Xiaomi, the Chinese Internet-hardware unicorn, also known as the Chinese-Phoenix, recently disclosed plans to go public on the Hong Kong Stock Exchange. We diligently read this 600-page filing, and yes, we noticed more than 1,300 times text redacted in this massive filing. With Xiaomi’s valuation estimated at $100 billion, this filing is another watershed moment for China’s venture ecosystem and adds to the growing list of Chinese unicorns: Lu.com, the online and mobile financial services platform valued at around $60 billion; Didi, the ridesharing giant, valued at $80 billion; and Meituan- Dianping, provider of on-demand online services, valued at $30 billion. Boasting a combined valuation of $270 billion, all three companies plan to go public in the next twelve months.
Over the years, U.S. investors have generally characterized Chinese startups as clones of their U.S. counterparts. But, over the years, we have also learned how the fundamental differences in competitive dynamics, consumer demographics, technology adoption, and access to capital have led to the creation of value in the Chinese private markets. Over the past decade, we have seen a clear reversal in the wave of innovation. More Chinese startups are creating innovative solutions to solve local problems . And, Chinese private tech investors have accordingly stepped up their game. In fact, 2017 was a record year for the Chinese venture capital ecosystem. Chinese VC fundraising hit $50 billion mark in 2017, approaching U.S. levels. Traditional VC investors and corporate investment arms of Chinese tech stalwarts, Alibaba, Tencent, and Baidu poured an estimated $45 billion into Chinese startups last year. Most importantly, China produced more unicorns last year than any other nation, including the United States. According to data by CB Insights, China is now home to 60 private companies with a market cap above $1 billion compared to just a handful 5 years ago.
A quick look at the world’s top 10 unicorns further highlights China’s ascent to a world leader in innovation. Six of the top 10 unicorns hail from China and enjoy a combined market cap of more than $400 billion. The remaining four American unicorns are worth $150 billion. For the Chinese unicorns, the huge potential of the Chinese and Asian markets, where these companies are dominant players, combined with large investments from SoftBank and Tencent, has significantly boosted valuations in recent years.
The Chinese unicorns’ impressive haul of venture money also demonstrates the country’s growing clout. The four Chinese unicorns in Exhibit 3 have collectively raised more than $35 billion, most of it from SoftBank and Tencent though other Chinese companies have invested.
In addition, the Forbes Midas list, the publication’s annual compilation of the world’s top dealmakers and venture capitalists, features 16 Chinese nationals or people based in China, the country’s largest number ever on the list.
Xiaomi’s estimated IPO valuation is $100 billion, making it the largest IPO since Alibaba in 2014. (Recent media reports, however, suggest the company may have cut the IPO valuation to $70 billion to $80 billion.) Xiaomi’s IPO would dwarf all of the smaller IPOs over the past 12 to 24 months. The company started off in 2010 with a mere $150 million valuation, but it grew rapidly and became the world’s fourth largest smartphone supplier. Since 2014, Xiaomi’s valuation has more than doubled. With a market favorable for IPOs this year, it might be the right time for Xiaomi to go public.
Xiaomi boasts a global list of investors, including Accel, Qualcomm Ventures, DST Global and Green Bay Ventures. Combined, they have invested $3.45 billion into Xiaomi over the past 8 years, a sum greater than the amounts raised by all the unicorns that recently went public.
This article does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.
Securities referenced in this article may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.
Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.
SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.
Copyright SharesPost, Inc. 2020. All rights reserved.