Xiaozhu, China’s answer to Airbnb, announced on Wednesday that it has raised $300 million from investors led by Jack Ma’s Yunfeng Capital, boosting its financial muscle to better compete with local rivals and US giant Airbnb for a slice of China’s home-sharing sector.
The Beijing-based companys’ round of funding was jointly led by Yunfeng Capital, a private equity firm co-founded by Alibaba Group chairman Jack Ma, and Advantech Capital. Singaporean sovereign fund GIC also participated in the funding, alongside existing investors Morningside Ventures and Capital Today, according to a statement.
Although it has now completed seven funding rounds since its founding in 2012, the unicorn start-up said it has no immediate plans for an IPO.
Moving into Smart Homes With Alibaba
The peer-to-peer based home sharing platform did not disclose the valuation for this latest round, but said in November 2017 that it was worth more than $1 billion after raising $120 million from a group also led by Yunfeng Capital, Reuters reported.
Xiaozhu co-founder and CEOChen Chi said that the new cash will be invested in global network expansion and the development of a smart home IoT system, backed by technology from Ma’s Alibaba Group. “Through building a smarter service chain, Xiaozhu hopes to provide shared home users with a safer, more reliable and convenient living environment globally,” he added.
Relying on Tech to Climb Over Regulatory Hurdles
Turnover in China’s short-term rental market is expected to reach RMB 50 billion by 2020, with over six million listings and 100 million users, according to a recent report by the country’s State Information Center. The homestay accommodation industry is, however, heavily regulated, due in part to strict address registration regulations. Local platforms have expanded into value-added services to drive profits and beat competition, while attempting to stay ahead of government rules requiring citizens and tourists to register their addresses with police within 24 hours of arriving in a city.
In May, Xiaozhu introduced Alibaba’s facial recognition technology in about 40 Chinese cities as a solution to the country’s regulatory uncertainty. The high tech service allows landlords to provide remote access to homes for their guests, who will receive electronic door codes automatically on their mobile phones once their identity is verified from a digital image.
As of October, 2018, Xiaozhu said it has over 500,000 active listings, covering more than 650 destinations globally. Earlier this year the company announced a strategic partnership with the online travel accommodation platform, Agoda and Alibaba’s travel brand Fliggy to expand its global network, share properties and promote post-pay services.
Home-Sharing Heats Up
Xiaozhu’s chief domestic rival, Tujia.com, valued at $1.5 billion, tapped investors for $300 million in new cash in October last year to sharpen its focus on global markets. The company was backed by Nasdaq-listed Chinese online travel giant Ctrip and claimed some 650,000 listings at the time.
Airbnb also had plans to triple its local workforce and double its investment in China, although it has been forced to comply with strict regulations, including disclosing host information to Chinese government agencies.
The US firm, along with Tujia and Xiaozhu, has also been required to shutter services during politically sensitive events, including China’s Party Congress.