Tencent-Backed Video Site Is Said to Seek $17 Billion Value
Tencent-Backed Video Site Is Said to Seek $17 Billion Valuation
(Bloomberg) -- Tencent-backed Chinese startup Kuaishou is seeking to raise funds at about a $17 billion valuation, people familiar with the matter said, as it expands its video-streaming service to Southeast Asia.
The company is targeting around $1 billion of financing, the people said, asking not to be identified discussing a private deal. The startup’s desired valuation would be almost six times the $3 billion it garnered after its last fundraising in March, the people said.
Tech giants from Tencent Holdings Ltd. to Alibaba Group Holding Ltd. are investing billions of dollars in video content because it’s proven highly effective at keeping ad revenue-generating users glued to their platforms. The latest investment in Kuaishou or “fast hand” -- a video platform in the same vein as Instagram or Periscope -- comes ahead of a potential initial public offering. No final agreements have been reached however and details of the deal could change, the people added. A representative for Kuaishou declined to comment.
The funding underscores the lofty valuations Chinese companies are fetching in a market awash with capital. Five of the world’s 10 biggest venture deals were in Chinese-based companies last year, while the U.S. accounted for two, according to researcher Preqin. The largest was the record $5.5 billion funding for Chinese ride-hailing giant Didi Chuxing. Investors are zeroing in on startups backed by Alibaba or Tencent, in particular.
“After a period of jitters over where the Chinese economy was going, investors seem to have gotten comfortable with the idea the world isn’t coming to an end and have started to see some impressive-looking numbers,” says Mark Natkin, managing director of Beijing-based Marbridge Consulting.
Rival video services YY Inc. and Momo Inc. tumbled in U.S. trading after the report. Beijing-based Momo slumped 5.1 percent, the most in six weeks, while Guangzhou-based YY dropped 3 percent, the most in five weeks.
Kuaishou, whose chief executive is Google alumnus Su Hua, uses artificial intelligence to recommend and place videos into the scrolling feeds of users. It garnered an early reputation as a platform for Jackass-style stunts, but clips of people eating sharp objects or playing with fireworks raised the ire of authorities.
Today it’s largely filled with slices of everyday life in working class China, from the migrant worker who dances at construction sites to a villager who livestreams his nighttime fishing trips. It’s also begun to push abroad and is exploring markets such as Indonesia and India. According to App Annie, it’s currently the fifth most popular photo and video iPhone app in Russia. The company, also backed by Baidu Inc., competed with news aggregation giant Beijing Bytedance Technology Co., to buy Musical.ly -- which is popular in the U.S.
At home, Kuaishou’s achieved viral popularity outside top-tier cities like Shanghai or Beijing. Its more than 100 million daily active users watch short clips and broadcasts of everything from noodle-slurping to physical feats of prowess, with more than 10 million videos uploaded a day. Unlike services run by YY or Momo, most of its viewers and uploaders live in the countryside or smaller communities.
Its existing backers include Sequoia, Morningside Group Holdings, China Media Capital and Lighthouse, Natkin said. “There’s still a tremendous amount of growth left and where you’ll see the bulk of that is lower-tier cities,” he said.
To contact Bloomberg News staff for this story: David Ramli in Beijing at dramli1@bloomberg.net, Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net, Jonathan Browning in Hong Kong at jbrowning9@bloomberg.net.
To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Ben Scent at bscent@bloomberg.net, Edwin Chan, Reed Stevenson
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With assistance from David Ramli, Lulu Yilun Chen, Jonathan Browning