(Yicai Global) Dec. 9 -- Taojiji, a startup Chinese e-commerce platform that has struggled to pay vendors, has gone bankrupt after burning through money to build a customer base, according to a person familiar with the matter.

Taojiji declared bankruptcy after a restructuring plan fell through, founder Zhang Zhengping told employees in a letter yesterday. The Shanghai-based company used its accounts payable for marketing and customer acquisition, the insider told Yicai Global.

The firm fell down the familiar rabbit hole of Chinese tech startups that burn through cash in a bid to grow quickly. Founded a bit more than a year ago, Taojiji's strategy was akin to that of Pinduoduo, investing heavily to lure buyers in third and fourth-tier cities. It had 40 million active monthly users within the first nine months.

Sellers from all over the country have converged on Taojiji's headquarters to demand payment, and they are ready to fight a protracted battle, a merchant from Wenzhou told Yicai Global. In October, the troubled firm reached a deal with vendors to reimburse them in installments or make them shareholders and partners.

The company's accounts are frozen so November wages and social insurance contributions have not been paid, Zhang's letter said, adding that the firm will set up a team to deal with contract terminations.

Signs of a downturn started to show when the firm's latest funding round, which started in June, received no interest, followed by waning sales. In October 2018, Taojiji secured USD42 million in its first round of financing. 

Editor: Emmi Laine