Category: Business

Introducing China’s Cryptocurrency Unicorns: Bitmain, Ebang, and Canaan Creative

In recent cryptocurrency news from China, three cryptocurrency mining hardware manufacturers – Bitmain, Ebang, and Canaan Creative – have been valued at more than $1 billion to climb up among the ranks of unicorn startups.

If you think about it, there’s a certain irony about how the first government in the world to ban cryptocurrency has now admittedly own three cryptocurrency unicorns.

Just last September, the Chinese government shut down all local crypto exchanges and banned initial coin offerings (ICO) amid fears that they could create financial instability.

However, fast forward today, Hurun Research Institute for the Greater China region has released the Q2 Unicorn Index ranking three Bitcoin mining firms among the list of 130 different Chinese unicorns.

Truth is, this is not the first time China has taken such contradictory actions.

In May, China Center for Information Industry Development (CCID), a research unit under the country’s industrial ministry officials had published a monthly rating index on 28 crypto coins and the blockchains behind them.

This goes to show that while China’s government is not a fan of cryptocurrency, the country still recognizes the merits and importance of bitcoin startups.

So, what does it mean to be ranked as a unicorn?

Cryptocurrency Unicorn

If this is the first time you heard the word unicorn outside the context of a mythical creature or in reference to LGBT, the term unicorn in business is a label given to privately held startup companies that have reached a valuation at over $1 billion in dollar terms.

The term was coined by venture capitalist Aileen Lee in 2013 and was meant to highlight the rarity of such successful ventures by comparing it to the mythical creature. And for the first time in China, the label is used to describe cryptocurrency-focused companies.

This means recognition for the thousands of other cryptocurrency and blockchain startups that are currently operating in China.

According to South China Morning Post, the number of companies which have registered names that includes the word ‘blockchain’ between January and July 16th of this year has increased by 500 percent when compared with the year of 2017.

As of July 16th, 3,078 companies had registered names containing the term qukualian (the Chinese translation of ‘blockchain’) during 2018, bringing the total number of firms with distributed ledger technology-themed names in China to more than 4,000.

Among them, the Top 3 Cryptocurrency Unicorns are:

#13 Bitmain: World’s Largest Designer of ASIC chips

Bitmain

Image Source: Qz.com

Founded in 2013 by Jihan Wu and Micree Zhan, Bitmain sits at the #13 spot on the list with Hurun valuing the company to be worth 70 billion yuan (about $10.3 billion).

The assessment is reflective of the US$10 billion Series B round funding that Bitmain raked in before its impending initial public offering.

The founder Jihan Wu, was the first person who had translated Satoshi Nakamoto’s legendary Bitcoin whitepaper into Chinese, as well as being the one who approached Zhan with a proposal to create an ASIC chip for specifically mining Bitcoin, known as Antminers.

The startup has also recently opened offices and mining centers in Washington, Quebec, and Israel. These offices are in addition to an expansion plan that has led the company to establish operations in Amsterdam, Hong Kong, Tel Aviv, Qingdao, Chengdu, Shanghai, Shenzhen, and Irkust, Wusia.

Besides, Bitmain’s strategic partnership with Block.one had also helped facilitate the creation and development of EOS one as of the fastest growing and most supported blockchains in the community.

#32 Canaan Creative: Maker of Bitcoin Mining Rigs

Canaan Creative

Image Source: Bcfocus.com

Tied with 20 other companies, Canaan Creative sits at #32 spot with a valuation of 20.34 billion yuan (about $3 billion). The startup is said to be the world’s second-biggest manufacturer of bitcoin mining chips and devices.

This valuation comes as per its financial statement included in part of its IPO filing, whereby Canaan raised 1.3 billion yuan (about $204 million) in its revenue for 2017 alone, marking a 3000 percent year-on-year growth compared with 2016.

Besides, the firm also brought in a net profit of $56 million in 2017, accounting for a six-fold increase as compared to its previous year. Backers of the startup include Jin Jiang International Group, Baopu Asset Management, and Tunlan Investment.

#53 Ebang: Telecommunications Co turned Bitcoin Mining Hardware Manufacturer

Ebang - China's cryptocurrency unicorn

Image Source: Tradingpeek.com

Ranking at the 53rd spot, Ebang is tied with 38 other companies at an approximated valuation of 10.17 billion yuan (about 1.5 billion). Founded in 2010, Ebang Communication started its business with production of hardware products for the telecommunication industry.

It was only in 2016 that the firm entered the cryptocurrency mining business and launched its own Ebit miners. In 2017, Ebang received 94.6 percent of its revenue from the sales of bitcoin miners.

Plans for Initial Public Offering (IPO)

All three companies have recently expressed their desire to conduct IPO on the Hong Kong Stock Exchange in the near future.

Looking at these news, it seems that cryptocurrency is gradually growing into what many are hoping it to be. With these three new China cryptocurrency unicorns, other crypto startups in China are sure to follow the path to these bitcoin mining companies.

First Coffee Unicorn of China: Luckin Coffee Raises US$200 million to take on Starbucks

China’s Luckin Coffee, a coffee franchise rivaling Starbucks had just closed a US$200 million Series A round from Singapore’s sovereign wealth fund GIC, China’s Legend Capital, Joy Capital, and Centurium Capital.

The funding round values Luckin at US$1 billion which makes it the newest Unicorn in China.

However, the scale of the capital and the fact that the round is labeled a Series A has been confusing because the company basically expanded overnight.

Founded by Jenny Qian, the former chief operating officer in Car Inc, Luckin Coffee started late last year.

Luckin Coffee has rapidly grown using a mass-store model and the company was soon found everywhere in China. It entered the market vigorously and expanded across China’s first and second-tier cities.

But in less than nine months after its launch, Luckin Coffee has opened 525 outlets across China’s major cities, in addition to offering on-demand delivery services in partnership with S.F. Express. Luckin Coffee will deliver for orders over RMB35 (US$5.30) within 30 minutes.

Besides, the coffee franchise selling point was clear, it positioned itself similarly to Starbucks. Both highlighting their freshly brewed coffee to be of high Arabica standards and made with professional blending.

Pricing-wise, Luckin Coffee is reasonably set between 20 to 30 yuan (about US$3 to US$5) which separates it from fast food coffees at McCafe or KFC that is 10 to 20 yuan (about US$2 or US$3), while being more attractive than Starbucks which sells at 30 to 40 yuan (about US$5 to US$6).

If that’s not enough to prove that it is a rival of Starbucks, the Chinese coffee chain has also opened fire on Starbucks, accusing the American coffee giant of engaging in monopolistic behavior and creating an unfair domestic trade market.

An act that Starbuck has called out as a publicity stunt.

Then again, Luckin is not a Starbucks copycat. The startup adds a technological touch making its coffee-shop model revolving around an app.

Luckin customers have to download the app to order and pay for their coffee. They do not accept cash and payments can only be made using WeChat or Luckin’s own coffee wallet. This breaks it out of the traditional retail mold, fitting it in with new retail trends like Alibaba and Tencent which partners with supermarket and convenience stores on mobile payments.

Similar to many other Chinese Internet-based startups, the startup has also been spending massively on cash discounts and promotions to gain market share. First-time customers can get a free cup of coffee, while their referrals can also get another free cup of coffee.

Despite the low prices and rising expansion project, the question is – how does the company justify its valuation and can it take on the coffee giant Starbucks?

Jeff Towson, an investment lecturer at Peking University in Beijing told Quartz, “Luckin Coffee can easily worth US$1 billion if it can execute on the business — but that’s a big if.”

He explains that a large part of Starbucks’ success is not just personalize marketing and coffee. China is Starbucks second largest market after the United States with more than 3300 stores in operation.

The coffee tycoon’s real leverage is with real estates whereby many of its stores are located strategically in expensive, high traffic locations that rivals cannot afford.

However, the startup uses app to draw people to less bustling locations that are cheaper to rent. This may be the solution to overcome the real estate power of the coffee tycoon.

Moving forward, Luckin Coffee plans to use the newly raised funds for product research, IT platform development, and business expansion.

India is heading for a record-breaking year with IPO counts

India’s stock markets have had a very busy year so far.

According to EY India IPO Readiness Survey Report, India exchanges has internationally scaled the highest IPO activity in terms of number of deals accounting for 16 percent of the total issues in the first half of this year from January to June.

In terms of proceeds, India exchanges accounted for 5 percent of global proceeds in the January-June period. As per the report, the January-June period saw 90 IPOs raising US$3.9 billion, registering a 27 percent jump in number of deals and 28 percent rise in value terms over the same period last year.

In the first half of 2018, India bourses witness 90 initial public offering (IPOs) – making for 16% of all listings worldwide and 27% more than a year ago.

India also made 28% year-on-year rise in IPO proceeds during January – June 2018 at US$3.9 billion (Rs 27,000 crore). This was 5% of the total funds raised via IPOs globally during the period, according to an EY report.

“The IPO ecosystem is evolving at a rapid pace in india with several companies looking to list within 2018,” said Sandip Khetan, the partner and national leader of financial accounting advisory services at EY India.

In fact, 15 of the 90 companies that went public in India during January-June 2018 listed on both of the country’s leading bourses: the National Stock Exchange (NSE) and BSE. These 15 accounted for 93% of the total proceeds during the period.

While NSE and BSE saw 42 and 33 deals respectively, which contributed 7% to total proceeds.

Out of 90 deals that listed in the first half of this year, 15 listed both on NSE and BSE, accounting for 93 per cent of the total proceeds.

The highest number of IPOs in India during the first half of 2018 was from the industrial sector which also topped in terms of proceeds. The companies from this sector that debuted on the stock market in 2018 include Varroc Engineering (raising rs 1955 crore) and Sandhar technologies (rs300 crore)

Meanwhile other key sectors were banking – Bandhan Bank, hospitality – Lemon Tree Hotels and food services Barbecue Nation.

During the second half of the year, it is likely to be India’s burgeoning renewables industry that will see a surge in IPO activity. “Many companies in this (renewables) sector are preparing for initial public offerings,” EY said.

For instance, ReNew Power, India’s largest renewable energy producer, plans to raise $390 million through a public listing, while Adani Green Energy, the firm that built the world’s largest solar plant in Tamil Nadu, is also eyeing an IPO.

The other factor that’ll keep the IPO momentum intact is the Security and Exchanges Board of India’s decision to reduce the number of years for which a company needs to declare financial results, from five to three, before going public. This will “provide an impetus to more IPO activity as lower efforts will be needed,” Khetan of EY said.

Is the Chinese tech IPO wave just a hype?

From Chinese phone maker Xiaomi to online service platform Meituan-Dianping, a huge number of Chinese tech unicorns are reaching maturity and has announced their intentions to IPO this year.

According to Dealogic, there are a total of 26 Chinese tech companies offering to sell US$85 billion worth of new shares, which accounts for 9 percent of the international IPO volume.

Among this new wave of Chinese tech companies rushing to sell their shares include three companies that rank among the world’s 20 largest internet firms: Xiaomi, Meituan-Dianping, and Didi Chuxing.

Recently listed, Xiaomi has reportedly drawn the interest in investment from three of the wealthiest people in China. Li Ka-Shing is said to invest US$30 million in the phone maker, while Alibaba founder Jack Ma and Tencent Chairman Pony Ma have also taken stakes in Xiaomi.

However, not all can be said the same for other pricey valuations.

Ping An Good Doctor, China’s largest online healthcare platform which debuted on the Hong Kong stock exchange in May has seen the slid of its shares below 11 percent of its IPO price on the second day of trading, as reported by Reuters.

This was amidst a reported retail oversubscription of 663 times for its US$1.12 billion IPO, as well as being backed by seven cornerstone investors including U.S. asset manager BlackRock, Singapore sovereign wealth fund GIC, and Canada Pension Plan Investment Board.

Tencent-backed Yixin, that debuted in November 2017 also shared the same experience, where it opened at HK$10 in the day only to be later trimmed by 5 percent at the end o the session, closing at HK$8.12. Its retail portion of the IPO was 560 times oversubscribed.

What this says is that investors are interested to pour money into promising IPOs, but are also quick to withdraw in hope of making a quick profit during times when shares first debut.

There’s also a reason why companies are tapping into the public market in haste. That’s to take advantage of a recent change in Hong Kong’s listing rules where biotech companies without revenue or profit the chance to apply for public listing.

Besides that, the city’s bourse had also launched a China Depository Receipt program that allows China tech giants listed in Hong Kong or in the United States to have a dual-class offering in the mainland.

It’s an ownership structure widely used by tech giants in the United States and gives founders stronger voting rights than other shareholders. Besides, after years of rapid growth in their home market, some Chinese tech firms are also now looking for the opportunity to expand to overseas market.

Xiaomi, for example, plans to expand into Europe to compete with Apple and Samsung in the smartphone market. Companies are simply in good shape and ready for further growth.

Hurun Research Institute reports that 151 companies in China have attained unicorn status by the end of the first quarter, with half of these unicorns incubated or backed by industry titans such as Alibaba and Tencent Holdings. Their combined valuations exceeded 4 trillion yuan (about US$630 billion).

Moreover, according to a professor of accounting at Peking University Paul Gillis, there’s a fear of missing out and Chinese tech companies might receive pressure from investors to join in and join big. He added that Meituan-Dianping’s valuation target of US$60 billion is hard to understand, given that the company has revealed a steep loss of US$2.9 billion last year from share-based compensation.

“Still there will be demand for shares,” said Ken Xu, a Shanghai-based partner at investment from Gobi Partners. “Both XiaoMi and Meituan are household names in China and market leaders in their respective business segments and may eventually rise to challenge the country’s traditional tech trinity – Baidu, Alibaba, and Tencent.”

“Their valuations are indeed at very expensive levels,” Xu says. “If you look at their fundamentals, then the targets aren’t very reasonable. But everyone is betting that these companies will become the next big thing in China, and people are worried about missing out.”

Moving forward, we have yet to expect Didi Chuxing and Meituan-Dianping which are slated for a Hong Kong listing later this year. The company based in Beijing is said to be targeting a US$60 billion valuation.

Meanwhile, even bigger listings are slated down in the pipeline, Ant Financial is also gearing up for a public float that may happen as early as next year. The payment affiliate of Alibaba has just completed a mega funding round in June that valued the company at US$150 billion.

With all these blockbuster IPO still standing in place, the fizz for Hong Kong IPO is not likely to go out anytime soon. Down the road, Hong Kong and China together could even end up being the largest issuing market for IPOs.

Food Tech Startup Swiggy joins unicorn club, raises US$210 million from DST Global, Naspers

Food delivery continues to dominate the flow of big capital and investors in India’s startup ecosystem with Swiggy being the latest to enter the unicorn league.

The food delivery startup has successfully raised US$210 million in its latest round of funding from Russian billionaire Yuri Milner’s DST Global and existing backer Naspers.

DST Global is one of the world’s most influential tech investor which counts Facebook, Airbnb, and Alibaba in its investment portfolio. For DST, this will be its third investment in India after online retailer Flipkart in 2014 and cab hailing firm Ola in 2015.

The round also saw participation from US-based hedge fund Coatue Management and existing investor Meituan Dianping, a China-based provider of on-demand online services.

It is with this latest funding round that Swiggy’s valuation has increased to US$1.3 billion as per sources with direct knowledge of the development.

Besides, this also officiates the Bengaluru-based firm as one of the fastest internet companies to join the Unicorn club four years after it inception. That is less than half the time it took for its rival food tech company Zomato to earn the title.

The last valuation of Swiggy was at US$700 million in February when it raised US$100 million from Naspers and Meituan Dianping.

With this round, Swiggy’s existing capital will cross US$466 million, which is essential as it continues to compete with Ant Financial-backed Zomato and new competitor entering the space, which includes UberEats and Foodpanda.

Swiggy currently has 35,000 restaurant partners and 40,000 delivery executives across 15 cities. It will use the additional capital to ramp up its supply chain network, expand to new markets and scale its headcount especially in the technology function.

Sri Harsha Majety, the CEO of Swiggy explains, “using this investment, we will continue to widen Swiggy’s offering, along with bolstering our capabilities and plugging the gaps in the on-demand delivery ecosystem.”

Swiggy has also been reportedly looking to increase its supply by exploring investment options with cloud kitchen players and restaurants for its Swiggy Access model even as the firm is working on a pilot of medicine delivery under its offering Swiggy Dash.

If anything, this deal is expected to escalate the fierce competition in the food delivery space, and to an extent boost innovation of the services to grow beyond ride hailing.

According to a Bloomberg report, more than 400 food delivery apps were operational in India between 2013 and 2016. The industry grew by 150% year-on-year and has an estimated Gross Merchandise Value (GMV) of US$300 million in 2016.

At the same time, this sector has witnessed a lot of consolidation. While some ventures with unique ideas has managed to survive, others succumbed to market forces simply due to lack of bad timing or lack of funding.

Currently, the momentum in the food delivery market in India is lead by Swiggy with about 11 million monthly orders followed by Zomato at about 7 million orders across India and UAE. While FoodPanda records about 1 million and UberEats about 750k per month.

However, all is not fixed as in related news, Swiggy’s rival Zomato also raised a US$400 million funding capital, a news that came a few days after Swiggy’s own announcement of a US$210 fresh funding.

However undeniably, the food delivery industry is nearing saturation. Question is – who will come up on the top: Swiggy, Zomato or new entries like FoodPanda or UberEats?

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