Listed for half a year, broke more than 80%!

For the vast majority of startup companies, going public means making it ashore.

However, some companies, even though they have successfully gone public, are still like they haven't completely made it ashore.

This is because many companies, after going public, have not survived until the lock-up period for shareholders to reduce their holdings and exit. The market value cannot sustain, causing the stock price to not only fall below the IPO price but also potentially deeply trap the strategic investors, rendering the significance of share unlocking meaningless.

Mobvoi, which successfully went public on the Hong Kong stock market with the glory of being the first AIGC in April this year, is a representative example of such a company.

This company, with an IPO price of HKD 3.8, opened on the first day at a break price of HKD 2.98. Although the price rose to a high of HKD 4.38 in the following days, it soon fell back and quickly dropped below the IPO price. In less than half a year since going public, the stock price of this first AIGC has fallen below HKD 0.7, with a decline of over 80%. Many investment institutions are likely facing significant losses.

The reason for discussing it today is that this company really resembles a typical epitome of Chinese innovative small companies struggling to explore and develop, facing various pressures, helplessly striving for change in the face of opportunities and risks.

01 The Gap Between Ideal and Reality

According to company information, Mobvoi was founded in 2012. The founder, Li Zhifei, holds a Ph.D. in Computer Science from Johns Hopkins University and has worked at a Silicon Valley research institute, engaging in core algorithm research and development in areas such as speech recognition and machine translation.

The reason for choosing the name "Mobvoi" is that in 2012, smartwatches were already on the rise, and Li Zhifei, who was working on machine translation and speech recognition at Google, also saw this trend. Therefore, he wanted to create a smart voice interaction search tool to assist people more conveniently as a virtual personal assistant software in their daily lives. For example, when commuting home and wanting to find a convenience store that is still open, instead of opening the phone, searching on Google, one can simply ask a question to the device (such as a smartwatch) and get the answer directly.

Later, the launch of the iPhone 4s with the built-in Siri intelligent voice assistant shocked consumers worldwide, further stimulating Li Zhifei's entrepreneurial idea.

Due to his top-notch professional education background, Silicon Valley elite talent, a hot and imaginative track, Li Zhifei's startup company also received capital's favor, having received a total of over USD 200 million in financing from top investment banks and companies such as Sequoia China, ZhenFund, SIG Haina, Google, Yuanmei Optoelectronics, and GoerTek.

This is a typical story of a science and engineering male entrepreneur.

However, the development journey of this company has been full of ups and downs, with several major business direction reforms.

Initially, Mobvoi focused on smart voice interaction as the landing scenario, launching its TicWatch series of smartwatches and even obtaining deep cooperation with Google (Google's Android Wear smartwatches in mainland China used Mobvoi's voice search and application services). Subsequently, they also introduced product lines such as smart speakers, smart headphones, smart wristbands, and smart car kits However, these so-called intelligent consumer electronics, as products in the user ecosystem, are the battleground for major brands and manufacturers such as Apple, Baidu, Xiaomi, and Huawei. Faced with the competition from these giants, MOBVOI basically has no advantage.

Later, in 2017 and 2019, MOBVOI successively received investments of $140 million and $15 million from Volkswagen China, and the two parties jointly established a joint venture company focusing on in-car AI technology called Volkswagen MOBVOI, with MOBVOI providing in-car AI solutions.

With the influx of funds and orders from major clients, MOBVOI naturally accelerated its expansion. In 2018, MOBVOI opened 20 new offline smart experience stores nationwide. By 2019, the company had nearly a thousand employees and had expanded into markets in North America, Europe, and Southeast Asia, each managed by independent teams.

However, despite the rapid expansion of its business lines, the revenue growth performance was not satisfactory. Starting in 2019, MOBVOI had to close all offline stores, streamline its business lines, and only retain two lines: smartwatches and in-car AI. The employee size was also reduced by half.

Later, in 2020, the release of the language model GPT-3 caused a global sensation, and AI large models began to dominate the global market. Feeling the bottleneck in development, Li Zhifei shifted the company's focus to the field of AI large models.

MOBVOI quickly trained a 7-billion-parameter model called UCLAI (later upgraded to a general multimodal large model "Sequence Monkey") and simultaneously launched an AI voice dubbing product called "Magic Sound Studio." Subsequently, based on the "Sequence Monkey" large model, the capabilities of "Magic Sound Studio" were further enhanced, and a series of products such as Qimiao Yuan, Qimiao Wen, Yan Zhi Hua, and DupDub were successively launched.

In the wave of AI, MOBVOI, which had accumulated some relevant technological expertise, also experienced revenue growth.

However, MOBVOI soon faced another major turning point. In 2021, Volkswagen announced its "breakup" with MOBVOI. Although MOBVOI continued to provide Volkswagen with value worth approximately $55 million in car voice interaction solutions and other services, which was crucial support for the revenue in the following two years, the uncertainty of receiving future orders from Volkswagen arose.

Therefore, it can be seen that with sluggish sales in consumer electronics at the C-end and the breakup with a major client at the B-end, MOBVOI's revenue began to significantly slow down.

From 2021 to 2023, MOBVOI's revenue was $398 million, $500 million, and $507 million respectively; with profits of -$157 million, -$73 million, and $109 million respectively. Most of MOBVOI's revenue from AI enterprise solutions came from Volkswagen. After the breakup, the aftermath of this business revenue gradually became apparent. From 2021 to 2023, intellectual property income from Volkswagen was $3.2 million, $213 million, and $139 million respectively, accounting for 0.8%, 42.6%, and 27.4% of total revenue Currently, Mobvoi's revenue mainly comes from AI software (including AIGC solutions and AI enterprise solutions) and AIoT hardware.

Among them, the AIGC solution can provide users with services such as dubbing, writing, digital humans, etc., and has attracted approximately 840,000 paying users, generating over 1 million payments in total; as for the AI enterprise solution, it is more applied in scenarios such as voice interaction, anti-fraud, customer service, etc. The intelligent devices and other accessories mainly consist of hardware devices centered around the AI smartwatch TicWatch series.

Looking back, over the 12 years since its establishment, the company's business direction has evolved from voice assistants to smart hardware and in-car AI, and now to large models and AIGC. It is fair to say that it is a follower of the AI trend.

Each of these trends is filled with huge market opportunities, but not every startup can seize them.

From 2013 to 2019, Mobvoi completed seven rounds of financing, with a total financing amount exceeding $250 million, approximately 1.78 billion RMB. Despite the company's accumulated operating losses of over 2 billion RMB over the years, it is still struggling to find its PMF (Product-Market Fit).

In the generative AI field, the cost of computing power is high, R&D investment is substantial, and profitability is challenging. It can be said that it is a highly competitive and difficult track. The major issue with Mobvoi's current business model is that it lacks the user ecosystem of giants like Apple, Huawei, Xiaomi. Its hardware products can only be a small part of the application ecosystem, and its AI software direction also faces numerous competitors attached to these giants.

Therefore, despite Li Zhifei's confidence in the future of AIGC, in an industry where many tech giants with strong technology, resources, and funding have already crowded the track and the market environment evolves rapidly, it is no easy task for Mobvoi to carve out a space for itself.

One small oversight can lead to a significant gap between ideals and reality.

02 History Repeats Itself

When anything new and a great opportunity arises, everyone rushes in, only to go through a process of survival of the fittest. ——Robin Li

According to media reports, in the past three years, over 200,000 artificial intelligence-related companies in China have been deregistered or revoked, with the number of AI-related companies that were newly registered but are now in a state of deregistration, revocation, or abnormal suspension from November 2022 when ChatGPT was released until August this year reaching nearly 80,000.

From nationwide enthusiasm to chaos, the underlying reason is the inability to find suitable commercial landing scenarios, leading to the eventual falsification of the majority of companies.

Most of these companies are "three-no" companies—lacking technology, resources, and funding, some of which have not even found their own business products and commercialization direction yet Many entrepreneurs originally thought that AI was an imaginative track, but after getting on board, they found the risks and costs so terrifying that they could hardly bear it, and finally had to stop loss and exit. Some managed to succeed before this wave of AI cooled down, but even so, under the pressure of not being able to find their own Product-Market Fit (PMF) for a long time, they still lived in anxiety and difficulty.

Companies like MOBVOI are already lucky enough. At least it caught the best time of the AI boom, but it is also facing huge cash flow pressure again, as well as the rapidly tightening IPO window in China, and luckily obtained the qualification for listing.

The current AI entrepreneurial bubble is very similar to the global Internet bubble in 2001. At that time, China had just accessed the international Internet shortly after opening the door to the new world of the Internet. Almost everyone was talking about the Internet, various new concepts and models emerged one after another, and many companies also crazily entered the market. Even by simply creating a simple website, giving it a name related to Internet technology, and without having a business product, they could attract a large number of investments.

But as the bubble was quickly burst, a large number of so-called Internet small companies collapsed instantly, with only a few truly viable companies with business models and operations able to survive.

Facing the current AI boom, although capital has become rational and pragmatic enough, there are still tens of thousands of AI-related companies that believe they can survive by seizing the opportunity.

According to reports, since the launch of ChatGPT at the end of 2022, China's generative AI market has been crowded with more than 200 large language models.

In response, Baidu's Robin Li believes that many large models are "reinventing the wheel," and the vast majority have little usage and will inevitably be washed away by the tide.

Sogou's founder Wang Xiaochuan also said that the future of the top tier of domestic AI large models may not exceed 5 companies.

Even so, players in the AI large model space still face huge challenges - commercialization and profitability.

In the first half of 2024, the leading AI computing power company Horizon Robotics had operating income of 64.7653 million yuan, a year-on-year decrease of 43.42%; the net loss attributable to shareholders of the listed company was 530 million yuan, marking the 8th consecutive year of losses for Horizon Robotics.

SenseTime, claiming to be China's largest computer vision software provider, had a revenue of 1.74 billion yuan in the first half of the year, with a net loss of 2.477 billion yuan during the same period; while iFlytek, the core of speech large models, also reported a net loss of 470 million yuan in the first half of the year.

Even Baidu, the domestic giant in AI large models that is most competitive and has already commercialized, feels the pain of burning a huge amount of money. The company's total revenue in Q2 was 33.93 billion yuan, estimated at 34.11 billion yuan, with a year-on-year growth of 0%; net profit decreased by 8% year-on-year.

This is a trend that one cannot afford to play without having enough resources.

03 Epilogue

From a strategic perspective, the rush of so many large and small Chinese companies to compete for tickets to the new era of AI is of great significance Because the future technological era will definitely be a true AI era like in science fiction movies, all industries can be empowered by AI. Whoever masters the strongest AI capabilities will possess the most powerful "weapon" in the world. This is a field that both countries and Chinese companies must compete in.

For investors, although the current AI bubble in China is rapidly deflating, it is still important to have confidence in this track. After the storm, a new batch of players with enormous growth potential will inevitably emerge.

When the industry is at its worst, it is actually the best time to test potential stocks. (End of the article)