Meicai, a Chinese startup that connects vegetable farmers with restaurants, is seeking at least $500 million in funding to try and grab a larger slice of a fragmented food sourcing market, people familiar with the matter said.
The company is looking to achieve a valuation of between $10 billion and $12 billion, one of the people said. The figures are preliminary and subject to change based on market conditions, the people added, asking not to be identified as the details are private. Meicai said in a statement it doesn’t have specific fundraising targets at this moment.
Meicai, which means “beautiful vegetable,” raised about $800 million in 2018 for a post-money valuation of $7 billion. It’s one of a crop of Chinese food and grocery delivery startups attracting capital from investors targeting a market that e-commerce hasn’t yet fully penetrated.
Fresh produce-sourcing has become a heated battlefield between startups like Meicai and on-demand services leader Meituan, which is counting on the segment to drive growth and anchor a food and restaurant management business. Groceries firm Beijing Missfresh Ecommerce Co. is planning to raise between $300 million to $500 million at a valuation of at least $3 billion, Bloomberg News reported this week.
Beijing-based Meicai counts Tiger Global Management, Hillhouse Capital, GGV Capital, Genesis Capital and China Media Capital among its backers. It’s also said to be part of an investment group considering a takeover of German food wholesaler Metro AG’s Chinese business.
Founded in 2014 by rocket scientist Liu Chuanjun, Meicai has set a goal of sourcing produce for about 10 million small- to medium-sized restaurants across the country. Using a smartphone app, its customers can order specialties such as bok choy and Sichuan peppercorns directly from farms, disrupting traditional wholesaling by cutting out middlemen. As of the end of 2017, Meicai served close to a 100 cities and revenue had surpassed 10 billion yuan ($1.5 billion).
Liu was born in a rural part of Shandong province, often helping his family maintain their corn field growing up. As one of the few people in his village to make it to university, he studied astrophysics at the Chinese Academy of Sciences and worked on rocket projects including China’s Shenzhou spacecraft, according to the company.
His startup operates in a fertile field. Food delivery giants Meituan and Alibaba Group Holding Ltd.’s Ele.me are only scratching the surface because takeaway accounts for just 20% of what people eat in China, Harry Man, a partner with Matrix Partners China, told the RISE tech conference in Hong Kong on Tuesday. The remaining 80% is consumed at home, he said.
“So who’s serving them, delivering fresh products to them — vegetables, fruits, meat, seafood and everything — is going to be a market multiple times bigger than takeout delivery,” he said. “Every single VC is looking at the market to see whether somebody can be able to knock it out and become the next mega unicorn in the market.”’