Starting Xiaomi Ecological Chain： 8 years of investment of 500+, nearly 30 successful listings, and many queued IPOs.
Text |VCPE Reference Li Zixuan Zhou Jianyu
Editor | Li Youran
The tree attracts the wind, and the ecological chain laid out by Xiaomi for many years is controversial.
Recently, there are rumors in the market that the eco-IPO policy represented by Xiaomi has changed significantly. "At present, the projects involving Xiaomi’s industrial chain under review in science and technology innovation board and GEM have been investigated, and the IPO policy concerning Xiaomi’s industrial chain is limited."
In response, the CSRC responded on March 29th, saying, "I will pay attention to some articles about the significant changes in the IPO policy of Xiaomi’s industrial chain from the media. In this regard, we made it clear that we did not introduce IPO restrictive policies for enterprises related to Xiaomi industrial chain, nor did we carry out special investigations. "
Subsequently, Xiaomi also responded to this matter in its official Weibo, saying that "recently, a large number of distorted, fabricated and unfounded false rumors have been published by the media against our eco-chain and related investment business", and said that a lawsuit has been filed against it and a trial will be held in the near future.
Xiaomi has carefully laid out the ecological chain for eight years. Is the IPO of related companies blocked because of Xiaomi? Will the ecological chain layout touch the regulatory red line?
VCPE Reference (ID:vcpecankao) tries to find the answer through Xiaomi’s investment layout, its impact on the invested enterprises and the opinions of professionals.
01 We have invested more than 500 companies in 8 years, and our manufacturing is a good idea.
Xiaomi has been laid out for 8 years, and with the business adjustment in each period, a huge industrial ecological chain has been built.
At the end of 2013, Xiaomi started the "Eco-chain Investment Plan". According to the enterprise investigation, Xiaomi carries out ecological chain layout through three platforms, one of which is direct investment through Xiaomi and its Hanxing Venture Capital Co., Ltd.; The second is indirect investment through two private equity institutions wholly owned by Xiaomi-Tianjin Jinxing Venture Capital Co., Ltd. and Xiaomi Private Equity Fund Management Co., Ltd.; Thirdly, the investment is made through Xiaomi Changjiang Industrial Fund jointly initiated by Xiaomi and Hubei Changjiang Economic Belt Industrial Guidance Fund Partnership (Limited Partnership).
As for Shunwei Capital, which is often mentioned by the outside world, it is more like a financial return-oriented institution established by Lei Jun for his angel investment dream. Only when encountering a project with strategic value, the investment department of Xiaomi Group will join hands with Shun.
It is worth noting that Xiaomi’s different investment platforms have different emphases, which also shows that Xiaomi will adjust the investment layout according to business expansion in different periods.
In the early days, Xiaomi’s strategy focused on using mobile phones as Internet terminals to connect the needs of all parties. From this, we can see that the most invested areas at that time were cultural media, hardware and enterprise services.
Around 2013, Lei Jun saw the popularity of intelligent hardware, and intelligent life products became its more concerned subdivision track, such as Roborock (688169.SH), a sweeping robot manufacturer, and Zimi, an intelligent hardware manufacturer acquired by Xiaomi.
Since then, Xiaomi has invested in companies such as Iqiyi (IQ.US), Fun Headline (QTT.US) and Jinshan Cloud (KC.US) in cultural media and corporate services.
Hundreds of rivers end up in the sea, and several major investment sectors complement each other. Unconsciously, Xiaomi has woven a large and comprehensive investment ecological network.
According to the statistics of business cards, Xiaomi has made a total of 521 investments, involving 17 fields. Among them, the top three investment times were manufacturing, hardware and cultural media, with 94, 76 and 59 investment events respectively, accounting for about 18%, 15% and 11%.
Among them, in addition to the investment department of Xiaomi Group, the Xiaomi Changjiang Industrial Fund has the highest frequency at present, with a total of 123 investments in five years, mainly focusing on semiconductor, hard technology and other related fields, such as Weilan New Energy, a solid-state lithium battery developer, and Zonghui Xinguang, a photoelectric semiconductor developer, Sagitar Juchuang, a multi-line laser radar developer, and Black Sesame Intelligent, an autonomous driving computing chip.
In addition, Xiaomi Private Equity Fund, which was established less than one year ago, contributed 10 investments. With Xiaomi’s ambition to build a car, it invested in automobile-related enterprises such as Zhilu chilye, a new energy vehicle parts provider, Aitek Automotive Electronics, a high-end controller chip developer, Qixin Micro Semiconductor, and Internet of Things technology-related enterprises such as Youzhilian Technology and Jiangyan Intelligent.
However, as an Internet company with mobile phone, intelligent hardware and IoT platform as its core, Xiaomi’s investment field is slightly extensive, but its layout is still perpendicular to its main business field.
In terms of investment rounds, Xiaomi entered the market earlier, mostly in Angel Round, A Round and B Round, with 121, 86 and 61 investment times respectively, accounting for 23%, 17% and 12%. This may be related to "Lei Jun has a hobby of angel investment".
In general, Xiaomi’s seemingly complicated investment ecological chain actually has a clear strategic layout. Xiaomi has its own logic on how to divide the control and investment details in the main line.
02Nearly 30 companies went public, and many companies entered the countdown to listing.
According to incomplete statistics, at least 30 of the eco-chain enterprises invested by Xiaomi have successfully listed, and most of their businesses are distributed in the fields of intelligent hardware and advanced manufacturing, and a few are financial and entertainment companies, which are coordinated with the business layout of Xiaomi’s hardware, finance and Internet.
However, the stock prices of these companies after listing show a picture of ice and fire at home and abroad.
Perhaps influenced by geopolitics, listed companies in US and Hong Kong stocks have experienced different degrees of decline. As of the close of March 31st, the share price of ZEPP.US was 2.87 USD/share. When it was first listed, its issue price was 11 USD/share. VIOT.US also dropped from the issue price of $9/share to $1.85/share; PINTEC titanium (PT.US) even dropped from the issue price of $11.88/share to $0.59/share.
The poor stock price performance of listed companies in the ecological chain has also affected Xiaomi’s finance.
Previously, science and technology innovation board Daily quoted Luo Pan, a teacher in the financial field, as saying, "In recent years, the market value has been sharply adjusted back, which has seriously affected the fair value and further reduced the profit of Xiaomi".
According to Xiaomi’s latest financial report, by the end of 2021, Xiaomi had invested 390 foreign companies, while at the end of 2020, this figure was still 310, and at the end of 2019, it was 290. Despite the increasing number of foreign investments, the fair value of Xiaomi Group’s investment at fair value through profit or loss in 2021 was 8.132 billion yuan, a decrease of 38.3% compared with 13.2 billion yuan in 2020.
However, most companies listed in China have gratifying market performance. For example, as of the close of March 31st, the share price of No.9 Robot (689009.SH) doubled after its listing in science and technology innovation board, from the issue price of 18.94 yuan/share to 44.10 yuan/share; Lihexing (301013.SZ), listed on the Growth Enterprise Market, had an issue price of 8.72 yuan/share at the time of listing, and now it has risen to 18.9 yuan/share.
In addition, a number of Xiaomi Eco-chain companies are queuing up for IPOs in science and technology innovation board and Growth Enterprise Market, and many of them are only a short walk away from listing.
Weijie Chuangxin (688153.SH) has officially launched science and technology innovation board IPO subscription; The initial inquiry time of Fengxiu Technology (688279.SH) is April 6th.
In addition, Sitway (Shanghai) Electronic Technology Co., Ltd. also entered the countdown to listing. On March 29th, official website, the China Securities Regulatory Commission, approved that it would register the initial public offering of shares with Tewei science and technology innovation board in accordance with legal procedures.
Among the companies that have not yet been listed, there are also many star companies that Weilan New Energy, Weizhao Semiconductor, Aibi Intelligent, and Newlink are betting on.
Among them, Weilan New Energy, a developer of solid-state lithium batteries, has frequently received hundreds of millions of large-scale financing in recent years. The investors behind it include well-known enterprises such as Huawei, Weilai and Geely, and the latest valuation has reached 15 billion yuan. In addition, after the completion of the C round of financing in September last year, the valuation of Black Sesame Intelligence also reached nearly 2 billion US dollars (about 12.7 billion yuan). Newlink, an energy digital open platform, reported the news of listing in Hong Kong at the beginning of the year.
03How to hedge the layout ecological chain?
By combing the IPO situation of enterprises in the Xiaomi ecological chain, VCPE Reference (ID:vcpecankao) found that since 2018, companies have succeeded in IPO almost every year, but there are also cases where the listing is not so smooth.
Fun Sleep Technology passed the IPO review in 2021 and submitted for registration, and was inquired twice by the CSRC at the end of 2021 and the end of January 2022 respectively.
In an inquiry letter, the CSRC asked Fun Sleep Technology to explain "the reason why Xiaomi has always been the main sales channel, and the efforts to expand third-party online platforms and unrelated sales channels are relatively small, and whether there are related obstacles".
Subsequently, the CSRC sent a second inquiry, pointing out that "the company takes Xiaomi e-commerce platform as its main sales channel", asking the issuer to explain "whether there are any special treatment or preferential treatment in Xiaomi platform sales, promotion, rebate, etc." and it is necessary to "compare and analyze whether there are differences in the sales policies of the company on the main e-commerce sales platforms".
Then, is [eco-chain company terminating IPO] really related to [Xiaomi’s large-scale layout of eco-chain]?
Industry insiders told VCPE Reference (ID:vcpecankao), "The core of the’ independence’ problem in this case lies in the’ big customer’, that is, whether the order number of Xiaomi, a big customer, accounts for too much in the total transaction volume of the IPO reporting company. Faced with the question of’ independence’, the company should explain clearly the rationality of excessive customer concentration, the sustainability of the transaction and its own hematopoietic capacity. "
Another senior investment banker, Wang Jiyue, told VCPE Reference (ID:vcpecankao) that "the failure of IPO was caused by Xiaomi" was just the rhetoric of the defendant media.
In this case, under what circumstances will large companies cause the IPO of eco-chain related companies to be blocked?
Wang Jiyue believes that the crux of the problem lies in "whether the business volume brought by industrial linkage is sustainable, whether it is only to help the listing to rush performance, and how much impact it has on the industry." If before the IPO, the enterprise can fully disclose the financial data, put the risk warning in place and sort out the solutions clearly, this will not necessarily become a problem. 」
Song Qinghui, a famous economist, told VCPE Reference (ID:vcpecankao) that at the external public opinion level, as long as there is no major public opinion, it will generally not cause the IPO of Xiaomi Eco-chain related companies to be blocked; If the public opinion is out of control, it will not only affect IPO pricing, meeting and other procedures, but even lead to IPO "abortion."
With the fermentation of public opinion, there are rumors in the market that Xiaomi will touch the red line of antitrust.
In this regard, Wang Jiyue believes that "whether it violates the Anti-Monopoly Law depends on whether the core enterprises that lay out the ecological chain have a dominant market position. Xiaomi’s ecological chain layout is only an investment, not a holding type, and it is not exclusive, so it generally does not involve the Anti-Monopoly Law".
As for the "disorderly expansion" that makes people talk about it, Song Qinghui said: "The disorderly expansion of capital means that capital alienation makes capital deviate from its established track, causing great risks to economic and social levels and even endangering the stability of the overall situation."
Wang Jiyue believes that "the layout of Xiaomi ecological chain belongs to normal industrial linkage".
Finally, Song Qinghui emphasized that "the mass reaction triggered by one incident is actually revealing the hidden truth of society, which is worth pondering. The reason why Xiaomi sued a media for spreading rumors that Xiaomi’s eco-chain enterprises are restricted by IPO policy is mainly because the disorderly expansion of capital in recent years has endangered national security and the bottom of people’s lives. If it is not guided and regulated, it will definitely impact the economic and social development order, such as the development space of small and medium-sized enterprises being compressed and squeezed out.
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