The bear sentiment in the Chinese stock market is showing up on the fund raising exercise of the technology startups. Both the investors, as well as, the companies started to feel the pinch of the recent sell-off. For instance, a fashion website, Mogujie.com, had plans to raise funds and will be the first one to feel the pain. The company was compared with the e-commerce firm, Alibaba Holding Group Ltd (NYSE:BABA), which attracted strong interest among the investors both at home and the United States.
Valuation Affected
When the market is in the bull-run, the companies could command some premium that results in the higher or fair valuation of the fund-raising firm. However, in the bear struck market, there is a strong demand to ask for a discount from the company’s planned pricing. That means the valuation would be lower. In the case of Mogujie.com, the company estimated a valuation of $2 billion.
This is a different scenario than what Alibaba Group Ltd (NYSE:BABA) faced when it was engaged in a similar exercise. The recent negotiation with the possible new investors suggests that their negotiation will yield lower valuation. Carlyle Group LP was also showing interest in the fashion designing firm. However, it will be more than the $1 billion valuation witnessed in the earlier fund raising exercise of June 2014.
No Alternatives
The tech startups don’t have alternatives but accept the lower valuation since they needed funds to catch up with the fast growing e-commerce business. The success of Alibaba Group Ltd (NYSE:BABA) has also made several startups to raise fund and already billion of dollars were raised in the recent months.
However, even the private equity firms have become wary since the market is falling like anything and there are also strong growth concerns on the Chinese economy. In fact, it is because of this reason even Alibaba Group Ltd (NYSE:BABA) is getting hammered. Its share price plummeted about 35% from the peak of $120 in November last year.
Alibaba Group Holding Limited, incorporated on June 28, 1999, is a China-based online and mobile commerce company in retail and wholesale trade, as well as cloud computing and other services. The Company provides technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem. The Company operates Taobao Marketplace, an online shopping destination, Tmall, a third-party platform for brands and retailers and Juhuasuan. The Company provides the fundamental technology infrastructure and marketing reach to help businesses leverage the power of the Internet to establish an online presence and conduct commerce with consumers and businesses. It is engaged in developing online marketplace standards in China. It has made significant investments in proprietary technologies and infrastructure in order to support its growing ecosystem. The Company’s technology and infrastructure allows it to harness the substantial volume of data generated from its marketplaces and to further develop and optimize the products and services offered on its platform.
The Company takes a platform approach to shipping and delivery by working with third-party logistics service providers through a central logistics information system operated by Zhejiang Cainiao Supply Chain Management Co., Ltd., or China Smart Logistics, its 48%-owned affiliate. The Company focuses on increasing active buyers and wallet share, expanding categories and offerings, extending its mobile leadership, enhancing the success of sellers on a broad basis, enhancing data and cloud computing technologies and developing cross-border commerce opportunities. The Company’s buyers buy on Taobao Marketplace, Tmall and Juhuasuan. Global consumers buy on AliExpress and global wholesalers buy on Alibaba.com. Small sellers in China sell on Taobao Marketplace and AliExpress, chinese brands sell on Taobao Marketplace, Tmall, Juhuasuan and AliExpress and global brands sell on Tmall Global. Sellers source products on 1688.com. Chinese wholesalers and manufacturers supply retail merchants in China on 1688.com and global wholesale buyers on Alibaba.com. Chinese wholesalers and manufacturers supply directly to global consumers on AliExpress. Global wholesalers and manufacturers supply global wholesale buyers on Alibaba.com.
The company conducts its business operations across 290 subsidiaries.
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