Nanalyze

7 of the Hottest Chinese Startups to Watch

The fact that the majority of startups we discuss here on Nanalyze are U.S. based is not just because the majority of exciting startups today are U.S. based, it’s because we’re exhibiting a behavior known as “domestic bias”. This means that you are likely to want to invest in companies that you are familiar with, companies that you know because they operate in the country you live in. Here’s a look at all the countries in the world that have more than one startup with a valuation greater than $1 billion:

United States 96
China 33
U.K 6
India 7
Israel 2
Canada 2
Germany 6
Singapore 3
South Korea 3
Sweden 2

We call startups with a valuation of $1 billion or more unicorns. There are presently 171 unicorns in the world according to the bright minds over at CB Insights. This means that 19.3% of all unicorns are Chinese startups which is not surprising considering that 1 out of 5 people on this planet are Chinese. As technology investors, we often overlook the major opportunities presented by the world’s second-biggest economy. This isn’t so much a case of domestic bias as it is a case of inaccessibility. Here’s a look at the website of one of these Chinese startups with a valuation of over $18 billion:

A chinese startup with a valuation of $18 billion's website

WTF is that thing wearing a crown with a pacifier and a rabbit tail? We couldn’t figure it out either. Aside from that, we can’t really figure out what it is this company does because there is no Engrish version of the site. Now we could hire someone who reads Mandarin to help us research hot Chinese startups like this one but the reason we don’t is because it’s very difficult, if not impossible, to invest in Chinese startups as an international retail investor. Are you really going to trust any mainland brokerage firm that wants to sell you shares in a “hot Chinese startup”?

Nonetheless, we decided it would be interesting to put the 6 hottest Chinese startups on your radar just in case you have a friend in China who you trust and who can use their guanxi to hook you up with some pre-IPO shares. Out of the 20 unicorns that have a valuation greater than $5 billion, 7 are Chinese. These 7 hot Chinese startups are as follows.

Click for company website

Xiaomi $46 Billion Valuation – Hardware 

This 8,000 employee consumer electronics company is the world’s 3rd largest smartphone maker and the largest smartphone vendor in China. Xiaomi set a world record last year by selling 2.1 million smartphones, 38,000 televisions, and 770,000 smart devices in 12 hours through their online portal. While the Company sells all kinds of cool products like the Ninebot One we profiled before, their plans for the future are to stick with the mobile phone, TV, and router. Xiaomi has taken in $1.45 billion in funding to date.

Click for company website

Didi Chuxing – $36 Billion Valuation – On-Demand

You would have seen these guys in the news lately as Uber recently lost their battle in China and agreed to sell Didi their “Uber China” venture which is valued at about $7 billion. The Company was formed in early 2015 when China’s two largest ride-hailing apps, Didi Dache, and Kuaidi Dache, decided to merge. Didi Chuxing has taken in an astounding $7.32 billion in funding so far from all kinds of high profile investors including Apple who put in a cool $1 billion.

Update 08/15/2018: Didi Chuxing’s driver services spinout Xiaoju Automobile Solutions recently acquired Hiservice, a three-year old company that focuses on after-service care that’s also a digital platform for car owners.

Click for company website

Lu.com – $18.5 Billion Valuation – Fintech

Founded just 5 years ago, Lufax as the company is known by has raised nearly $1.7 billion in funding to become the largest internet finance company in China. Lufax acts as a trading platform for institutions to offer financial products to retail investors such as wealth management and peer-to-peer (P2P) lending by charging a 4% commission on all transactions. The Company has said an IPO could take place in the second half of 2016 on a domestic and overseas exchange (presumably in the U.S.). P2P lending is not going well in China these days, and competition is fierce with almost 3,000 P2P firms trying to get a piece of the action. China’s P2P market is the largest in the world.

Update 12/04/18: Lufax has raised $1.33 billion in new funding at a $38 billion pre-money valuation led by Primavera Capital to fund growth. This brings the company’s total funding to $3 billion to date.

Click for company website

China Internet Plus Holding – $18 Billion Valuation – eCommerce/Marketplace

This Chinese startup was formed as a merger between two other companies (Meituan and Dianping) and is a mobile internet company that offers merchant information and consumer reviews, group-buying, online restaurant reservation, take-out service, e-coupon promotions, and other online to offline services. The Company has raised $4.34 billion so far along with participation from a fair number of U.S. investors including Google and Sequoia Capital.

Click for company website

DJI Innovations – $10 Billion Valuation – Hardware

DJI has taken in just $105 million so far and is now the largest drone company in the world. The Company sells an entire line of consumer drones and has been backed by mainly U.S. venture capital firms. You can read more about DJI in this article we wrote last year about them.

Click for company website

Zhong An Insurance – $8 Billion Valuation – Fintech

In 2013, the heads of Ping An, Tencent, and Alibaba joined together to launch China’s first online-only insurance company. Last year they took in almost $1 billion from investors that included Morgan Stanley and China’s top domestic investment bank China International Capital Corp (CICC). Here’s some excellent Engrish about what it is they do:

Big data allows insurers can not meet the needs of the past becomes possible. We do not use the Internet channels to cut the cake original market, but in the era of big data mining new social needs, create new products, the cake really big.

The cake really big indeed, because at the end of their first year of operation, the Company had underwritten over 630 million insurance policies. Zhong An is said to be exploring an IPO in mainland China this year.

Click for company website

Lianjia – $6.2 Billion Valuation – eCommerce/Marketplace

Founded in 2001, Lianjia has taken in $1.08 billion in funding to develop a Chinese real estate agency service provider. The Company which is also known as “Home Link” is said to own 7 percent market share in China’s online and offline real estate services market and 50 percent in Beijing alone. They are expected to IPO in the next 5 years based on terms they gave their investors.

While we don’t know of any way to buy pre-IPO shares in any of these Chinese startups, there is a chance they could IPO on the U.S. market like Alibaba did in 2014 when they debuted the world’s biggest IPO.

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