HONG KONG (Reuters) - Luckin Coffee, an up-and-coming coffee chain with ambitions to challenge Starbucks Corp SBUX.O in China, is targeting a valuation of $1.5 billion to $2 billion as it launches a new round of funding, people familiar with the matter told Reuters.

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The fundraising comes as Luckin expands at breakneck speed across China. The firm only officially launched in January and yet has already opened over 1,400 cafes in 21 cities under a supercharged growth plan based on cheap delivery and online ordering.

It has financed its expansion with funding from investors including Singapore sovereign wealth fund GIC Pte Ltd [GIC.UL]. In July, Luckin said it closed a $200 million investment round bringing its valuation to $1 billion. That made it one of the fastest companies in China to reach unicorn status.

In the new round of talks with prospective investors, Luckin plans to raise $200 million to $300 million in fresh equity, said one of the people familiar with the matter, who all declined to be identified as the information was not public.

As the deal terms are still subject to change, the amount could fall within the $100 million to $200 million range, said a second person.

Luckin has also begun early-stage discussion with investment banks regarding an overseas initial public offering (IPO), most likely in Hong Kong or New York, two of the people said.

Luckin declined to comment on financing or IPO plans.

The coffee chain and its investors aim to challenge the dominance of Starbucks, which has over 3,400 stores in China - its second-biggest market after the United States. In some media, Luckin has touted itself as China’s home-grown answer to its world-famous rival.

The firm has distinguished itself with aggressive marketing, an emphasis on delivery and a tech-centric purchasing experience. For instance, customers must place orders using Luckin’s app, through which they can then view a livestream of their coffee being made.

In May, Starbucks said it aimed to roughly double its China store count to 6,000 by 2022. In August, it announced a coffee delivery partnership with e-commerce firm Alibaba Group Holdings Ltd BABA.N.

The following month, Luckin revealed it had formed its own partnership with Alibaba's tech rival Tencent Holdings Ltd 0700.HK.