Megadeal May Make Chinese Internet Company the World’s Biggest Startup

(Bloomberg) -- SoftBank Group Corp., KKR & Co. and General Atlantic plan to make a giant investment in fast-rising Chinese internet player Bytedance, according to people familiar with the matter, a deal that could make it the world’s biggest startup.

The latest round may value Beijing Bytedance Technology Co., parent of news aggregator Toutiao and video sensation Tik Tok, at around $75 billion before investment, said the people, who requested not to be named because the matter is private. SoftBank is initially targeting an investment of about $1.5 billion though it’s unclear how big its final check will be, the people said. While KKR and General Atlantic have led discussions, the people added, SoftBank could play a much bigger role if its investment approaches the outsized amounts it’s known for.

Six-year-old Bytedance, which was said to be seeking around $3 billion in the current round, started out by using artificial intelligence to personalize content for users but has successfully branched out into short-video via a service called Douyin, known as Tik Tok abroad. That service had 500 million monthly active users as of July. It also owns the Musical.ly app, which has about 100 million users and is being merged with Tik Tok, the company said in August.

The current deal is still in discussions and terms could change, the people said. Representatives for Bytedance and SoftBank declined to comment. General Atlantic had no immediate comment, while KKR didn’t respond to an emailed query. The Information first reported that the Chinese company was in talks with SoftBank and KKR about a deal.

Bytedance is among the largest of a new generation of Chinese internet giants challenging the longstanding dominance of Tencent Holdings Ltd. and Alibaba Group Holding Ltd. Unlike peers such as Didi or Meituan, it’s grown without the backing of either Tencent or Alibaba into one of the country’s most popular online services.

At $75 billion, Bytedance would just eclipse Uber Technologies Inc., valued at $72 billion according to CB Insights data. It would also surpass ride-hailing rival Didi Chuxing’s $56 billion. Closely held Ant Financial, an affiliate of Alibaba’s, is said to be valued at $150 billion but CB Insights doesn’t count them as privately backed.

The funding round comes despite Chinese content providers facing one of the harshest internet crackdowns in the country’s history and a funding squeeze that’s pinched smaller startups. Bytedance, like many of its competitors, has seen several apps either temporarily pulled from Chinese app stores or shut entirely on the orders of regulators over allegedly inappropriate content.

SoftBank’s arrival could mark a new chapter for the Chinese firm. Founder Masayoshi Son is known for taking an active hand in developing companies in his portfolio, which include Uber and WeWork through its Vision Fund.

©2018 Bloomberg L.P.