Xiaomi Said to Seek Funds at About $50 Billion Valuation

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Xiaomi Corp. is in talks for a funding round that values the smartphone maker at about $40 billion to $50 billion, people familiar with the matter said.

The discussions are at an early stage and nothing is finalized, said the people, who asked not to be identified because the matter is private. The world’s third-biggest smartphone maker had a financing round in August 2013 that valued the company at $10 billion.

Founder and Chief Executive Officer Lei Jun has pushed Xiaomi, which sells direct to consumers and only released its first smartphone in 2011, into new markets from Singapore to India. The international expansion, combined with surging sales of its Mi 4 smartphone and low-cost Redmi model, have vaulted the company into the ranks of the world’s top vendors.

“They have a cost advantage over many of the larger vendors because of their online sales model,” said James Roy, a Shanghai-based analyst at China Market Research Group. “It’s been a really dramatic rise for Xiaomi in the past four years from nothing.”

Joy Han, a spokeswoman for Beijing-based Xiaomi, declined to comment.

The valuation surpasses more established Asian electronics makers including Sony Corp., which has a market capitalization of about $21 billion, and Lenovo Group Ltd.’s $16 billion. Lenovo, the world’s largest PC maker, just acquired Google Inc.’s Motorola Mobility phone unit.

Smartphone Competition

DST, an existing investor, is among the potential participants in the funding round, said one of the people. Xiaomi’s valuation would also exceed recent funding rounds that pegged U.S. startups Uber Technologies Inc. at $17 billion and Snapchat Inc. at $10 billion. Forbes reported on Oct. 31 that Xiaomi was seeking a valuation of more than $40 billion. A representative for DST, run by Russian investor Yuri Milner, couldn’t be reached for comment.

In an interview in September 2013, CEO Lei said Xiaomi wouldn’t sell shares to the public in the next five years. Xiaomi more than tripled global smartphone shipments to 17.3 million units in the third quarter from 5.6 million a year earlier, IDC reported Oct. 29. Its market share more than doubled to 5.3 percent from 2.1 percent, the researcher said.

That lifted Xiaomi into the world’s top three vendors for the first time, trailing only Suwon, South Korea-based Samsung Electronics Co. and Apple Inc. in Cupertino, California, IDC reported. Cross-town competitor Lenovo subsequently completed its purchase of Motorola in a combination that would have made it the third-largest vendor, according to IDC.

New Markets

Xiaomi has been winning users by selling inexpensive phones with hardware and specifications comparable with more expensive devices. Xiaomi sells its flagship Mi 4 starting from 1,999 yuan ($327) on its China website, or just more than one-third of the starting price for Apple’s iPhone 6 in China.

The company has also begun branching from phones into other consumer electronics. In May, the company unveiled its first tablet computer, the Mi Pad. The company earlier released the MiBox, a TV set-top box, and televisions that connect to the Web, running the Android operating system.

Xiaomi, which keeps costs down by selling directly to consumers online, was backed in its earlier funding rounds by investors including Singapore’s Temasek Holdings Pte, Qiming Venture Partners, Qualcomm Ventures, IDG Capital and Morningside Venture Capital.

Xiaomi, which means millet in Chinese, was founded in 2010 to make software for mobile devices running Google’s Android system, and the company introduced its first smartphone in China the following year. In April, Xiaomi said it would enter 10 new markets including India, Brazil and Russia.

To lead that international push, Lei hired Hugo Barra, a former Google vice president who had helped oversee Android product management.

Lei has set a goal of boosting sales fivefold to 100 million phones next year. Xiaomi shipped 18.7 million units in


— With assistance by Edmond Lococo, Olga Kharif, and Brian Womack

(Adds comment from analyst in fourth paragraph.)
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