Despite the aura of "AIGC" and "big model", Mobvoi’s valuation has stagnated in five years, and its listing has suffered a break, once falling by more than 20%.
Before IPO, Mobvoi raised a total of 233 million yuan, with the highest valuation of 757 million yuan. Volkswagen China, which contributed the most, lost nearly 90% when it withdrew in 2021. Sequoia China, the earliest investor, can be described as one of the biggest winners. It used only $3.465 million, that is, it gained a profit of $29.855 million and a stock right worth $74.55 million, with a book income of nearly 30 times.
It is noteworthy that after the launch of the self-developed model "Sequential Monkey", the annual compound growth rate of AIGC business income in Mobvoi from 2021 to 2023 exceeded 300%, and the number of paying users increased from 63,000 to 410,000. However, considering the high training cost of the big model, it is worth paying attention to whether Mobvoi, which will spend only 155 million yuan on R&D in 2023, can maintain its technological superiority.
Source: New Fortune Magazine (ID: xcf Plus)
Author: Zhang Tianlun
On April 24th, Mobvoi (02438.HK), known as "the first AIGC share", was listed on the Hong Kong Stock Exchange. As the first profitable AI-Generated Content company listed in Hong Kong at China Grand Model Raceway, its business situation and secondary market performance attract people’s attention.
However, after the opening of the day, Mobvoi suffered a break, and its share price once fell by more than 20%. In the afternoon, it rebounded strongly and finally closed down by 3.16%.
Since its listing, Mobvoi’s share price has dropped by 2.11% compared with the issue price, and its market value has dropped to HK$ 5.548 billion, which has also cast a shadow over its subsequent trend.
01
Behind the "AIGC First Share": Volkswagen’s investment in China exploded by 90%
Before the IPO, Mobvoi completed a total of seven rounds of financing, with a total financing amount of US$ 233 million, and its valuation rose from US$ 5.01 million in the A round in 2013 to US$ 757 million in the D-2 round (Table 1). In other words, Mobvoi’s current market value of HK$ 5.548 billion still has a gap of nearly 6% compared with its valuation five years ago.
Although its share price is discounted compared with the primary market, according to the statistics of New Wealth, the only injured investor in the round of financing is Volkswagen (China) Investment Co., Ltd. (hereinafter referred to as "Volkswagen China").
Volkswagen China is the largest investor in Mobvoi. In 2017, it purchased 289 million preferred shares of Mobvoi through its wholly-owned subsidiary, Volkswagen Finance Luxemburg S.A for US$ 140 million. In September 2019, it once again participated in the D-2 round of financing with US$ 15 million, and got 31 million D-2 preferred shares.
However, Volkswagen China, which invested heavily in the project, soon chose to quit. In December 2021, Mobvoi repurchased all the shares held by Volkswagen China at a price of $17 million. Based on this calculation, the loss of Volkswagen China’s investment this time is close to 90%.
Assuming that Volkswagen China has held shares so far, its investment loss will be reduced to 8.9% based on the issue price of HK$ 3.8 per share in Mobvoi, which is about 124 million USD.
Among other investment institutions, Sequoia China, Zhenge Fund, SIG Haina Asia, Goer, etc., which were funded in the early stage, all earned a lot of income.
After the listing of Mobvoi, the largest external shareholder is SIG Heiner Asia, holding 16.03%, while Sequoia China, Goer and Zhenge Fund hold 10.92%, 10.03% and 3.07% respectively.
Sequoia China, who was the first to participate in Mobvoi’s A-round and A-1-round financing, is one of the biggest winners. In the A round of financing, Sequoia China acquired 161,675,300 shares of Mobvoi at a price of US$ 1.358 million, and the cost per share was only US$ 0.0084. In the A-1 round, Sequoia China once again got 53,889,600 shares at a price of 2,107,000 US dollars, with a cost of 0.039 US dollars per share.
It is worth mentioning that in 2018, Sequoia China transferred 61.88 million shares acquired in Series A to two investors, namely GWC Robotics Investment Limited and So Artemis Limited, at a price of US$ 20.25 million and US$ 10.125 million respectively, and made a profit of US$ 29.855 million. The value of the remaining 153.68 million shares listed in Mobvoi is as high as $74.55 million. Based on this calculation, Sequoia China only spent $3.465 million, that is, it gained a profit of $29.855 million and a stock right worth $74.55 million, with a book income of nearly 30 times.
Google, whose capital contribution is second only to that of Volkswagen China, invested $40 million and $1.87 million in the C and D-2 rounds of financing in Mobvoi respectively, with an average shareholding cost of $0.22 per share, which is still 120.5% higher than the IPO issue price.
As the founder of Mobvoi, Li Zhifei holds 376 million shares of the company through Mobvoi AGI Limited, a wholly-owned company, with a shareholding ratio of 25.2%. At present, the stock market value is about HK$ 1.4 billion.
Li Zhifei is a Ph.D. student in computer science at Johns Hopkins University in the United States. Before he founded Mobvoi, he worked as a research scientist at Google from May 2010 to August 2012, and was mainly responsible for the algorithm development of language translation models.
In 2012, voice search, a new interactive technology, became popular after Apple Siri came out as an iPhone 4S built-in application. Li Zhifei also left Google and returned to China to establish Mobvoi.
According to the prospectus, the services provided by Mobvoi focus on AIGC and voice interaction technology. According to the current business, it mainly includes three parts: AIGC solution, AI enterprise solution, intelligent equipment and accessories.
Among them, the revenue of AIGC solution business, with AI dubbing assistant "Magic Sound Workshop" and AI digital person "Wonderful Yuan" as its main products, has increased rapidly, from 07 million yuan to 118 million yuan in 2021-2023, with a compound annual growth rate of over 300%.
The revenue of AI enterprise solution business, which mainly focuses on automotive voice interaction solutions, increased from RMB 53 million in 2021 to RMB 226 million in 2022, and then decreased by 14.2% in 2023.
The revenue of smart devices and other hardware businesses, mainly selling smart watches with TicWatch, dropped from 338 million yuan in 2021 to 164 million yuan in 2023.
Figure 1: Income from various businesses in Mobvoi.
Source: Public Prospectus
Since Mobvoi’s AIGC business has made rapid progress in recent years, why is its valuation stagnant? Why did Volkswagen China quit its shareholder ranks early?
02
Volkswagen China: From investing $140 million to clearing shares.
Since the establishment of Mobvoi, its business has gone through the process of continuous exploration, and its development is mainly divided into four stages.
The first stage is to try to develop voice search service software. In 2013, Mobvoi established the WeChat voice search service platform; In 2014, after Google launched Google Glass, Mobvoi launched "Mobvoi on Google Glass", a Chinese smart voice search application. However, with the failure of the Google Glass project, this application also stopped updating.
In 2014, Mobvoi entered the second stage of development, that is, from software to hardware business, and its smart equipment and other accessories business also started.
At that time, Mobvoi hoped to put voice search’s capabilities into products, and finally chose the smart hardware market-it first released Ticwear, the world’s first Chinese smart watch operating system, and then launched TicWatch in June 2015.
At the same time, Mobvoi has also reached a strategic cooperation with Google, which will build the Ask App Store in all smart watches equipped with Android Wear system sold in China. Also in 2015, Google shot, and Mobvoi completed the C round of financing, with a valuation of 273 million US dollars, becoming a hot start-up in the AI market.
TicWatch, as one of the few products with relatively perfect smart watch operating system in China at that time, was quickly favored by the market after its launch. In the "Double Eleven" sales list of JD.COM in 2015, TicWatch ranked third in the field of smart watches, second only to Apple’s i Watch and Motorola’s MOTO 360. Since 2016, Mobvoi has successively launched smart speakers, smart headphones and other products, and at the same time promoted the products to the sea.
At the strategic new product launch conference held in 2018, Mobvoi not only iterated on smart watches, smart headphones, smart audio and other products, but also released the first mass-produced AI voice chip module "Wen Xin" in China in the face of the enterprise market, and said that it would open 20 new offline smart experience stores nationwide. However, with Huawei, Xiaomi, Glory and other giants stepping up the smart hardware market, Mobvoi’s competitive advantage in products has been gradually erased or even overtaken.
It can be seen that during 2021-2023, the revenue of its smart devices and other accessories business dropped from 339 million yuan to 164 million yuan, accounting for 85% of the total revenue to 32.3%. In the same period, the number of its global distributors also dropped sharply from 101 to 39.
It is not difficult to see that the weakening influence of Mobvoi in the smart device market is one of the reasons that restrict its valuation growth.
The protagonist in the third stage of Mobvoi’s development is Volkswagen China, an automobile giant that brings Mobvoi an opportunity to explore the B-end market.
Back in 2017, Volkswagen China not only invested US$ 140 million in Mobvoi, but also invested US$ 40 million each, holding 50% of the shares, and set up a joint venture company Mobvoi JV, with the goal of realizing the application of multiple AI technologies, including speech recognition, in several factories and models of Volkswagen in China. In layman’s terms, it relies on Mobvoi’s voice interaction technology to provide car voice assistant for Volkswagen China, as well as some additional functions such as personalized push, GPS and in-car entertainment information system.
In 2020, Volkswagen’s brand-new ID.4 series models adopt the voice interaction technology provided by Mobvoi, and users can realize various vehicle control functions such as conveniently regulating air conditioning temperature, answering phone calls, navigating and so on by waking up the word "Hello, Volkswagen".
As of July, 2021, the front-mounted vehicle voice interactive system platform led by Mobvoi has been used in Audi A4L, Passat, New Magotan and other main best-selling models. At that time, it is expected that the pre-loading capacity will reach 15 million in 2023.
"By the end of 2023, audi ag will launch a total of eight ID models in China, and Mobvoi is also committed to continuously lighting up the highlights of the entire ID family and other new Volkswagen models." Mobvoi wrote on WeChat WeChat official account.
But also in 2021, Volkswagen China and Mobvoi parted ways. It not only emptied all its shares in Mobvoi, but also bought 50% of Mobvoi JV held by Mobvoi for $15 million.
However, both parties signed a series of intellectual property agreements in December 2021 at the same time of equity delivery, and Mobvoi continued to provide the back-end technology of voice dialogue system.
According to Mobvoi’s prospectus, from 2021 to 2023, its intellectual property income from Volkswagen was 3.2 million yuan, 213 million yuan and 139 million yuan respectively, accounting for 0.8%, 42.6% and 27.4% of the total revenue. In 2022, its related intellectual property agreement came into effect for the first full year, and the related income accounted for 81% of its AI enterprise solution business income in that year, and it decreased to 62% in 2023. It can be seen that the high growth of its AI enterprise solution business income came from Volkswagen China.
It is not difficult to see that in order to cooperate with Mobvoi on-board voice dialogue system, the cost paid by Volkswagen China includes US$ 155 million investment, US$ 40 million registered capital for establishing a joint venture company Mobvoi JV, US$ 15 million acquisition of Mobvoi JV, and nearly RMB 360 million in intellectual property fees. This does not include the loss during the operation of Mobvoi JV. In 2021 alone, the loss of the joint venture company was as high as 37.13 million yuan.
In 2024, Mobvoi will completely lose this heavy customer. According to public information, in 2024, Volkswagen ID.7 chose to cooperate with Iflytek to upgrade its brand-new intelligent voice system.
According to the prospectus, Mobvoi is still actively expanding B-end customers. At present, it has reached technical cooperation agreements with a number of automobile companies, including testing the company’s large model and developing its applications, and developing intelligent cockpits equipped with voice assistants, smart housekeepers and voice recognition and generation technologies.
However, with the entry of giants such as Xiaomi, Huawei, Baidu and Iflytek, the competition of car voice track has already entered the Red Sea. At present, more than 2 million cars are pre-installed with Mobvoi Voice Assistant. By contrast, in 2022 alone, Iflytek’s smart car business added more than 7.1 million sets of pre-installed shipments, and the cumulative shipments exceeded 46.1 million sets.
In 2023, or affected by the decline in the revenue of AI enterprise solutions business, the cash flow generated by Mobvoi’s operating activities dropped from 72.44 million yuan in 2022 to 28.39 million yuan, which is another reason for further depressing market expectations besides the contraction of smart equipment business.
03
AIGC: What’s the color geometry, and what’s the shareholder’s income?
While the revenues of smart devices and AI enterprise solutions are declining, Mobvoi is also rapidly moving towards the fourth stage of enterprise development, that is, the AIGC track under the big model.
According to the prospectus, the main products of Mobvoi AIGC solution business can be divided into three categories: one is the AI dubbing assistant represented by "Magic Sound Workshop"; The second is the AI writing assistant represented by "wonderful writing" and "magic writing"; The third is the AI digital person represented by "Wonderful Yuan". At the same time, it can also provide a "DupDub" solution that integrates three types of capabilities.
Before making a big model, Mobvoi’s products such as "Magic Sound Workshop" and "Magic Writing Works" were mainly built with exclusive algorithm models. In 2023, it launched the self-developed large model "Sequence Monkey", which has the multi-modal generation ability and can understand and generate human-like text, audio, images and videos, thus qualitatively improving the AI capabilities of different products.
Mobvoi, for example, said that the rhythm and naturalness of the synthesized speech in Magic Sound Workshop have been greatly improved after using "Sequential Monkey". At the same time, its multi-modal generation ability also supports content creators to use innovative functions such as AI writing in short videos, which is convenient for editing and rewriting content in different styles (Figure 2).
Figure 2: Advantages of "Sequence Monkey"
Source: Public Prospectus
As the fist product of the company’s AIGC solution business, "Magic Sound Workshop" is a platform that uses NLP algorithm to analyze written text and convert it into natural human voice to produce AI-generated content. The tools include software dubbing, cloud editing, copy extraction and human voice processing. It provides more than 1000 sound styles and diverse sound sample combinations from external suppliers, and supports 37 languages and 15 dialects. In the charging mode, "Magic Sound Workshop" combines two modes: subscription and in-software payment. The annual membership fee is 289 yuan, and the price range of sound source is 199-899 yuan/year.
In 2023, after joining the large-scale model capability of "Sequence Monkey", the income of AIGC solution business in Mobvoi increased from 39.857 million yuan in 2021 to 118 million yuan, and the gross profit margin increased from 88% to 92.2%, which became the biggest bright spot in the future development.
According to the prospectus, from 2021 to 2023, the number of paying users in Mobvoi increased from 63,000 to 410,000. And with the development of services such as Wonderland, its average income from each paying user increased from 104 yuan to 248 yuan, and correspondingly, the average customer acquisition cost of each paying user also increased from 31.8 yuan to 133.1 yuan (Figure 3).
Figure 3: The scale of paying users and the cost of obtaining customers in Mobvoi.
Source: Public Prospectus
However, as we all know, AIGC is an exceptionally expensive track. Whether Mobvoi’s profit level can support the continuous improvement of its technology may be the most concerned issue for investors in the secondary market at present.
According to the Artificial Intelligence Index Report released by Li Feifei’s team, it is estimated that the GPT-4 of OpenAI will use 78 million dollars worth of computing resources for training, and the Gemini Ultra of Google will cost as much as 191 million dollars. Iflytek, as one of its biggest competitors in the field of voice interaction, will spend 3.481 billion yuan on research and development in 2023.
From 2021 to 2023, Mobvoi’s R&D expenditure was 92 million yuan, 119 million yuan and 155 million yuan respectively, which was obviously difficult to keep up with the giant’s burning progress.
Nowadays, under the general trend that the giants have increased their AIGC, it is worth paying attention to whether Mobvoi will face the rapid squeeze of technological advantages and market space as when giants such as Huawei and Xiaomi entered the smart hardware market in 2018. How to build long-term competitiveness in the AIGC track surrounded by giants is also a problem that more small and medium-sized AIGC enterprises need to face together.
In this listing, Mobvoi raised a net amount of HK$ 267 million, and its uses include: 44.3% to continuously improve modeling technology for model training, vertically optimize the underlying basic model by introducing technology and talents, and improve the existing program algorithm of the solution; 35.7% is used for solution development and marketing; 10% is used to seek strategic alliances, investments and acquisitions; 10% is used for working capital and general enterprise purposes.
From the financial point of view, from 2021 to 2023, Mobvoi’s total annual losses attributable to equity shareholders were 205 million yuan, 986 million yuan and 867 million yuan respectively. If the book value changes of redeemable preferred shares and common shares are excluded, their adjusted profits in 2022 and 2023 will be 108 million yuan and 17.53 million yuan respectively.
It can be seen that to stand out in the AIGC competition, increasing income is the most important thing in Mobvoi at present.
Any information and information mentioned in this article is only the expression of the author’s personal views or the statement of specific events, and does not constitute recommendation and investment advice. Investors should bear the risks and consequences of investing accordingly.
