1) Let's talk about how Xiaomi's one of the savviest and stealthiest Chinese tech investors bar none.
Their playbook involves selling mobiles close to margin to land a consumer, before upselling that customer on products they've invested in.
Almost Shopify for hardware
Their playbook involves selling mobiles close to margin to land a consumer, before upselling that customer on products they've invested in.
Almost Shopify for hardware
2) Xiaomi famously announced they would never make more than 5% in profit margin from hardware in 2018.
Because they see the phone as a distribution channel for their platform of products and services, the phones are cheap to basically acquire consumer 'traffic'.
Because they see the phone as a distribution channel for their platform of products and services, the phones are cheap to basically acquire consumer 'traffic'.
3) Xiaomi carries over 2,000 consumer devices in their online and offline stores, of which it is only responsible for a select few, like TV, Xiaomi Pad and speakers.
The rest is made by 400 partner companies.
But Xiaomi isn't a simple retailer, they are a platform
The rest is made by 400 partner companies.
But Xiaomi isn't a simple retailer, they are a platform
4) You see, Xiaomi realised earlier on that it had crucial assets such as existing supplier relationships, distribution channels, and the Xiaomi brand.
All of which would help fledging hardware startups gain a foothold in the highly competitive white goods space
All of which would help fledging hardware startups gain a foothold in the highly competitive white goods space
5) So they offer all of this and capital to startups.
Let Xiaomi invest, the offer goes, and Xiaomi opens their product expertise, consumer distribution channel, supplier bargaining power and brand equity all to the startup.
It is a powerful lure and most startups take it.
Let Xiaomi invest, the offer goes, and Xiaomi opens their product expertise, consumer distribution channel, supplier bargaining power and brand equity all to the startup.
It is a powerful lure and most startups take it.
6) Xiaomi's investment portfolio is sizable - 330 companies worth $9.1bn in unrealised book value as of June 2021. In 2020, they made $345m (post-tax) from exits.
Companies such as Niu (scooter), Huami (wearable) and Ching Mi (power strip) have IPO'ed off Xiaomi ecosystem
Companies such as Niu (scooter), Huami (wearable) and Ching Mi (power strip) have IPO'ed off Xiaomi ecosystem
7) The investment arm also coupled with Lei Jun (Xiaomi founder's) VC firm work together to acquire strategic intelligence on the market. Before Xiaomi entering EV, they have had investments in NIO and Xpeng already.
8) In 2020, they ranked number two in number of investments made by Chinese big tech, behind only Tencent (who invests as a business)
9) News came yesterday that Xiaomi just set up a new PE fund of RMB 1.1 billion ($172.7 million). I sense this is to gear up for bigger checks as they go deep into EV's supply chain
If you want to know more, I wrote a deep-dive on Xiaomi for premium subscribers a while back. lillianli.substack.com/p/premium-xiao…
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