SenseTime: An AI unicorn from hong Kong's Chinese University

21st Century Business Herald reporter Bai Yang reported from Beijing

After a long period of rumors of listing, SenseTime has finally officially embarked on the road to IPO. On August 28, SenseTime submitted an IPO application to the Hong Kong Stock Exchange.

In the field of artificial intelligence in China, SenseTime, Megvii, Yuncong, and Yitu are known as the "Four Little Dragons of AI". Before SenseTime, the other three companies had launched IPO plans, but so far, it is still uncertain who will spend the title of "AI First Stock".

With the disclosure of SenseTime's prospectus, the mystery of the "AI Four Little Dragons" has also been unveiled. Through comparison, it can be found that although SenseTime is not the earliest AI company founded, in terms of revenue scale, SenseTime has become the first of the "Four Little Dragons".

In 2020, SenseTime's revenue was RMB3.446 billion. The prospectus quoted Sullivan as saying that in terms of revenue in 2020, SenseTime is not only one of the "Four Little Dragons", but also the largest supplier of artificial intelligence software in Asia and the largest supplier of computer vision software in China.

In the past few years, with the rapid development of the AI industry, AI entrepreneurship is also in full swing, and among the many startups, SenseTime is undoubtedly the leader, in the seven years after its establishment, SenseTime has won 12 rounds of financing totaling about US$5.2 billion, and investment institutions include SoftBank (14.88%), Alibaba (7.59%), Primavera Capital (3.08%), Silver Lake Capital (3.05%), IDG Capital (1.42%), etc.

The reason why it can become the darling of the capital market, SenseTime's initial attraction comes from its founding team. Tang Xiaoou, 53 years old this year, is the founder and actual controller of SenseTime, and the soul of SenseTime, and all the stories about SenseTime start from him.

He is married to the University of Chinese, Hong Kong

Xiaoou Tang received his B.A. in Engineering from the University of Science and Technology of China in July 1990, a Master of Science degree from the School of Engineering and Applied Sciences from the University of Rochester in October 1991, and a Ph.D. from the Massachusetts Institute of Technology in June 1996.

During his doctoral studies, Xiaoou Tang began his research in the field of AI. Subsequently, Tang Xiaoou gradually laid his position in the field of AI, especially face recognition technology, through one achievement after another.

There are many labels on Tang Xiaoou, such as the CVPR Best Paper Award in 2009, which is the first time in history that Asia has won the award. In addition, Xiaoou Tang served as the editor-in-chief of the International Journal of Computer Vision (IJCV) and the chairman of the International Computer Vision Congress, and is now the vice president of the Shenzhen Institute of Advanced Technology of the Chinese Academy of Sciences and the head of the Shanghai Artificial Intelligence Innovation Center.

The birthplace of SenseTime is the University of hong kong Chinese. In January 1998, Tang Xiaoou began to serve as a professor in the Department of Information Engineering at the University of Chinese in Hong Kong, and in 2001, he set up a multimedia laboratory at the University of Chinese in Hong Kong, from which SenseTime's founding team originated.

The founding team of SenseTime, in addition to Tang Xiaoou, also includes four co-founders, including Xu Li, Wang Xiaogang, Xu Bing and Yang Fan. Among them, except for Yang Fan, the other three have intersected with the University of hong kong Chinese.

The 39-year-old Xu Li is the executive chairman, executive director and chief executive officer of SenseTime, responsible for the company's vision strategy, business development and day-to-day operations.

In December 2010, Xu Li received his Ph.D. in Computer Science and Engineering from the University of Chinese, Hong Kong, and from October 2010 to July 2013, He was a postdoctoral researcher at the University of Chinese, Hong Kong, focusing on computer vision and computational imaging.

Xiaogang Wang, 44, is the executive director and chief scientist of SenseTime, responsible for the overall planning and management of the company's research team.

He received his Master's Degree in Research from the University of Chinese, Hong Kong in December 2003 and joined the Department of Electrical Engineering at the University of Chinese as an Assistant Professor in August 2009 and has been a Professor since August 2020. In addition, according to the prospectus, Wang Xiaogang is also Tang Xiaoou's brother-in-law.

The 31-year-old Xu Bing is the executive director and secretary of the board of directors of SenseTime, responsible for corporate development strategy and overall management of financing and strategic investment. In November 2012, Xu Bing received a double bachelor's degree in information engineering and mathematics from the University of Chinese, Hong Kong, and since August 2012, she has been a doctoral candidate in the Multimedia Laboratory of the University of Chinese, Hong Kong, focusing on deep learning and computer vision.

Fan Yang, from Tsinghua University, received his bachelor's and master's degrees in electrical engineering from Tsinghua University in July 2003 and July 2006. Prior to joining SenseTime, Fan Yang was a research-level software development engineer at Microsoft (China) Co., Ltd. from July 2006 to November 2014. Since November 2014, he has served as Vice President of SenseTime, where he is mainly responsible for SenseTime's strategic planning and corporate development.

The prospectus discloses that Tang Xiaoou, Xu Li, Wang Xiaogang and Xu Bing are the beneficiaries of different voting rights of SenseTime, and the A shares they hold in their hands can cast 10 votes per share.

In terms of shareholdings, Amid, which Tang Xiaoou actually controls, holds 6,906,080,602 Class A shares, accounting for 21.73%, and Amand also indirectly holds 1,891,820,000 Class B shares; while Xu Li holds 0.9% of Class A shares, Wang Xiaogang holds 0.73% of Class A shares, and Xu Bing holds 0.33% of Class A stocks.

In addition, Xu Li, Wang Xiaogang and Xu Bing also held 565,386,529 shares, 302,140,143 shares and 252,236,581 Class B shares through SenseTalent, respectively.

In corporate management, Tang xiaoou is mainly responsible for the design of SenseTime's research and innovation strategies, as well as promoting collaboration with leading universities and academic institutions to establish research partnerships. It can be seen that in the division of labor of the sensetime management team, Tang Xiaoou's main energy is still used for technology research, while the operation of enterprises at the industry level is handed over to other partners.

In fact, if you want to trace the origin of SenseTime, it may be derived from a research result of Tang Xiaoou's team in March 2014. At that time, Tang Xiaoou's team released a face recognition algorithm with an accuracy rate of 98.52%, surpassing the human eye recognition ability (97.53%) for the first time in the world.

In June 2014, Tang Xiaoou's team published the DeepID series of algorithms, which gradually increased the accuracy of face recognition to 99.55%. It is the breakthrough of these technologies that has opened the prelude to the landing of technology in the face recognition industry, and this is also what SenseTime has been doing in the past seven years.

The leap from "learning" to "production"

According to the prospectus, SenseTime's revenue mainly comes from the sales of software platforms, including software licensing, artificial intelligence software and hardware integrated products and related services.

According to the source division, SenseTime's revenue mainly comes from four sectors, namely smart business, smart city, smart life and smart car. In 2018, smart business was the most important source of revenue for SenseTime, accounting for 46.1%, but in the following years, the proportion of revenue from smart cities continued to increase, and in the first half of 2021, SenseTime's revenue from smart cities reached 786 million yuan, accounting for 47.6%, exceeding the revenue of 647 million yuan in the smart industry.

As of June 30, 2021, SenseTime's software platform had more than 2,400 customers, including about 250 Fortune 500 companies and listed companies, 119 cities and more than 30 automotive companies, while SenseTime had empowered more than 450 million smartphones and more than 200 mobile applications, including 5 mobile applications with more than 500 million monthly active users.

Despite the increasing number of customers, SenseTime's dependence on head customers is becoming more and more obvious. According to the prospectus, as of 2018, 2019, 2020 and the first half of 2021, senseTime's largest customers accounted for 8.7%, 7.7%, 11.9% and 22.9% of the revenue, respectively, while the revenue of the top five customers accounted for 28.4%, 26.3%, 31.4% and 59.3% respectively in the same period.

In terms of overall revenue, in 2018, 2019, 2020 and the first half of 2021, SenseTime's revenue was 1.853 billion yuan, 3.027 billion yuan, 3.462 billion yuan and 1.652 billion yuan, respectively. The corresponding adjusted net loss was $220 million, $1,037 million, $878 million and $726 million, respectively.

From the perspective of revenue growth, SenseTime's revenue growth rate in 2019 was 63.3%, and the growth rate in 2020 dropped to 13.9%, which was mainly affected by the epidemic, and SenseTime's revenue in the first half of 2020 was 861 million yuan, which accounted for only 24.8% of the annual revenue in 2020.

Of course, it is also because of the low base in the first half of 2020 that the revenue growth rate in the first half of 2021 reached 91.87%. However, SenseTime's adjusted net loss in the first half of 2021 is also close to the full year of 2020.

In the AI industry, technical capabilities are the most core content of competition. Therefore, while promoting the landing of technology, SenseTime's investment in research and development is also continuing.

According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, SenseTime's R&D investment was 849 million yuan, 1.92 billion yuan, 2.45 billion yuan and 1.77 billion yuan, respectively.

As of June 30, 2021, SenseTime's R&D team includes 40 professors plus 3,593 technical R&D personnel, including more than 250 phD and phD candidates, accounting for 68% of the company's total number of R&D teams.

Continuous investment in research and development has also helped SenseTime build certain competitive barriers. As of the first half of 2021, SenseTime has generated a total of 22,196 AI models, in addition, SenseTime has won more than 70 championships in various global competitions, published more than 600 top academic papers, and has 8,123 intellectual property portfolios, including 4,169 patent assets in China and 3,954 patent assets overseas.

After years of development, artificial intelligence has evolved from an emerging technology to a technical base, and more and more industries are aware of the importance of artificial intelligence and have begun to apply it. To achieve this process, it is inseparable from the efforts of AI companies such as SenseTime.

However, the technology empowerment industry is a huge and complex project, which poses more difficult challenges for AI companies, how to further breakthrough technology and how to land more extensively and deeply, and whether enterprises can achieve self-hematopoiesis, which are also questions that AI companies, including SenseTime, need to answer.

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