Issue 37 | May 21, 2018

Issue 37 | May 21, 2018
An Exit: Hot Pot Chain Haidilao Files for Hong Kong IPO

Haidilao (海底捞), one of China’s most popular hot pot chains with 320 restaurants across the world, has filed for an IPO on the Hong Kong Stock Exchange to raise a reported $600 million to $700 million.

Haidilao was the top Chinese cuisine restaurant both in China and globally based on 2017 revenue, according to the consultancy Frost & Sullivan. For 2017, the company reported an annual profit of 1.028 billion yuan ($161 million), a 39.8% year-on-year increase, according to its filing. Its revenue jumped 36% to 10.6 billion yuan ($1.7 billion).

Founded in 1994, Haidilao, whose name roughly translates to “scooping treasure from the bottom of the sea” has since become the dominant hot pot restaurant chain in a country obsessed with this dish. Founder Zhang Yong, a former tractor factory worker, is now a billionaire.

The restaurants mainly serve spicy Sichuan-style hot pot and are popular for their creative customer service. When it gets crowded, diners pass the time in the waiting area with Internet terminals, board games, and kids’ toys. They can also enjoy a free shoeshine, manicure, or hand massage. On special holidays, magicians in colorful, traditional masks perform tricks. Periodically, a server breaks into the restaurant’s signature Olympic-style “noodle dance.”

Customers often recount stories of Haidilao’s waiting staff going the extra mile. One customer arrived at the restaurant on a late night when it was already closed, and a waiter gave him free snacks so he did not stay hungry. Another said he was in a rush to head to the airport after a meal but could not get a taxi, and a Haidilao store manager took him to the airport with his own car.

Haidilao is also the first hot pot restaurant to roll out a takeout service. When customers order takeout from Haidilao, the restaurant delivers them not just food, but also an electric stove, a pot, a power strip, a tablecloth, aprons, a trash can, extra soup, hair bands (for tying back long hair), a wiping cloth for eyeglasses, toothpicks, and chewing gum.

Haidilao said in the prospectus that it plans to open 180 to 220 new restaurants this year. The hot pot chain is gearing up efforts to take its brand global. The Chengdu-based restaurant chain already has entered overseas markets including Singapore, Los Angeles, Seoul, and Tokyo.
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A Big Deal: Qi Lu Steps Down as Baidu COO
Baidu announced on May 18 that its chief operating officer, former Microsoft executive Qi Lu, will be stepping down in July, less than two years into his tenure there. Baidu stock was down more than 9% after the announcement, and its market cap decreased by almost $10 billion.

Qi Lu was hired at Baidu to take over daily operations from CEO Robin Li in early 2017. Immediately prior to that, he was an executive vice president at Microsoft, where he was in charge of Office applications. Earlier in his career, he worked at IBM and Yahoo.

Lu said in the statement that he can no longer work full time in China for “personal and family reasons” and will spend more time in the US. He will retain his role as vice president of Baidu’s board and will focus on research and development, although he will no longer be working full-time for Baidu.

Lu is part of a recent exodus of Baidu’s senior executives, which includes six out of the company’s original seven founders, former chief scientist Andrew Ng, and former director of its Silicon Valley AI Lab Adam Coates. Various departed key members of Baidu’s self-driving vehicle unit have founded at least four self-driving startups: Roadstar,, Jingchi, and

Many Chinese commentators wrote that Baidu’s inability to retain talents has shaken public confidence in the company. “Baidu has lost not just Qi Lu, but also the chance to win the next Qi Lu,” one wrote.

A Number:
1.04 Billion – Number of monthly active users of WeChat, which passed the 1 billion mark for the first time during Q1 2018. Tencent reported that its first-quarter profit increased 61% year-on-year to 23.3 billion yuan ($3.66 billion).
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A Graphic: Toutiao Changes its Slogan
In the latest version of its app released this week, ByteDance (a.k.a Toutiao) has changed its slogan from “Headlines that matter to you” (你关心的 才是头条) to “Information creates value” (信息创造价值). In a statement, the company said that as a platform, it will strive towards spreading information that’s not just valuable to people, but also reinforces positive values.

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By popular demand, we have created a Slack channel and WeChat group for followers of the 996 Newsletter/Podcast. This is a community brought together by its shared interested in tech in China. In these groups, we will regularly share China-related news, insights, as well as events and job opportunities (many of our portfolio companies are hiring!).

You will get to talk directly with the authors of this newsletter as well as other members of the GGV team, and connect with other like-minded people who care about tech in China. You can pitch us startup ideas, ask us questions about fundraising, suggest guests to interview, or give us feedback. Hans Tung, managing partner at GGV Capital, will host regular AMA (Ask Me Anything) sessions in these groups.

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Zara Zhang & Hans Tung at GGV Capital