LeEco Runs Short of Cash & Slows ‘Reckless’ Spending

Is China’s LeEco a flash in the pan that, like China’s Xiaomi, soars to the top but then slows to everyday speed?

After having acquired Vizio, one of the top three sellers of TVs in the US market, LeEco in October made a splashy US debut with products such as smartphones, smart TVs, an electric car, a VR headset, a smart bicycle and its OTT service that some call the Netflix of China. Its stated goal is to develop an ecosystem in which all its products and services work together seamlessly. It’s a goal that has eluded Apple, Google and Amazon – although they are continuing to try.

This week LeEco chairman and billionaire Jia Yueting said the company is running low on cash. According to Bloomberg, he said, “No company has had such an experience of being caught in both ice and fire. We blindly sped ahead, overextended our global strategy and spent recklessly on expanding our business scale when our capital and resources were in fact limited. LeEco will quit the expansion strategy at the cost of burning money … and instead focus on the existing market.” He also cut his pay to 15 cents (1 yuan) and committed to investing 10 million dollars in the company.

LeEco has already hired 500 of the 12,000 employees it plans to have in a Santa Clara campus setting that it bought from Yahoo earlier this year. It planned to call the Santa Clara campus EcoCity.

North American operations manager Brian Hui told a TechCrunch Beijing audience that things are better than they seem. He said, “If you read the letter, it’s not about whether it [LeEco’s growth] is sustainable or not sustainable. “It’s not about running out of money. It’s how you can spend your money wisely… You go through a very aggressive user base growth period before you enter a financially sustainable period. I think this is pretty normal, applying to any kind of startup.” Hui said developing a self-driving vehicle was LeEco’s “highest priority” and the company would not lay off any of the nearly 600 it has hired to do that.

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