Social Commerce Startup Yunji Raises $200M Via IPO

Yunji, the Chinese eCommerce company that has a link to WeChat, the popular China-based messaging app, is raising as much as $200 million via a initial public offering in the U.S.

Reports that cite a Securities and Exchange Commission filing from last week say the Chinese eCommerce startup is aiming to raise money as it expands its business. In the fall Reuters reported Yunji was preparing to go public via an initial public offering (IPO), aiming to raise $1 billion at a valuation of between $7 billion and $10 billion.

Yunji capitalizes on apps like WeChat to reach and sell to people. Yunji makes most of its money from selling to users. Its rival Pinduoduo, which raised $1.63 billion via a listing on the Nasdaq, makes the majority of its money from advertising fees levied on merchants, noted the reports.  Yunji is behind Pinduoduo in terms of revenue and users. Yunji ended 2018 with 23.2 million buyers compared to its rival’s 272.6 million monthly active users, according to reports. It counts CDH Investments and Huaxing Growth Capital as investors.

While Yunji has seen fast growth, it hasn’t been scandal free. In 2017 the company was fined $1.4 million by the Chinese government for allegedly engaging in pyramid selling. The company apologized and vowed to overhaul its marketing strategy. From the beginning, Yunji charged people a fee to join the eCommerce site — and for the fee, they were able to take advantage of discounts and perks. They were also granted permission to open their own tiny store on the site. They got paid for selling products to others and recruiting new members to the eCommerce platform. That enabled it to create a big network at a fast rate, but it raised the ire of regulators in China.  Despite the overhaul of its marketing strategy,  reports say Yunji warned in its prospectus that China could change what constitutes a pyramid scheme at any time, which could be a risk to the company’s business.