Asia Awards: VC Deal of the Year – Tujia

"One is selling furniture and the other is selling services but they are very similar in terms of the offline user experience, the complete consumer experience," he says.

Lightspeed came across Tujia in late 2011. The VC firm had identified travel as a key investment theme for the next 3-5 years and the Airbnb and HomeAway model - whereby travelers looking for holiday accommodation are matched with property owners with space to rent - was singled out as one to watch.

Tujia's founders already had start-up pedigree. Jun Luo, was formerly joint CEO of NASDAQ-listed China Real Estate Information, while Melissa Yang used to be CTO of Escapia, a US vacation rental platform bought by HomeAway.

Thanks to their connections, Ctrip and HomeAwayboth participated as in the Series A round in early 2012. This round, worth more than $10 million, was led by Lightspeed, with CDH Investments also participating.

A second round followed 12 months later, taking the total raised to $64 million. By this point, Tujia's business had grown to a nationwide platform featuring 400,000 rental properties in 65 Chinese cities and 45 foreign cities. The existing investors were joined by GGV Capital, Qiming Venture Partners and CBC Capital.

AVCJ understands that Tujia is generating meaningful revenue but has yet to turn profitable. Cao describes the company as "in growth mode," with consolidating its position as market leader and improving customer service the current priorities.

Interestingly, Tujia's long-term sustainability may lie in how it differs from HomeAway - and thereby embraces the online-to-offline model.

The US site allows the party listing a property to set the rental price and then takes a commission off the top. Tujia, meanwhile, has a property management business bolted on to its website. An individual with a holiday home in Sanya can appoint Tujia to maintain and rent out the property, with the company setting the price and splitting the revenue with the landlord.

In many cases, the owner doesn't list the property at all but relies on a local manager who posts it on Tujia in order to attract more custom. Cao argues that the third-party approach is appropriate given home rentals are still relatively new to China.

"The Chinese aren't necessarily comfortable having other people stay in it," he says. "Tujia makes it more comfortable by taking responsibility for the property."

(The award was collected by James Mi, pictured, Cao's co-founder at Lightspeed China.)

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• Topics
• Greater China
• Venture
• Consumer
• Early-stage
• Venture
• China
• Consumer
• AVCJ Awards
• Lightspeed Venture Partners