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April 12, 2011 1:09 am
The soaring valuation of group-buying services on the internet has spilt over into China, with Lashou.com, one of several Groupon copycats, announcing that it had been valued at $1.1bn by its latest fundraising round.
The extra $110m investment takes the total raised by the company, which was launched only in March last year, to $170m, and marks an intensification of the land-grab under way in one of the fastest-growing corners of e-commerce.
Groupon itself sought to buy a controlling stake in Lashou late last year, in a deal that would have valued the Chinese company at the time at $500m, according to one person familiar with its bid. It has since launched its own service there, alongside local internet company TenCent.
Lashou has been growing in its early months at a faster rate than Groupon achieved, said Richard Lim, a founder of GSR Ventures, the Chinese company’s largest shareholder. Based on its revenues last December, the company was already seeing annualised revenues of $150m and doubling every eight weeks, he added.
While Groupon had the market largely to itself in its first year, however, Lashou has faced a handful of other well-funded local competitors. That has resulted in a business with a gross profit margin of 20-30 per cent, according to Mr Lim – considerably lower than the 50 per cent margin of Groupon, though the US company is also widely expected to see its profitability decline as it faces more competition.
The escalation in Lashou’s valuation in a matter of months comes as investors have pushed up the prices of Chinese e-commerce companies more widely. The rising share prices have aroused memories of the US dotcom bubble of more than a decade ago, though venture capital investors argue that the boom has a long way to run.
“Eventually [valuations] will settle down – but valuation is a factor of growth, and these companies are experiencing super-high growth,” said David Chao, a partner in Doll Capital Management, one of the earliest venture capital firms to invest in Chinese internet companies.
“I think there will be a shake-out, though not as much as there was in the US,” he added.
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