Xiaohongshu, dubbed China’s Instagram, tests Web3 waters with investment in US start-up Shil.me

Xiaohongshu, the Chinese social media platform with 200 million monthly active users, took part in a US$1.2 million pre-seed fundraising round of Shil.me
Shil.me expects to see digital assets expand beyond visual art and profile pictures, which currently dominate NFTs

NFTs

Yaling Jiangin Shanghai

Published: 5:00pm, 9 Jun 2022

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Xiaohongshu, known as China’s answer to Instagram, has invested in a US-based start-up developing a Web3 internet platform built on blockchain, despite Beijing’s hostility towards cryptocurrencies and digital tokens.

The Chinese social media platform with 200 million monthly active users this week took part in a US$1.2 million pre-seed fundraising round of Shil.me, which plans to build a platform “where people can display, share, transact and manage” non-fungible tokens (NFT) and other Web3 products.

Xiaohongshu declined to comment on the funding or its future plans for Web3.

Unlike Web2, which some criticise for Big Tech’s control of user data, some investors are promoting Web3 as a next-generation version of the internet owned by the users. However, Web3’s future in China is clouded by Beijing’s draconian restrictions on cryptocurrencies like ether. In the field of NFTs, for instance, many Chinese firms have banned trading and even ditched the term for a more neutral phrase, “digital collectibles”, to stay within the regulatory lines.

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At the same time, China’s internet service firms have been actively exploring Web3 and the metaverse. Xiaohongshu’s latest investment is a part of the wave.

Xiaohongshu has not revealed the structure of its investment team, but according to domestic media reports and online job posts the team has made start-ups related to Web3 and technology, media, and telecoms one of its key focus areas, in addition to consumer brands and enterprise services.

China’s venture capital firms have long been eyeing developments in cryptocurrency and Web3. Sequoia China, the Silicon Valley firm’s mainland operation, invested in Hong Kong-based cryptocurrency financial services start-up Babel Finance last May.

Cathay Capital, a global private equity firm co-founded by Chinese entrepreneur Mingpo Cai, this week announced a US$100 million fund with French public investment bank Bpifrance and cryptocurrency hardware wallet maker Ledger to invest in Web3 start-ups globally.

Xiaohongshu’s own art and fashion NFT trading platform, known as R-Space, was launched within the app last year. Its digital collectibles were minted on Tencent’s Zhixin Chain, a consortium blockchain overseen by the tech giant, which is different from public blockchains used to support cryptocurrencies.

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Shil.me, founded by engineers from University of California, Berkeley and Harvard University, expects to see digital assets expand beyond visual art and profile pictures, which currently dominate NFTs.

“Audio and music NFTs have already started garnering traction, metaverses and video games have in-game NFT assets,” the company said in the announcement. “Eventually, tickets, souvenirs, videos, books, and any digitally asset will become tokenised.”

Apart from Xiaohongshu, Shil.me’s pre-seed fundraising investors included OpenSea Ventures, the investment arm of one of the world’s largest NFT marketplaces, Folius Ventures, Zee Prime Capital and Mask Network.

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