Tencent-backed grocery delivery startup Missfresh has raised $495 million in funding, billing the round as the largest single fundraising in China’s grocery delivery industry, Chinese media reported.

Why it matters: The deal reflects growing investor confidence in the cash-burning sector after the country saw a massive surge in demand for fresh food deliveries following the outbreak of Covid-19.

  • The unexpected boost came as whole cities were placed under lockdown to curb the spread of the disease, forcing people to stay at home.
  • The resurgance of the grocery delivery market offers a boost to several players in the sector, including JD Daojia, Meituan, and Ele.me, Dingdong Maicai.

Read more: Covid-19, an opportunity for e-commerce

Details: Missfresh’s $495 million round was led by a fund under state-backed China Capital Investment Group, Latepost reported (in Chinese). Social media giant Tencent, Tiger Global, Abu Dhabi Capital Group, and the Suzhou and Changshu Government Industrial Fund also participated in the round.

  • Missfresh was valued at $3 billion before the investment. The company’s new valuation was not disclosed.
  • The proceeds from the round will be used to build the company’s supply chain and spur innovation in its business model, Latepost quoted Wang Jun, Missfresh’s chief financial officer, as saying. Wang added that the company has reached profitability.

Context: Founded in 2014, Missfresh has received more than $1 billion in funding from investors including, Tencent, Tiger Global, and Goldman Sachs, the company’s website shows.

  • Missfresh operated more than 1,500 warehouses as of the middle of last year, serving nearly 25 million monthly active customers.
  • Fresh grocery e-commerce is a challenging sector due to the high attrition rates of perishable goods and the significant logistics requirements, which weigh heavily on margins.
  • The sector boomed a few years ago, culminating in multiple firms bowing out, included Amazon-backed Yummy77 and Xianpinhui, and most recently Dailuobo.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.