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Xiaohongshu, China’s fastest-growing social media platform, has gained the backing of enterprise capital agency DST International in a uncommon instance of international buyers placing cash right into a tech sector it has largely shunned since a Beijing crackdown.
The photograph and video-sharing platform, wildly common with feminine metropolis dwellers, organized stake gross sales of current shares in current weeks to present and new buyers that valued the corporate at $17bn, based on three individuals with information of the matter.
DST, based by Moscow-born Israeli tech entrepreneur Yuri Milner and a previous investor in Fb, took half within the spherical together with Hong Kong-based HongShan, previously Sequoia China, which added to its current stake. Chinese language non-public fairness corporations Hillhouse Funding, Boyu Capital and Citic Capital additionally invested. The dimensions of DST’s funding couldn’t be ascertained.
Xiaohongshu, DST, HongShan and Citic declined to remark. Hillhouse and Boyu didn’t reply to requests for remark.
The vote of confidence comes after Xiaohongshu, which interprets as “little purple ebook” and can also be backed by VC agency GSR Ventures and Singaporean state-backed investor Temasek, turned worthwhile in 2023. It made $500mn in web revenue final yr on revenues of $3.7bn, the Monetary Instances reported beforehand. In contrast, it made a $200mn loss on revenues of about $2bn in 2022.
Unusually, Xiaohongshu additionally has the backing of Chinese language web giants Tencent and Alibaba, with start-ups usually having to decide on between them for funding. Assist from each events means it’s unlikely to be an acquisition goal for both group, given their efficient veto over a sale to a rival, based on individuals conversant in the matter.
Buyers are betting that Xiaohongshu is one in every of a small group of Chinese language tech unicorns that may sit up for a blockbuster preliminary public providing after delivering robust development.
Xiaohongshu reached 312mn month-to-month lively customers in 2023, a 20 per cent improve from the earlier yr, making it the fastest-growing giant social media platform in China final yr, primarily based on a Monetary Instances calculation.
On the peak of Chinese language web start-up valuations in 2021, Xiaohongshu was valued at $20bn in a fundraising spherical that included Temasek. It noticed this fall to $14bn on the finish of final yr, in two separate offers the place Beijing-based VC Gaorong Capital and HongShan purchased stakes from China-based Genesis Capital and Granite Asia, previously often called GGV, respectively, based on individuals with information of the matter.
Genesis Capital, Gaorong Capital and Granite Asia didn’t reply to requests for remark.
“Xiaohongshu hit a $20bn valuation in the course of the peak of VC tech funding. However in contrast to many different start-ups which can be compelled to do successive down rounds or shut down, it’s rising into its valuation,” stated one VC in Shanghai.
Investor confidence in Xiaohongshu has been boosted by its robust monetary efficiency and revived hopes that Beijing might once more look favourably on abroad listings of huge tech firms. It’s three years for the reason that disastrous New York IPO of ride-hailing group DiDi, which later delisted because it turned one of many victims of a wider crackdown by Beijing on the nation’s tech giants.
One investor cautioned that Xiaohongshu’s wealth of client data might complicate any potential plans to launch an IPO overseas, given Beijing’s restrictions on cross-border knowledge sharing.
Xiaohongshu is a go-to guide for worldwide Chinese language travellers in quest of restaurant and purchasing suggestions. The corporate has been increasing its abroad enterprise growth crew to scour markets common with Chinese language vacationers and produce extra advertisers to the platform, based on an individual with information of the matter.
Xiaohongshu has additionally change into necessary to retailers trying to develop their audiences and it has been providing to advertise synthetic intelligence start-ups on its platform in trade for fairness, the FT reported beforehand.
