Chinese social media sensation Xiaohongshu wins major foreign VC backing


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Xiaohongshu, China’s fastest-growing social media platform, has gained the backing of venture capital firm DST Global in a rare example of foreign investors putting money into a tech sector it has largely shunned since a Beijing crackdown. 

The photo and video-sharing platform, wildly popular with female city dwellers, arranged stake sales of existing shares in recent weeks to current and new investors that valued the company at $17bn, according to three people with knowledge of the matter. 

DST, founded by Moscow-born Israeli tech entrepreneur Yuri Milner and a past investor in Facebook, took part in the round along with Hong Kong-based HongShan, formerly Sequoia China, which added to its existing stake. Chinese private equity firms Hillhouse Investment, Boyu Capital and Citic Capital also invested. The size of DST’s investment could not be ascertained.

Xiaohongshu, DST, HongShan and Citic declined to comment. Hillhouse and Boyu did not respond to requests for comment.

The vote of confidence comes after Xiaohongshu, which translates as “little red book” and is also backed by VC firm GSR Ventures and Singaporean state-backed investor Temasek, turned profitable in 2023. It made $500mn in net profit last year on revenues of $3.7bn, the Financial Times reported previously. By contrast, it made a $200mn loss on revenues of about $2bn in 2022.

Unusually, Xiaohongshu also has the backing of Chinese internet giants Tencent and Alibaba, with start-ups typically having to choose between them for investment. Support from both parties means it is unlikely to be an acquisition target for either group, given their effective veto over a sale to a rival, according to people familiar with the matter. 

Investors are betting that Xiaohongshu is one of a small group of Chinese tech unicorns that can look forward to a blockbuster initial public offering after delivering strong growth.

Xiaohongshu reached 312mn monthly active users in 2023, a 20 per cent increase from the previous year, making it the fastest-growing large social media platform in China last year, based on a Financial Times calculation.

At the height of Chinese internet start-up valuations in 2021, Xiaohongshu was valued at $20bn in a fundraising round that included Temasek. It saw this fall to $14bn at the end of last year, in two separate deals where Beijing-based VC Gaorong Capital and HongShan bought stakes from China-based Genesis Capital and Granite Asia, formerly known as GGV, respectively, according to people with knowledge of the matter. 

Genesis Capital, Gaorong Capital and Granite Asia did not respond to requests for comment.

“Xiaohongshu hit a $20bn valuation during the peak of VC tech investment. But unlike many other start-ups that are forced to do successive down rounds or close down, it is growing into its valuation,” said one VC in Shanghai.

Investor confidence in Xiaohongshu has been boosted by its strong financial performance and revived hopes that Beijing could again look favourably on overseas listings of large tech companies. It is three years since the disastrous New York IPO of ride-hailing group DiDi, which later delisted as it became one of the victims of a wider crackdown by Beijing on the country’s tech giants.

One investor cautioned that Xiaohongshu’s wealth of consumer information could complicate any prospective plans to launch an IPO abroad, given Beijing’s restrictions on cross-border data sharing. 

Xiaohongshu is a go-to manual for international Chinese travellers in search of restaurant and shopping tips. The company has been expanding its overseas business development team to scour markets popular with Chinese tourists and bring more advertisers to the platform, according to a person with knowledge of the matter.

Xiaohongshu has also become important to retailers looking to grow their audiences and it has been offering to promote artificial intelligence start-ups on its platform in exchange for equity, the FT reported previously. 



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