HONG KONG--Meituan.com, a Chinese startup backed by Alibaba Group Holding Ltd. BABA -1.92 % , is planning to raise more than $1 billion in a new funding round that could value the online group-buying service at more than $15 billion, people familiar with the matter said.
The fundraising plans, which are at an early stage, could more than double the price tag hung on the company by investors after Meituan raised funds in January at a $7 billion valuation. Meituan is an online marketplace where users can find discount deals from restaurants, hotels, movie theaters and other local businesses.
China's mobile Internet industry is booming and local startups are rushing to carve out niches within e-commerce, social networking and other areas. Companies such as Meituan are burning through cash by offering big discounts and subsidies to attract more users to their services, necessitating frequent fundraisings.
Meituan is in discussions with investment banks to serve as its placement agent for the deal, the people familiar with the matter said. Terms of the fundraising, such as valuation and amount raised, could change as Meituan gauges investor appetite. The January fundraising brought in prominent Beijing-based investment firm Hillhouse Capital Group and Fidelity Management & Research Co., the investment adviser for Fidelity's mutual fund family, the people said.
Meituan's existing backers include Chinese e-commerce giant Alibaba as well as private equity and venture-capital firms such as Sequoia Capital China, Boyu Capital, and General Atlantic Inc.
Meituan's fundraising comes amid a recent slide in China's stock market, which has raised concerns about investors' appetite for startups. But firms like Meituan backed by prominent venture capitalists or large tech firms should have fewer problems raising money, investors say.
Meituan is spending aggressively to expand its user base and better compete with similar services such as restaurant review site Dianping Holdings Ltd., which is backed by Alibaba rival Tencent Holdings Ltd. Earlier this year, Dianping raised $850 million from a group of investors including smartphone maker Xiaomi Corp. in a round that valued the Shanghai-based startup at $4.05 billion, according to people familiar with the matter.
Meituan Chief Executive Wang Xing co-founded the Beijing-based company in 2010, taking inspiration from U.S. group-buying service Groupon Inc. Mr. Wang, who studied computer science in the U.S., adopted the business model to fit China's market, where the company takes smaller commissions to generate larger volumes of sales. It now has more than 200 million active users and operates in more than 1,000 Chinese cities, according to the company.
Meituan earns its revenue by collecting a commission from merchants on each transaction. The company doesn't disclose its earnings, but has said that it aims to boost the volume of transactions through its website and mobile application to more than 100 billion yuan ($16.11 billion) this year from 46 billion yuan last year.
Before Meituan, Mr. Wang founded a Facebook-like social networking website, Xiaonei, and a Twitter-like microblogging platform, Fanfou, in China.
Write to Rick Carew at rick.carew@wsj.com and Juro Osawa at juro.osawa@wsj.com
Source: China's Meituan Aims to Raise More Than $1 Billion
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