Greengrocer Xingsheng Youxuan to bag USD 3 billion from Sequoia, Tencent, others

Changsha-based community group-buying platform Xingsheng Youxuan is set to secure USD 3 billion in a new round of fundraising, led by Sequoia Capital with the participation of Tencent, FountainVest Partners, Singapore’s Temasek, KKR, DCP Capital, Primavera Capital, and Evergrande Group, Chinese financial media outlet Latepost reported on Thursday.

The valuation of the firm will reach at least USD 8 billion, doubling from half a year ago. It raised in total USD 4.6 billion in the past year. In July, the company finished C+ financing round worth USD 800 million from KKR, Sequoia China, Tencent, and China Renaissance, just five months after e-commerce giant JD.com invested approximately USD 700 million. It is expected that the new round will complete after the Lunar New Year period.

Xingsheng Youxuan’s rivals are not sitting on their hands either. Nice Tuan, which is backed by Alibaba is mulling a financing round worth USD 300 million to USD 400 million, while the smaller platform Shixianghui is also close to getting fresh capital, the Latepost report said.

Founded in 2018 as an e-commerce unit of Hunan local supermarket chain Furong Xingsheng, Xingsheng Youxuan leverages on the group-buying model that provides groceries at bargain prices to residents who live near each other. In 2020, its gross merchandise value (GMV) exceeded RMB 40 billion (USD 6.17  billion), almost four times the volume from the prior year, boosted by the pandemic.

However, despite its advantage after years of operating local supermarkets, the firm is surrounded by tech giants—including Meituan, Didi, and Pinduduo—that are coveting the business to generate new revenue sources. Didi’s Chengxin Youxuan, Meituan’s Meituan Youxuan, and PDD’s Duoduo Maicai are aggressively expanding in the sector, luring customers with low prices and cash subsidies.

As the group-buying model is spreading like a wildfire across China’s numerous urban clusters, it also grabbed the attention of regulators. State media has criticized the investments by the internet giants as a lazy method of monetizing user traffic. Commentators suggested that the companies should rather focus on core technological innovation. But competition in the space hasn’t slowed down nevertheless.