5 ms·

Xiaomi raises $1.1B on a $45B valuation

51 points by moritzplassnig 12y ago

pearjuice 12y ago
So any explanation on what a company with a $45B valuation needs an investment of $1.1B for?
- waihtis 12y ago
  valuations are based on future incomes.
- repsilat 12y ago
  They make smartphones -- they're a hardware company. The money will probably help them ramp up production and increase advertising presence. The valuation implies that they're profitable, but it takes time for profitability to turn into cash in hand. Raising this money (an action pretty similar to taking out a loan) will let them strike while the iron is hot.
  - justaman 12y ago
    It appears their margins are razor thin. http://www.forbes.com/sites/parmyolson/2014/12/15/xiaomi-profit-margins-samsung-china/ http://www.forbes.com/sites/parmyolson/2014/12/15/xiaomi-pro...
  - tiatia 12y ago
    "They make smartphones -- they're a hardware company." Actually, they don't make smartphones. They design and sell smartphones.
- mc808 12y ago
  Valuation is descriptive, not really relevant to how much they need or raise. If you can raise $1 by selling 0.00000000222% of your company, then the company has a $45 billion valuation for the time being (if I counted 0s correctly).
- spacefight 12y ago
  Marketing. Buying IP to protect future growth.
echoless 12y ago
Looks like they've got the war-chest ready to defend against future lawsuits when they get into markets that actually take IP laws seriously. Their hardware's actually decent, but they shamelessly ripoff Apple. They could have gone the route of providing the same hardware with stock android and getting treated like a credible company. Instead, they ripped off iOS wholesale.
- touristtam 12y ago
  boohoohoo, this is the same argument over and over again. :p Although I have yet to find how to block permissions per app on iphone. For the UI I don t see why this is even an issue. Xiaomi is selling an android device customized for the chinese market primarly and not a generic idevice (which would be impossible anyway). I d like to think you are correct about pre empting future lawsuits. disclosure: I own a Mi2s device in the uk and I am quite happy about it, despite the lack of 4G and sd card reader.
- smackfu 12y ago
  Why would they bother going into the EU or US?
  - Giulalbez 12y ago
    Their phones are already getting there, anyway.
- Giulalbez 12y ago
  It was known when they launched, that xiaomi's interface look was apple "inspired", but besides that I dont know why it can be called shameless ripoff, sure there must be other reasons. The feel and look of the phone actually have some kind of own personality, is different from IOS and different from stock Android, and probably will get more different with time. Apple, probably, somewhere in time also took "inspiration" from other companies ideas.
WhitneyLand 12y ago
Will someone please explain this valuation? A company with very thin margins, no defendable IP, and very little barrier to entry for competitors. Yes I've noticed they seem to be executing well and starting international expansion but I can't see how investors get past the first three points.
- akhatri_aus 12y ago
  Its probably something to do with their revenue growth. While they have razor thin margins, its very easy to increase them once there's some kind of brand established. There's probably that bit of 'unknown' in there too, being that the company may be able to penetrate the Chinese market in creating a desirable product very well. The unknown being the Chinese market could be significantly larger than western markets in terms of how a single company could scale its sales in the single geographic location in such a way that history may not have seen before.
  - steveax 12y ago
    Very easy to increase margins? Historically, this is very difficult for companies to do. What makes Xiaomi special in this aspect?
    - akhatri_aus 12y ago
      It's building recognisable brand, and that too a fairly good one. Historically it's been quite easy for companies that do this to raise margins. This is a company barely 4 years old and quite nearly a household name in asian countries. Additionally when manufacturing electronics, input components decrease in price so there is a natural tendency for their margins to increase even if they keep their pricing consistent.
  - Giulalbez 12y ago
    Xiaomi recently bought large stakes in chinese "youtubes" companies, YiQiYi and youku, it seems those companies are investing in creating their own TV shows and stuff, and big brands are advertising on the videos people in China already watch on those sites. The quality of the advertisings increased drasticcaly recently, with even big international brands advertising on them. Maybe someday phones will be like video-game consoles, where they loose money selling the hardware to make money on apps or services.
chvid 12y ago
A bit funny that this is announced on Facebook given that Facebook is blocked in China.
passive 12y ago
Neat. Their phones always interested me, but I recently got a pair of their headphones, which are amazing. Not just in the quality of the item itself, but the fact that they are made on the other side of the earth, and arrive at my door rather promptly for less than an hours wages. (I know that point itself isn't unique to Xiaomi, but they are exploiting it to great success)

So any explanation on what a company with a $45B valuation needs an investment of $1.1B for?

waihtis 12y ago
valuations are based on future incomes.
repsilat 12y ago
They make smartphones -- they're a hardware company. The money will probably help them ramp up production and increase advertising presence. The valuation implies that they're profitable, but it takes time for profitability to turn into cash in hand. Raising this money (an action pretty similar to taking out a loan) will let them strike while the iron is hot.
- justaman 12y ago
  It appears their margins are razor thin. http://www.forbes.com/sites/parmyolson/2014/12/15/xiaomi-profit-margins-samsung-china/ http://www.forbes.com/sites/parmyolson/2014/12/15/xiaomi-pro...
- tiatia 12y ago
  "They make smartphones -- they're a hardware company." Actually, they don't make smartphones. They design and sell smartphones.
mc808 12y ago
Valuation is descriptive, not really relevant to how much they need or raise. If you can raise $1 by selling 0.00000000222% of your company, then the company has a $45 billion valuation for the time being (if I counted 0s correctly).
spacefight 12y ago
Marketing. Buying IP to protect future growth.

Looks like they've got the war-chest ready to defend against future lawsuits when they get into markets that actually take IP laws seriously. Their hardware's actually decent, but they shamelessly ripoff Apple. They could have gone the route of providing the same hardware with stock android and getting treated like a credible company. Instead, they ripped off iOS wholesale.

touristtam 12y ago
boohoohoo, this is the same argument over and over again. :p Although I have yet to find how to block permissions per app on iphone. For the UI I don t see why this is even an issue. Xiaomi is selling an android device customized for the chinese market primarly and not a generic idevice (which would be impossible anyway). I d like to think you are correct about pre empting future lawsuits. disclosure: I own a Mi2s device in the uk and I am quite happy about it, despite the lack of 4G and sd card reader.
smackfu 12y ago
Why would they bother going into the EU or US?
- Giulalbez 12y ago
  Their phones are already getting there, anyway.
Giulalbez 12y ago
It was known when they launched, that xiaomi's interface look was apple "inspired", but besides that I dont know why it can be called shameless ripoff, sure there must be other reasons. The feel and look of the phone actually have some kind of own personality, is different from IOS and different from stock Android, and probably will get more different with time. Apple, probably, somewhere in time also took "inspiration" from other companies ideas.

WhitneyLand 12y ago

Will someone please explain this valuation? A company with very thin margins, no defendable IP, and very little barrier to entry for competitors. Yes I've noticed they seem to be executing well and starting international expansion but I can't see how investors get past the first three points.

akhatri_aus 12y ago
Its probably something to do with their revenue growth. While they have razor thin margins, its very easy to increase them once there's some kind of brand established. There's probably that bit of 'unknown' in there too, being that the company may be able to penetrate the Chinese market in creating a desirable product very well. The unknown being the Chinese market could be significantly larger than western markets in terms of how a single company could scale its sales in the single geographic location in such a way that history may not have seen before.
- steveax 12y ago
  Very easy to increase margins? Historically, this is very difficult for companies to do. What makes Xiaomi special in this aspect?
  - akhatri_aus 12y ago
    It's building recognisable brand, and that too a fairly good one. Historically it's been quite easy for companies that do this to raise margins. This is a company barely 4 years old and quite nearly a household name in asian countries. Additionally when manufacturing electronics, input components decrease in price so there is a natural tendency for their margins to increase even if they keep their pricing consistent.
- Giulalbez 12y ago
  Xiaomi recently bought large stakes in chinese "youtubes" companies, YiQiYi and youku, it seems those companies are investing in creating their own TV shows and stuff, and big brands are advertising on the videos people in China already watch on those sites. The quality of the advertisings increased drasticcaly recently, with even big international brands advertising on them. Maybe someday phones will be like video-game consoles, where they loose money selling the hardware to make money on apps or services.

chvid 12y ago

A bit funny that this is announced on Facebook given that Facebook is blocked in China.

passive 12y ago

Neat. Their phones always interested me, but I recently got a pair of their headphones, which are amazing. Not just in the quality of the item itself, but the fact that they are made on the other side of the earth, and arrive at my door rather promptly for less than an hours wages. (I know that point itself isn't unique to Xiaomi, but they are exploiting it to great success)