Hillhouse, Temasek Bet on China's Designer Toy Market in Hunt for Next Pop Mart
China's collectibles industry secured its largest funding round of 2025 as trading card company Shanghun raised hundreds of millions of yuan led by Hillhouse Venture, signaling renewed investor interest in the toy sector following Pop Mart's market surge driven by its Labubu character phenomenon.
The funding round, which included participation from Banyan Capital and Cathay Innovation, represents a bet on the next potential unicorn in China's fragmented collectibles market. Shanghun, founded by former Kayou executive Sheng Chuan and Yaoji Technology chairman Yao Shuobin, focuses on trading cards tied to gaming intellectual properties from companies including Tencent, NetEase, and miHoYo Network Technology .
The investment highlights venture capital's renewed appetite for consumer collectibles after a prolonged slowdown in new consumer sectors. Industry consolidation is accelerating through both venture funding and acquisitions, with publicly listed companies increasingly acquiring emerging toy brands as growth drivers.
Pop Mart's market capitalization briefly reached over 300 billion yuan ($41.2 billion) this year, fueled by the viral success of its Labubu character, demonstrating the sector's potential for explosive growth when brands achieve cultural breakthrough.
Institutional Capital Targets Next Breakout Brand
Major investment firms are backing companies across collectibles subcategories, from trading cards to blind boxes. Besides Shanghun's fundraising, other notable deals include 52TOYS raising 144 million yuan ($19.8 million) from investors including Wanda Film, while TOPTOY, the collectibles brand under Miniso Group , secured strategic funding led by Temasek Holdings at a post-money valuation of approximately 10 billion Hong Kong dollars.
The investment thesis centers on replicating Pop Mart's success in different product categories. According to Zhuozhi Consulting data cited in 52TOYS' prospectus, China's top four IP toy companies by gross merchandise value in 2024 generated 8.72 billion yuan, 4.3 billion yuan, 930 million yuan, and 900 million yuan respectively, holding market shares of 11.5%, 5.7%, 1.2%, and 1.2%.
Trading cards offer particular appeal to investors due to their interactive gameplay elements compared to static collectibles. Industry sources note that card-based products provide multiple engagement mechanisms including trading card games similar to Magic: The Gathering, puzzle-style collections, and scarcity-driven collecting around sports cards.
Shanghun differentiates itself by partnering primarily with gaming companies for IP licensing, targeting adult consumers rather than children. According to a former employee, the company's "Identity V" card series generates the majority of its revenue, though like peers it remains heavily dependent on single IP partnerships.
Acquisition Wave Drives Industry Consolidation
Beyond venture funding, a merger wave is reshaping the collectibles landscape as public companies seek growth through acquisitions. Quantum-based education company QuantumCTek saw its stock surge 140% after acquiring Wakuku creator Letsvan in March 2025, while entertainment company Le Hua Entertainment gained 400% during June as its linked toy IP gained popularity.
B.Duck IP operator Semk Products International recently announced the acquisition of collectibles company HIDDEN WOOO alongside its interim results. According to HIDDEN WOOO's founder, the acquisition provides expanded funding for international expansion, with the buyer having been an existing investor since the company's early stages.
The consolidation reflects both the sector's growth potential and its operational challenges. Most collectibles companies rely heavily on licensed IP rather than developing proprietary characters, creating dependency on external content owners and limiting long-term value creation.
Strategic investors are particularly active, with companies possessing complementary assets like retail networks or content libraries seeking vertical integration. Wanda Film has already opened 175 specialty stores with 52TOYS across its cinema network, while Hengdian Group invested in trading card company Jika She to leverage its film and tourism IP resources.
Market Dynamics Challenge Sustainable Growth
Despite fundraising activity, the collectibles sector faces structural profitability challenges across its value chain. Retail channels including Nine Wood, operated by M&G Stationery, reported 1.406 billion yuan in revenue for 2024 but posted net losses of 12.44 million yuan.
Franchise operators report that existing partners have largely ceased new store openings due to margin pressure. According to industry sources, stores typically require 700,000 yuan in operating costs to generate 1 million yuan in revenue, yielding final profits of just 50,000-100,000 yuan after accounting for inventory management across 5,000+ SKUs.
The economics favor IP owners and manufacturers over retailers, particularly during viral product cycles when suppliers command premium pricing and allocation control. While successful IP launches drive foot traffic to multi-brand stores, the revenue benefit primarily flows to upstream partners rather than retail channels.
Companies are pursuing expansion strategies focused on market share capture rather than immediate profitability, with major chains like Ningbo Kule Chao Play Cultural and Creative operating over 300 locations across first and second-tier cities through franchise models with centralized management.
The funding surge reflects both the sector's demonstrated potential for breakout success and the increasingly competitive landscape as established players and new entrants battle for market position ahead of anticipated industry consolidation.