Tudou.com Mum on New VC Funding

Has Chinese video-sharing site Tudou.com raised another $53 million in VC funding? That’s what was reported yesterday by SinoCast and, if true, would boost the Shanghai-based company’s total venture capitalization to over $81 million. The problem is that neither Tudou nor its investors are talking, and the report has yet to be substantiated elsewhere.

Part of the problem may be that Tudou was recently penalized by the Chinese government for hosting material deemed inappropriate. no specifics as to the violation or punishment, but the matter stems from a recent Chinese ban on distributing online video that involves pornography, discloses government secrets, disrupts social stability or damages the reputation of China (read:

Tibet protest videos). It has ordered 25 websites offline, and issued warnings or worse to another 32 (including Tudou). It’s unclear if YouTube is among either group, although it’s been inaccessible from within China for more than a week. SinoCast’s article suggested that Tudou does not want to announce the round until the company’s undisclosed punishment concludes. That also seems to extend to its investors, who peppered me yesterday with “no comments.”

So, in the meantime, let me present three unfounded hypotheses:

(1) This deal involves a strategic investor, because $81 million is way too much for VCs alone to invest in a video-sharing site. It’s also too much dilution for the company to accept, without a rationale that trumps short-term finances.

(2) The investors are made a bit nervous about the government action, and are reconsidering. This seems unlikely, but lots of VCs seem to maximize the Chinese market potential while minimizing the prospect of government interference. Perhaps this was a wake-up call.

(3) Tudou plans to announce the deal soon, but just hasn’t gotten its PR machinery in gear yet. That would be the Occam’s Razor scenario, which probably means it’s right.