MEICAI, a Chinese startup that connects vegetable farmers with restaurants, is seeking at least US$500 million in funding to try and grab a larger slice of a fragmented food sourcing market, people familiar with the matter said.

The Tencent Holdings Ltd.-backed company is looking to achieve a valuation of between US$10 billion and US$12 billion, one of the people said. The figures are preliminary and subject to change based on market conditions, the people added.

Meicai, which means “beautiful vegetable,” raised about US$800 million in 2018 for a post-money valuation of US$7 billion. It’s one of a crop of Chinese food and grocery delivery startups attracting capital from investors targeting a market that e-commerce hasn’t yet fully penetrated.

Fresh produce-sourcing has become a heated battlefield between startups like Meicai and on-demand services leader Meituan, which is counting on the segment to drive growth and anchor a food and restaurant management business.

Beijing-based Meicai counts Tiger Global Management, Hillhouse Capital, GGV Capital, Genesis Capital and China Media Capital among its backers. It’s also said to be part of an investment group considering a takeover of German food wholesaler Metro AG’s Chinese business.

Founded in 2014, Meicai has set a goal of sourcing produce for about 10 million small to medium-sized restaurants across the country.

Using a smartphone app, its customers can order specialties such as bok choy and Sichuan peppercorns directly from farms, disrupting traditional wholesaling by cutting out middlemen. (SD-Agencies)