HONG KONG—Dianping Holdings Ltd., one of China’s most popular restaurant-review and group-buying services, has raised $850 million from a group of investors including smartphone maker Xiaomi Corp., putting a lofty $4.05 billion valuation on the Shanghai-based startup, according to people familiar with the situation.
Dianping’s fresh funding heightens expectations for the application’s future prospects, as it is the second-largest fundraising round on record for a Chinese startup after Xiaomi raised $1.1 billion in December. Investors are pouring record amounts of cash into Chinese technology startups, hoping to capitalize on the rapid growth in the country’s market for e-commerce and other online services. Many of these companies, including Dianping, have postponed plans for initial public offerings of stock in favor of raising sizable amounts of capital from private investors.
Apart from Xiaomi, other investors participating in the fundraising round include Internet company Tencent Holdings Ltd., Singapore state investment company Temasek Holdings Pte. Ltd., private-equity firm FountainVest Partners and Chinese conglomerates Wanda Group and Fosun Group, according to a person familiar with the situation.
Dianping, which is often compared with the U.S. online-review site Yelp Inc., closed the latest fundraising round on March 27 after some late demand from investors pushed back its earlier timetable for closing, the person said.
Dianping resembles a mixture of Yelp and Groupon, and the site is a marketing platform for restaurants and other local businesses in China. Co-founder Zhang Tao launched Dianping in 2003 after he earned his M.B.A. from the University of Pennsylvania’s Wharton School.
Dianping’s launch predates Yelp, which was founded in 2004. In the fourth quarter, Dianping had more than 190 million monthly active users and more than 60 million reviews of restaurants and other local businesses, the company said. Its service covers more than 12 million local businesses in about 2,300 cities across China, it said.
Chinese social-networking and game company Tencent has been a significant backer and strategic partner for Dianping. Tencent took a 20% stake in Dianping in February 2014. Since then, Dianping’s service has been integrated into Tencent’s popular WeChat smartphone messaging app.
In January, Dianping’s chief competitor, Meituan.com, said it had raised $700 million in its latest round of financing, which valued the company at $7 billion. Meituan is backed by Alibaba Group Holding Ltd., which led an early $50 million funding round for Meituan in 2011.
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