A member of the top 25 from the Global Corporate Venturing Powerlist
In the April issue of Wired magazine, a profile of Xiaomi co-founder Lei Jun looked at how he had “built a company priced by its investors at $45bn – briefly the world’s most valuable tech startup – by creating not a smartphone business, but a new kind of internet-enabled ecosystem: one that turns customers into ‘fans’ who co-design and then evangelise products; that transfers market-demand risk to small hardware startups in which it tactically invests; that slashes costs by minimising inventory and optimising supply chains in fresh ways; and that, by selling high-quality devices at prices so low as to obliterate margins while profiting from services, content and accessories, is innovating at the top of its market”.
The profile added: “In five years, Xiaomi has built a base of 160 million phone users, entered markets such as Indonesia and India, and challenged western assumptions of how Chinese tech companies think.”
As a co-founder with Lei and Hong Feng, Liu De is responsible for Xiaomi’s industrial design and Xiaomi’s head of ecosystem products and is understood to have invested into about 100 startups, three of which are already valued at more than $1bn, according to a shareholder in Xiaomi.
As well as cash thrown off from its internet platform and phone sales, Xiaomi has raised substantial amounts from corporate, government and other venture investors. Xiaomi, the China smartphone manufacturer backed by media company IDG and wireless technology producer Qualcomm, raised $1.1bn in series E funding in early 2015 at a valuation of $45bn, according to the company’s president Bin Lin, a deal that won Global Corporate Venturing’s Large Investment of the Year award. Deals over the past two years to April 2015 when Lei said he wanted to achieve a goal of 100 investments, include data centre service provider 21Vianet, video content portal iQiyi, downloading technology company Xunlei and personal transportation technology provider Ninebot.
In Wired’s profile, Liu said: “We have reviewed 600 startups in the past two years, and invested in 54. We help them define their product and use our sales channel, supply chain, branding and financing. They are our special forces, and we are the commander.
“Usually within one meeting [we have decided whether to invest or not, a decision made by his team of 20 engineers]. We respond much faster than traditional investors.
“It is a totally new model for high-tech innovation. Most VCs and investors tend to have experience in software and internet companies, not hardware – so a lot of the famous VCs rely on Xiaomi’s judgment and follow up on our investments.
“We do not care about a company’s valuation – only whether it has the best product and team. These 20 engineers will join the companies’ boards, but never as an opposition vote. We respect the founders and their dreams.
“The internet of things will be even more significant than smartphones and mobile internet. Wearables, watches, scales, home appliances will be connected, and your smartphone will be the connector. We need to grab this opportunity. The ecosystem is our bet on the future. In 10 years’ time, people will see that Xiaomi has changed the Chinese market.”
Louie Gao, Ninebot’s CEO and founder and a portfolio company of Xiaomi, agreed and said Xiaomi’s team helped five-year-old Ninebot in its 2015 acquisition of Segway, according to the Wired profile of the company. He told Wired that Xiaomi was “much more involved than a typical investor – they will give feedback, help iterate the design, make intros to supply partners, offer sales channels. That could mean a fivefold difference in sales volumes. Lei Jun gave feedback about its appearance – he suggested the shape of its knee-high handles.”
As Lui graduated from Art Centre College of Design and received master’s degree before returning to China and founding the Industrial Design Department of Beijing University of Technology, this type of ergonomic feedback and attention to detail might well have been the type he could have provided.
Xiaomi’s investment activity since the beginning of 2015
