Xiaohongshu raised $500 million, with a new valuation of over $20 billion

On 8 November, media reports said that Xiaohongshu (or Little Red Book) had raised $500 million in a new round of funding from existing shareholders, including Temasek (a state-owned Singaporean investment company), Tencent, and Alibaba.

This marks the social e-commerce app’s sixth round of financing, with over $20 billion as its post-investment valuation. This social media platform has had a rapid rise despite its tender years and this new wave of financial backing could elevate the brand further.

Xiaohongshu was founded in 2013, as a Hong Kong shopping guide for Chinese consumers, allowing users to post product reviews and share shopping experiences.

As more young people, who have a wide range of interests, start using the platform, Xiaohongshu evolved into a robust community with various lifestyle content of high quality.

As of this August, the app has around 160 million monthly active users, up by 97% when compared to January 2020, with about 70% of them being born in the 90s. This high active user base, coupled with a key consumer demographic for lifestyle brands, has made Xiaohongshu an essential platform for brands to leverage.

From “find good things from around the world” to “mark my life”, Xiaohongshu explores its way to cultivate consumer behaviour in China, once again attracting interest from brands armed with the data to advertise to their best demographics. 

An investment manager commented that Xiaohongshu is always at the forefront of trends, “It is the foremost platform for brands to develop the best-selling products, even for newly established ones”.

Now with an emphasis on lifestyle content, Xiaohongshu also fuels other demands, such as camping, glamping, surfing, and a host of areas other than beauty. This diversification for its market has allowed Xiaohongshu to attract potential investors and partnerships with a wider variety of companies, once again positively impacting its growth.

Liu Jianing, Managing Director of the leading financial institution China Renaissance, shared his thought on the value of the online community. He believes those communities offer unique value that you can’t find elsewhere on the internet.

Namely, they form a robust triangular connection between the content creators, the content-related products or services, and the content consumers, which can significantly impact consumption. With further investment and reach with Xiaohongshu, it is an exciting time and one full of intrigue into the potential the platform can realise over the coming years.

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