What country has the most fertile ground for startups?
Huge numbers of potential buyers (1.4 billion citizens); fierce competition leading to increased efficiency; huge grants for public and private businesses; introduction of the latest technologies in all areas. Have you recognized the country? Sure, we are talking about China.
With all of the above, Chinese startups are growing like weeds. Of course, a lot of them are filtered out in the valley of death, but the number of unicorns appearing out of nowhere is no less impressive. They get distributed not only locally but all over the world as well. We wouldn’t be able to cover them all: as early as 2018, another Chinese unicorn popped up every 4 days. And in 2019, there were already more IT projects with a billion-dollar value than in the United States with its famous Silicon Valley.
That’s why we picked the most successful, famous, and recent projects for our blog.
The Most Expensive Unicorn of 2020: Trend-Setting Startup
The unequivocal leader tech company Byte Dance can be safely assigned the status of “Chinese Startup 2020”.
If it doesn’t ring a bell, think about the hyped-up social video platform TikTok. It conquered the whole world in 2020 and is clearly not going to lose ground in 2021. Originally a kids’ app, TikTok quickly became one of the most promising networks for marketing and brand promotion. Even government agencies are starting to use it for PR and presence.
As a result, the founder of ByteDance, programmer Zhang Yiming went from an unknown developer of mobile apps in 2012 to a billionaire with global influence (estimated net worth -- $ 27.7 billion in 2021, according to Forbes).
- In addition to TikTok and its Chinese-audience analog Douyin, the company has 5 more platforms in different countries.
- Initially, the startup relied on its other product, the news aggregator Jinri Toutiao. But the format of a social network turned out to be more effective. For the first time in China, it set a new global trend.
- ByteDance became the most valuable unicorn in 2020, its net value was estimated at $ 140 billion. However, the startup founders are not going for an IPO. The American segment TikTok Global is the only one that is planned to be brought to the stock exchange.
- The estimated value of TikTok is $ 50 billion.
- By mid-2020, the number of TikTok downloads reached 2 billion.
- Large US companies Walmart and Oracle have been planning to buy the American segment of TikTok for six months. However, the deal is currently put on hold: the White House believes TikTok is a threat to national security due to data leakage.
By the way, although the main rival of TikTok -- Likee is founded by the Singapore-based IT startup Bigo Technology (2016), this app also has Chinese roots, represented by its parent organization JOYY Inc.
The project also shows excellent results, proving that communication through short dynamic videos is a successful idea. Currently, it has 1.5 billion users in 150 countries and two gigantic investors from China: the fintech company Tencent and the IT firm Baidu.
Chinese Tech Startups
Most Chinese projects are focused on the latest technologies: AI, robotics, and VR. Corporate interest in this niche and government grants allow startups to multiply. Not all of them are successful, of course, but some become well-known even before they go public.
The main direction of this startup is AI technologies for face recognition. Among the most known products is the Face++ platform, used by companies such as Lenovo Group. In addition, the startup is developing other apps. One of them is supposed to help users find their lost dogs. It can recognize a pet by its nose print with 95% accuracy.
The company was founded in 2011, Qi Yin runs it as CEO. Now Megvii is a unicorn worth over $ 4 billion. Major investors include Alibaba, Huawei (jointly developing facial recognition systems), and government agencies in China. AI-based security systems are marketed in Africa and Latin America.
Megvii has been planning to go public since August 2019. But becoming the first publicly traded AI company has been continually delayed by a series of human rights scandals. The startup is accused of discriminating against Uyghurs living in China since the face recognition application was allegedly used to find them. Company representatives keep objecting to this charge.
Another unicorn of artificial intelligence, the main competitor of Megvii, SenseTime was founded in 2014. It specializes in computer vision and security control. The accuracy of SenseTime algorithms is highly rated by the US National Institute of Standards and Technology. However, the startup was blacklisted by the White House just as other AI developers from China.
The startup’s customers include the Central Bank of China and other government organizations (medical, police, and retail), as well as manufacturers of smartphones and drones. SenseTime sells products to foreign countries (Latin America and Africa as well). Its technologies have been used most successfully at the peak of the coronavirus.
SenseTime is considered to be the most expensive AI unicorn. At the end of 2018, its estimated value was $ 7.7 billion on the stock exchange. In one round, the startup attracted more than $ 1 billion. Investors include such giants as Alibaba, Qualcomm, and SBCVC. The developer seems to be in no hurry with going public.
CloudWalk was founded in April 2015 by a former employee of the Chinese Academy of Sciences. Again, it specializes in face recognition. This startup is on the US government’s sanctions list together with SenseTime and Megvii.
The main directions are AI in finance, mobility, enterprise, and city management. The product is mostly demanded by government agencies, mainly financial institutions (Bank of China and Haitong Securities). In 2020, the unicorn was valued at $ 3.1 billion. In December 2020, it started preparing documents for an IPO on the Shanghai Stock Exchange.
The fourth developer of machine vision was founded in 2012. It works closely with government agencies and private businesses, and its value was estimated at $ 2 billion. Among the investors, there are ICBC International Holdings, Huawei, Sequoia Capital China, and others.
Yitu developments are used by banks, police, medicine, and smart cities of China. In addition to facial recognition, a trained AI can identify symptoms of lung disease from X-rays. Yitu Technology is blacklisted by the United States on suspicion of violating the rights of the Uyghurs.
A Chinese startup based in Shanghai, Enflame Technology is founded in 2018. It specializes in manufacturing AI microchips. Its main product is called Cloudblazer T10. The startup is viewed as one of the most promising developers, actively promoted by private corporations and the state. The company’s cloud platform microchips can handle a large database and are used in machine learning.
The developer’s prospects were appreciated by the tech giant Tencent and many other sponsors, including the state. in January 2021, investments in the startup amounted to $ 278.5 million.
Cambricon Technologies Corp
This is another SoC AI developer from Beijing attracting large investments along with Enflame. It was founded in 2016 and produced AI microchips for Huawei till 2018. In 2020, the startup founder Chen Tianshi entered a list of the richest people in China under 40 (net value is estimated at $ 3.1 billion).
Cambricon microchips support deep learning of artificial intelligence. The product is used in more than 100 million smartphones all over the world. In July 2020, the startup received around $ 369 million during its IPO.
In January 2021, the company got a $ 200 million investment from Chinese investors, including giants, such as Tencent and Baidu.
Chinese Fin-Tech Startups
Money makes money. This is exactly the rule that Fin-Tech project developers follow. China is no exception as the largest private corporations are actively launching such projects in the country.
A subsidiary Fin-Tech startup of the Alibaba Group, Ant Group specializes in digital finance. It produces the Alipay online transfer platform. The startup was founded on October 16, 2014, and has since grown to a giant company with a preliminary estimate of $ 313 billion (as of October 2020). About 118 trillion yuan had passed through the platform by mid-2020, making it the largest in the world. Ant Group finances startups too (for example, Megvii). The last thing that separates it from the status of the full-fledged company is a public offering on the stock exchange.
The IPO at the end of 2020 was stopped by the head of China, Xi Jinping. As with ByteDance, the Chinese government is concerned that the market is captured by powerful unicorns, so the state needs to control digital finance.
This is another giant that was in 4th place in the list of the most valuable unicorns in 2020. Recently, Lufax has successfully moved to the category of public companies.
It was founded in 2011. Its patron is the large insurance company Ping An Insurance. The startup develops an online platform for financial services, mainly investment and peer-to-peer (P2P) lending.
Lufax went public at the end of October 2020 with an estimated net value of $ 33 billion. It attracted $ 2.4 billion in investments during the campaign.
Chinese Transport Startups
In China, drones and electric vehicles are a very developed area of business. Both government and private corporations are interested in manufacturers, so autonomous driving attracts many potential customers. Among other reasons, the demand is linked with the pandemic and the general state of the environment.
Therefore, startups developing transport almost instantly grow into expensive companies (i.e. LeeAuto). After the resounding success of Elon Musk, every self-respecting manufacturer of fuel-free vehicles is trying to create their own Tesla killer.
This is the very route that the 2014-startup chose to follow. Its electric cars are much cheaper than its competitors from the USA, and analysts believe they are more technologically advanced (in terms of autopilot and other features). The startup became famous, among other things, after a series of scandals and accusations of stealing technologies from Tesla.
Nevertheless, it is a very promising unicorn company with $ 2.6 billion investments and large sponsors, both domestic and foreign. The list of Xpeng’s investors includes Alibaba Group and Xiaomi. In August 2020, the startup conducted an IPO in New York and raised $ 1.5 billion.
In December 2020, Xpeng electric vehicles started to sell in Norway. The startup founder plans to establish factories in Europe.
Didi Chuxing is a ride-booking service founded by former Alibaba Group employee Cheng Wei in 2012. At the moment, the company’s services are used by 450 million passengers across China. The developer is not planning to stay within the framework of his own country, so he assesses the transport markets of foreign countries, including Russia. Since 2020, a separate division of the startup has been developing drones and face recognition systems to detect signs of drowsiness in drivers.
In 2019, Didi Chuxing entered the top 3 most expensive startups in China with an estimate of $ 55 billion. After that, its cooperation with Toyota Motors increased its value to $ 62 billion. At the moment, Cheng Wei has a fortune of $ 2.8 billion, and his company is one of the largest Chinese IT unicorns with a turnover of $ 1 billion.
The Neolix startup was founded in 2018. Its drones (delivery robots and retail vehicles) became well-known in 2021 when KFC mobile delivery vehicles appeared on the streets of China. Amid the 2019 pandemic, the company’s drones were disinfecting the streets and delivering food and medicine. Neolix robots have 4 levels of autonomy, which allows them to avoid obstacles on the road without involving drivers or dispatch managers.
The startup’s partners include Yum Brands (owner of KFC), JD.Com, Huawei, Alibaba, and Pizza Hut. In 2020, Neolix raised $ 29 million during Series A. In 2018--2020, the company has attracted more than $ 43 million in investments.
The company Pony.ai appeared relatively recently (December 2016), but now it’s one of the most expensive unicorns in drone development. In February 2021, the total valuation during the third round of the exchange amounted to $ 5.3 billion. The startup founders James Peng and Lou Tiancheng are former employees of the Baidu concern. Investors and partners include Sequoia Capital China, automakers Toyota Motor Corp and FAW Group.
The main focus is autonomous last-mile delivery. Apart from drones, Pony.ai is developing its robo-taxi service. The startup is one of the few companies that have received permission to test its vehicles in California and Beijing.
WeRide is the second major player among drone developers, founded in 2017. It’s working to achieve the 4th level of autonomy that requires no human intervention even in difficult areas. In 2019, the company launched its own robo-taxi service in Guangzhou, and in 2020 it released 100 drones that received permission to move driver-free.
Major investors include Nissan, Renault, Mitsubishi, and the bus manufacturer Yutong. In January 2021, the startup raised $ 310 million in a Series B funding round. WeRide has not yet disclosed its estimate, as well as the date of its IPO. But so far, it is the only developer of autonomous vehicles to receive strategic support from the Renault-Nissan-Mitsubishi alliance.
Chinese Ed-Tech Startups
The pandemic has caused a surge in demand for online education. Naturally, developments in this area attract the interest of large investors. As a result, a number of ed-tech startups took off in no time.
The startup is founded in 2017. It is the biggest unicorn in education with a total estimate of $ 15.5 billion. In April 2020, it attracted $ 1 billion of investments, breaking a record for the niche. Among leading investors, there are Tencent Holdings, Hillhouse Capital Group, Warbug Pincus, and IDG Capital.
Yuanfudao is producing an app with online lessons and homework for schoolkids. Starting from 2019, the number of users has begun to grow exponentially. Between January and mid-March 2020, Yuanfudao ranked 1st in the number of in-app purchases in the Education category in China.
VIPKid is one of the most successful and perspective Ed-Tech startups. It is founded in 2013, and in 2020, its total funding exceeded $ 1 billion. The startup had an estimated value of $4.5 billion. The list of investors includes Tencent, ZhenFund, Sequoia Capital, and Sinovation Ventures.
It is producing English lessons for kids from 4 to 12 years old. Chinese students are telecommuting online with teachers from Canada and the USA.
This online education platform for students received $ 2.9 billion of investments. At the end of 2020, the company attracted a total amount of $ 1.6 billion in Series E. Its main investors are Alibaba Group, Tiger Global Management, SoftBank Vision Fund, and Sequoia Capital China. The startup is estimated to be valued at $ 10 billion.
The company broke the industry record for the number of students. In autumn 2020, more than 10 million students were listening to online broadcasts. The age limit of the Zuoyebang platform is children from kindergarten to grade 12. In addition to online lessons, the startup offers various courses and personalized teacher consultations. Its main competitor is Yuanfudao.
Chinese Med Startups
As expected, the virus outbreak caused the rise in healthcare developments. But even before that, China launched many successful startups that solved urgent problems of long queues at healthcare facilities and difficulties in obtaining medicines.
One of the most expensive unicorns in medicine, WeDoctor was founded in 2010 and estimated at $ 6 billion in 2018. In 2020, the startup raised $ 1.34 billion in investments. The IPO on the Hong Kong stock exchange planned for late December 2020 was complicated by the dismissal of CFO John Cai, but WeDoctor is not going to cancel it.
The lead investor is Tencent Holdings Ltd. Other sponsors are Goldman Sachs, Morningside Group, and Hillhouse Capital Group. Initially, the startup offered an online platform for making appointments with a doctor, but its functionality expanded later. WeDoctor offers online advice, writes prescriptions, and diagnoses users remotely using built-in AI. In addition, the service cooperates with 3,000 hospitals in China, providing offline consultations there.
iCarbonX appeared in 2015. The company set a world record as the fastest unicorn: it was estimated at $ 1 billion only six months after its founding thanks to investments from Tencent. The startup developed a mobile application Meum that helps its users determine their state of health, choose a diet or a training system.
The company’s main value is the ability to diagnose the disease at an early stage. Apart from Tencent, China Bridge Capital has also invested in this biotech startup. In 2018, iCarbonX was ranked among the 50 Best AIs in China.
Ping An HEALTHCARE
Founded in 2015, a spin-off startup from parent company Ping An Insurance entered the top-3 most expensive healthcare startups in 2020 with total funding of $ 1 billion. Among its investors, there are SBI Group and Soft Bank Vision Fund. Since its IPO in Hong Kong, the unicorn’s market capitalization reached $ 16 billion (as of July 24, 2020).
The startup developed the Ping An Good Doctor mobile application. It provides sets of remote medical services, including health tests, top-ratings of medical specialists, a doctor’s appointment, and online consultations (special terminals are installed on the territory of state-owned enterprises). The application was especially active during the peak of the pandemic. The startup received the Company of the Year 2019 award.
JD Health is a unicorn founded by the parent-company online store JD.com. In 2020, the total funding was $ 1 billion, and after the IPO in December 2020, the startup was valued at $ 3.5 billion. It was the second-largest IPO on the Hong Kong Stock Exchange in the past year.
The main product of JD Health is a digital pharmacy. Investors include JD.com, CICC, CPE, and Baring Private Equity Asia.
E-Commerce Projects in China
Even though this industry was partially affected by the pandemic, online shopping services were able to stay afloat and even get additional funding.
The platform for exchanging used cars, DaSouChe skyrocketed in 2012 and turned out to be in great demand in China. By 2019, half a million people have used the service. The platform collects vehicle data, helps close a deal, checks the car condition, and provides after-sale services.
The total estimate is $ 3.5 billion. DaSouChe received investments from Alibaba Group, Primavera Capital Group, Morningside Ventures, Warburg Pincus, CreditEase Fintech Investment Fund.
Founded in 2015, Chehaoduo is a retailer of new and used cars. The sales are carried out through the Guazi and Maodou online platforms, as well as a mobile app and actual stores.
In 2020, the investments of the unicorn amassed to $ 3.8 billion with a total estimate of $ 9 billion. The list of investors includes 58.com, Bank of China, Bank of Communications, Capital Today, China Construction Bank, CKE, CMB International Capital, GIC, Kunshan Rural Commerce Bank, Tencent Holdings,and Tiantu Capital.
Chinese Startups Are Serious Competitors of SIlicone Valley
Observing the unicorns helps to indirectly estimate the current state of Chinese industry and technologies.
Today, it’s an impressive market with high achievements in developing AI, self-driving vehicles, and online services. But the pandemic dictated a stark change in this market. The need for security, remote education and medical services, and contactless shopping has brought some startups to new heights.
But COVID-19 isn’t even the deciding factor. Based on the general business trends and active state investments into new projects, the number of unicorns in China will only multiply, making it a serious competitor to Silicon Valley.