HONG KONG: The “Little Red Book” has become a symbol of capitalist success in Communist China.
E-commerce start-up Xiaohongshu, which means “Little Red Book” in Chinese, has raised US$100mil from Tencent Holdings Ltd and other investors at a valuation of about US$1bil, two people familiar with the matter said.
The online shopping site co-founded in 2013 by Charlwin Mao, which connects overseas merchants with local buyers, becomes China’s newest billion-dollar startup. It also attracted investment from Genesis Capital and Tiantu Capital in its latest round, the people said, asking not to be identified because the matter is private.
The funds will help bankroll the Shanghai-based startup’s expansion. Xiaohongshu — which calls itself RED and stresses its name bears no relation to Mao Zedong’s book of quotations – works by letting its mostly younger female users post pictures of favorite products. It then connects them with sellers abroad of everything from Body Shop anti-dandruff shampoo to Lotte peach liquor.
Its fundraising comes as venture capital firms grow more cautious about valuations in China, an economy forecast to grow this year at its slowest pace in a quarter-century.
Genesis Capital is a late-stage investment firm founded by Richard Peng Zhijian, who oversaw Tencent’s investment unit. Genesis and Tencent didn’t respond to e-mailed queries. Calls to Shenzhen-based Tiantu’s general line went unanswered. Xiaohongshu co-founder Mao said he couldn’t immediately comment.
Three-year-old Xiaohongshu claims 17 million registered users on its LinkedIn page and had attracted investment previously from GGV Capital and Zhen Fund.
It specialises in cross-border e-commerce, marketing foreign brands to increasingly wealthy local shoppers.
That’s a market forecast to reach 6.5 trillion yuan (US$1 trillion) by 2016, the state-run Xinhua News Agency cited the Ministry of Commerce as saying in March.
It didn’t elaborate on that figure.
The company says its name has nothing to do with Mao’s famous tome, considered one of the most-printed works in history and known to English-speakers as the “Little Red Book.” The late Communist leader’s book is called “Hong Bao Shu” or “red treasure book” in Chinese. “Why isn’t your website called ‘Little Black Book,’ ‘Little Blue Book,’ ‘Little Purple Book’ or ‘Big Red Book’?” reads a question posted by Xiaohongshu in a section of its website sketching out its origins. “We don’t know. But anyway, our name isn’t because of Hong Bao Shu.” — Bloomberg
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