Next Up: Mega IPOs From China Tech Unicorns
Several mega-funded Chinese tech startups are poised to public this year or next. Among them are the biggest unicorns around: ride sharing service Didi Chuxing, smart gadget maker Xiaomi, merged e-ecommerce sites Meituan-Dianping, and news aggregator ByteDance.
In the lineup for a return on their deals are venture investors Matrix Partners, Sequoia Capital China, Softbank, Tiger Global, Qiming Venture Partners, DST Global, Capital Today, SIG Asia Investments, Trustbridge Partners and Qualcomm Ventures.
The combined market capitalization of these new listers could well surpass a quarter-trillion dollars, making China tech IPOs the talk of of the town once again since the blockbuster Alibaba $25 billion IPO in 2014. Who knows what will happen when Alibaba’s fintech unit, Ant Financial, goes public?
Last year saw a surge of public listings from China companies: 137 global IPOs raised $32.2 billion, according to Renaissance Capital. That was a good chunk of total global IPOs: 374 companies raised $141 billion.
And, two Hong Kong-listed tech companies were among the top performers of the year: Apple supplier Foxconn raised $374 million at a valuation of $2.3 billion and Tencent-backed China Literature drew in $1.1 billion at a valuation of $6.4 billion.
The upcoming IPOs will put New York and Hong Kong exchanges, the venue for most of these China tech IPOs, in a heated competition.
New York has been the traditional home for China tech listings, but now pending reforms by the HKSE to soon allow dual-class share structures could attract more new economy Chinese companies to go public closer to home. The priority is on market valuation, and an argument could be made that product and culture familiarity gives Hong Kong some leverage for China tech.
Last year, 16 Chinese firms brought in a combined $3.4 billion from the NYSE and Nasdaq.
Hong Kong had 25 IPOs with $12.4 billion in proceeds while Mainland China listings surged to 93 IPOs at $16 billion, after a slowdown in recent prior years. One of those Hong Kong listings was from Fosun unit Sisram Medical in Israel, the first Israeli company to go public in Hong Kong. The IPO was handled by Tel Aviv-based law firm Yigal Arnon & Co.
It’s going to be interesting to watch as the IPO parade unfolds in the coming months.
Meanwhile, I’d be remiss if I didn’t add that London is courting bicycle sharing startup Ofo, already a unicorn.
Google has another China company to its list of Chinese tech investments in China, doling out capital to mobile game live streaming platform Chushou. The deal was a series D, and it came on top of funds from the only series A investor AlphaX Partners, a spin-out by Highland Capital as a new China fund run by Chuan Thor. Previous investors to the Series D round were Qiming Venture and Shunwei Capital. Chushou has now raised at least $155 million.
Selfie app Snow China has scooped up $50 million from Softbank and Sequoia Capital China. Facebook once tried to buy the Snapchat clone app which has now migrated away from social media features.
Chinese videostreaming app Kuaishou is reportedly wrapping up a $1 billion fund raise led by Tencent, ahead of a Hong Kong IPO it’s mulling over for 2018.
Chinese Internet security firm Qihoo 360 has formed a $150 million cultural and art fund. Qihoo teamed up with Beijing Cultural Center Fund to go after upgrades in consumer tourism.
Nexus Venture, one of the more active VCs in India, plans to raise its fifth fund, targeted at $350 million to $400 million and increasing investment in U.S. software companies.
ByteDance, a leading AI-powered content platform that operates Chinese news aggregator Toutiao has partnered with the popular media company BuzzFeed to distribute BuzzFeed content to users in China on Toutiao, Xigua Video and its international platform TopBuzz. The deal capitalizes on China’s vast and fast-growing digital media market.
Ride-hailing leader Didi has gotten into the bike-sharing race with its own brand that has launched in Chengdu.
Concerns are rising of a venture bubble in China tech, particularly in AI, where it seems no obstacle to raising money even those lacking a clear product and staff. Case in point is Aibee Beijing Intelligent Technology, founded by a former Baidu exec, who just attracted $25 million-plus for his startup valued at more than $800 million, according to the Financial Times. In on the deal were prominent investors Sequoia and General Atlantic as well as strategic investors Baidu, Alibaba and Tencent.
A new biennial report just out by the National Science Foundation and the National Science Board concludes that China has become or is on the verge of becoming a scientific and technical power. The report notes that China has emerged as the world’s second-largest R&D spender, at 21% of the total with the U.S. at 26%. It also finds that China is catching up in fundamental research and a technical workforce. Read Opinion, The Washington Post.
The U.S. has fallen out of the top 10 innovative countries identified in a Bloomberg Index based on seven factors. South Korea, Sweden and Singapore top the list. The U.S. slipped to 11 while China moved up two spots to 19th.