Alibaba joins US$600 million fundraising round for AI start-up Megvii, sources say

Megvii, the Chinese developer of facial recognition system Face++, is said to be raising at least US$600 million from investors including Alibaba Group Holding and Boyu Capital, according to people familiar with the matter.

The Beijing-based company, which already counts billionaire Jack Ma Yun's Ant Financial Services and one of China’s largest state-backed venture funds as investors, will close this round of funding within weeks, the people said, asking not to be named because the matter is private. The company will then seek a second tranche of funding, the people said.

Alibaba is ramping up its investments in China’s largest artificial intelligence start-ups, hoping to employ the technology across its growing internet and retail empire.

Megvii provides face-scanning systems to companies including Lenovo Group and Ant Financial, the payments company that underpins Alibaba’s e-commerce platforms. It is competing with SenseTime, another start-up backed by Alibaba, for market share in sectors such as retail, finance, smartphones and public security that could use facial recognition.

New York-listed Alibaba, the parent company of the South China Morning Post, and Megvii declined to comment. A Boyu representative who answered calls to its main number said the firm had no comment and declined to forward calls.

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Megvii will use a significant proportion of funding from this round to support retail initiatives, including applying its technology in unmanned stores, the people said. New backer Boyu Capital is a private equity firm co-founded by a grandson of former Chinese leader Jiang Zemin.

Beyond commerce, facial recognition technology has attracted interest from government authorities who want to be able to detect crimes and threats to social stability before they take place.

Megvii’s software uses facial scans held in a Ministry of Public Security database drawn from legal identification files on about 1.3 billion Chinese. Its other investors include Foxconn Technology Group, CCB International Holdings, Qiming Venture Partners and Sinovation Ventures.

SenseTime is said to be in discussions to raise nearly US$1 billion in funds from Japanese conglomerate SoftBank Group Corp’s Vision Fund, people familiar with the deal said separately last week.