China had 206 tech start-ups valued at more than US$1 billion, moving ahead of the US with 203

Sequoia Capital ranked as the world’s top unicorn investor, followed by Tencent Holdings and SoftBank Group Corp

Of the 494 tech unicorns founded in the 2000s that have not yet gone public as of June 30, China had 206 such firms to move ahead of the US with 203, according to the inaugural Hurun Global Unicorn List 2019 released on Monday.

“China and the US dominate with over 80 per cent of the world’s known unicorns, despite representing only half of the world’s GDP and a quarter of the world’s population,” said Rupert Hoogewerf, chairman and chief researcher of Shanghai-based publishing group Hurun Report, in a statement. “The rest of the world needs to wake up to creating an environment that allows unicorns to flourish.”’

The world’s unicorns are based in only 24 countries around the world, spread around 118 cities and have a total value of US$1.7 trillion, according to the latest Hurun list. India ranked third with 21 unicorns, followed by the UK with 13 and Germany with seven.

Alipay operator Ant Financial Services, TikTok owner ByteDance and ride-hailing giant Didi Chuxing topped the Hurun unicorn rankings, with a combined valuation of US$280 billion.

Among cities, Beijing was ranked as the world’s unicorn capital with 82 such firms, ahead of San Francisco with 55. Shanghai followed with 47, New York had 25 and Hangzhou counted 19. As a region, Silicon Valley led the world with 102 of the world’s unicorns.

The findings bolster China’s efforts in closing the gap with the US on fostering many of the world’s most innovative companies, despite a protracted trade war that has placed several Chinese technology start-ups under a trade ban by Washington.

“The breadth and diversity of small, but growing Chinese tech companies is considerable, and easily rivals what we see in Silicon Valley,” said Paul Haswell, a partner who advises technology companies at international law firm Pinsent Masons. “The challenge now is whether the explosion in tech start-ups is sustainable in China, particularly as the Chinese economy faces some of its toughest challenges.”

Hikvision Digital Technology, the world’s largest supplier of video surveillance systems, recently warned it may lose customers and miss out on business opportunities after Washington placed the company on a trade blacklist that restricts it from buying American technology.

Venture capital deals in China have also plummeted, as investors pulled back amid unpredictable trade talks and growing concerns about start-up valuations. The value of investments in the country tumbled 77 per cent to US$9.4 billion in the second quarter from a year earlier, while the number of deals roughly halved to 692, according to market research firm Preqin.

“With a few major exceptions, investments in Chinese unicorns are dominated by mainland investors,” Haswell said. “But with Chinese investors tightening their belts, we could see the landscape for would-be unicorns become more challenging.”

American venture capital firm Sequoia Capital ranked as the world’s top unicorn investor, with a portfolio of 92 unicorns as of June 30, according to the Hurun Global Unicorn List. Chinese internet giant Tencent Holdings took second spot with 46 unicorns, while Japanese conglomerate SoftBank Group Corp ranked third with 42.

“Unicorns are supposed to be hard to find, but investors like Sequoia, SoftBank and Tencent make it look easy,” Hoogewerf said.

That reflected an interesting difference between China and the US. China’s big tech companies are also some of the world’s biggest investors into start-ups. By contrast, the likes of Amazon.com and Google barely make the top 100 investors in start-ups.

There were 192 unicorns involved in the e-commerce and financial technology sectors, while 118 were in the cloud computing, artificial intelligence and logistics sectors, according to the Hurun list.

“These are the industries that are disrupting the world economy, initiating the Fourth Industrial Revolution, and widely considered to hold the key to the future,” Hoogewerf said. “Not surprising that many of the world’s top young talent want to work in these sectors.”