China's AI start-up Megvii raising USD 500 million at USD 3.5 billion valuation

Chinese artificial intelligence provider Megvii Inc, commonly known as Face++, is targeting to raise USD 500 million in a new funding round that pegs the current valuation of the firm at USD 3.5 billion, people with knowledge of the matter said.

Bank of China Group Investment Ltd, the state bank’s private equity (PE) arm, is looking to lead the fundraising with USD 200 million, two of the people told Reuters, declining to be named as the information is confidential. Terms of the fundraising have not been finalised, the people added.

Beijing-based Megvii declined to comment. Bank of China’s PE arm did not respond to a request for comment.

Megvii’s latest fundraising comes amid Beijing’s plans to build a ubiquitous closed-circuit television (CCTV) surveillance network and become an international leader in AI, a technology that is increasingly becoming key to various sectors.

Chinese and some foreign investors are pouring money into start-up firms that specialise in AI given Beijing’s emphasis on the technology. Investments in the sector surged to nearly USD 2 billion this year via 75 deals, more than four times the total value in the previous two years, according to Refinitiv data.

The technology has grabbed the attention of businesses from healthcare to financial services looking to use algorithms to comb through large troves of data to recognise patterns and solve problems. It is also set to spread to driverless cars and service robots in the future.

Megvii’s rival SenseTime Group Ltd raised USD 620 million in May at a valuation of over USD 4.5 billion, after a USD 600 million round in April led by Alibaba.

Earlier this year, Alibaba also invested USD 327 million in Megvii, the start-up behind the e-commerce giant’s online payment arm Alipay’s “scan your face to pay” function, a fundraising document reviewed by Reuters shows.

Alibaba and Megvii declined to comment on the investment.

In 2017, Megvii raised USD 460 million from investors including China State-Owned Capital Venture Investment Fund, Ant Financial and Foxconn Technology.

Founded in 2011 by Yin Qi and his two friends from Tsinghua University’s prestigious pilot computer science program, Megvii provides facial recognition and other AI technology to businesses and governments.

Megvii counts Alibaba, Ant Financial, Lenovo Group and Huawei Technologies as key clients and serves government entities and state-owned firms, its website shows.

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