Estimated valuation: $45 billion

Product: Consumer Electronics, Mobile Phones

IPO Timeline: 2025 

Date Founded: April 2010

Smart phone maker Xiaomi Inc., based in Beijing, has grown into the industry's fifth-biggest global producer in the six years since it was founded. It sold 15.5 million phones in the second quarter alone, competing against giants such as No. 1 Samsung and No. 2 Apple Inc. (AAPL), according to Gartner.

Xiaomi's Serial Founder

The entrepreneur behind that success is founder and CEO Lei Jun, age 47. Jun developed a strong track record building companies before Xiaomi. After graduating from Wuhan University with a BA in computer science, Jun worked at Kingsoft, a Chinese software company, eventually becoming CEO. Then he founded Joyo.com, an online bookseller, which was eventually sold to Amazon.com. He’s also remained an active investor in more than 20 e-commerce, social networking and mobile companies, including YY.com, according to Forbes.

Started in April 2010 by eight people including Jun, the company grew rapidly in its major market, mainland China, by selling smartphones at lower prices than larger rivals, entrenching itself in the market. Even with its low-price strategy, the company still made a profit through a different approach to selling compared to Samsung and Apple. Xiaomi sells its phones nearly at cost and makes money on accessories, apps, smart-home products, videos and other products. The company has succeeded in keeping many of its customers locked into its ecosystem, including by providing them with exclusive content and differentiated apps by using flash sales and social media to market phones such as the Mi series, the Mi Note Series, and the RedMi Series.

Overheated Phones, Slowing Growth

Xiaomi has faced stiffening competition in the past two years as Chinese handset makers such as Oppo Electronics and Vivo undercut Xiaomi's prices. Despite selling more than 70 million smartphones in 2015, Xiaomi’s revenue struggled to grow, rising only 5% to $12.5 billion, according to Fortune, as user complaints about hot phone temperatures, tepid consumer reviews and a slowing smartphone market hampered sales. To bolster revenues, Xiaomi has entered India and Brazil partnering with local retailers or opening up manufacturing plants.

The company's image has been hurt by the overheating of some Xiaomi phones. In an attempt to address the problems, the company has put out videos and notices on websites as well as issued software updates. It’s unclear how widespread this issue is and there have been no reports of exploding phones as occurred with Samsung's Galaxy Note 7.

Big Venture Capital Backers

Those problems haven't scared away a long list of big name venture capital funders. Xiaomi's large China footprint has enabled it to raise $1.45 billion in six funding rounds. In December 2010, it raised $41 million in a Series A funding round, raising another $90 million a year later. Backers include Morningside Group, Qiming Venture Partners, Temasek Holdings, IDG Capital Partners and Qualcomm Ventures, which is the VC arm of chipmaker Qualcomm Inc., which has a strong relationship with Xiaomi, according to Crunchbase.

Qualcomm Ventures has invested in companies like Doctors on Demand, 99Taxis, Zoom and others. Temasek Holdings, the investment vehicle of Singapore, has invested in companies such as Airbnb, Jet, Didi Chuxing and others. And Morningside has made 133 investments over its lifetime.

IPO Plans

Many investors have speculated when Xiaomi might be ready to go public. Founder Jun says he's in no hurry. Jun has previously stated on the record, according to CNBC,  that he intends to take Xiaomi public no sooner than 15 years after its founding, or around 2025. He insists Xiaomi won't go public until it's ready. "We believe Xiaomi needs to be trusted by consumers from the bottom of their heart,” Jun was quoted as saying at a conference with respect to his IPO plans.

 

 

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