The startup sector in Mainland China is on fire and investors have more opportunities than ever to take part, thanks to several huge new funds joining the search for the next unicorn (a startup company worth at least US$1 billion).
Mega-funds buying up Chinese tech startups include SoftBank’s US$100 billion Vision Fund and China Merchants Group’s US$15 billion China New Era Technology Fund, but there are also a host of multibillion-dollar funds from private equity firms such as Carlyle, Sequoia Capital, KKR and Hillhouse Capital Management.
Investors can get access to the sector through many of these funds, but there will also be opportunities to invest directly because this new generation of startups are in a hurry to launch public offerings and capitalise on sky-high valuations. We take a look at some of the most promising unicorns in Mainland China and Hong Kong.
With investors that include Goldman Sachs and funding of more than US$300 million, this Hong Kong startup is rapidly expanding around the world. It allows users to easily book travel activities online—from theme parks and musicals to cooking courses and guided tours.
In Hong Kong, for example, Klook offers cheap tickets for Ocean Park, Disneyland, helicopter tours and the Peak Tram. In total, the company says it provides access to more than 50,000 activities and services from 5,000 partners in more than 200 destinations around the world.
Founded at Hong Kong’s Science Park by a group of academics from the Chinese University of Hong Kong, Sensetime is the city’s first tech unicorn. It claims to be the world’s most valuable artificial intelligence startup, focusing on computer vision and deep learning. It has already raised more than US$1.6 billion from investors and is valued at a whopping US$4.5 billion.
Its technology is used for a wide variety of applications, including facial recognition, medical image analysis, autonomous driving and remote sensing by companies such as Honda, Alibaba, Xiaomi and Weibo.
China is the home of bitcoin mining— it controls more than two-thirds of the world’s supply—and Bitmain makes the rigs that do the vast majority of the work. Most cryptocurrencies are produced (or “mined”) by computers cracking a complicated code, and serious mining operations involve warehouses full of dedicated machines that are purpose-built for the task. Bitmain’s Antminer line of computers has become the processor of choice for cryptocurrency miners.
The company claims to have 85 per cent of the global market for mining machines, which has made it hugely profitable. It reportedly earned US$2.5 billion in revenue in 2017, almost all from the sale of mining rigs. A rumoured public share sale would almost certainly be greeted with enthusiasm by punters looking to strike virtual gold.
This pony is close to sprouting a horn and turning into a unicorn. Mainland China’s leading startup focused on self-driving technology has raised US$214 million this year from investors such as Sequoia, Fidelity, China Merchants and a host of other Chinese funds.
In February, Pony.ai soft-launched an autonomous ride-hailing fleet in Guangzhou, becoming the first company to offer fully self-driving car rides to the general public in Mainland China. In June, it won the first autonomous vehicle testing licence in Beijing.
“We look to support businesses which are the pioneers in their field,” says Jarlon Tsang, managing partner at Eight Roads, one of the company’s investors. “We believe autonomous vehicles will be a rare life-altering technology and we have confidence Pony.ai will be a leader in this field.”
This coffee-delivery chain started business in January and was already claiming a valuation of US$1 billion by July after raising US$200 million from investors that included some of the biggest venture capital and private equity players in the region. It is using the money it has raised to expand rapidly.
With more than 1,000 stores already in operation across the country, it plans to open another 1,000 during the next year and is quickly rivalling Starbucks, thanks to an exclusive focus on delivery and pickup coffee, with completely cashless stores that rely on customers downloading an app to order and pay for their drinks.
Its success has also seen it secure a tie-up with Tencent, which owns the all-powerful Chinese payment platform WeChat Pay.
It might seem as though the whole world is lining up to invest in Mainland China, but plenty of Chinese people are also keen to move some of their money in the opposite direction. Backed by legendary US investor Jim Rogers, Tiger Brokers is an online brokerage that gives Mainland China-based investors access to US stocks—and especially companies beloved in Mainland China, such as Apple.
It has raised US$80 million this year in its latest funding round, valuing the company at just over US$1 billion. As well as Rogers, investors include Xiaomi, Interactive Brokers and several Chinese private equity firms.