$30M: The Magic Number for Resource-Hungry Chinese Video Sites

The Chinese video market is currently much more volatile than ours in the U.S., with startups scoring huge rounds of funding to compete for a rapidly growing broadband userbase, but also facing the risk of closure if they can’t get on good terms with the government. With this much money in the game, someone’s going to get hurt. But in the last week alone, news emerged that Chinese video-sharing site Youku and Ku6.com both raised at least $30 million.

Youku said today it had raised $30 million from Brookside Capital Partners, Sutter Hill Ventures, Farallon Capital and Chengwei Ventures. That’s in addition to a recent $10 million loan from Western Technology Investment. (Sample video embedded above.)

Youku told Pacific Epoch the funding would be enough for more than one year of operation. That estimate, though vague, adds validity to Eric Eldon’s report at VentureBeat that the company was spending $2 million per month to stay in business. Youku has now raised a total of $80 million.

Pacific Epoch is also reporting that another Chinese video-sharing site, Ku6.com, will announce the completion of a Series C round of $30 million this week. The company had previously raised at least (and thought to be much more than) $10 million from Baidu, Draper Fisher Jurvetson, and DT Capital Partners. The company is reportedly adding staff for running user-generated advertising and original content programs.

Ku6 is one of the video sites reported to have been given permission to operate by the Chinese government, while market leaders Tudou, Youku and 56.com have not. 56.com seems in especially dire straits; it has been offline for most of the last month, and some are reporting that government pressure may be driving the company out of business.