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Kai-Fu Lee’s Sinovation Ventures: Why Invest In Bitmain?

Sinovation Ventures, one of China’s prominent funds which is led by former Google China head Kaifu Lee, has invested $12.5 million in Bitmain’s A funding round to get 1.13% stake in August,2017. Wang Jiaping, the executive director at this venture fund and the man who facilitates the deal, revealed the reasons why Sinovation Ventures decided to invest in the world’s largest bitcoin mining hardware manufacturer, according to Chinese blockchain news outlet PANews.

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Bitmain’s IPO prospectus shows the company has experienced a ultra-high-speed development over the past five years since its establishment with a nearly 400% annual growth rate of its net assets. In the first quarter of 2018, it managed to surpass Nvidia in terms of profit margin by double points, generating $1.1 billion in total net profits. If Bitmain successfully goes public, it could be the most eye-catching and largest IPO filed by technology companies in Hong Kong.

Kaifu Lee once said as a Tech VC, Sinovation Ventures is good at riding the wave of technical innovation and entering the market in the early stage before the tailwind is generated. The fund discovers Bitmain when starting the layout of the AI accelerator chip.

Wang believes the rapid development of AI has greatly increased the demand for computing,making the semiconductor industry ripe with opportunities.And the specialized ASIC chis represents the future of this industry.

Wang said, “ Bitmain is a company that dominates the fast-growing market and is an excellent underlying investment”. He thought the the firm’s core business is the design and sale of bitcoin mining rigs, which makes Bitmain’s development prospects particularly clear. Its latest SHA256 algorithm acceleration chip powered mining machine accounts for more than 70% of the market share.

Another key point that impresses Wang is Bitmain’s ability to manage risk. “ Blockchain industry, especially the crypto market, is in a state of constant and big fluctuation.But Bitmain’s main business still goes smoothly in such a turbulent market.” Wang said.

“ In the short term, the sales of Bitmain mining rigs will be affected by the price of digital assets. But in the long run, the company’s value is not only reflected in the sales of mining equipment, but also in its layout in AI chips and related fields. We are very optimistic about its future outlook.” Wang added.

So far, Sinovation Ventures has invested in only one blockchain-related company. The reason behind the limited layout in the space is that transaction processing speed offered by the current underlying blockchain technology fails to meet the demands of blockchain applications.

Wang indicated  his fund will give priory to underlying technology when it comes financing blockchain startups in the future.

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