NEW YORK -- China's Luckin Coffee has raised $150 million from investors led by BlackRock, the Starbucks challenger said Thursday, lifting the valuation of the startup to $2.9 billion.
A fund managed by BlackRock, the world's largest asset management firm, contributed $125 million to the round, Beijing-based Luckin said.
The new war chest will help Luckin advance its aggressive expansion, which aims to snatch Starbucks' crown of China's largest coffee chain, and will intensify the competition in the traditionally tea-drinking nation.
Luckin, created by the former chief operating officer of Chinese transportation service provider Ucar, is big on delivery services, filling a need previously not met by Starbucks. Customers can order coffee from Luckin's app or other platforms including Tencent Holdings' messaging platform WeChat, with guaranteed delivery within 30 minutes. Starbucks played catch-up and launched its own delivery service in September.
Luckin also wins at being more affordable. An Americano, which costs 28 yuan ($4.18) at a Starbucks, sells for 21 yuan at the Chinese chain. Luckin touts that all its coffee comes from the higher-quality Arabica beans -- a variety that Starbucks also uses -- and says it sources from regions including Ethiopia, where the coffee plant species originates.
The new funding came just five months after the Chinese homegrown coffee chain raised $200 million from investors including Singapore's sovereign fund GIC, China International Capital Corp and Joy Capital.
Founded in late 2017, Luckin has taken China by storm. The company has opened more than 2,000 locations -- up from just 800 last July -- in a serious threat to Seattle-based coffee giant Starbucks, which entered the Chinese market two decades ago and has about 3,600 stores in the country. Many of Luckin's locations, however, are the size of a boba tea shop and designed mainly for delivery or pickup.
Chinese consumers have grown accustomed to the convenience of food and beverage delivery, thanks to local tech companies like Meituan Dianping and Ele.me, which is backed by Alibaba Group Holding. These companies often spend heavily on price subsidies in order to push for rapid market penetration.
Similarly, the price offensive Luckin launched against Starbucks and its new store additions are burning cash. Chinese media reported that Luckin lost about $128 million in the first nine months of 2018. Luckin did not dispute the report and said its losses were within expectation as the company continues expanding, local media reported.
Yang Fei, Luckin's chief marketing officer, said at a January event that it aims to open another 2500 stores by end of 2019 and that it will continue investing to keep prices low for another three to five years. Investors are on the same page -- if not more bullish -- when it comes to Luckin's growth ambition and willingness to keep spending, Yang said.