Deal focus: PE targets China’s gay community

It was as recently as 1997 that China decriminalized homosexuality - and it took another five years before the Chinese Society of Psychiatry stopped listing it as a mental disorder. More recently, acceptance of the lesbian, gay, bisexual and transgender (LGBT) community has risen, and the emergence of social networking apps targeting these groups is one of the by-products.

Around 5% of China's 1.3 billion total population is thought to be gay. Blued, a gay dating app spun out from Chinese gay discussion online forum Danlan.org in 2012, now has about 21 million users domestically. Its market share in China was 44.4% as of January, beating other gay social apps such as Zank and Jack'd, according to consulting firm Analysys International.

"The gay online community is less competitive than other more general community groups. Blued is the dominant player in this space, and its users are very loyal to the brand. It's like other networking sites, such as Facebook - the stronger you are, the bigger the networking effect," says David Wei, chairman and founding partner at Vision Knight Capital.

Attracted by this niche focus, Vision Knight recently led a Series C-plus round for Blued, joined by China Mobile Games and Entertainment Group (CMGE). The total amount raised - including a Series C round completed few months ago, led by Ventech China with participation from Bertelsmann Asia Investments, DCM and Hong Kong's New World Group - is "hundreds of millions" of renminbi.

"One of our latest strategies is to look at the so-called non-core user groups, as opposed to core groups that everyone else is looking at. The gay population is a niche non-core group," Wei explains. "Also, we're looking to back internet companies that can expand into Southeast Asia or even globally. As China's population is the biggest in the world, Blued has the potential to become a global business."

In addition to its 21 million domestic users, Blued has six million outside China - the largest international base of any gay community app. The company monetizes its business through mobile advertising and broadcasting live shows, and there are plans to introduce mobile games through a partnership with CMGE. Blued is expected to generate RMB100 million ($15.2 million) in revenue this year and is already at break-even point.

The company previously received a RMB10 million ($1.6 million) Series A round from Crystal Stream and Zhonglu Capital, and a $30 million Series B round led by DCM, AVCJ Research records show.

Blued will use the latest capital injection to improve its business structure, grow its global user base and develop local products for overseas markets, such as Southeast Asia. "It is normally easier for niche market players to expand cross-border. The gay community is less focused on where people are coming from, so the difference between nationalities is less significant," says Wei.

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• Topics
• Greater China
• Technology
• Consumer
• China
• Vision Knight Capital
• TMT