Xiaomi Inc. is now the world’s most valuable technology start-up, The Wall Street Journal reported.
The Chinese smartphone maker has raised US$1.1 billion in the latest round of venture capital funding, valuing the firm at more than US$46 billion, including the fresh capital.
Xiaomi’s valuation ranks it above all other start-ups backed by venture capitalists, including Uber Technologies Inc., the US taxi-booking app that said earlier this month a new round of funding valued it at US$41 billion.
The Beijing-based technology startup, chaired by co-founder Lei Jun, rose to become the leader in market share of the Chinese smartphone market in just four years.
Now, investors are hoping the firm can build a more lucrative business around not just cheap smartphones, but software and services to users of its devices, while replicating its success in other internet-connected home electronics, the report said.
For Xiaomi, selling its smartphones at rock-bottom prices is a way to acquire users for apps and other services, and growing hopes for that business model is at the heart of its surging valuation, the newspaper said, citing a person familiar with the firm’s latest round of funding.
Lei confirmed the latest funding round in an announcement on his Chinese microblog page Monday.
Investors included Hong Kong-based technology fund All-Stars Investment Ltd., Russian investment firm DST Global, Singapore sovereign wealth fund GIC Pte. Ltd., and Yunfeng Capital, a private equity firm affiliated with Alibaba Group Holding Ltd. executive chairman Jack Ma Yun.
Running a platform that distributes apps and other services and taking a cut from their revenue can be more profitable than selling hardware, the report said.
For example, Chinese internet giant Tencent Holdings Ltd. (00700.HK), whose main businesses are online games and social networks, had a net profit margin of 29 percent in the third quarter.
Because Xiaomi is still private, it doesn’t disclose profit margins. But a confidential document viewed by The Wall Street Journal last month showed Xiaomi HK Ltd., the unit that controls the firm’s domestic and Taiwan units, had a profit margin of 13 percent.
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