VC-backed Chinese dating app set for $267m US IPO

Momo will reach its goal if underwriters fully exercise the overallotment option and 18.4 million American Depository Shares (ADS) are sold at the top of the $12.50-14.50 indicative range, according to a regulatory filing. Given how market volatility has played havoc with other offerings in recent weeks, this is an ambitious target.

The company's venture capital and private equity shareholders are Matrix Partners, Sequoia Capital and Yunfeng Capital, none of which will make a partial exit through the offering. They will be diluted to 17.7%, 5% and 5%, respectively, although their voting power will be much lower because of the greater weighting attributed to Class B shares held by Yan Tang, the company's co-founder, chairman and CEO.

Alibaba, which is already an investor in Momo, has agreed to purchase $50 million in shares via the concurrent private placement, while classifieds website 58.com is putting in $10 million. As a result, Alibaba's holding will be diluted by a smaller margin, from 20.7% to 20.4%.

Momo, which is best known for its "flirting" function, launched in August 2011 and racked up 10 million users within 12 months. As of September 2014, it had 180.3 million users, of which 60.2 million are classified monthly active users. That same month, users of the app sent a daily average of 655.2 million one-to-one messages.

The app is downloaded free of charge, and Momo started generating revenues in July 2013 through the introduction of a membership subscription package, which offers additional functions and privileges. Later in 2013, mobile games, paid emoticons and mobile marketing services were launched, further monetizing the app.

Momo posted revenues of $13.9 million in the first half of 2014, up from $3.1 million in the final six months of 2013, with membership subscription fees accounting for 63% of the takings. The company has yet to turn a profit. Losses amounted to $3.8 million, $9.3 million and $8.3 million in 2012, 2013 and the first half of 2014, respectively.

Matrix participated in Momo's first institutional round, committing approximately $5 million in Series A funding in 2012 alongside an unnamed individual investor. The Series B round took place later the same year and was reportedly worth $40 million. Commitments disclosed in the filing include $1.5 million from Matrix, $15 million from Alibaba and $1.5 million from DST Advisors.

Last October, Matrix put in a further $13 million via the Series C round, while Alibaba and DST each invested $10 million. Several other parties contributed smaller sums. Sequoia and Yunfeng came into the fourth round in May of this year, committing $90 million apiece. Tiger Global invested $31.8 million.

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• Topics
• Consumer
• Technology
• Greater China
• Exits
• Venture
• Consumer
• TMT
• China
• Venture
• Exit
• IPO
• Sequoia Capital
• Yunfeng Capital
• Alibaba Group
• Matrix Partners