China’s Most Prominent Face Recognition Startups On Track To Raise $1.6 Billion

Chinese facial recognition startup Megvii Inc. is said to be raising at least $600 million from Alibaba Group and Boyu Capital, according to Bloomberg. The news comes in a week after Bloomberg reported that SoftBank is seeking to invest $1 billion in Megvii’s competitor Sensetime. If both funding rounds materialize, a total of $1.6 billion fresh cash will flow into the AI-powered face recognition space in China.

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So far Megvii has raised $607 million from Alibaba’s Ant Financial, Qiming Venture Partners, and government-backed funds like the Russian-China Investment Fund, among others.

Megvii and SenseTime have raised $2.2 billion in total so far. But although Megvii and SenseTime are two of the biggest players in the face recognition space, its smaller competitors are also picking up cash from investors.

So far this year, seven deals have been made in Chinese face recognition startups, ranging from early to late-stage rounds. Lead investors include Intel Capital, Tiger Global Management, and Fidelity International. Alibaba has participated in three of the seven deals. It led a $600 million Series C in SenseTime, leaving little doubt over the e-commerce giant’s ambition to leverage face recognition technology in its retail and finance businesses. Bloomberg reported that Megvii also plans to use its face recognition technology in retail settings.

Both SenseTime and Megvii also sell their products to law enforcement agencies. SenseTime has partnered up with public security bureaus in Guangzhou and Yunnan to detect crimes, and Megvii uses facial scans provided by a Ministry of Public Security database drawn from legal identification files on about 1.3 billion Chinese, per a Bloomberg report.

The fast expansion of this technology into retail and government surveillance poses hard to answer questions about privacy and government oversight of citizens. However, Megvii and Sensetime’s ability to raise giant rounds of funding shows that VCs and state-backed investors are willing to punt those problems down the road in favor of growth and market share.