Bytedance Ltd. has closed $3 billion of funding from SoftBank Group Corp. and other major investors at a valuation of $75 billion, cementing its position as the world’s biggest privately backed startup, according to people familiar with the matter.
The deal, which Bloomberg News reported earlier also involves KKR & Co. and General Atlantic, represents a major infusion of cash that will quicken the Chinese media giant’s expansion beyond its home turf. SoftBank aimed to invest about $1.8 billion depending on the availability of secondary shares, one of the people said, declining to be named because the talks were confidential. The bulk of its investment would be in primary stock, the people added. And Bytedance remains in talks with other interested investors, which could offer more funds in future, the people said.
Six-year-old Bytedance, owner of news aggregator Toutiao and video sensation Tik Tok, has surpassed Uber Technologies Inc. to become the world’s most valuable startup, according to CB Insights, which values Uber at $72 billion. Having become a major player in China’s internet scene, it’s now planning to use its influx of cash to take on Western rivals. Its biggest overseas hit is a video service called Douyin — known as Tik Tok beyond China — that’s siphoning attention from the likes of Tencent Holdings Ltd. and Facebook Inc.
Bytedance is said to have earned $2.5 billion in revenue last year and had initially targeted 50 billion yuan ($7.2 billion) for 2018, but has yet to turn a profit. It started life as a producer of apps for sharing crass jokes before moving to its signature news aggregation service Jinri Toutiao, which means “Today’s Headlines.” It then spent years building up its user base and perfecting its recommendation systems. Toutiao’s now a hit among users who spend almost as much time on Toutiao as they do on WeChat, the Tencent super-app that acts as phone, social media and digital wallet for over a billion users.
Bytedance launched Douyin in 2016 after noting the popularity of Vine-like short videos and karaoke clips on apps like Kuaishou and Musical.ly, quickly overtaking its rivals. A year after, it acquired Musical.ly for $800 million. The company now has hundreds of millions of users and is regarded as a key member of a fast-rising cohort of Chinese internet giants that includes ride-hailing service Didi Chuxing and on-demand titan Meituan Dianping.
What’s remarkable is that founder Zhang Yiming was able to do it all without taking money or seeking protection from the twin suns of China’s internet: Alibaba Group Holding Ltd. and Tencent. The latter has sought to launch competing services with limited success, and even taken Bytedance to court. Baidu Inc. and Tencent have both traded lawsuits with Bytedance over allegations of copyright infringement.
Bytedance’s biggest potential risk may be China’s notoriously sensitive censors. In April, it was forced to shutter Neihan Duanzi, the popular joke-sharing app that helped launch its brand, and temporarily remove its Toutiao app from app stores. Relations with the authorities may since have improved: this week, the state-endorsed All China Federation of Industry and Commerce named Zhang one of the 100 top entrepreneurs of the past 40 years.