Sequoia & Strategics Fund JD’s Fintech Unit With $1 Billion In Market Race
Sequoia Capital China along with asset management company China Harvest Investments and Hong Kong-based insurance conglomerate China Taiping Insurance have contributed to creating a Chinese fintech unicorn, with their $1 billion funding of JD Finance, the consumer financial services unit of NASDAQ-listed e-commerce firm JD.com, boosting its valuation to $7 billion.
The deal, which sees Beijing-based JD.com retain majority ownership of JD Finance, illustrates the highly competitive market as JD broadens its financial offerings online. Strong financings of fintech companies in China, particularly those in mobile, have been on a fast incline. The mobile payments market in China is expected to triple from $1 trillion in 2014 to $3 trillion in 2018, according to China consulting firm iResearch.
Prior to its $1.78 billion IPO in 2014, JD had raised some $450 million from investors dating back to 2007. Its earlier backer, Beijing-based private equity firm Capital Today invested $10 million and held a 4.8% stake, while JD’s largest equity holder, Tiger Global, injected $21 million in 2007, $60 million in 2009 and another sum in 2010 for a 18.1% pre-IPO stake. Asia focused hedge fund Hillhouse Capital invested $255 million in 2010 for a 13% stake. Other investors include Canada’s large Ontario Teachers’ Pension Plan, Yuri Milner’s Digital Sky Technologies and Saudi Arabia’s Kingdom Holding Company and Prince Alwaleed acquiring a 2.5% equity stake in JD.com in 2013 at a value of $250 million.
JD.com, formerly 360buy and founded by Richard Liu in 1998, is the largest online direct sales company in China in terms of transaction volume. In investing in JD Finance, Sequoia and other investors are betting on the unit’s growth on the back of the e-commerce site’s large operations covering 196 warehouses across 46 domestic cities. JD Finance’s top business areas include consumer credit, online and mobile payment, wealth management and supply chain finance. Last year, the finance unit developed a joint venture with U.S.-based ZestFinance to offer credit services in China, and even launched an equity crowdfunding platform in April.
The firm’s top rival is Alibaba’s independent finance arm, Ant Financial, which raised funds in June 2015 valuing it at more than $40 billion and has officially announced the opening of a second round of financing, as the latest step toward an anticipated IPO. Gaming giant Tencent, maker of WeChat and a backer of JD.com, is also seeking fresh funds, and had begun promoting a WeBank online bank service in early 2015.