Graffiti intelligence, an Internet of things platform company, recently submitted a prospectus to the US Securities and Exchange Commission and plans to IPO on the New York Stock Exchange. Morgan Stanley, Bank of America Securities and CICC acted as underwriters.
At present, the trading code, offering price range and the number of shares issued have not been disclosed in the prospectus. However, Chuangye Bang learned from people close to investors that the company, founded in 2014, had grown into a super Unicorn with a valuation of US $8.37 billion (about RMB 54.1 billion) before it went public.
Combined with the equity information disclosed in the prospectus, the total wealth of the founders behind the company has exceeded 10 billion yuan. Among them, Wang Xueji, founder and CEO of the company, holds about 11.9 billion yuan of shares; Chen liaohan, founder and President of the company, and Zhou Ruixin, CTO, also hold about several billion yuan of shares.
And they are not over 40 years old.
From student entrepreneurship army to Alibaba cloud, a group of post-80s' journey to change the world
Wang Xueji and Chen liaohan were born in 1982. In 2001, they studied in Zhejiang University of technology and became classmates. That year, the school just released the restrictions, allowing students to take computers to school, virtually giving them the opportunity to start a business.
In 2003, because of learning and interest, Wang Xueji and Chen liaohan founded a forum to discuss PHP technology. A year later, the team rented a house with a monthly rent of 3000 yuan near Xiasha university town in Hangzhou, and developed the underlying code of the community into phpwind software, which made small and medium-sized webmasters without much technical ability quickly build forums.
Graffiti intelligence founding team, photo source: graffiti intelligence official website
At that time, the forum was the mainstream form of social interest on the Internet. Phpwind is growing rapidly. In 2005, Wang Xueji and his classmates graduated, and the number of product users has reached one million level.
In 2006, with the help of capital, phpwind's operation mode changed from charging to free, ushering in explosive growth. By the time it was acquired by Alibaba in 2008, the team that built China's early Internet infrastructure had monopolized the market with another software that Tencent would later acquire.
In fact, the acquired phpwind was the first business team of Alibaba cloud, which helped Wang Jian, chief architect of Alibaba group at that time, transform Alibaba cloud from concept to product, and then realize commercialization. As a result, Wang Xueji became the first general manager of Alibaba cloud, contributing to the cloud habitat conference with great influence in the future.
In addition to Alibaba cloud, in today's Alibaba's basic business, Wang Xueji and his team have also made contributions at the senior level. He and Chen liaohan are also the founders of the incubation team of mobile Taobao. They have become the code scanning payment of the basic form of China mobile payment.
By 2014, Wang Xueji faintly felt that after entering the mobile Internet, the way of human communication will be revolutionized again.
So Wang Xueji and his classmates set out to start a business again and set up graffiti intelligence with the goal of Internet of things.
Old American venture capital helps, and Tencent shares
At the beginning of 2015, doodle intelligence received millions of yuan of angel investment from Wu Yongming, Li Zhiguo and bat capital. Among them, Qu Tian, the founding partner of bat capital and the current founding partner of ATM capital, is the operator of Alibaba's acquisition of phpwind.
Then, in the second half of the year, the company obtained US $15 million round a financing from NEA (hereinafter referred to as NEA).
NEA is Uber Driver.ai And coursera. The organization focuses on information technology and biomedical. But the proportion of Chinese companies in its investment list is not high.
In 2014, Alibaba successfully listed on the US stock market. NEA was impressed and began to keep in touch with Alibaba's internal members. Also in this communication, NEA learned about Wang Xueji's team and took the initiative to contact and ask for investment.
It turns out that NEA has become the biggest boost in the development of graffiti intelligence. With the help of NEA's huge global network of contacts, graffiti intelligence has come into contact with large overseas capitals such as quadrille capital and the Cha's family fund in Hong Kong.
Public reports show that graffiti intelligence has completed four rounds of financing before submitting the prospectus. In addition to the angel round and round a mentioned above, the company received several hundred million yuan of round B financing led by CICC and participated by Dongfang Fuhai, NEA and quadrille capital in October 2017.
One year later, round C financing of US $200 million was successfully completed. Leading investors are Australia's sovereign wealth funds, future fund, NEA and quadrille capital. In addition, CICC Silicon Valley fund, broadband capital and Hong Kong Chashi family fund have also become shareholders, driving the company's valuation to exceed 10 billion yuan.
It is worth noting that Tencent and Hillhouse later also aimed at Wang Xueji's team. The financing was rarely reported in the media, but it was exposed in the prospectus.
Graffiti smart IPO of restricted shares and common shares after round C financing photo source: graffiti smart prospectus
According to the prospectus, graffiti smart will issue 52428269 Series D preferred shares from September 16 to November 1, 2019, obtaining US $180 million. The largest subscribers are Tencent mobility limited, the Hong Kong registered entity of Tencent, NEA and broadband capital.
Just before the submission of the prospectus, nvmb XIV holding limited, a fund managed by hillhood capital, and Tencent subscribed for the company's common shares on February 1 and 2 this year, respectively. The deal totaled about $200 million, and the fair value of graffiti smart shares rose to $12.48 per share.
After that, due to the increase of IPO possibility, the decrease of market liquidity discount and the increase of market sales rate, the fair value of the company's stock per share was once again pushed up to $14.46.
Changes in the fair value of each share of the company's stock source: graffiti smart prospectus
According to people close to investors, the company issued additional employee options at the end of February. By the time the prospectus was submitted, graffiti smart had been valued at $8.37 billion.
Doodle smart shareholder structure, data source: doodle smart prospectus
In this upcoming IPO, NEA has become the largest shareholder with 23.9% shareholding, which is undoubtedly the biggest winner. In addition, Tencent also owns 10.8% of graffiti intelligence.
But it is Wang Xueji and his classmates who have benefited the most. According to the prospectus, Wang Xueji holds 22%, Chen liaohan 5.6% and Zhou Ruixin 4.2%. A new group of Billionaires will be born soon.
According to the prospectus, the revenue of graffiti intelligence is mainly composed of three parts:
One is the Internet of things PAAS, which you can understand as the Internet of things operating system running in the cloud. Through it, people can easily develop a low-cost Internet of things environment, and combine different intelligent devices into a whole solution.
In this business, the business model of graffiti intelligence is similar to that of traditional cloud computing services, charging service fees according to the number of products deployed by customers.
This part is also the main income source of graffiti intelligence. According to the financial report, this part of business contributed $76.365 million in revenue in 2019, accounting for 72.2% of the overall revenue. The proportion will be further improved after one year: by 2020, the revenue scale of Internet of things PAAS will reach US $150 million, accounting for 84.3%.
The second part is SAAS and other business. In the description of the prospectus, this part is related to the software for deploying and managing different types of intelligent devices, and it is more a shaped solution for hotels, security and other industries.
According to the prospectus, SaaS and other businesses account for far less than the former. In 2019, the business contributed $1.95 million in revenue, accounting for 1.8% of the total revenue. In 2020, the revenue will reach US $61.26 billion, but it still accounts for only 3.4% of the total revenue.
However, SaaS and other businesses are divided into industry SAAS and other value-added services in the company's business model, which are introduced side by side with PAAS of the Internet of things. And from the data point of view, this is the fastest growing part of the company's revenue.
Revenue composition of graffiti smart in each quarter, data source: graffiti smart prospectus
The last part of revenue comes from the distribution of smart devices. According to the prospectus, this revenue comes from OEM equipment sold to brands and system integrators. However, this part of the content did not enter the company's business introduction, and the proportion of scale and revenue is also shrinking.
In fact, the composition of revenue reflects the company's exploration in development.
At the beginning of graffiti smart entrepreneurship, smart wearable devices became the wind outlet. In 2013, Google publicly displayed its smart glasses Google glass, which triggered the industry's pursuit of smart wearable devices. At that time, it was generally believed that smart bracelets, smart watches, smart glasses and smart speakers would be the next subversive after smart phones.
Behind this is the consideration of cost. Wang Xueji found that the gross profit of hardware was low. In case of pressure goods, you may lose money.
Photo source: graffiti smart prospectus
The data in the prospectus can support this. The gross profit margins of PAAS and SaaS businesses of the Internet of things in 2020 are 35.9% and 75.6% respectively, while the gross profit margin of smart device distribution business is only 13%.
Combined with his early entrepreneurial experience, Wang Xueji more or less returned to his familiar field through this choice: to be an infrastructure builder in an explosive industry.
According to the prospectus, by the end of 2020, the number of PAAS deployed in the Internet of things of graffiti technology has reached 117 million, and the number of customers has exceeded 5000. Among them, 188 customers, including Philips, Schneider Electric and calex, have an annual order value of more than US $100000, accounting for 87% of the revenue of graffiti technology.
But there are challenges ahead. According to the prospectus, graffiti intelligence is still at a loss. The company's net loss in 2020 was 66.912 million US dollars (about 430 million yuan), which was narrowed from 70.477 million US dollars (about 460 million yuan) in the previous year.
Doodle smart core performance data, data source: doodle smart prospectus
In addition, the prospectus also quoted data from CIC and IDC: from 2019 to 2024, the annual compound growth rates of the total global IOT PAAS market and the size of the global IOT software market are 18.9% and 12.9%, respectively, reaching US $171.7 billion and US $237 billion, respectively.
In this market with an expected volume of less than one trillion US dollars, IC and Internet giants such as arm, Google, Microsoft, Huawei and Alibaba have also incorporated IOT operating system into their business.
How to survive and develop in the fight with giants, undoubtedly test the future ability of graffiti intelligent team.