Almost 100 tech companies reached a valuation of more than $1bn in China last year, led by ecommerce and video-streaming services, according to an annual ranking of the country’s top tech businesses by Hurun.
Hurun, which is best known for compiling an annual rich list, said China now had 186 tech start-ups worth more than $1bn, led by the fintech Ant Financial, which is worth Rmb1,000bn ($148bn).
The fastest growing start-ups include ByteDance, whose offerings include the Toutiao news feed and short video-streaming Douyin; Tencent-backed short-video app Kuaishou; and Meicai, an online platform for farmers selling vegetables. All three saw their valuations rise by 400 per cent in the past year.
The fastest growing sectors, in terms of valuation, were internet services, medical and health companies, and education.
But Hurun’s data showed a sharp slowdown in the final quarter of last year, when just 11 companies saw their valuations hit the $1bn mark. That compared with 86 over the previous three quarters.
Last year saw 24 Chinese tech initial public offerings, according to Hurun, but the weak performance of many of these companies on the public markets has soured investor sentiment. All but a handful of the listings in 2018 ended the year below their IPO price.
Allied with deflated valuations and a reduction in financing, many start-ups are braced for a capital winter. “Valuations have to come down to a level which is more sensible,” said one capital markets lawyer, pointing to a number of “down rounds” valuing start-ups below their previous fundraising.
“We’ve had a remarkable boom in unicorns [companies worth more than $1bn] over the past year, no question,” said Rupert Hoogewerf, founder of Hurun. “But clearly, to find a new unicorn every four days is just unsustainable. No country in the world is doing that.”
In the final quarter, he said, Hurun marked down valuations or eliminated six to eight companies that had been on the list, including ofo, the bike-sharing group that is facing bankruptcy.
Sequoia led the ranks of backers, investing in 49 start-ups last year, up from 27 in 2017. Tencent and Alibaba, China’s acquisitive tech giants, also played a key role. Tencent invested in 30 this year, while Alibaba backed 17.
The duo are favoured by start-ups, in large part because they are able to send traffic from their platforms, such as Tencent’s WeChat, which has more than 1bn users, to their apps.
Additional reporting by Nicolle Liu
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