Jing Gao
Screenshot of user interface of Gongfu Xiong (“Kungfu Bear”)
China’s leading massage-on-demand service, Gongfu Xiong, has officially denied rumors that it is broke after failing to complete its fundraising on Monday.
When reached for comment regarding news reports that its Series B fundraising round fell through, Wang Run, founder and CEO of Gongfu Xiong (literally “Kungfu Bear” in Chinese) said to Sina Tech News over the phone, “This is ridiculous! What are we supposed to do? Maybe it’s time we lawyer up and sue them!”
“It is true that our Series B hasn’t closed yet,” Wang added, “But that doesn’t mean it will fail. Moreover, does a little trouble raising funds necessarily mean bankruptcy? Yes, we have made adjustments to our business. Isn’t this something that all startups should be doing?”
Headquartered in Beijing, Gongfu Xiong was launched in October, 2014 to allow users to book in-home massages with massage therapists online. Gongfu Xiong raised a couple of million RMB from angel investors in its first month and several million USD in a Series A in November 2014. The company has not disclosed the exact amount of funds raised.
Between May and July 2015, Gongfu Xiong acquired five similar massage-on-demand services and expanded to seven major Chinese cities, including Shanghai and Guangzhou. As of July, more than four hundred massage therapists have signed up with Gongfu Xiong.
Gongfu Xiong heavily subsidizes its massage therapists, offering a base monthly salary of 7,000 RMB and letting therapists take as much as 80% of fees as commission, a masseur told Guangzhou-based New Express. Putting that in perspective, the average monthly income in Shanghai for 2015, the highest among all Chinese cities, is 3,995 RMB. This compensation package has reportedly “spoiled” workers, who skimp on providing quality service in favour of making fast cash.
Gongfu Xiong has also overlooked several hidden problems amid rapid growth, which have surfaced lately to dent its reputation.
More recently, Gongfu Xiong received some unwanted publicity when a few masseurs in Beijing staged a high-profile protest, claiming that Gongfu Xiong defaulted on their wages. “Pay us our hard-earned money!” They chanted outside the company’s headquarters.
“Kungfu Bear, Pay Us Our Hard-earned Money,” the banner reads.
CEO Wang Run dismissed the wage dispute as mere farce, “Actually, we are the ones who are at a disadvantage.” He said the trouble-making masseurs failed company quality control measures. Gongfu Xiong penalized their substandard service by withholding their commissions but not their base salaries.
“But they made a scene, smashed up our local office, threatened with suicide, and spread photos of their protest banner everywhere as if they were the victims,” Wang said.
One of the company’s key investors, has supported Gongfu Xiong throughout its troubles.
Sunny Zhao, Director of Vertex Venture, the VC that led Gongfu Xiong’s Series A, said to Sina Tech, “[The bankruptcy rumor] is just a dirty trick employed by their competitors to stall this financing round. They are so far away from going broke. It is natural that fundraising is a bit harder now. The entire O2O (Online-to-Offline) sector is having a tough time. You will know that if you talk to a few VCs.”
Company rival, Xiongmao Nana (literally Panda Nana), announced last week that it has raised RMB 60 million in an A-series funding. The app claims to have 300,000 registered users and currently serves eight Chinese cities, including Beijing, Shanghai and Shenzhen.