As everyone knows, the eventual success of a startup almost always depends on the sort of money it can raise and how long the company’s investors can keep going before a viable business model can take shape. In other words, it is a long game and it takes years before a company can be deemed enough for an IPO. More often than not, many of the company’s do not get to that stage either, but if startup investment dries up, then the failure of a company is inevitable. Startups in China are currently going through such trouble as investment capital at some of the bigger private equity seems to have dried up amidst economic troubles in the country. It has emerged that Beijing Missfresh E-commerce Co. or simply Missfresh, which is involved in the grocery business, has struggled to attract investment from its backers.
The company is primarily backed by Chinese tech royalty Tencent Holdings, but other backers like Tiger Global Management and Goldman Sachs Group are equally high profile. According to sources in the company which is close to the developments, Missfresh is looking to raise capital in the range of $300 million and $500 million and that too at a valuation of $4 billion. At this point of time, many startups are struggling, they are also struggling to raise cash that could allow them to grow their businesses quickly and many are currently seeking a new injection of capital from their backers. However, things have not proven to be as easy as it used to be for large startups even a year or so ago when raising capital used to be relatively straightforward.
Currently, there are other factors at play that has dried up the coffers of many of the biggest startup backers in China. The trade war with the United States has been a severe strain on the revenues of many of these companies. In addition to that, the slowdown in the Chinese economy has also proven to be a drag on the bottom line of many startups and that in turn has made life difficult for the backers as well.