Luckin Coffee: the Newest Unicorn after First Funding Round

Luckin Coffee announced on July 11 the completion of their Series A funding round, giving the company a valuation of $1 billion and bringing it into the unicorn club.

The $200-million investment was led by Centurium Capital, a private equity firm established by Liu Hui, former managing director of Warburg Pincus Asia. This is Luckin Coffee’s first public round of financing, and Centurium Capital’s first investment. Other investors include JOY Capital, Government of Singapore Investment Corporation (GIC), and Legend Capital.

The money raised in this round will be used mainly towards product development, technological innovation, and business development.

Launched in January 2018, Luckin Coffee has set up 525 stores in 13 major Chinese cities within five months. The founder of the new coffee chain, Jenny Qian Zhiya, was the former COO of UCAR Inc., one of the largest chauffeured service providers in China.

“We have confidence that we can deliver on product quality, price, and user experience with mobile Internet, big data, and other technologies,” said Jenny Qian, also CEO of Luckin Coffee.

Analysts believes that Luckin Coffee has the potential to beat Starbucks in China with its unique placing-all-orders-on-app. Luckin Coffee can offer direct coffee delivery while for Starbucks delivery, Chinese coffee consumers can only order on third-party platforms.

Luckin Coffee, however, has been encountering difficulties as they play catch-up with Starbucks who already operates more than 3000 stores in the country. In an open letter issued in May, Luckin Coffee accused Starbucks of monopolistic practices causing unfair competition and hindering their business development.

The Chinese coffee startup pointed out that Starbucks signed contracts with many property management companies that prevent them from signing leases with any coffee or coffee-related shops.