Future tech

Who has the most unicorns – China or the US?

A report by Deloitte and China Venture says that China accounts for 38.9 per cent of the total number of unicorns globally, and the US accounts for 42.1 per cent

PUBLISHED : Thursday, 07 September, 2017, 7:37pm
UPDATED : Thursday, 07 September, 2017, 10:50pm

More than one third of the world’s unicorns were born out of China, according to a report, as the world’s second-largest economy aggressively embrace technology to spur growth.

The report by Deloitte and China Venture recorded that China has 98 unicorns – companies that venture capitalists and private investors valued at US$1 billion or more but have held back from listing – in 2017, accounting for 38.9 per cent of the world’s 252 unicorns that are collectively valued at US$879.5 billion.

The US topped the list with 106 unicorns, or 42.1 per cent of the total number, while third-placed India has 10.

The unicorn big names have not only come from the US – sharing service providers Uber and Airbnb, but also from China such as Did Chuxing, a Uber rival that bought Uber’s China business in 2016, and Alibaba’s finance arm Ant Financial, phone maker Xiaomi and drone producer DJI.

In China, the finance sector has produced the biggest number of unicorns – 16, led by Ant Financial and JD Finance, a subsidiary of e-commerce giant

“China’s internet giants are aggressively developing online payment service and e-commerce business, and at the same time, the traditional finance institutions are also actively embracing technologies and seeking cooperations with tech companies,” said the report, mainly written by Zhong Yuntai, senior manager at Deloitte China.

“Fintech will massively generate revenues and remain at a high growth pace in China.”

Fintech will massively generate revenues and remain at a high growth pace in China
Zhong Yuntai, Deloitte China

In 2016, China’s fintech revenue reached US$421.4 billion, and is expected to surge to US$1.97 trillion in 2020, according to data from iResearch.

Besides the fintech sector, China’s most valuable companies have also grown from the e-commerce sector, which is driven by the rapidly expanding number of online shoppers, the culture and entertainment, and auto industries.

The US unicorn scene, is however, different. Almost one third of the 106 unicorns are corporation service providers, led by data analytics company Palantir Technologies and Infor Inc., a provider of enterprise software and services worldwide.

“In the US, most companies have the habit of paying for corporation service, which will improve their work efficiency and cut operation costs,” said Zhong.

“But in China, the demand for corporation service, especially those offered by domestic companies, is weak. Most Chinese companies prefer to choose US corporation service providers.”

The report found US venture capital firm, Sequoia to be globally the most farseeing investor. It has invested in 40 of the 252 unicorns. In second place is China’s internet giant, Tencent Holdings which has invested in 30 unicorns, and followed by Google, with 25.

China’s largest e-commerce platform Alibaba, the owner of the South China Morning Post, has invested in 14, and China’s search engine Baidu has invested in 12.

“Compared with US companies, Chinese venture capitals have become more aggressive, and they are more willing to bear high risks to seek high returns,” Zhong said.

Looking forward, the report projected that the unicorns would most likely come from the artificial intelligence space, where AI is expected to be widely adopted in the society at large, and in the transport industry, on the back of the development of new energy vehicles and bike-sharing service.