A Chinese e-commerce site called Pinduoduo, or PDD, has raised more than $1 billion at a valuation of about $15 billion, roughly 10 times the level just a year ago, according to people familiar with the matter.
The Shanghai-based company, founded by ex-Google engineer Colin Huang, is getting the money from existing investors including Sequoia Capital China and Tencent Holdings Ltd., said the people, asking not to be named because the matter is private. Some of the money was invested at a slightly lower valuation, one of the people said. The company didn’t respond to requests for comment.
PDD has become one of the fastest-growing startups in China by creating a sort of Facebook-Groupon mashup, where people spot deals on fruit, clothes or toilet paper and then recruit their friends to buy at a discount. The app, often used through Tencent’s WeChat messaging service, offers merchandise at times 20 percent cheaper than market price by letting consumers buy directly from manufacturers, cutting out middlemen, advertising and acquisition costs. Huang and his developers also used their experience to add gaming elements to the shopping experience, dolling out coupons and rewards.
The startup has increased its transaction volume by at least 10 times in the past year and plans to use the funding for expansion, another person familiar with the matter said. Among PDD’s other investors are IDG Capital and Banyan Capital. It raised more than $100 million at a valuation of more than $1.5 billion, people familiar said in April last year.
PDD’s latest fundraising fell short of the rumored $3 billion that periodical 36kr had reported, without citing sources.
Besides its reputation for low prices, PDD has benefited from a large base of users in lower-tier cities. In the year ending December 2017, the number of people using its mobile app at least once a month grew by 724 percent to hit 156.5 million users, according to data from QuestMobile. For comparison, JD.com Inc., a well established e-commerce provider with a market cap of about $56 billion, had 225.7 million monthly active users at the end of 2017.
Huang launched his career in Silicon Valley and then returned home to become a serial entrepreneur. The idea behind PDD is to give people a different experience than at traditional e-commerce sites like Amazon.com or Alibaba, where shoppers tend to plug in a keyword and then pick out an item after sorting through a few options. Instead, his app is supposed to be more like a digital version of shopping at the mall with friends, where you can share ideas and get feedback from people you trust.
If a shopper recruits friends to join them in an eligible purchase, the entire group gets a discount. Because PDD is used on Tencent’s messaging service, the app’s sales items have become a common sight on WeChat Moment threads – the equivalent of a Facebook user’s feed.