Tencent-backed crowdfunding site Waterdrop comes under fire

December 11, 2019 13:25
Waterdrop, founded by Shen Peng in 2016, has  been accused of employing aggressive marketing tactics. Photo: Chinanews.com/Sina

Crowdfunding charity site Waterdrop, also known as Shuidichou, has come under fire after an online video revealed its aggressive marketing tactics.

According to the viral video, the company has been dispatching employees to hospital wards in over 40 Chinese cities, asking people to donate and soliciting patients for crowdfunding projects on its platform.

Waterdrop was founded by Shen Peng in 2016. Shen, 32, is one of the founding members of food delivery website Meituan Dianping (03690.HK). He worked with Meituan for seven years and became one of the top officials of its food delivery unit.

Given his key position in Meituan Dianping, it’s not surprising that Shen received funding from the company and its major shareholder Tencent (00700.HK) in the early stage.

Other investors include International Data Group, DST Global and Boyu Capital.

As a long-time supporter, Tencent has led the investment from rounds A to C, and also connected Waterdrop to the WeChat app.

The platform has raised nearly 2 billion yuan (US$284.2 million) as of June this year, valuing it at over 10 billion yuan.

It’s now the largest crowdfunding charity platform in China with more than 250 million independent donors.

Those in need of money for urgent issues – patients, for example – can start a crowdfunding project on the website and set a donation target simply by sharing relevant information such as personal financial situation, medical expenses, etc.

Anyone can make a donation and any amount – even as little as 1 yuan is accepted.

The site can also be used to raise money in the aftermath of a natural disaster.

Unlike other platforms, Waterdrop claims it does not charge any commission on the funds raised.

The problem is, Waterdrop is not a non-governmental organization; it makes money by selling online insurance products to platform users.

Worse, online media platform Pear Video on Saturday revealed that Waterdrop employees are required to meet a “business quota”, i.e., getting a minimum of 35 donations per month.

The “sales team” also solicits fundraisers when they meet people in need of aid. But the real situation is often exaggerated to win donors’ sympathy and, of course, their money.

The platform pays them a commission of up to 150 yuan for each donation.

Following the report, Waterdrop suspended such field activities and pledged to launch an in-depth investigation.

Charity crowdfunding can be more cost-efficient and flexible than traditional ways of raising money. However, it often lacks supervision, due diligence and transparency.

The revelation has definitely tarnished the charity site’s reputation, and has raised calls for a better regulatory framework for this type of operation.

This article appeared in the Hong Kong Economic Journal on Dec 9

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RT/CG

Hong Kong Economic Journal columnist