Dang Dang Gets US$11M From Tiger Tech Fund; Amazon A Potential Follower
Li Guoqing and Yu Yu, the joint presidents of China's biggest online book seller Dang Dang, announced on December 31 that the company has succeeded in raising a third round of capital, attracting US$11 million from Tiger Technology Fund, which also invested in rival Joyo in October. Tiger Technology Fund estimates Dang Dang's market value at US$60 million, its $11 million giving it an 18 percent stake. After Tiger's entry, shares of existing shareholders including IDG, Softbank and Luxemburg Cambridge Investment holdings have been diluted. However, the management team's share holding through Beijing Kewen Guolue has increased and is now the controlling shareholder.Several other US investors including IDG, Amazon and BlueRidge have contacted Dang Dang over the past three months. The Financial Times reported that Li and Yu were in frequent contact with Amazon during their recent visit to the US. Although some of Dang Dang's shareholders prefer to lose money first and profit later, the management team's breakeven strategy won out. If negotiations succeed, Amazon's investment will be much greater than that of Tiger. Dang Dang had $1 million cash on hand before the most recent round of capital raising.. Yu said Dang Dang prefers private capital raising for financing under US$100 million because the cost of an IPO is too high. Dang Dang's sales in 2003 were 80 million Yuan and Tiger estimates Dang Dang's PE ratio was 6. Dang Dang claimed 40 percent of China's B2C market with a gross profit margin of approximately 23 percent. However, its revenue was still below Joyo's 105 million Yuan.