Chinese Internet companies are in the limelight, and valuations are too high to worry about?

Dry Goods: 2014 China's concept of technology stocks in the U.S. market, the amount of money has been set record, but in this boom also can not help but worry about whether the Chinese technology start-up companies valuation is too high. The biggest attraction of China's technology start-ups stems from its huge user base and rapid user growth, but whether these indicators can be translated into revenue or profit is debatable. Another big challenge for application investors is whether Chinese consumers are willing to pay for online services, which is a mystery.

China's technology start-ups have made a record of the investments they have raised from investors, raising concerns that these companies are overvalued.

One of
's most recent deals has been to comment on the Web site for 800 million of dollars in funding. Demand from new investors has boosted the value of finance, which, according to the source, has raised the value of the site to around 4 billion dollars. The figure is twice times the value of a year ago and more than the 3.4 billion dollar market capitalisation of Yelp, already publicly traded. The group's main competitor, the network, also received a whopping $700 million trillion in investment this February.


The skeptics of these huge financing and valuations point out that Chinese technology start-ups are increasingly being labelled as expensive, but at the same time they have not found a way to create sustainable income, let alone make money. In judging the value of the company, investors and managers of these Internet companies tend to choose the number of users and sales of goods as indicators, rather than traditional income and profitability.


Some risk investors say they will slow the pace of investment in Chinese technology start-ups this year because they are too expensive.


, chief investment officer at OTS Capital in Hong Kong, said Tony Hsu, "one of the factors driving the valuations of Chinese technology start-ups is the loss of fear that many investors will do their best to raise valuations without considering the price they pay for their companies. 」





China's technology companies raised 5 billion of billions of dollars only in the second half of 2014, according to Hong Kong's Centre for Asian private equity research, compared with just 700 million dollars in the same period in 2013. Of the $5 billion trillion in total financing, one of the biggest is from the 1.1 billion dollar financing that millet companies received. Millet's valuation in December 2014 has reached $46 billion trillion, which has made it one of the world's most valuable technology start-ups. In August 2013, Millet was valued at 10 billion dollars, and its valuations had risen 4 times-fold in more than a year.


's concern about the overheating of Chinese technology companies also appears in the US tech start-ups and tech stocks. Snapchat, after accepting a 200 million dollar investment from China's power-maker Alibaba, now has a valuation of $15 billion.

"I did not say that the technology industry in the United States and China is the twin brother, but the two really affect each other," said Lin, a Chinese partner at the
DCM Venture fund. 」


investors often compare similar tech start-ups in the US and China, especially at a time when valuations are soaring. The Uber valuation reached $41 billion trillion in December 2014, prompting the investment market's demand for a taxi and a quick taxi to China's largest two-bit software. After accepting a new round of $1.3 billion trillion in funding, the two companies made a $600 million equity swap and announced a merger. After the merger, the two companies will continue to retain both their original business and team. The company's existing investors say they are actively engaged with new buyers, and the combined valuations are expected to reach around $10 billion trillion.





China's wealthy are becoming increasingly interested in investing in technology start-ups, which have only a small stake in investing in technology start-ups, and not too much influence. But the willingness of Chinese billionaires to invest in tech start-ups like real estate now looks assured. All-Stars investment, the biggest investor in Millet's latest round of financing, is mostly from China's rich.


Venture capital trading has been protected in China, investors, for example, would get a so-called ratchet clause that would allow VCs to buy shares at a cheaper price, which would allow investors to hold a larger share if the companies they invested had less than their previous valuations.


In this context, investors are looking forward to the company listing, last year Alibaba in the United States, a record 25 billion U.S. dollar IPO is a typical example, and Alibaba's main competitor Jingdong's shares have risen by more than 50% since the IPO last year.


in some cases, the valuation of the company prior to the IPO will provide a useful reference for the company's market capitalization. According to the source, the public comments, although hired banks to participate in its IPO, but private investors can bring more value and more rapid implementation.


The main attraction of Chinese science and technology Enterprises is the rapid growth of users. App developers are looking for niche markets that cover 500 million of China's smartphone users. The monthly active user of the public comment net has surpassed 190 million, in the last quarter, the handset user contributed the website 85% Page view quantity. In the previous quarter, Yelp's number of independent visitors reached 136 million.


However, one of the big challenges facing Chinese technology start-ups is how to turn large users into income and profits. Most of China's technology start-ups, including the public comments mentioned above, did not disclose details about the company's finances. The company's founder, Lei, said this month that sales have doubled over the same period last year, reaching $11.9 billion trillion, and he expects the sales of millet handsets to exceed 100 billion yuan in the next three quarters. However, the company has not yet disclosed its profitability. Millet's investment is now betting that the Millet mobile App Store can generate additional revenue by selling games and other services.

"The main risk investors face now is whether Chinese consumers are willing to pay for online services, and we still have a huge question mark on this," said Wang Ping, China's manager of
Forrester. 」


article source: The WALL Street journal,tech2ipo/Creative Chen Yu Compilation