2018: The Year of Capital for Lei Jun

When talking about Lei Jun, people are as likely to mention his role in Xiaomi as his history as an investor. Lei Jun has already invested in numerous Internet companies. In 2018, Xiaomi is continuing its path to a public listing. 2018 is on track to be the “capital year” for Lei Jun.

At the start of 2018, Huami attracted attention with its move to go public

News came after Huami submitted its IPO proposal to the US Securities and Exchange Commission on January 12. The maximum amount of fund-raising is $138 million. It is expected to that Huami will receive a valuation of February 7 and will be listed on the Nasdaq on February 8.

Huami is Xiaomi’s ecological chain company. Shunwei Capital, which was established by Lei Jun, and the Xiaomi Fund hold 20.4 percent and 19.3 percent of Huami’s shares respectively. Several popular Xiaomi products, such as Xiaomi smart watch, Xiaomi bracelet and Xiaomi scale, are all made by Huami. In 2017, Huami contributed more than 1.5 billion yuan to Xiaomi’s sales.

Huami AMAZFIT

According to Huami’s proposal, Xiaomi is its most important customer and distribution channel. The strategic cooperation agreement between Huami and Xiaomi will expire in October 2020, but Huami is too dependent on Xiaomi – a risk mentioned in the report. Its only relationship is with Xiaomi, and Xiaomi sales will directly affect the success of Huami.

But because of this relationship, Huami’s listing is also regarded as a pre-test for the valuation of Xiaomi. Although there is no substantial support and help, it’s a great chance for Xiaomi to have one eco-chain company listed in the US. The more eco-chain companies get listed, the better Xiaomi’s position.

Xiaomi Business Model

Lei Jun has invested in his entire supply chain

When talking about the Xiaomi eco-chain, Chinese media noted that Xiaomi CEO Lei Jun has purchased the shares of more than 18 third-board companies.

Tianjin Venus Investment, established by Xiaomi and Shunwei Capital and co-founded by Lei Jun, has invested in several third-board companies, such as Dongli, Yeahmobi, Careland, HaiRun, Egret and Pcase, since 2014.

Through Kingsoft, Cheetah Mobile and Thunder Network, Lei Jun also indirectly invested in several more third-board companies, including Zhongtian Kosen, ixinyou, Moxiu, DNS.com, Anqu and Yuechuan Game.

In his own name, Lei has also invested in Stead Technology and Hechuang Technology.

Most of these are Internet technology companies, and they are suppliers in the Xiaomi ecosystem. In 2017, annual sales in Xiaomi’s ecosystem totaled 20 billion yuan. Many popular Xiaomi products, which contributed to the sales, are from the new third-board companies in which Lei invested.

Mi power bank

Dongli Technology, for instance, is the first Xiaomi eco-chain company entering the capital market, and it is listed on the new third-board.

Dongli is the parent company of Qingmi Technology, which manufactures Xiaomi patch boards. The main business of Dongli is to develop, design, manufacture and sell smart homes. The core technologies are integrated circuit technology, communication protocol technology, intelligent software platforms and analog chip technology.

Although financially Huami outperformed Dongli, Dongli still performed well in the first half of the 2017 fiscal year according to its Financial Report. The report showed revenue was 97.5 million, up 22.07 percent over the same period in 2016.

Mi power strip

Pcase is also a link in the Xiaomi eco-chain. It is a manufacturer and distributor of intelligent terminal accessories. Pcase mainly provides mobile phone peripheral businesses, such as the design, production and sale of handset shells and tablet computer shells.

Lei Jun has invested in his entire supply chain: from Internet technology and intelligent to hardware development, software and information technology, cultural and sports entertainment, SaaS and cloud computing.

However, the profitability of the new third-board companies Lei invested in was not impressive during the first half of 2017. Tencent data showed the net profits of Yeahmobi were the highest (179 million yuan), while Careland, Pcase and others were at a loss.

Xiaomi has started on its own listing

According to the pre-IPO project, currently Xiaomi is valued at $54 billion, and after listing, the conservative estimate of market capitalization will be $100 billion. It is certain that Xiaomi will have an IPO in Hong Kong. Morgan Stanley and JP Morgan have reached an agreement with Xiaomi. Pre-IPO financing launched and will be completed by February 27 this year.

Xiaomi’s eco-chain companies cannot be compared with Xiaomi in both company size and market value. But the new third-board companies played an important role in Lei Capital Territory. With the support of Lei Jun and the promotion of Xiaomi, these enterprises should be strong performers.

Lei Jun’s capital year will bring more wonderful stories to them in the future.

This article originally appeared in Huxiu and was translated by Pandaily.