strategy and business

CHINA’S HERD OF UNICORNS

JAMES ZHU KNEW the time had come to join Fanli as fulltime chief operating officer in 2010, when the Shanghai-based startup first began to raise money. At the time, Fanli was an online shopping rebates service cofounded by an acquaintance, Gary Ge Yongchang, who ran it from his apartment’s living room. The startup period was difficult; China’s e-commerce market was still immature. The company had just two servers, one for the website and one for the database. Online speed was glacially slow. Fanli’s employees walked up and down Shanghai’s streets handing out cards to drum up interest. Ge initially paid out rebates using his personal credit cards.

Zhu was only helping out Fanli part-time; he had a senior role in the Shanghai office of Corel, a Canadian software company. “I had a great job,” he recalls. “I had a driver, oversaw a team of 200 people, and was paid quite a bit.” But institutional investors convinced him to come onboard as Fanli’s full-time chief operating officer. “They wanted me to have skin in the game,” he says. Within a year, he joined, and Fanli raised US$10 million in Series A funding (its first round of venture capital finance).

Nine years later, Fanli has grown into one of China’s largest e-commerce websites — an online directory and “flash event” company that matches Chinese shoppers with marketers from around the world, helping people find their most-desired goal (as Ge has been known to state it): “value for money: the best products at the lowest prices.” Fanli’s story is typical of about 200 rapidly growing Chinese “unicorns,” enabled by leading-edge digital technology, the burgeoning Chinese middle class, new capital-raising opportunities in Shanghai and elsewhere, and the enthusiastic entrepreneurialism of their founders.

The standard definition of a unicorn is a privately held startup valued at more than $1 billion. Currently, when people think of Chinese unicorns, they think of the handful of companies that have risen to global status in two, and Tencent. Since these few are already valued at $10 billion or more, they are now known as “superuni-corns.” Many more Chinese unicorns are coming up behind them, still relatively unknown because they currently operate only within China, which is large enough to sustain them for some time. But sooner or later, many of this second wave of Chinese unicorns will grow into global giants.

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