Douyu, the live-streaming service backed by Tencent Holdings Ltd. that’s been compared to Amazon’s Twitch, is in talks to raise a billion yuan in funds at a valuation of about $1.2 billion, according to a person familiar with the matter. The three-year-old company, whose name means “fighting fish,” needs capital to expand beyond games-streaming and fend off rivals, the person said, asking not to be named discussing a private deal.