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A new deal will see a Chinese messaging giant help a Canadian startup attempt to takeover much of the online lives of American youth.
Waterloo, Ontario-based Kik Interactive Inc. announced Tuesday afternoon that it has sold a five percent stake in the company to one of China’s biggest Internet companies, Tencent, for $50 million US.
“Funding will be used to double the company’s size as it continues to build experiences and services for U.S. youth,” the company said in a press release Tuesday. Of the 240 million users, 70 percent are between 13 and 24 years old with about 40 percent of U.S. teens using Kik.
The start-up’s plans go beyond being simply a messaging platform and, according to founder Ted Livingston, these broader ambitions are one of the main reasons Kik chose to take money from Tencent.
Tencent owns WeChat, which is used in China by 600 million monthly users. WeChat is more than a messaging platform and allows users do things like order food, buy clothes or pay bills. In partnering with Tencent, Kik says it aims to be the “WeChat of the West.”
“They would support Kik running independently to win the U.S.”, said Livingston in a blog about why the company chose Tencent.
The deal values the Waterloo-based messaging platform, which boasts 240 million registered users, at $1 billion. As a newly-minted “unicorn” – a popular term for a startup valued at $1 billion or more -- Kik joins the ranks of other Canadian tech darlings like Shopify, Hootsuite and Avigilon, according to data compiled by Garibaldi Capital Advisors.
Kik has raised $120.5 million since its inception in 2008 from notable investors such as RRE Ventures, which invests in BuzzFeed, as well as Union Square Ventures, which has invested in Canada-based Wattpad, Tumblr, and LendingClub.
Rival Snapchat, which has 600 million users, has raised about $1.2 billion at a reported $20 billion valuation.
“Today, there are only five other companies in the world that see the future like we do: Tencent, Line, Facebook, Snapchat, and Telegram,” Kik's Livingston said in his blog. “One of them owns the largest internet market in the world. We couldn’t be more excited to partner with them as we run this race.”