Tuya Smart is listed on the New York Stock Exchange! The first global IoT cloud platform to be listed

Last night, Tuya Smart (stock code: TUYA) was officially listed on the New York Stock Exchange and won the title of "the world's first IoT cloud stock."

Tuya Smart founder and CEO Wang Xueji, co-chairman and president Chen Liaohan, director and CFO Liu Yao, vice president of marketing and strategic cooperation and CMO Na Jingdan and other Tuya Smart executives as well as New York Stock Exchange China chief representative Yang Xu jointly rang the bell for the listing.

Wang Xueji, founder and CEO of Tuya Smart, said in his speech: "I would like to thank the government leaders, investors, partners and team for their support. Tuya was founded in an era when the IoT track was not optimistic. In the past seven years, we have overcome all difficulties and opened up a way for survival in the global IoT field with the spirit of technological innovation and global strategy. The Tuya team is just like the English name of Tuya, 'volcano under the glacier'. From a distance, it looks like a high mountain covered with ice and snow, low-key, but it may erupt at any time."

Double Buff support from Alibaba & Tencent?

The fiercely competitive IoT platform track has never lacked unicorns. It took Tuya Smart seven years to grow from a passionate entrepreneurial team to a world-leading IoT cloud platform service provider that empowers more than 200 million devices. According to data from its official website, as of December 31, 2020, Tuya IoT development platform has accumulated more than 262,000 registered developers, more than 122 million voice AI interactions per day, 84 billion device requests per day, Powered by Tuya empowers more than 252,000 device SKUs, and products and services cover more than 220 countries and regions, radiating more than 100,000 online and offline sales channels worldwide.

Tuya Smart, founded in 2014, has witnessed the entire process of the domestic IoT market. Co-chairman and President Chen Liaohan once said in an interview: "Tuya Smart took a year and a half to get its first customer. We also questioned ourselves at the time, wondering if we had chosen the wrong direction, if we had entered the market too early... We had a lot of thoughts, but in the end we persisted."

Chen Liaohan and Tuya Smart CEO Wang Xueji are classmates and business partners for many years. They jointly developed the PHPWind community software in their junior year, whose main business is to help moderators and webmasters build their own forums. This community open source system was acquired by Alibaba in 2008. Wang Xueji and Chen Liaohan also joined Alibaba Cloud's first business team and served as Alibaba Cloud's first general manager and Alibaba Cloud's operations director respectively.

In 2014, Wang Xueji and Chen Liaohan, Lin Yaona, Zhou Ruixin and other original team members who joined Alibaba from PHPWind "joined hands" to start their own business. It was because of this experience in Alibaba Cloud that Wang Xueji got to know the "benefactor" of Tuya Smart - Wu Yongming, one of the 18 founders of Alibaba at the beginning. He served as the head of the group's search business, advertising business and wireless business in Alibaba. When Wang Xueji left Alibaba to start a business again, as Wang Xueji's immediate boss at the time, he paid out of his own pocket to become an angel investor of Tuya Smart.

In addition to Wu Yongming, Tuya Smart's angel investors include Li Zhiguo, Alibaba's 46th employee, and Bat Capital, founded by Qu Tian, ​​also a former Alibaba employee. Because of this, Tuya Smart was once considered an Alibaba-affiliated company.

But what’s interesting is that Tuya Smart has never received official investment from Alibaba. Instead, Tencent has invested in it twice since 2019, with a total amount of approximately US$250 million, and holds a 10.8% stake in it.

With the halo of the founding team and angel investors, Tuya Smart's development is gradually getting on track.

A trillion-dollar market sought after by capital

According to Tuya Smart's prospectus, its total revenue in 2020 was US$180 million, a year-on-year increase of about 70%. However, behind the gratifying results lies the difficulty of IoT industry revenue. In 2019 and 2020, Tuya Smart generated net losses of US$70.5 million and US$66.9 million, respectively. As of December 31, 2020, the company had accumulated losses of US$192.5 million.

Image source: Leifeng.com

Although the company's loss rate is narrowing, Tuya Smart may not be able to go public in the United States under this heavy pressure without strong capital support. According to "IPO Early News", Tuya Smart's IPO subscription was closed one day in advance because it was favored by investors, especially long-term funds. The final issue price of US$21 per share was also higher than the upper limit of the previously planned issuance range.

Why are a number of well-known investment institutions including Tencent and Hillhouse Capital so supportive of Tuya Smart?

Let's first take a look at Tuya Smart's main business. According to the prospectus, its main businesses are divided into IoT PaaS, distribution of smart devices, SaaS and others. The core revenue is IoT PaaS, which accounted for 72.2% and 84.3% of the revenue in 2019 and 2020 respectively.

IoT PaaS: Provides solutions based on cloud, Internet of Things, edge computing and other technologies. Specifically, in terms of hardware products, it is the networking module that enables device networking by embedding the networking module, and then connecting the networked devices to Tuya Smart's IoT cloud platform, ultimately realizing the transformation of traditional products into IoT products with edge computing, storage, and networking capabilities, as well as the intelligent management of devices.

Smart device distribution: Provide brand manufacturers and system integrators with smart devices from OEM partners that have deployed Tuya Smart IoT PaaS.

IoT SaaS: Provides industry SaaS for vertical industries such as hotels and real estate. Enterprises can use these SaaS solutions to manage and operate smart devices.

Other value-added cloud services: Provide value-added services such as artificial intelligence virtual assistants and big data analysis to corporate customers, and provide value-added services such as data storage, message push, content services, etc. to Tuya Smart device users.

In recent years, the AIoT industry has become a focus of attention in the capital market. Different from traditional industries such as land, sea, air, military industry, medical care, and metals, the enabling value of the AIoT industry will also grow rapidly with the development of technology and the continuous expansion of application scenarios.

Wu Yongming, an early investor of Tuya Smart and chairman of Yuanjing Capital, mentioned in an interview with the media "IPO Early News" that today's underlying technology and market acceptance have led to various complex application scenarios in the AIoT market, whether it is home, office, manufacturing, service industry, public facilities service, etc., all have the foundation for the intelligent interconnection of all things. "My judgment is that the devices that need AIoT connection still have room for more than a hundred times of growth, and it will definitely give birth to a richer hardware and software ecosystem, as well as various software services based on the ecosystem."

Therefore, although it is still in the vortex of losses, Tuya Smart’s tank is full in the continuously growing and highly potential track of the Internet of Things. We will have to wait and see whether it can take the lead in the future.

In addition, it is worth mentioning Tuya Smart's equity incentive policy. Tuya Smart adopted an employee equity incentive plan, the 2015 Plan, on December 23, 2014. The prospectus shows that the purpose of Tuya Smart's "2015 Plan" is to attract and retain the best talents to hold positions of great responsibility, provide more incentives for selected employees, directors and consultants, and promote the success of the company's business. As of the date of the issuance of the prospectus, options for the purchase of a total of 62,965,000 common shares issued under the "2015 Plan" have not been exercised, and 27,969,167 options have been vested and can be exercised.

In the comment section of Tuya Smart's IPO night live broadcast, an employee left a message saying "Thanks to the company's options, I have achieved financial freedom..."

References:

1. "Tuya Smart is rushing for IPO, an AIoT company that does not sell hardware, the team originated from Alibaba Cloud, and Tencent is the major shareholder", QuantumBit

2. "Tuya Smart is listed on the New York Stock Exchange! Becoming the first stock of the global IoT cloud platform", Financial Times

3. "Tuya Smart, breaking out of the siege of giants?", Leifeng.com

4. "Dialogue with Wu Yongming of Yuanjing Capital: The "Global New Generation" under the Wave of Graffiti and Smartphones", Uncle C, IPO Early Knowledge

5. "Futu Securities ESOP: Tuya Smart IPO, how does the first IoT cloud platform implement equity incentives?", Financial Times