Ren Zeping, Gan Yuan, Xie Jiaqi / Hengda Institute
Many high-quality unicorns in China have been overseas. In order to promote new economic development and allow domestic investors to share in the growth of the new economy, in 2018 the country has gradually introduced a policy to welcome the return of unicorns. What are the characteristics of unicorns? Why is it overseas? How to meet unicorns? What are the new changes in the new related policies? What are the opportunities and risks? This article aims to study the industry characteristics, business models, domestic and foreign policy differences, interpretation of domestic new policies, impact on A shares, opportunities and risks of unicorns in a textbook-based system.
What is a unicorn? The international definition of a unicorn is a company with a valuation of more than US$1 billion in less than 10 years.From a global perspective, the U.S. and China accounted for more than 70% of the companies and demonstrated the vitality of China’s new economy. According to CB Insight statistics, from 2013 to March 2018, there were 237 unicorn enterprises worldwide. Of these, 118 were from the United States, accounting for 49.78%; followed by China, with 62 accounting for 26.16%; third and fourth were Britain and India, with 13 and 9 respectively. If the valuation is by industry, the top three are financial technology, e-commerce and software services, which account for about 45% of the overall valuation. Global circulating crowdfunding and venture capital are important reasons for the rapid growth of these companies. The industry is mainly distributed in high-end manufacturing, the Internet and high-tech fields.
What are the types and characteristics of unicorns? According to the innovative form, it can be mainly divided into platform eco-type and technology-driven type.Platform ecotypes are mainly based on the Internet to build platforms and do not directly contact with entity management. Similar third parties are linking bridges for entities and consumers. "The platform" is a time-based model based on the Internet and can be summed up in three points. "Familiarity," "recognition" and "realization", the dynamics of marketing, management and finance enabled by IT Linkage. Technology-driven is driven by high technology, such as big data, cloud computing, artificial intelligence, blockchain technology, etc., representing high-tech manufacturing companies.
Why Chinese Unicorns? Different from the international definition, the Chinese unicorn needs to be registered in China.As of March 2018, there were 126 unicorn enterprises in China, distributed in 15 cities and 15 industries, with a total valuation of 625.3 billion U.S. dollars, or approximately RMB 4 trillion. In contrast to the international situation, China's unicorns have short growth cycles, strong innovation capabilities, and concentrated outbreaks. The outbreak of unicorn enterprises shows that China’s overall innovation strength has improved. These companies have led the development of new industries and promoted the development of cross-border industries in the upstream and downstream industries. "Hardtech" has become a typical feature of China's unicorn. From the investment and financial perspective, it can be seen that the preference of investors has changed from a heavy-asset traditional enterprise to a light-asset high-tech enterprise, and is often concentrated in the tuyere industry.
Where are the Chinese unicorns distributed? It is based on the Internet and focuses on "North, Shanghai, Hangzhou, and Shenzhen".According to the list of industries, companies are highly concentrated in areas such as culture and entertainment, e-commerce, automotive transportation, and technology finance. The foundation of these companies is the Internet as their carrier. The top rankings were big entertainment and e-commerce, with 18 companies accounting for 14.17% each. In terms of geographical distribution, over 80% of the unicorns are clustered in the four major cities of North, Shanghai, Shenzhen, Hangzhou and Hangzhou, while Beijing ranks first among 58 companies. In addition, Beijing has an overall estimate of 336.1 billion US dollars. Value leads other cities. Interestingly, although the number of Shanghai Unicorn enterprises is twice that of Hangzhou, the overall valuation is lower than Hangzhou, and Shenzhen ranks fourth with US$19 billion.
What are the commercial characteristics of Chinese unicorns? "Technological innovation + platform ecosystem + high-tech zone + policy support".Over 65% of Beijing Unicorn enterprises focus on “cultural content”, “big data”, and artificial intelligence. These are all outlets; 50% of Shanghai Unicorn enterprises are new Internet+ companies, such as fresh fruit, Companies such as Xiao Hongshu and Hungry, 45% of Shenzhen Unicorn enterprises are technology-driven, 14 are Hangzhou Unicorn enterprises, mainly e-commerce and internet finance, and most of them are around the Ali ecosystem. As can be seen from the list, about 50% of companies are more or less related to BAT. Among them, 27 are associated with Alibaba, 37 are associated with Tencent, and 16 are associated with Baidu; there are a total of three that are related to the three, are they hungry, drip, and Car help.
First, what is a unicorn?
1. Basic Concepts: Founded in less than 10 years, with a valuation of more than US$1 billion
The unicorn, a mythological mythical creature, resembles the spiral angle of a white horse's head. Whether in the East or West legend, the emergence of unicorns indicates the arrival of Lucky Fuyao. Because of these characteristics, Aileen Lee, a famous Cowboy Venture investor in 2013, has been established in the market for a short period of time (less than 10 years since its establishment) and has been valued by investors or valuation agencies of more than US$1 billion (approximately RMB 6.3 billion). Startup companies, collectively referred to as "Unicorns". The word "unicorn" has become popular in the United States and quickly spread to the international community.
Therefore, for the concept of unicorn, the criteria for the determination are two points: one is time; the other is valuation.
Divided by time, the standard reached in 2 years is called a newborn unicorn or a newborn unicorn, and if it exceeds 10 years, it will be excluded from the list.
In terms of valuation, valuations of less than US$1 billion but potential for growth are called potential unicorns; estimates of between 1 billion and 10 billion are common unicorns; valuations exceed US$10 billion (about 6300 (billion yuan) is a super unicorn.
2. International overview: China and the United States lead the world in terms of quantity, high investment and financial growth to increase the number of unicorns
From a global perspective, the United States and China divide up more than 70% of companies.The U.S., as the country of origin of the unicorn concept, topped the list of leading colonies for several years. According to CB Insight statistics, from 2013 to March 2018, there were 237 unicorn enterprises worldwide. Of these, 118 were from the United States, accounting for 49.78%; followed by China, with 62 accounting for 26.16%; third and fourth were Britain and India, with 13 and 9 respectively.
From the perspective of valuation, the total size of the company reached US$837 billion in 2018, peaking in 2014 and 2015. According to the country's classification, the United States still holds the first place and China ranks second, but the gap between the two countries is not large and the average valuation of each company in China is much higher than that of the United States. If the valuation is by industry, the top three are financial technology, e-commerce and software services, which account for about 45% of the overall valuation.
Looking at the situation of investment and financing, it is not difficult to find that the birth of unicorns is closely related to external investment and financing. Judging from the number of freshmen each year, 2015 and 2017 were the peak period for the production of unicorns, with 66 and 65 start-up companies respectively. Among them, the United States accounted for 32 and 28, and China accounted for 18 and 22. In the case of a large increase in investment and financing in the previous year, the growth rate of Unicorn will increase in the next year. For example, under the condition of high investment and financing growth in 2014, 2015 was the year when the number of freshmen broke out. As global liquidity strengthens, the development of technology is accompanied by the development of capital injection. Global circulating crowdfunding and venture capital are also one of the important reasons for the rapid growth of these companies.
From the perspective of industry distribution, companies are mainly distributed in the three major areas of high-end manufacturing, the Internet, and high-tech. There are 32 different types of industries, and the top four e-commerce, software services, financial technology, and great health groups have 37, 34, 27, and 17 respectively, accounting for about 60% of the total.
Technology-oriented high-tech and high-end manufacturing are mainly focused on vehicles, hardware, and big data and artificial intelligence: such as SpeceX, Weilai is a representative of transportation; Xiaomi, Meizu, and Royale Corporation are representatives of hardware, Qultrics, Palantir Technologies is a big data representative.
The Internet is based on the platform ecology (this feature is explained in detail below), mainly in e-commerce, financial technology, software services, on behalf of the company is Ant Financial, the United States Volkswagen, Airbnb and so on.
3. What are the characteristics of unicorns?
According to the innovative form, it can be mainly divided into platform eco-type and technology-driven type.
Platform ecotypes are mainly based on the Internet to build platforms and do not directly contact with entity management. Similar third parties are linking bridges for entities and consumers. The main companies are Uber, Lyft, and the United States Public Comments Group. The core idea of platform eco-business is to rely on the platform to "share".
What is the platform? The platform is a business model created by human beings. It aims to use a powerful Internet effect to blur boundaries to conduct multi-group interactions. In addition to affecting its own user base, a good platform can also expand and redefine the industry structure and formulate industry rules. "The platform" is a time-based model based on the Internet and can be summarized in three points. "Familiarity," "recognition," and "dealing", the dynamics of marketing, operations, and finance enabled by IT Linkage. The enterprise develops mobile user space according to the user's needs. After the user is familiar with it, the user is promoted in the surrounding area. After that, the user and the user form a network of interpersonal relationships. The brand effect is deeper, the user's stickiness is improved and the user's sense of dependence is enhanced, the user's replacement cost will be increased, and a long period of continuous and user activity will form a good cycle. When the enterprise platform users expand to a certain scale, there will be a strong flow guiding effect, and it will be easier and more valuable to realise. Relying on the powerful capital accumulation, resource integration, and system management capabilities of platform-based companies, the unicorn enterprises that have emerged have exhibited significant explosive growth characteristics.
For example, the public opinion of the United States Group, the strength of the wisdom of catering on the mobile side is beyond doubt. In 2017, the transaction volume exceeded 360 billion yuan, accounting for 85% of the market share, and mobile transactions accounted for about 95%. With a high percentage of market share, the U.S. group is based on existing traffic users, and the deployment of other industries is also faster and more convenient. On March 21 this year, the U.S. delegation took a taxi to enter Shanghai and officially entered the taxi market. In addition to further tapping user value and improving the ecological layout of the company, the move is also aimed at enhancing the valuation of corporate capital markets and realizing the realization of traffic flow.
"Sharing" is to break the gap between private and public, traditional and technological, industry and community. Enterprises that have no resources can interconnect and increase availability, liquidity, and economy. The focus is on "technical + traditional" and "cross-border". "Traditional + science and technology" has broken through the barriers to solidification and reduced the regional spirit while bringing vitality to enterprises. Cross-border cooperation blurs the boundary of scope, integrates resources, and optimizes the allocation of resources, each exerting its advantages to bring about an optimal economic solution. For example, Uber, Didi, and Lyft are integrations for travel and sharing by car; Airbnb is an integration of hotel housing and accommodation.
Technology-driven is driven by high technology, such as big data, cloud computing, artificial intelligence, blockchain technology, etc., representing high-tech manufacturing companies. Most of these companies are continuous innovation and have a natural monopoly, with the emphasis on differentiation. For example, Tesla, an electric car leader, analyzed that its three core technologies, including battery technology, motors and control technology, and overall integration capabilities, make Tesla electric vehicles different in performance and appearance. After that, Tesla conducted space space technology exploration again, further pushed up the technical barriers of enterprises and expanded the development space. The advantage that high-tech brings in comparison with other traditional enterprises cannot be compared to is one of the important reasons for the rapid development of technology-driven enterprises.
In addition, from the economic aspect, most of these unicorns affect the economic operation of the industry and even change the mode of operation. For example, Alibaba introduced Alipay and introduced changes in its payment methods. After years of consumer training, Alibaba has formed and released various payment habits for various industries. From the perspective of using senses, these companies give consumers different ways to use traditional or cognitive. Such as Apple's Siri artificial intelligence system, Amazon's Alexa, Alibaba's Taobao and so on. The use of these innovative methods will allow consumers to have a deep impression for the first time. Second, regardless of efficacy or interest, they support consumer use. To do this, the unicorn company's road to success will be successful.
Second, why are Chinese unicorns so cattle?
1, Fast growth, wide range, concentrated outbreaks, investor industry concentration
In addition to the internationally-defined concept of unicorns, the 2016 China Unicorn Enterprise Development Report released by the Ministry of Science and Technology Torch Center in collaboration with the Great Wall Institute of Corporate Strategy gave the concept of a Chinese unicorn, defining standards. The following four points need to be met: 1) a company with legal personality registered in China; 2) a time of establishment of no more than 10 years; 3) private equity investment and not yet listed; 4) valuation of the company exceeds 1 billion US dollars.
According to this definition, combined with the list of Hurun, IT Orange, CB Insight, Torch Center of Ministry of Science and Technology, and PitchBook, the total number of unicorn enterprises in China as of March 2018 totals 10 The 15 cities in the city had a total valuation of 625.3 billion U.S. dollars, about 4 trillion yuan, of which 11 were super unicorns, which accounted for more than 10 billion U.S. dollars, accounting for 8.66% (see the Appendix for details). Compared with the 2014 Torch Center released by the Ministry of Science and Technology, from 2014 to 2018, the number of unicorns in China has undergone tremendous changes, with an average of 19 new unicorn enterprises each year, which has grown into an index change. This also reflects the short growth cycle, innovative ability, and concentrated characteristics of new start-ups in China. The outbreak of unicorn enterprises shows that China’s overall innovation strength has improved. These companies have often become leaders in leading the development of new industries. They have also promoted the development of even more cross-border industries in the upstream and downstream industries, stimulating the regional economy and becoming new. A strong economic support. "Hardtech" has become a typical feature of China's unicorn. "Hardtech" can effectively create high-end supply and effectively optimize China's economic structure.
From the perspective of investors, the rapid development of unicorn enterprises can not be separated from the high level of capital support. According to statistics from Hurun Research, Sequoia Capital ranked first in funding for 27 unicorns and over US$5 billion in investment. In addition to other well-known venture capital companies, the largest number of unicorn investment companies is the BAT system, with Tencent ranked first. The areas of concern of these investment entities are different each year, but in the same year, the focus will be highly concentrated in similar areas. For example, in 2015, it focused on sharing bicycles and Internet finance; in 2016 and 2017, it focused on culture, entertainment, artificial intelligence, and big data.
As for the reasons for such high concentration, from the perspective of these investee companies, these investment and financing institutions preferred technology companies that possess technology gates or differentiated technologies. The technology of these companies is often welcomed. Then the head is BATHM's layout in order to improve the ecology. The most important point is that investment and financing has now gone from traditional heavy-duty fixed assets to highly technological and innovative light-asset companies.
2. Geographical characteristics of the industry: It is based on the Internet and focuses on "North, Shanghai, Hangzhou, and Shenzhen".
According to the list of industries, companies are highly concentrated in areas such as culture and entertainment, e-commerce, automotive transportation, and technology finance. The foundation of these companies is the Internet as their carrier.
Ranked first in the big entertainment industry and e-commerce, each accounting for 14.17%. Big entertainment includes cultural media, live video, animation, ticketing and other sub-sectors. Companies include iQiyi, Betta TV, Himalayan FM, fast-handed, today's headlines. And these companies pass the point is in the user group traffic, in-depth user experience with content, increase user stickiness, "content" dispute is the point of these companies to distinguish with other companies.
The e-commerce industry has rapidly developed from the emerging industry to a mature and stable period. The business model is clear and the profit model is obvious. Unicorn enterprises are highly concentrated in these industries. The current e-commerce industry may be more appropriate for new retail, including fresh retail, group purchase, maternal and child e-commerce, and furniture e-commerce. Experienced traditional B2C, B2B, C2C, O2O to the new retail now, relying on the Internet sales model, the speed of transformation iterations can only be faster than consumers think. It is one of the main modes of this industry that the "Link + Online Retail" is connected to the online link. The industry's focus is on customer traffic: the online and offline flows are fed back to each other, and mutual assistance is the essence.
The rapid development of these two areas is inseparable from the consumption upgrade, and the data can also be seen to change people's consumption patterns. Purely "desired goods" can no longer be satisfied with consumption, and contemporary consumers, the escalation of consumption escalation, from the material to the spirit, from the tradition to the intelligence are the needs of the times.
In terms of geographical distribution, over 80% of the unicorns are clustered in the four major cities of North, Shanghai, Shenzhen, Hangzhou and Hangzhou, while Beijing ranks first among 58 companies. In addition, Beijing has an overall estimate of 336.1 billion US dollars. Value leads other cities. Interestingly, although the number of Shanghai Unicorn enterprises is twice that of Hangzhou, the overall valuation is lower than Hangzhou, and Shenzhen ranks fourth with US$19 billion. From this point of view, unicorn enterprises are mainly distributed in the capital and the Pearl River Delta region.
In terms of geographical distribution, many unicorns gather in “North, Shanghai, Hangzhou, and Shenzhen” because of the high level of economic and technological development of these cities and the support of the government. The policies of the High-tech Zone encourage innovation; secondly, these cities With a large number of people, there is a clear trend in the flow of talents. Third, these cities have head and create companies that bring innovative atmosphere to the entire environment, such as Alibaba Group in Hangzhou; Baidu, Sohu and Sina in Beijing; Tencent in Shenzhen; and Shanghai. The United States public comment.
3. Business Characteristics: "Technology Innovation + Platform Ecology + High-tech Zone + Policy Support" ”
On the whole, most of these companies are located in the National High-tech Park, and the National Hi-tech Park serves as a gathering place for national economic development. The outbreak of Unicorn reflects the vitality of the new economy and the importance of science and technology. Looking at each other, the development areas of the four regions are also different: Over 65% of Beijing Unicorn enterprises are concentrated in “cultural content”, big data, and artificial intelligence. These are all outlet areas; Shanghai Unicorn Enterprises 50% are new Internet+ companies, such as fresh fruit, small red books, hungry, etc.; 45% of Shenzhen Unicorn enterprises are technology-driven; 14 Hangzhou Unicorn enterprises, with e-commerce and internet finance. Mainly, most of them are around the Ali ecosystem.
In addition to the boost of the Hi-tech Zone, China’s growth of “unicorns” cannot be separated from the gestation of platform companies. Under the new economic background, fission splitting became the new generation of Chinese unicorn enterprises. In 2017, a total of 36 unicorn enterprises were split from the fission of platform-based enterprise business, accounting for 28.35% of China's unicorn enterprises. Relying on the powerful fund accumulation, resource integration, and system management capabilities of platform-based companies, the unicorn enterprises that have emerged have exhibited significant explosive growth characteristics. The platforms that are keen to incubate unicorns include Alibaba, Tencent, Jingdong, and China Ping An.
Under the current trend of corporate ecologicalization, unicorn enterprises have become an important component of the corporate ecological chain. Through self-incubation and strategic investment, platform-based companies can build a complete ecosystem. As can be seen from the list, about 50% of companies are more or less related to BAT. Among them, 27 are associated with Alibaba, 37 are associated with Tencent, and 16 are associated with Baidu; among them, three are associated with the three. Are they hungry or drip? And car help.
In terms of valuation, a total of 11 super unicorn enterprises with valuations of over 10 billion U.S. dollars, in addition to Dajiang Science and Technology, are all related to BAT (Alibaba has once injected capital to Xiaomi Technology). It can be seen that the more companies with high market value, the higher the possibility of association with BAT.
In terms of policies, insisting on innovation is the primary driving force for development. The rapid development of unicorns is also inseparable from a friendly policy environment. With the “13th Five-Year Plan” issued by the State Council stressing that it will enter the ranks of innovative countries on schedule and lay a solid foundation for building a strong world in science and technology, China will continue to implement innovation-driven development strategies and support supply-side structural reform as the main line. . The Nineteenth Congress will also make high-tech development a top priority, comprehensively deepen the reform of the science and technology system, vigorously promote all-round innovation with science and technology innovation at its core, and shape leading-edge developments that rely more on innovation-driven and more first-mover advantages.
Appendix: List of Chinese Unicorns
Source: Evergrande Research Institute (combined with Hurun, IT Orange, CB Insight, Torch Center, Ministry of Science and Technology and PitchBook)