said at the time that it would use the cash to expand in the U.S. and to other international markets in Asia and Europe.

“These strategic partnerships will enable us to gain further momentum and accelerate our growth, deepening our foothold in the U.S. and other new strategic markets,” said GiladTyto Care said in a statement at the time.