SHEIN's Fundraising History

@Jing Liu

I hadn't planned to write about SHEIN, but seeing today's IPO ceremony suddenly stirred something in me. So I'm jotting down the fundraising story from back then, on the fly.

At today's IPO, rumor has it that Sky Xu hadn't originally planned to attend. That's why in most of the photos circulating today, he's nowhere to be seen. It wasn't until late last night that he decided to show up.

But on site, he wore a white SHEIN t-shirt and simply drifted with the crowd below stage. If you weren't an employee or investor, you'd never have recognized him. It was only during the group photo that he hurried onstage to pose.

The investors kept a low profile too. Within elsewhere's limited circle of investor friends, virtually no one made any public statement. Most had also declined interviews ahead of the IPO.

Rewind four years, and SHEIN was a company valued at $100 billion. The people chasing it back then were no fewer than those chasing AI or large language models today, and the euphoria was no less intense.

Four years on, market hotspots have rotated through several cycles. Looking back at this story now feels somewhat surreal.

IDG

Speaking of SHEIN, the first investor that comes to mind is naturally Meng Lian at IDG.

For a long stretch, IDG and Lian, along with this company name unknown to many, were repeatedly mentioned by investors living in Beijing and Shanghai.

The reason, beyond SHEIN having once been a $100 billion company, was this: Lian lived in the Guangzhou-Shenzhen area — actually more Guangzhou than Shenzhen.

Across more than a decade of Chinese venture capital history, with internet and consumer deals concentrated mostly in Beijing and partly in Shanghai, Guangzhou was a place with virtually no presence. This only amplified the legend of this investment story.

I once asked Lian about it. He said there was nothing mysterious really — a friend introduced him to Sky Xu, and after one meeting he felt he should invest immediately: in 2016, compared to the "Five Tigers of Bantian" at the time, SHEIN was a markedly different company.

Lian said something to Xu on the spot, roughly: "I've made all the preparations to invest in you." Meaning, by then he had already met numerous cross-border companies and had built considerable knowledge of the space.

Plus, IDG faced virtually no competition then. Most peers were busy fighting over internet deals in Beijing and Shanghai. So this investment moved very quickly.

Years later, as SHEIN gradually surfaced, IDG and Lian became something of a phenomenon in the investment world. I heard countless investors traveled south to learn from him. But I also heard that many left feeling unsatisfied — was he holding something back?

I later asked Lian about this too. His answer: it really wasn't that complicated. Often the two sides simply weren't in the same situation, or playing the same game. There's actually very little people can truly learn from others.

But the core reason was probably this: in 2016, you had to be an investor living in Guangzhou, and you had to choose to look at cross-border. That was the crucial secret.

There's also a coincidence: legend has it that Sky Xu collected ancient coins as a hobby. And Lian once mentioned that they were fellow Shandong natives, and that Shandong people might naturally have a stronger interest in history and culture.

HSG

Another investor was Zou Jiajia, partner at HSG.

In some ways, HSG landing SHEIN was even more jarring. At that time, HSG didn't even have an office in South China.

Slightly after IDG, HSG invested in SHEIN around mid-2018. But Zou and Xu had probably met around October 2017.

Before that, Zou had made a dedicated trip to Guangzhou's Zhongda — the largest textile and garment distribution hub in the area — where she spent a month and a half visiting.

In conversations there, everyone mentioned one company: SHEIN. But even then, despite some funds having already invested, it remained an absolutely underwater company for the broader primary market.

Similar to Lian's impression, after talking with Xu, Zou's feeling was: "the best player in a vast crowd."

But the investment process was more complicated. In a 2020 interview with us, Zou barely elaborated, only saying: she met Xu in October 2017, and the deal didn't close until summer 2018. In between, HSG had also made several other investments in the globalization space.

One detail from Zou's recollection was quite interesting. She remembered a 2017 speech by Edison Chen at New York University about "Made in China," where he proudly declared himself Chinese, with everything starting from China, and that Made in China ≠ low standards.

This story was meant to illustrate that amid global penetration of e-commerce and upgrading of China's supply chain, there would be companies with a chance to beat Zara, H&M, and the like. And SHEIN was a company that grew out of exactly this historical backdrop.

Today, HSG's globalization portfolio includes, beyond SHEIN, Amer Sports, Aoji Technology Co., Ltd., Aventon, Miracle Miles, and many others.

Greenwoods, JAFCO Asia

Like many young founders: Sky Xu once knew nothing about the investment industry, not even that venture capital existed in the world.

So looking back now, SHEIN's first two institutional investors — JAFCO Asia and Greenwoods — were both somewhat off the beaten path.

Last year, JAFCO Asia was acquired by Malaysian private equity secondaries firm BAL (Bee Alternatives Limited).

And in many people's perception, Greenwoods is a secondary-market private equity firm. But actually, Greenwoods early on told a story of primary-secondary integration. During this period, they invested in DiDi, Dianping, Bilibili, AHS Recycle, UR, China Shengmu Organic Milk, Yijiupi, Phoenix Healthcare, Gan & Lee Pharmaceuticals, 51 Credit Card, Handu E-Commerce Group, and other companies.

SHEIN was roughly a product of this phase.

But later as regulation tightened, few funds continued to tout the primary-secondary narrative. In recent years, Greenwoods' primary-market activity has also become rarely visible.

Taihe Capital

SHEIN did have an FA back then. Legend has it that initially it was a small local FA in South China, and later Taihe Capital. This was also one of the deals that catapulted Taihe to fame.

What's interesting is that in early 2018, Taihe published a WeChat article with a section discussing the future of retail: "The leaders will all be 'N+1+1+1' models," which included this passage: "More internet-native versions of Zara, UNIQLO, and Muji will emerge."

Supposedly it was because of this article that an investor felt Taihe had strong insight, and proactively introduced SHEIN to them. Later, Taihe not only became SHEIN's FA but also a shareholder.

The Wall Street Veteran

Over the past few years, IPO rumors about SHEIN were like the boy who cried wolf. Every so often, some new variant of listing news would surface.

And in these, one name kept coming up: Donald Tang. In November 2022, he officially joined SHEIN as executive chairman, only to depart this year.

Tang was once a prominent Chinese figure on Wall Street.

In 1982, a young man from Shanghai arrived in the United States clutching just $20, enrolling in chemical engineering at California State Polytechnic University, then working his way through the securities industry. By 1992, Bear Stearns hired him to take over its Hong Kong branch, and he rose to become global vice chairman and CEO of Bear Stearns Asia.

To this day, an article about him still circulates widely: "From Dishwasher to Wall Street Elite."

Before joining SHEIN, Tang had actually founded a company: Tang Media Partners (TMP).

In 2018, the company held a grand press conference in Hong Kong. Neil Shen attended to show his support, publicly expressing his admiration for Tang — roughly that Tang was a name that had thundered in his ears when he first arrived on Wall Street, his senior in the industry.

However, TMP didn't continue operating, and shut down a few years later.

Morning Runs, $100K Investments, and the $100 Billion Legend

Today's SHEIN IPO is being discussed by far fewer people than expected. But between 2020 and 2022, even the slightest news about it became industry legend.

Around April 2022, SHEIN completed a funding round at a $100 billion valuation.

That may seem unbelievable now, but at the time, investors were falling over themselves to secure allocation.

Legend has it that one dollar-denominated PE firm specifically parachuted in a particularly well-connected investor. This person's targets for the year were two: SHEIN and HEYTEA. Despite how severe the pandemic was, this investor frequently flew to Singapore to "go running with Sky" — all to pry open a funding allocation.

The round did eventually open up, but this firm itself ultimately didn't invest.

There's also an unverifiable legend: that one firm's administrative receptionist had followed on with roughly $100K at an early stage, which became the envy of many.

One SHEIN investor once told us that when the valuation hit $100 billion, they themselves felt it was overvalued. Looking back, would it have been wiser to sell some shares then? But this is a story capital markets repeat endlessly: swinging back and forth between overvaluation and troughs.

"When the world thought we were badass, we weren't that badass. When the world thought we were dumbasses, we weren't that dumbass."

For SHEIN, a line from 36Kr's article today hits the mark: "Neither storm nor shine."

So for investors, could today's AI story be the SHEIN or globalization story of four years ago? Or have the discerning already started looking for the SHEIN of ten years ago?

Cover image: Vincent van Gogh, Weaver Facing Right, 1884, Musée du Louvre