Author: Guo Libo, Wei Wan and Wang Dandan
Source: cast in the net (ID:China-Venture)
1 key discovery and inspiration
XIAOMI success factors: extraordinary founder and team + innovative ecosystem model + first-class investment institutions.
Important investment institutions: Morningside Capital + QiMing Venture Partners + Shunwei Capital.
Four investment keywords: reformer (Morningside Capital) + Ecological Model (QiMing Venture Partners) + Business Synergy (Shun for Capital) + Industry leaders (DST, all-Star Investment).
XIAOMI completed a total of nine rounds of financing, with a total financing amount of 1.547 billion US dollars.
As of March 31, 2018, XIAOMI Group has established an ecosystem of more than 210 companies through investment and management, of which more than 90 companies are focused on developing smart hardware and consumer products. And four companies, including Zepp Health and Zimi Technology, have become unicorns valued at more than $1 billion.
XIAOMI's financing history can be called the most unicorn. Become a unicorn in 1 year and a super unicorn in 3 years (valued at more than $10 billion).
Compared with the current financing of some well-known unicorns of US $5-1 billion per round, Lei Jun adopts a small-step fast-running strategy for XIAOMI's financing, which is quite self-discipline and restraint. Lei Jun also held more than 30% of the shares, keeping control of the enterprise very well. This is in sharp contrast to the equity diversification caused by the rapid financing of the recently acquired unicorn. For entrepreneurs, it is very necessary to recognize the dual attributes of capital.
Lei Jun, as an entrepreneur and investor, jointly invested in CVC and IVC to build an ecosystem model. While setting up a super unicorn enterprise, he also created an excellent investment institution Shunwei capital. This efficient and dual identity is legendary in the entrepreneurial and investment circles.
XIAOMI went public at a good time. HKEx shares with different rights and domestic CDR gift package. No wonder Lei Jun sends out the feeling that his luck is not too bad.
VC can only get high returns if it discovers unicorns, such as a hundred times the return for Morningrise. If you fight for a unicorn in the later stage, you may have to pull out your teeth. XIAOMI's last round of investment institutions made a book return of just over 1 point in 4 years. XIAOMI's financing history has also sounded a wake-up call for investors.
2 Silicon Valley classic "unicorn" financing growth history
2.1 A brief history of XIAOMI's financing
XIAOMI submitted a prospectus to the Hong Kong Stock Exchange on May 3. A month later, in early June, with the official landing of the CDR system in the A-share market, XIAOMI immediately submitted an application for CDR issuance to the CSRC. According to the latest news, XIAOMI finally decided to distribute and implement the listing plan in Hong Kong and in China, that is, after listing in Hong Kong, he chose the opportunity to list in China by issuing CDR.
At the same time, the prospectus shows that the company has completed a total of nine rounds of financing since its inception. By systematically combing the previously released information and combining with the contents of the prospectus, this paper rearranges the main financing context since the establishment of XIAOMI. In order to more clearly analyze the purpose of each round of financing, and understand the overall strategic layout behind it.
Data show that with the steady growth of the company, XIAOMI basically maintains the rhythm of financing once a year, which on the one hand reflects the strong growth trend of the company, on the other hand, it also provides great support for the follow-up development layout of the company.
In April 2010, Lei Jun and his team founded XIAOMI. XIAOMI completed the first round of financing at the end of 2010, and the investors were Morningside Capital, QiMing Venture Partners, IDG and Shunwei Capital. XIAOMI in the start-up period, like all new companies, the main purpose of this round of financing is product development.
At the end of 2011, XIAOMI completed round B financing, when investors added Qualcomm Inc and Temasek in addition to the first round of participating institutions, and data show that, in addition to the above institutional investors, Yuri Milner, founder of the Russian investment company DST, also participated in this round of financing in his personal capacity. The successful listing of XIAOMI mobile phone received great market attention, but at the same time, it also brought certain challenges to the production capacity at that time, so expanding the production scale and purchasing spare parts became the main purpose of this round of financing. In addition, what deserves particular attention is the addition of Qualcomm Inc, the current round of investors. Qualcomm Inc is not only the main chip provider in the mobile phone field, but also XIAOMI's chip supplier, introducing Qualcomm Inc as its investor. it reflects XIAOMI's layout for the key areas in the upper reaches of the industrial chain.
At the end of June 2012, XIAOMI completed round C financing, which was led by DST, an international investment agency. At this time, the company was valued at US $4 billion. In only half a year, XIAOMI's valuation has quadrupled compared with the last time. During this period, XIAOMI's mobile phone has increased a variety of configurations and enriched user choices, and with the successful launch of the mobile phone, relevant peripheral products have also been launched gradually, greatly improving XIAOMI's brand recognition. at the same time, software and application products such as MIUI rice pomelo as well as Internet services have also received good market attention, so this round of financing XIAOMI is still standing on the basis of the company's core business. Excelsior for its main products.
In August 2013, XIAOMI completed a new round of financing, when XIAOMI's mobile phone position in the domestic market has become increasingly stable, while with the great success in the mobile phone field, XIAOMI gradually increased investment in hardware equipment, such as routers, mobile power supplies, portable WIFI, air purifiers, etc., and began to lay out the hardware system ecological chain.
At the end of 2014, XIAOMI announced the completion of the fifth round of financing, when the company's valuation was as high as 45 billion US dollars. The implementation of this round of financing plan, on the one hand, ensured XIAOMI's domestic investment in its systematic ecosystem enterprises; on the other hand, the introduction of international investment institutions also provided necessary support for XIAOMI's overseas strategic expansion plan. In that year, XIAOMI successfully entered the Indian market. And since then began its strategic layout of globalization.
2.2 calculation of return on investment rounds
Since XIAOMI submitted his listing application to the Hong Kong Stock Exchange on May 3 to the feedback of the CSRC on XIAOMI's CDR application document for initial public offering on June 14, XIAOMI's valuation has been a hot topic in the market. Multi-agency forecasts show that the generally accepted valuation range is between 70 billion and 100 billion US dollars, but recently, new economic stocks, including Ping An Healthcare And Technology, have fallen below the issue price quickly after listing, making the public generally have greater doubts about the reasonableness of the primary market valuation. Therefore, on the one hand, this paper will still combine the mainstream views in the market, on the other hand, it will partially adjust the valuation range with reference to the recent market performance of the stock market and the operating performance and expectations of the listed subjects. the paper returns of investment institutions are measured at three valuation points: $100 billion, $70 billion and $50 billion.
Through the calculation, it can be found that if the valuation of XIAOMI's listing reaches 100 billion US dollars, the return multiple of the investment institutions participating in round A will reach 400 times, and the return multiple of the investors in round B will also be as much as 100. although in the later stage, with the company's valuation several times higher, the corresponding multiple of return of the institution will also be greatly reduced, but it is still much higher than the general benefit level of the market. The return of the last round of investment institutions is still more than twice as high.
If the valuation of XIAOMI's listing reaches $70 billion, the return multiple of round An investors is about 280x, and the internal rate of return is slightly lower than the above return, but the final round of investment institutions can still get an internal rate of return of 14%. However, the most pessimistic estimate is that if XIAOMI's IPO is valued at US $50 billion, although round An investment institutions can still get 200 times the return and the internal rate of return can reach 103%, the last round of investors will not be very satisfactory because of their late entry and high valuation.
At the same time, XIAOMI's IPO prospectus revealed that its main investment institutions include Morningside Capital, QiMing Venture Partners, Shun Wei Capital, DST, all-Star Investment, etc., Morningside Capital holds about 17.19% of the total outstanding shares held by Apoletto, about 7.01% of the shares held by DST, QiMing Venture Partners holds about 3.98%, Shunwei Capital holds about 2.92%, and all-Star Investment holds about 1.24%. According to the shareholding, even at a valuation of $50 billion, Morningside will have a market capitalization of $8.595 billion, making it the biggest winner among institutional investors, followed by DST and QiMing Venture Partners.
In addition, due to XIAOMI's Internet company attribute, in view of the late listing path choice and institutional influence, the main beneficiaries of this capital feast are US dollar funds.
Morningside currently manages four US dollar funds and one RMB fund, with a capital size of about US $1.7 billion, with investors from internationally renowned sovereign funds, family funds, parent funds and university foundations.
Qiming Venture manages five US dollar funds and four RMB funds with total assets of US $2.7 billion, mainly focusing on Internet consumption, health care, information technology and clean environmental protection technology. most of the funds come from some family funds and parent funds. Such as Princeton University, Robert Wood Johnson Foundation, New York University, UK Rock Fund, Caimen Capital, Emerald Hill Fund, UTIMCO (University of Texas Fund Management Company), Mayo Clinic (Mayo Clinic), Dietrich Foundation (The Dietrich Foundation) and so on.
Shunwei Capital currently manages three US dollar funds totaling US $1.75 billion and two RMB funds of 2 billion yuan, focusing on the opportunities for change brought about by the Internet, mobile Internet, high-tech industries and the combination of the Internet with other industries. Investors also come from top international investment institutions such as sovereign funds, family funds, funds in funds and university foundations. DST, IDG, Qualcomm Inc, Temasek and GIC all have foreign investment background.
2.3 different rights of the same share
XIAOMI submitted the IPO application to the HKEx as a unicorn of the new economy. in addition to the extremely high valuation scale boosted by its multiple financing rounds, the equity structure of "different rights of the same share" has also attracted great attention because it is expected to become the first share listed on the HKEx since the implementation of the system. At the same time, through the system setting, Lei Jun still has absolute control over XIAOMI.
Different rights of the same share refers to the common stock structure which contains two or more different voting rights in the capital structure, as a corporate regulatory structure of "controlling the big by the small". This system means that individual shareholders enjoy voting rights or other related rights out of proportion to their economic interests in the company. this structure is conducive to the direct use of equity financing by growing enterprises, but at the same time can avoid equity over-dilution. Cause the founding team to lose the voice of the company, and ensure the stable development of such growing enterprises. According to the prospectus, XIAOMI's shares are divided into Class A shares and Class B shares. Holders of Class A shares can cast 10 votes per share, while Class B shares are entitled to 1 vote per share, while Class A shares are all held by the founders Lei Jun and Lin Bin. At the same time, Lei Jun also holds about 10.9% of the total shares of Class B shares, a total of 31.4% of the shares of the group, but has 55.7% of the voting rights. According to the voting entrustment agreement signed by other shareholders of the company and Lei Jun, Lei Jun, as the trustee, can actually control another 2.2% of the voting rights, a total of 57.9% of the voting rights of the issuer. Through reasonable equity arrangement, Lei Jun firmly controls the company in his own hands, which on the one hand benefits from Lei Jun's own investor identity, on the other hand, it is also the embodiment of Lei Jun's strong belief in steering the company as an entrepreneur.
On the other hand, mobike and OFO, which have developed rapidly in the same period, have completed several rounds of financing in just three or four years since their establishment, and are now valued at more than US $2 billion, which is also in line with today's public perception of unicorns. However, because the setting of the equity structure did not lock in the control of the founder, in the later stage, with the company's round of financing and the entry of multiple investment institutions, the founder's equity was gradually diluted until the final loss of the right to speak to the company. Mobike was acquired by Meituan in April 2018, and the founder team was out. In the existing equity structure system of OFO, although founder Dai Wei is still the largest shareholder. However, the combined shareholding ratio of DiDi Global Inc., Matrix Partners, Jin Shajiang and other institutions has far exceeded that of Dai Wei, and the founders have also lost absolute control of the company, and the demand for capital is difficult to ensure that the future development of the company can still be in line with the original aspirations of entrepreneurs.
Through the above analysis, we systematically sort out the main financing nodes since the establishment of XIAOMI, from which we can find that although XIAOMI has achieved great success and created a business miracle in just eight years, however, its development context has not broken away from the normal development rhythm of an enterprise. in the early days of the company, although XIAOMI obtained a considerable financing scale, the company has been focused on making products and making efforts in the core business. Until the industry position is stable, XIAOMI began to gradually increase the investment in the hardware system ecological chain, and gradually layout the XIAOMI ecological circle, the strategic layout is becoming increasingly clear. In addition, it can also be found that although the investment of capital can ensure the realization of the company's strategic goals, at the same time, it is very necessary for entrepreneurs to recognize the dual attributes of capital, which can provide key assistance for the growth of the company, but it may also bury hidden dangers for the future development of the company, resulting in the founder being elevated.
3 Analysis of XIAOMI's key investment institutions
3.1 Morningside Capital Liu Qin
Morningside Capital is one of the earliest early-stage venture capital institutions in China, focusing on health care, Internet, information services, media, software, communications, life technology and education. The fund managed by Morningside Capital is one of the earliest investors of XIAOMI. From the perspective of income, Morningside Capital will become the biggest capital winner after XIAOMI's listing. Morningside Capital emphasizes high-quality products, less investment, no more, subtraction, change, reformers, and pay attention to long-term and compound interest effects.
Liu Qin co-founded Morningside Capital in June 2007 and has been the managing director of the company. Liu Qin specializes in media, entertainment, consumer services, corporate services, artificial intelligence and Internet finance. She has more than 18 years of venture capital experience, and has successfully invested in YY, Phoenix New Media, XIAOMI, UC, Xunlei Ltd, Aiwu Jiyu, Juzhong Media, Kangsheng Creative and other companies. Liu Qin is currently a non-executive director of XIAOMI Group and a director of several major subsidiaries of XIAOMI.
Liu Qin and Lei Jun met as early as when Lei Jun worked in Jinshan Software. In 2010, Apple Inc launched iPhone4 and surpassed Microsoft Corp to become the world's most valuable technology company with a market capitalization of US $221.36 billion. 2010 is also the year of Android operating system, the market share of Android operating system is growing rapidly, and it has become the mobile operating system second only to Symbian. The evolution of UC browser from a single browser to an ecosystem also provided inspiration for the birth of XIAOMI. In 2010, Lei Jun put forward to Liu Qin the idea of building a new mobile phone company from scratch. Lei Jun put forward the idea of developing affordable and high-quality technology products in Lei Jun's geek spirit, and bet on the future of smartphones. and the construction of the ecosystem model has also been recognized by Liu Qin, Morningxing Capital has become XIAOMI's founding investment institution and round A, round B important investment institutions.
3.2 QiMing Venture Partners Kuang Ziping
QiMing Venture Partners focuses on investing in early and growing outstanding enterprises in Internet consumption, health care, information technology and clean environmental protection technology. So far, Qiming has invested in more than 210 enterprises, and successful cases include XIAOMI, Dianping, Meitu, Bilibili Inc. on-screen comments, Tigermed and mobike. By establishing a detailed investment structure and conducting in-depth industry analysis, QiMing Venture Partners invests in teams that have the courage to fight in the market, have reasonable planning and have the strength of execution. XIAOMI's founder Lei Jun and his seven co-founders (Hong Feng, Li Wanqiang, Lin Bin, Liu de, Wang Chuan, Huang Jiangji and Zhou Guangping) not only have successful entrepreneurial and technology business management experience And with the technical experience of Microsoft Corp, Alphabet Inc-CL C, Motorola and other enterprises in software and hardware, investing in XIAOMI is in line with QiMing Venture Partners's investment strategy. In terms of return on investment, QiMing Venture Partners has always occupied the leading position in China's venture capital industry.
Kuang Ziping is the founding managing partner of QiMing Venture Partners. Before founding Qiming, Mr. Kuang Ziping was the China Director of Intel Corp Investment Department. His companies include: Lanshun Technology, Toubao, Douding Network, Qiniu Information Technology, Yunzhisheng, Xiao Ant Technology, Yataili Automation, face++, must be selected. By analyzing the overall development trend of global smartphones and domestic and foreign competitors at that time, Kuang Ziping believes that China's mobile phone market still needs subverters like XIAOMI. In addition, Lei Jun's personality charm and his all-star core team's industry understanding, execution and feelings for the Internet industry are the core factors of investing in XIAOMI.
3.3 Shunwei Capital Xu Dalai
Shunwei Capital was founded in 2011, focusing on mobile Internet and smart hardware. Lei Jun is the founder of Shun Wei Capital and XIAOMI. XIAOMI's investment is mainly driven by strategic value. Shunwei Capital mainly pursues financial returns. Shunwei and Xiaomi will jointly invest in projects with both financial investment value and strategic investment value. There is a very close cooperation between Shun Wei Capital and XIAOMI eco-chain investment team, especially in the field of smart hardware, jointly completed the investment layout of XIAOMI eco-chain enterprises such as 1MORE, Zepp Health, Zimi, MISFIT and so on. However, in areas where there is no business coordination with XIAOMI, such as new real estate services, Shun Wei Capital has also independently made financial investments in projects such as urban youth apartments and YOU+ international youth communities.
Lei Jun is the founding partner and chairman of Shunwei Capital and a well-known entrepreneur and angel investor in China's IT industry. Lei Jun founded XIAOMI Technology in 2010, XIAOMI Technology Chairman and CEO, and also served as Chairman of Kingsoft, YY, Cheetah and other three listed companies. To a certain extent, Shunwei capital can also be regarded as the institutionalization of Lei Jun's personal angel investment.
Xu Da has been the co-founder and CEO of Shunwei Capital since April 2011. Xu Dalai's investment areas cover high-tech and Internet, manufacturing, retail and consumer, and logistics industries. Representative investment projects include XIAOMI Technology, Kingsoft and so on. Xu Dalai is currently a non-executive director of XIAOMI Group and a director of a number of XIAOMI subsidiaries. Prior to co-founding Shun Wei Capital, he held management positions in a number of internationally renowned institutions such as C.V. Starr, Singapore Government Direct Investment Corporation (GIC), American International Group (AIG) and Deutsche Bank. Among them, GIC is also one of the important investment institutions of XIAOMI E round. Xu Da also served as a director of Kingsoft from August 2006 to May 2008.
3.4 DST Yuri Milner
Russia's Digital Sky Technologies Limited (DST) was founded by Yuri Milner in 2009 to make minority investments in the most important and fast-growing Internet companies.
DST is one of the world's leading technology investors, and its portfolio includes some of the world's most famous Internet companies, such as Facebook Inc, Twitter, WhatsApp, Snapchat, Airbnb, Spotify, BABA, XIAOMI, Flipkart and so on. The company pioneered a model that provides liquidity to founders, employees and early investors through a mix of primary and secondary transactions. DST focuses on late-stage investments, focusing on companies with a valuation of more than $1 billion, especially those that are already profitable and are about to grow, or have a high threshold and a large user base, and profits can be delayed. XIAOMI will obviously become a leader in the field of low-cost smartphones and their biosphere, with listing potential and long-term sustainability, which meets DST's criteria for selecting invested companies.
3.5 all-Star Investment Fund Ji Weidong
Established in April 2014, the all-Star Investment Fund, whose actual controller and managing partners are Ji Weidong and Fu Mingxia, is a hybrid fund focused on Internet and consumer brands in Greater China. All-star investment funds expect excellent long-term returns by investing in category leaders and category killers who have strong barriers to competition in the industry.
Ji Weidong is the co-founder and chief investment officer of the all-Star Investment Fund. He was the managing director of Morgan Stanley and the head of investment research for the media and Internet industry in the Asia-Pacific region. Ji Weidong has participated in the listing of more than a dozen companies, including BABA, Tencent, Dangdang, perfect time and Space, Shanda, Renren Inc, Xueershi, YY.com, Phoenix New Media and MakeMyTrip. XIAOMI's deal is a major milestone for Ji Weidong, marking the initial success of Ji Weidong's shift of focus to the choice of investors in late-stage start-ups such as XIAOMI. XIAOMI was already valued at US $45 billion during the E round of financing, and XIAOMI investor Lei Jun said publicly in 2014 that XIAOMI would not be listed for five years, so some investment institutions were cautious about this valuation and exit method. The investment model of the all-star investment fund was pioneered by Tiger Global Management, a hedge fund of Chase Coleman, which provides funds to technology companies that are too big to raise money through traditional venture capital and to technology companies that are cautious about listing through IPO.
To sum up, after entering the early investment stage of round An and B, XIAOMI Morningside Capital and QiMing Venture Partners will become the biggest capital winners after XIAOMI IPO. Morningside's in-depth excavation of industry reformers and paying attention to long-term and compound interest effect are important factors for its success; QiMing Venture Partners has a discerning eye. In XIAOMI's early stage, he saw the embryonic form of the ecosystem model from his software and hardware layout, which also laid the foundation for later returns. Shun Wei Capital gives full play to the synergistic effect of IVC on XIAOMI. The early entry into XIAOMI is not only to obtain financial returns, but also to provide strong capital backing for the growth of the enterprise. And the late entry of DST will also get the corresponding exit return after XIAOMI IPO.
4 Analysis of the investment and financing situation of XIAOMI ecosystem
4.1 XIAOMI's layout of enterprises in the ecological circle
XIAOMI's "Triathlon" business model consists of three collaborative pillars: innovative, high-quality, well-designed hardware focused on superior user experience, efficient new retail that can sell products at generous prices, and rich Internet services. As of March 31, 2018, XIAOMI Group has established an ecosystem of more than 210 companies through investment and management, of which more than 90 companies are focused on developing smart hardware and consumer products. And four companies, including Zepp Health and Zimi Technology, have become unicorns valued at more than $1 billion. Power Future, the parent company of Qingmi Technology, whose main products are power converters and USB data lines, launched its new third board in August 2016. In December 2016, Kairun shares, the parent company of Runmi Technology, landed on the gem. Zepp Health listed on the New York Stock Exchange (NYSE) at a valuation of $560 million in February. Zepp Health was established in January 2014, the main products XIAOMI brand smart bracelet and smart scale, independent brand AMAZFIT series smart bracelet and smartwatch, is the world's largest shipper of smart bracelet.
Take Zepp Health, a typical company in XIAOMI's ecosystem, as an example. Anhui Zepp Health is a technology company specializing in wearables, with representative products such as XIAOMI bracelet, XIAOMI bracelet 2, Huami watches and so on. Zepp Health received round A financing provided by XIAOMI Technology and Shunwei Capital in January 2014, and US $35 million in round B financing provided by Shunwei Capital, Sequoia Capital, Banyan Capital and Morningside Capital in December of the same year.
Zimi Electronics also reflects the typical characteristics of investment and financing in XIAOMI's ecosystem. Zimi Electronics was founded in February 2012, is a mobile phone accessories and consumer electronics company, products related to mobile power supply, Bluetooth speakers, wireless routers, etc., its products include XIAOMI mobile power supply and so on. Zimi Electronics received round A financing for Capital and XIAOMI Technology in August 2014, while round B financing of tens of millions of US dollars was completed in February 2015, with investors including GGV Capital GGV and round An investor XIAOMI Technology. In addition, Zimi Electronics has also invested in other enterprises in conjunction with XIAOMI Technology from a strategic layout point of view, such as providing angel investment to Energy Monster, an intelligent sharing company, in April 2017. The investors in Energy Monster's tens of millions of RMB angel round financing are Shunwei Capital, XIAOMI Technology, Zimi Technology, Qingliu Capital and Hillhouse Capital. This financing also means that XIAOMI will share portable battery into his ecosystem.
The investors in XIAOMI ecosystem are mainly composed of XIAOMI Company and Shunwei Capital. In most cases, XIAOMI and Shunwei invest in a company and enter under the same conditions in the same round in order to reduce conflicts of interest. XIAOMI CVC investment is mainly strategic value-driven, through brand marketing, technology research and development, channel layout supply chain management and other aspects to improve the ecological layout, Shun for capital as IVC mainly pursues financial returns, some projects have both values. Shunwei Capital has worked with XIAOMI on a large number of eco-chain projects based on smart hardware, such as Zimi (XIAOMI Mobile Power supply), Huami (XIAOMI bracelet), Zhimi (air purifier) and plus Lianchuang (XIAOMI headphones). Most of the other investors in XIAOMI's ecosystem have also appeared on XIAOMI's investor list, including Morningside Capital, GIC and GGV Capital GGV, which Tong Shihao later joined.
Behind most of XIAOMI's ecological circle, there is a shun-for-capital investment layout. XIAOMI started the ecological chain project at the end of 2013. Since then, the investment volume and amount of XIAOMI and Shunwei Capital began to increase rapidly. Intelligent hardware ranks first in the investment field of XIAOMI and Shun Wei Capital. From a strategic point of view, the intelligent hardware products of invested enterprises such as Zimi and 1MORE can expand XIAOMI's industrial chain, increase XIAOMI's sales, build an intelligent hardware ecological chain and the layout of cultural entertainment and corporate services, forming a sizeable intelligent Internet of things closed loop, and can also bring rich financial investment returns for Shun for capital. The accelerated layout of Internet finance in recent years is not only a popular investment track, but also can feed XIAOMI's new retail field, providing financial support for the development of the entire ecological chain.
According to the statistical investment data, XIAOMI Company made a total of 164investments, of which round An accounted for the largest proportion, and 97 rounds of round An accounted for 59% of the total investment. Round B and Angel Wheel are also the key investment areas of XIAOMI, with 28 and 22 investments respectively. The main investment rounds of Shunwei Capital are also concentrated in Angel Wheel and An and B rounds.
XIAOMI's investment in biosphere enterprises is mainly concentrated in hardware, culture and entertainment, corporate services, local life, finance and other fields. In terms of the amount of investment, hardware, culture and entertainment and enterprise services are the main areas of investment. In terms of investment, culture and entertainment accounted for the largest amount of investment, reaching 7.51 billion yuan, followed by local life (5.97 billion yuan) and hardware (4.24 billion yuan). The products in the first three investment areas of the ecosystem can achieve interconnection, which will help to improve the user experience, and further improve the share of XIAOMI's consumer products and the degree of user dependence.
XIAOMI's investment in the ecosystem has increased significantly since 2012, with the number of investment enterprises growing from 2 in 2012 to 43 in 2017, with a compound annual growth rate of 176 per cent. In 2014, XIAOMI won China's annual sales champion for the first time with 60.8 million mobile phones, with a market share of 14.97%. 2014 and 2015 are not only two years of rapid development of XIAOMI, but also two years of XIAOMI's substantial expansion of the ecosystem through investment, with investments as high as 10.22 billion yuan and 9.85 billion yuan respectively. Since then, XIAOMI's investment in the ecosystem has gradually stabilized.
The release of the first mobile phone product in 2011 enabled XIAOMI to achieve a breakthrough from 0 to 1, while the ecological model built at the end of 2013 enabled XIAOMI to achieve a leap from 1 to N. the layout of hardware, new retail and Internet services Triathlon has changed the traditional mobile phone manufacturers' hardware cost pricing model. In addition, Shun Wei Capital and XIAOMI lay out the ecological chain from the perspective of IVC and CVC at the same time, which not only provides financial support for a large number of excellent Internet companies, but also provides strategic support in brand, supply chain and technology for these enterprises to grow into unicorns.
4.2 Shunwei Capital: institutionalization of Lei Jun Angel Investment
Shunwei Capital, as a young investment institution that "conforms to the trend", not only lays out XIAOMI's ecological circle in the field of financial investment, but also embodies the institutionalization of Lei Jun's angel investment. Lei Jun, as a well-known angel investor in the IT industry, invested in Lakala, UC browser, Street Network, good Doctor online and other Internet enterprises before the establishment of Shunwei Capital in 2011. In 2011, Lei Jun and Xu Dalai were optimistic about the rise of China's local investment funds, complying with the trend and creating compliant capital to better understand China's national conditions and entrepreneurs. Shunwei Capital has been pinning high hopes since its inception, and the first phase of its RMB fund LP can be said to be star-studded, including Taikang Life Insurance Chairman Chen Dongsheng, New Hope Group Chairman Liu Yonghao, Yunfeng Fund founder Yu Feng, Cheetah Mobile Inc CEO Fu Sheng and others, Tsinghua University, Midea's company, as well as the Guochuang Yuan he Mother Fund, Zeng Yu at the helm and Yu Shengwei Fund, which were invested by CIC and Ren Zhengfei.
From the statistics of the 125 investments of XIAOMI Capital, it can also be seen that the investment institution with the largest number of co-investments in the same round as Shunwei Capital is Shunwei Capital, with a total of 64 joint investments, accounting for 51%. This shows the high synergy effect of Shunwei Capital and Shunwei Capital.
According to statistics, Shunwei Capital has invested a total of 287 times since its establishment in 2011. More than half of Shunwei Capital's investment is concentrated in round A, with a total of 157 round investments; round B is also an important round of investment for shun capital, with a total of 72 investments, accounting for 25%; and Shunwei Capital also retains Lei Jun's angel investment preference to a certain extent. A total of 39 angel round investments, accounting for 14%.
Shun Wei Capital and XIAOMI Company have a high degree of synergy. In terms of the amount of investment, they are mainly concentrated in hardware, enterprise services and e-commerce, and hardware and enterprise services are also located in the top three areas of XIAOMI investment. In terms of the amount of investment, enterprise services, education and automobile transportation ranked in the top three with 7.89 billion yuan, 6.07 billion yuan and 4.59 billion yuan respectively. The typical investment cases of Shunwei Capital in the ecosystem of enterprise services are: Zepp Health, Zimi, Magic Acoustics and so on.
From 2011 to May 2018, the cumulative investment of Shunwei Capital reached 295. In 2014, the pace of Shunwei capital investment accelerated, and the number of investment increased significantly. From 2011 to 2017, the compound annual growth rate of Shunwei capital investment was 41%, and the investment amount reached 43.87 billion yuan. In 2018, Shunwei Capital has accelerated the capital layout, and the amount of investment has reached 11.19 billion yuan as of May.
At the same time, a typical example of success in entrepreneurship and investment is Peter Thiel of Silicon Valley. Peter Thiel, the co-founder of PayPal Holdings Inc, earned $55 million for a 3.7 per cent stake when eBay bought PayPal Holdings Inc in 2002. Since then, he has focused on the social networking sector that many thought was frothy at the time, providing $100000 in investment for LinkedIn. In 2005, Peter Thiel invested $500000 in Facebook Inc, then valued at $4.9 million, with a stake of 10.2 per cent, which was diluted to about 3 per cent with Facebook Inc's subsequent rounds of financing. Based on Facebook Inc's 2011 IPO valuation of $100 billion, Peter Thiel's shares are worth about $3 billion, a return of more than 6000 times. In 2005, Peter Thiel founded Fengdes Venture Capital (Founders Fund) and successfully invested in a series of transformational start-ups founded by other members of the PayPal Holdings Inc gang (PayPal Holdings Inc Mafia), including YouTube, photo-sharing software company Slide, user review site Yelp, PalantirTechnologie, which searches for terrorist and financial fraud software, rocket manufacturing company SpaceX, electric car company Tesla Motors, and shared accommodation platform Airbnb and shared travel company Lyft. Established its reputation in Silicon Valley entrepreneurial and investment circles. To some extent, the development trajectory of Shunwei Capital is similar to that of Founders Fund, which is an investment fund established by successful entrepreneurs, which provides a key boost for transformational startups to grow into unicorns while pursuing financial returns.
Excellent investment institutions always have certain similarities. Fengdes Venture Capital, under the leadership of Peter Thiel, has provided sufficient financial ammunition for the growth of super unicorns in the United States. on the other hand, Shunwei Capital has carried out capital transfusions for enterprises in XIAOMI's ecosystem to grow into unicorns beyond the C round of "life and death". As a successful entrepreneur, Peter Thiel shifted his focus to the field of venture capital after starting a successful business, while Lei Jun chose to lead Jinshan to start a business again after a successful listing and created XIAOMI. And let the individual angel investment institutional products into capital as IVC to provide capital support for the XIAOMI ecosystem. Shun Wei Capital not only achieved XIAOMI in the field of financial investment, but also played a synergistic role in promoting the growth of XIAOMI start-up enterprises in the ecosystem.
5 experiences and lessons of unicorn investment
Judging from XIAOMI's super unicorn growth history, start-ups that create new markets and subvert traditional markets from scratch are breaking existing industrial boundaries and gaining strategic advantage in the blue ocean market. Investment institutions, as behind-the-scenes heroes, have played an important role in the growth of these unicorns.
For start-ups in industries such as TMT, because of their different profits and business models from traditional industries, and may go through multiple rounds of financing, the founding team should keep a clear understanding of the dual attributes of capital, gradually increase the strategic layout of collaborative business on the basis of tamping the core business, and lock in corporate control through reasonable equity structure settings to avoid equity over-dilution.
When the unicorn concept was first proposed in 2013, there were fewer than 40 unicorns valued at more than $1 billion in the world, but by 2017 there were 252 unicorns worldwide. This should be attributed to the great changes brought about by the scientific and technological revolution. The traditional economy is growing in a straight line, while the current era of the digital economy is explosive exponential growth. although there is a bubble in the valuation of unicorns, there is nothing wrong with the logic of growth. There are still plenty of investment opportunities for unicorns.
Unicorns are not scourges and have great investment value, but unicorns are no different from other investment targets, just like investing in stocks, investment is risky and must be cautious.Judging from XIAOMI's financing history and the returns of investment institutions, the timing of investment is very important. There is no shortage of unicorn investors in society, but what is really lacking is the discoverers and breeders of unicorns. And this is the key to a high return on investing in unicorns.