Tencent-backed Little Red Book to seek $200m for expansion

Women-focused shopping site is seeking to more than double its valuation since its last round of funding

Chinese e-commerce startup Xiaohongshu, or “Little Red Book,” is in early talks to raise at least $200 million (Dh734 miilion) at a valuation or more than $2.5 billion to quicken its expansion in a heated e-commerce space, according to people familiar with the matter.

The women-focused shopping site cofounded in 2013 by Charlwin Mao is seeking to more than double its valuation since its last round of funding more than two years ago, the people said, requesting not to be named because the matter is private. Its plans are preliminary and the fundraising targets may change, they added.

Business model

Xiaohongshu — which calls itself RED and stresses its name bears no relation to the seminal book of Mao Zedong’s quotations — works by letting its mostly younger female users post pictures of their favourite products. Backed by Tencent Holdings Ltd., it competes not only against titans like Alibaba Group Holding Ltd. but also up-and-comers that rely on social media such as Pinduoduo, which is said to have raised more than $1 billion at a $15 billion valuation.

Meilishuo, another women-focused fashion retailer, is said to be seeking a US IPO at a valuation of about $4 billion. Xiaohongshu declined to comment. But co-founder Miranda Qu told Bloomberg Television in April her company was looking into another round of fundraising this year, and said it was open to an initial public offering within two to three years.

The start-up, which already counts Genesis Capital, ZhenFund and GGV Capital among its backers, originally focused on connecting buyers with cosmetics sellers overseas. Yet with China imposing more stringent import policies, it shifted to domestic merchandise and built a social media platform similar to Instagram, on which celebrity influencers help recommend products.

Qu said the company wasn’t affected by trade tensions between China and the US as it focuses on cosmetics and fashion items not yet on a proposed tariffs list.

And revenue contribution from overseas products had dropped since the company pivoted to its own home market.

Xiaohongshu now plans to open its first physical store in Shanghai in June and will soon have more than 100 million users, she said. Monthly active users have grown 40 per cent since the end of last year, she added.