How a well-funded Chinese ecommerce startup failed

Sorry, closed forever. Photo credit: Bryan Mills

We hear every day about how startups succeed. But Jack Ma says you can learn just as much (if not more) from the stories of failure. To that end: consider the case of Metao.

Metao was a Beijing-based overseas ecommerce startup founded by guy named Xie Wenbin in 2014. After an initial angel round, it raised a US$5 million series A round from Matrix Partners China in mid-2014, and then a series B worth US$30 million that included Matrix Partners and other well-regarded VC firms like Morningside Ventures at the end of that year. Now, about a year and a half later, the company appears to be dead.

He’s dead, Jim

To be clear, Metao’s collapse isn’t officially confirmed. But the company’s social media accounts have been silent since January, CEO and founder Xie is incommunicado, Metao’s Beijing office space is deserted, and former employees told Chinese website iHeima that the turn of the year brought a massive round of layoffs and resignations. Neither Matrix Partners China nor Morningside Ventures currently lists Metao as an active portfolio company. Tech in Asia has contacted both firms to inquire about the status of Metao, and will update this post if we hear back.

Now, one explanation for some of that could be that Metao got acquired. And for a while, rumors were swirling that ecommerce giant JD had indeed acquired the startup. But JD representatives told iHeima that no acquisition has occurred.

So, as far as anyone can tell, Metao is dead. The obvious question: what killed it?

Early growth

Chinese news site iHeima has a good rundown of the events that probably led to Metao’s downfall. With the caveat that this is still speculation until the founder comes out to tell the full story, here’s what iHeima thinks went down.

But at the same time, other overseas ecommerce firms were growing

Metao came around at the right time – overseas ecommerce was absolutely exploding in China in 2014. Founder Xie Wenbin didn’t have any experience in the field – in fact, he’d never even traveled abroad – but he saw the opportunity and took it, founding a company called CNHaitao (the name would later be changed to Metao).

Metao went through several iterations. Xie originally saw it as an overseas shopping guide or a C2C we-buy-it-for-you service, but in mid-2014 the company pivoted into a B2C ecommerce platform that relied on daily sales to attract customers. This worked marginally well, but it wasn’t a runaway success, and the company grew at a modest rate.

In late 2014, the company raised its US$30 million series B. Xie poured money into advertising and doubled-down on the business model of offering major sales to attract customers, which led to a faster spurt of growth. The company was posting impressive sales figures, and approaching a million active users on its platform.

Killer blow