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China's Mobile Economy by Xiaodong Lee, Dominic Barton, Winston Ma

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Chapter 3 Xiaomi: The Most Valuable Start-up in China

A few days before the end of 2014, Lei Jun, the founder and CEO of Xiaomi, the fast-rising Chinese smartphone maker, announced the receipt of $1.1 billion in investment funds following its latest round of fund-raising. Just months before, in the Summer of 2014, Xiaomi took the No. 1 position in China's smartphone market – the world's largest. That investment round valued Xiaomi at $45 billion, making it the highest valued start-up in the world at that time (close to Yahoo's market value), even ahead of $41 billion achieved by the US car-sharing service Uber Technologies Inc. earlier in the same month. (Uber's valuation exceeded Xiaomi later after additional fund-raising rounds.)

Consistent with Xiaomi's signature online-first marketing for its smartphones, the founder announced the investment terms in a post on his verified account on Weibo, China's Twitter-like messaging service. The mobile world, both in China and the West, immediately erupted into heated debate about whether this rising star could justify a $45 billion valuation. Was Xiaomi just an Apple copycat? Could it maintain its leadership position in the fast-maturing market of China when competing with domestic technology conglomerates as well as foreign behemoths like Samsung and Apple? Most importantly, how likely was it that Xiaomi would be able to apply its successful model for low cost smartphones into other product areas to create a new global internet powerhouse? ...

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