Why did capital "abandon" Royole Technology? Investors in the industry: There are mistakes in the direction strategy

When the domestic mobile phone market blows the wind of "folding screen" and the players entering the game are marching forward, Royole Technology, which has a "unique" flexible screen technology and is known as "high yield and low cost", is experiencing "cold winter".

Following the exposure of wage arrears for half a year last month, on April 6, Royole Technology will take a three-month holiday. In this regard, a number of Royole Technology employees confirmed this to the nanduwan finance agency reporter.

Founded in 2012, in less than 10 years, Royole Technology has grown into a high-profile "unicorn" company, with a valuation of up to $6 billion (about 38 billion yuan).

Behind the high valuation, Royole has an enviable growth experience, financing all the way to the "soft hand": from 2012 to 2020 in the 8 years, a total of more than 40 investment institutions to Royole Technology to throw "olive branches", to give a lot of financial support, the current disclosed transaction amount of financing has nearly 10 billion yuan.

However, if there is divine help, Rouyu is still caught in the "whirlpool" of wage arrears, work stoppages, and losses. Since obtaining the last financing in 2020, Royole Technology has "fallen out of favor" in the capital market, and there is no capital to help in public information, and the plan to impact the IPO has also been stranded several times.

Counting royole's financing process, what makes investors decide to give up Royole? Some investors familiar with Royole analyzed to the reporter of Nanduwan Finance Agency that Royole's technology has its uniqueness and threshold, but choosing a self-built production line is one of the important factors that will lead it to the road of loss.

The 8 years of capital "darling": won the A-F round of financing, and the amount of financing has been disclosed to be nearly 10 billion yuan

In 2012, Liu Zihong, a "scholar bully" who returned from Stanford University, founded Royole Technology, focusing on full-flexible displays and flexible sensors, and one of the landing directions of this technology is the folding screen mobile phone.

In the flexible screen industry track, mainstream players such as Samsung, LG, BOE, etc., use the "low temperature polysilicon (LTPS)" technology route. This technology is not only costly, but also a major problem with low yield. In this context, Royole has its own "unique cheats": "ultra-low temperature non-silicon process integration (ULT-NSSP)" technology, with Royole's self-proclaimed "high yield, low cost" quickly "out of the circle".

This "unique cheatbook" has become one of the reasons why Royole Technology is favored by the investment circle. In the 8 years from 2012 to 2020, a total of more than 40 investment institutions threw "olive branches" to Royole Technology and gave a large amount of financial support, and the financing of the disclosed transaction amount alone is nearly 10 billion yuan.

Counting the financing process of Royole Technology, the financing of the disclosed transaction amount can be sorted out into the following timeline:

In June 2012, royole Technology, which had just been established, received tens of millions of yuan of A round financing from Songhe Capital and Shenzhen Venture Capital.

In June 2013, Songhe Capital and Shenzhen Venture Capital continued to lead the investment, and the internationally renowned investment institution IDG Capital entered the B round, and Royole Technology received tens of millions of dollars in investment.

In August 2015, Songhe Capital and Shenzhen Venture Capital led the C round, with a total investment of RMB 1.1 billion in 8 institutions, including Cornerstone Capital, CITIC Capital, IDG Capital, Yuanzheng Investment, Fuhui Venture Capital, Shanghai Pudong Development Bank, Alpha Wealth and Qishi Capital.

In November 2016, WARMSUN Capital, Qianhai Fund of Funds and Qicheng Capital invested 500 million yuan in three institutions, which was a C+ round of financing for Royole Technology.

In September 2017, Royole Technology received another US$800 million in Series D financing, of which US$560 million was debt financing from China CITIC Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China and Ping An Bank, and US$240 million from Hanfu Capital, Shanghai Pudong Development Bank, Zhonghai Shengrong, Tanshi Capital and WARMSUN Capital.

In May 2018, Poly Capital entered the E round of financing of Royole Technology, and three months later, Yingke Capital, CMB Equity Investment and Anto Capital participated in the E+ round of financing. Also in August 2018, Mumeng Group and Star River Venture Capital Invested Inroy Technology Pre-IPO, but the transaction amount of these rounds of financing was not disclosed. At this time, the valuation of Royole Technology has reached 5 billion US dollars.

In May 2020, Royole Technology received another US$300 million F round of financing from SF Holdings, Everselm Zhongli and China Railway Dacheng.

From capital "darling" to "abandoned": Investors in the industry believe that Royole should not choose to build its own production line

In 8 years, under the chase of capital, Royole Technology quickly completed a total of 13 rounds of financing from A to F.

But even with technology and capital, as a start-up company, Royole is far from having a deep industrialization accumulation compared to traditional manufacturing companies, and self-built production lines were not a wise choice for Royole at that time.

However, Liu Zihong and the team eventually chose to build their own production line. The relevant person in charge of Royole revealed that the financing obtained by Royole before was basically invested in self-built production lines, and it was still in the dilemma of "lack of money".

Why take the risk? In 2017, Liu Zihong revealed the reason in an interview with the media, saying that Royole was actually forced by helplessness: we did not want to build our own production line at the beginning. But after the release of the technology in 2014, many manufacturing companies in the manufacturing industry, including panels, came to us to talk about cooperative production. However, after contact, we feel that it is not easy to promote, because some manufacturers want us to take the technology and process to their production line to run through, and then sign the contract, rather than signing it first. "Think about it, how can our team say yes? Because there is no guarantee, things like processes and recipes cannot be protected by patents. The team had a lot of concerns and couldn't go ahead. ”

However, people in the investment industry familiar with Royole believe that it is precisely because Royole has chosen the road of self-built production lines that it has been forced to a non-wage loss, and the investment institutions are prohibitive. Investors to the Nanduwan Finance Agency reporter analysis, technical background Liu Zihong underestimated the self-built production line burning speed, even if it is tens of billions of funds, self-built production line can also burn out quickly, "the team did not accurately judge the production line burning speed, even good technology is wasted." If you choose to cooperate with companies with mature production lines, the results may be different. ”

Royole's self-built large-scale production line of flexible screens, which is known as the world's first, is located in Longgang, Shenzhen, and began to be built in October 2015. The flexible screen production base, which covers an area of 100,000 square meters and a construction area of about 400,000 square meters, was officially started and opened in 2016, and mass production was announced in June 2018.

However, the mass production capacity of this production line has also been questioned. Previously, Nandu had reported royole's "mass production difficulty" dilemma, in addition to the transaction with a number of large customers, in terms of production capacity, the prospectus showed that Royole's capacity utilization rate is not high. The design capacity of the fully flexible display in 2018, 2019 and the first half of 2020 was 11.67, 46.67 and 23.33 thousand, respectively, but the actual production capacity was 1.76, 14.56 and 1.23 thousand, and the capacity utilization rate was 15.1%, 31.2% and 5.3%, respectively. It can be seen that the company's production capacity is far from saturated, and there may be a large number of idle situations in the production line.

After the production line of Royole Technology announced mass production, the reporter of Nanduwan Finance Agency issued an application to Royole to go to the production line for an interview, but did not receive a promise from Royole. Now it seems that the refusal to visit the outside world may also be inextricably linked to its mass production "dilemma".

Three months after Royole was exposed to wage arrears and holidays, the investors behind it were also silent about Royole's situation. Nandu reporters tried to send interview requests to investment institutions such as Shenzhen Venture Capital, Cornerstone Capital, and Songhe Capital that had "inserted knives in two ribs" for Royole, but they did not get an official response.

The road to self-help: The science and technology innovation board folded, with a loss of 3.2 billion yuan in three years

After facing financial difficulties, Royole Technology has also sought to go public.

At the beginning of 2020, it was reported that Royole Technology submitted an IPO application in the United States to raise $1 billion. However, it was later reported that Royole abandoned its plan to list in the United States and instead listed in the Chinese market.

On December 31, 2020, Royole Technology submitted a prospectus to be listed on the Science and Technology Innovation Board. According to the prospectus, Royole Technology plans to raise 14.4 billion yuan through this IPO, which will be used for flexible cutting-edge technology research and development, flexible display base upgrade and expansion construction, flexible technology enterprise solution development, new generation flexible intelligent terminal development and supplementary working capital.

Compared with the proposed fundraising amount of 14.4 billion yuan, Royole's revenue and profit are very dismal. According to the prospectus filing, from 2017 to 2019, royole's net losses were 359 million yuan, 802 million yuan and 1.073 billion yuan, respectively, while the net loss of 960 million yuan in the first half of 2020 was close to the loss scale of the whole year of 2019. In three and a half years, the cumulative loss reached 3.195 billion yuan.

The impact on the science and technology innovation board failed to achieve its wishes. On February 9, 2021, Royole Technology and the sponsor applied to withdraw the listing application documents. On February 10, the Shanghai Stock Exchange announced that it would terminate the review of royole Technology's initial public offering of shares and listing on the Science and Technology Innovation Board. As for the reason for the withdrawal, Liu Shuwei, who was an independent director at the time, explained that it was because "there is a direct level of 'three types of shareholders' in the company's shareholder structure and other qualified circumstances that need to be further demonstrated."

Savior or "PPT" style cooperation? After being exposed to wage arrears, Royole has received new strategic cooperation

Faced with a dilemma, there have also been investors trying to save Royole. In December 2021, some media reported that after Royole Technology fell into a capital crisis, Songhe Capital, which participated in the company's A, B and C financing, was implementing a "rescue" to help coordinate Royole Technology to raise funds, and the plan was to carry out a new round of convertible bond financing to existing shareholders and interested investors. "It may not be successful, I hope Royole can survive this time." In this regard, the reporter of Nanduwan Finance Agency asked Songhe Capital for verification, but as of press time, there has been no response.

On January 16 this year, Royole, which has a tight capital chain, also seems to have ushered in the dawn of Ganlin for a long time, announcing that it has reached a strategic cooperation with Shenzhen CIIC Wei'an Robot Technology Co., Ltd. (hereinafter referred to as "CIIC Wei'an").

According to the cooperation agreement, CIIC Weian will purchase flexible displays, flexible sensors and software and hardware integration solutions from Royole Technology in batches for the company's full line of commercial robot products, with a total procurement amount of about 3 billion yuan for three consecutive years from 2022. Regarding the current progress of cooperation between the two sides, CIIC Wei'an expressed inconvenience to the reporter of Nanduwan Finance Agency, "At present, the company pays more attention to its own development, and the development of friendly businessmen should have its own considerations."

What is the background of CIIC Wei'an, does it have the strength to bear an order of about 3 billion yuan to help Royole tide over the difficulties? According to tianyancha information, CIIC Weian was established in 2018 with a registered capital of 10 million yuan, and has only completed the A and B rounds of financing in 2021, of which the B round of financing is only a few hundred million yuan publicly disclosed. In addition, according to public information, the robots that the company has used have not been equipped with flexible screens or adopted related technologies.

There are also Royole employees who revealed to the Nandu reporter that at present, the company can not see the progress of cooperation with CIIC Wei'an, "If there is progress, it will also play a strong shot internally, but there is not." "Based on the company's scale, financing history, current landing products and employee feedback, it is still unknown whether the company can purchase orders of about 3 billion yuan to Royole for three consecutive years."

In addition, in November last year, Royole also announced the signing of an order of 600 million yuan, which will be delivered within two years. According to public information, Royole regards the signing of this order as another certification of Royole's own technology and products by the market, but does not disclose customer information. This order coupled with the strategic cooperation with CIIC Health, Royole Technology has accepted a total of 3.6 billion yuan in procurement, and whether these purchases can really land and alleviate the problem of Royole Technology's tight funds is still unknown.

Written by: Nandu reporter Yan Zhaoxin intern Bai Hongguo