Meituan-Dianping, China’s largest group deals site, confirmed that it has closed a colossal $3.3 billion round at a valuation of $18 billion. The company claims that this is the largest single funding round ever raised by a venture-backed Internet startup in China.
Backers include returning investor Tencent, one of China’s top Internet companies; DST Global; TBP Capital, Canada Pension Plan Investment Board, Baillie Gifford, CDB Kai Yuan Capital Management; Capital Today; and Temasek Holdings. Merchant bank China Renaissance served as the financial adviser for the round.
Meituan-Dianping’s current valuation puts it at No. 5 on CrunchBase’s unicorn leaderboard, behind Uber, Xiaomi, Airbnb and Palantir Technologies, and just ahead of Chinese taxi app Didi Kuaidi, which is also backed by Tencent and Temasek Holdings.
The joint company was formed last October when competitors Meituan and Dianping announced a merger. It claimed 170 billion RMB ($25.84 billion) in gross merchandise volume (or the value of merchandise sold online) last year and currently serves about 150 million monthly active users who place about 10 million orders each day.
Meituan and Dianping, which still operate as independent brands, were the strongest contenders in China’s group buying wars, when up to 5,000 Groupon clones struggled against one another before consumer interest in group buying sites started to dwindle around 2011. Meituan and Dianping, however, both benefited from the support of China’s top Internet companies.
Tencent invested in Dianping, while Chinese e-commerce leader Alibaba backed Meituan (it sold its $1 billion stake after the merger). Both also offer a wider array of services than group discounts–Dianping specializes in restaurant orders, and both offer a wide array of services, including ticket bookings, travel reservations, and wedding services.
While the two companies may have been originally founded to replicate Groupon, Meituan-Dianping has emerged as the largest player in China’s online-to-offline (O2O) market. O2O, which is a catch-all term for strategies that encourage more consumers in brick-and-mortar outlets to shop online (or vice versa), is important for Chinese Internet companies that want to grow their mobile businesses because most transactions are enabled by smartphones.
O2O encompasses a wide array of products and services, ranging from group buying, ticket booking and online ordering from physical businesses to mobile payments and taxi hailing.
According to China’s State Council, the O2O market was worth 305 billion yuan ($48 billion) in the first-half of 2015, a 80 percent year-over-year increase. Competition among O2O companies is fierce and many offer deep discounts of up to 60 percent in order to undersell rivals. Meituan and Dianping’s merger means that the two are no longer engaged in a price war, but as the funding shows, maintaining its position in the O2O market still requires a huge amount of capital.
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