Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and the related notes appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under “Risk Factors,” “Business,” and information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding whether to buy the ADSs.Our Mission
Our mission is to build an IoT developer ecosystem and to enable everything to be smart.
Our Culture
We are a team of engineers and entrepreneurs with rich experience in software, cloud and enterprise services. Together as a team, we have a vision that in the era of Internet of Things, or IoT, every “thing” will be connected seamlessly to unleash enormous commercial opportunities through software and to create value for users. We founded Tuya based upon the principles of team spirit, innovation and unlimited courage. We firmly believe that success comes for those who share a common pursuit to change the world for the better, those who are reformers to constantly generate groundbreaking ideas, and those who are brave enough to face the challenges and turn these ideas into reality. These beliefs underpin all the work we do and are the foundation of our corporate culture.
Overview
We have pioneered a purpose-built IoT cloud platform that delivers a full suite of offerings, including Platform-as-a-Service, or PaaS, and Software-as-a-Service, or SaaS, to businesses and developers. IoT is fundamentally changing the world and creating enormous business opportunities. Our IoT PaaS offering enables businesses and developers to quickly and cost-effectively develop, launch, manage and monetize software-enabled devices and services. Our Industry SaaS offering enables businesses to easily and securely deploy, connect, and manage large numbers and different types of smart devices. We also offer businesses, developers and end users a wide range of cloud-based value-added services to improve their ability to develop and manage IoT experiences.
Through our IoT cloud platform, we have enabled developers to activate a vibrant IoT ecosystem of brands, OEMs, partners and end users to engage and communicate through a broad range of smart devices.
We had over 5,000 customers in 2020, primarily including brands, original equipment manufacturers or OEMs, industry operators and system integrators. For the same period, our IoT PaaS empowered over 2,700 brands to develop their smart devices, including leading brands such as Calex, Philips and Schneider Electric. Our IoT PaaS currently enables businesses and developers to develop smart devices in more than 1,100 categories sold across over 220 countries and regions globally. In 2020, we powered over 116.5 million smart devices, making us the largest IoT PaaS business in the global market of IoT PaaS in terms of the volume of smart devices powered, according to CIC. As of December 31, 2020, there were approximately 204.3 million smart devices powered by Tuya. We are also attracting an increasing number of Industry SaaS customers. We have also established a large and active community of over 262,000 IoT device and software developers as of December 31, 2020. Our IoT cloud platform is currently capable of processing over 84 billion cloud requests and over 122 million AI voice interactions daily. Today, smart devices powered by Tuya are available in over 100,000 stores all over the world.
IoT provides the opportunity of connecting every thing and every person. This offers a growth opportunity similar to that of the mobile internet. Today, billions of smartphone users run their lives on millions of apps. The mobile internet revolution is made possible by ubiquitous high speed connectivity, local capabilities in computing, storage and networking, and most importantly a software experience that transforms business operations and user interaction. We believe IoT will follow a similar evolution enabled by connectivity, computing, software and software development tools. The IoT developers are key to unlocking the IoT growth opportunity. As developers create more smart devices and IoT services, they need a software platform that enables them to develop efficiently and manage the complexities of the full development cycle.
We are the software platform for the IoT era. Traditionally, businesses offered static, disconnected devices that limited their ability to establish and maintain long-term relationships with their end users. We have built a neutral, comprehensive, cloud-native and developer-friendly platform, where businesses and developers can develop software applications that turn traditional devices into connected and active devices, engage with end users throughout the product lifecycle, and create new revenue opportunities.
Our products enable customers across a broad range of industry verticals, such as smart home, smart business, healthcare, education and agriculture. Our multi-cloud platform allows customers to switch among major cloud infrastructure providers, such as Amazon Web Services, Microsoft Azure and Tencent Cloud, and integrates mainstream third-party technologies, such as Amazon Alexa, Google Assistant and Samsung SmartThings, to make smart devices more intelligent.
We have established a thriving ecosystem of brands, OEMs, developers, partners and end users on our platform due to powerful network effects. End users of smart devices demand a single interface to interact with various types of devices from different brands—an experience similar to using different apps on one smartphone. Our platform provides an open architecture to connect any device from any brand, while enabling users to manage all devices across brands through a single portal—the exact experience they desire. As a result, more brands want to join our platform to integrate their devices onto the single user interface through which devices from other brands are connected. These self-reinforcing network effects further increase our brand awareness and generates word-of-mouth referrals, helping us form an extensive, vibrant and increasingly interconnected IoT ecosystem.
We help our customers succeed and we benefit from their growth through our consumption-based revenue model as we deploy IoT PaaS to more smart devices developed by our customers. We had 188 premium IoT PaaS customers, defined as IoT PaaS customers who individually contributed more than US$100,000 of revenue during the immediately preceding 12-month periods, as of December 31, 2020. In 2020, our premium IoT PaaS customers contributed approximately 87% of our revenues generated from IoT PaaS. Our dollar-based net expansion rate of IoT PaaS was 181% for the trailing 12-month period ended December 31, 2020, indicating strong growth within our existing customer base.
We also provide Industry SaaS in select verticals to directly help businesses deliver a full IoT experience, driving efficiency, cost saving and productivity. For example, our Smart Hotel SaaS solution allows hotel managers to monitor from a single control point different aspects of hotel services, such as housekeeping, guest traffic control, property surveillance and maintenance. Our Smart Consumer Security SaaS solution enables home and business owners to monitor multiple smart consumer security devices, such as sensors and motion detectors, to enhance security and provide better control over their properties.
Our business has scaled rapidly in recent periods. For 2020, our revenue grew to US$179.9 million, representing an increase of 70% over the same period in 2019. We generated net loss of US$70.5 million and US$66.9 million in 2019 and 2020, respectively.
The Internet of Things Era
Internet of Things—the concept of connecting physical devices to a large, interconnected network—is profoundly transforming the way individuals interact with the physical world and changing how device companies develop products.
In the past decade, the mobile internet transformed people’s way of life. There was a convergence of operating systems and application development tools for smartphones, which drove a vibrant ecosystem of phones, users, developers and applications. Today there are billions of smartphone users and millions of mobile apps. These mobile apps enabled people to socialize online, consume local services and conduct their lives from a smartphone. The concept of “Social, Local, Mobile”, or SoLoMo, has created trillion dollars of value in mobile internet.
The IoT era transcends the mobile internet, with SoLoMo evolving to “Assistant, Space, Things”, generating a massive opportunity for value creation by businesses.
The Growing Importance of a Software Experience
With favorable technology drivers, users want a software experience in IoT, and businesses need to deliver it.
Challenges in Delivering IoT and Software Experience
Businesses and developers still face a number of challenges in delivering software-enabled IoT offerings, which also affect the end user experience:
These significant challenges have created the need for an IoT platform that takes care of the complexities of developing, launching, supporting and growing IoT software, so businesses and developers can leverage full-stack infrastructure and tools to develop devices and software applications with ease.
The Tuya Solution—An IoT Cloud Platform
We have pioneered an IoT cloud platform that empowers businesses and developers to transform from offering traditional products into providing software-enabled smart devices and IoT services that extend beyond the point of sale. Customers leverage our IoT cloud platform to quickly and cost-effectively launch, manage and monetize their software-enabled devices and services. We deliver a one-stop, developer-first, cloud-agnostic platform with broad use cases that allows our customers to digitalize their businesses and transform the experience of their end users. Through our platform we have established a thriving ecosystem of brands, OEMs, developers, partners and end users.
The foundation of our solution is Tuya IoT Cloud infrastructure, our unified underlying cloud infrastructure that provides a rich set of infrastructure capabilities and developer tools.
Based upon Tuya IoT Cloud infrastructure, we offer the following products and services:
cloud-based services directly to end users including IoT data storage, push messaging and content services.
The Benefits of Our IoT Cloud Platform
The key benefits to our business customers include:
The key benefits to developers on our IoT cloud platform include:
The key benefits to end users include:
Our Market Opportunity
We believe that as organizations transition from traditional product companies to digital businesses with software-enabled IoT products, a significant amount of IT spend will be allocated to IoT enablement. We provide these organizations a neutral, comprehensive and scalable platform with an open ecosystem. According to CIC, we are one of the earliest in the industry to provide full stack IoT solutions spanning the perception, network, cloud and application layers. Our vision is to become the largest platform to enable IoT products and services across the globe. Our technology and products address use cases in the large markets of IoT PaaS as well as IoT SaaS, which includes application software and analytics software spend on IoT. According to CIC, the worldwide IoT PaaS total addressable market is forecasted to grow from US$72.2 billion in 2019 to US$171.7 billion by 2024, representing a CAGR of 18.9%. China represents 26.2% and 28.9% of this market in 2019 and 2024, respectively. According to IDC, the worldwide IoT software total addressable market is forecasted to grow from US$129.2 billion in 2019 to US$237.0 billion by 2024, representing a CAGR of 12.9%. China represents 16.6% and 18.1% of this market in 2019 and 2024, respectively.
Our Competitive Strengths
Pioneer and Global Leader of IoT Cloud
Our first-mover advantage, scale and expertise allow us to partner with our customers to help them develop software that differentiates their products, thereby gaining significant IoT mindshare with our customers.
Open and End-to-end IoT Cloud Platform
We have built an open and fully integrated IoT cloud platform that provides businesses and developers across the world with lifecycle services and enable them to build and manage applications effectively by taking care of the remaining complexity.
Differentiated Technology and Data Capabilities
We fully leverage our cutting-edge technology to enable our customers to have better developing experience, and help them better serve end users.
Thriving Ecosystem with Powerful Network Effects
We have established a thriving ecosystem of brands, OEMs, developers, partners and end users on our platform due to powerful network effects. End users of smart devices demand a single interface to interact with various types of devices from different brands—an experience similar to using different apps on one smartphone. Our platform provides an open architecture to connect any device from any brand, while enabling users to manage all devices across brands through a single portal—the exact experience they desire. As a result, more brands want to join our platform to integrate their devices onto the single user interface through which devices from other brands are connected. These self-reinforcing network effects further increase our brand awareness and generates word-of-mouth referrals, helping us form an extensive, vibrant and increasingly interconnected IoT ecosystem. Additionally, we allow our customers to try out new ideas based on our consumption-based revenue model to accelerate their adoption of our platform and cultivate a vibrant culture for innovation.
Our Growth Strategies
We believe we are the leading IoT cloud platform based on our leading position in the global market of IoT PaaS. According to CIC, we are the largest IoT PaaS business in the global market of IoT PaaS in terms of volume of smart devices powered in 2020. We intend to strengthen our position as the leading IoT cloud platform and continue to grow our business by pursuing the following strategies:
Summary of Risks Affecting Our Company
Investing in the ADSs involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in the ADSs. The main risks set forth below and others you should consider are discussed more fully in the section entitled “Risk Factors”, which you should read in its entirety.
unable to expand our customer base and/or the use of our products and services by our customers declines, our business may be harmed.
Contractual Arrangements and Corporate Structure
We are a Cayman Islands company and currently conduct substantially all of our business operations in the PRC through Hangzhou Tuya Information Technology Co. Ltd., our wholly-owned subsidiary incorporated in the PRC. Hangzhou Tuya Information Technology Co. Ltd. controls Hangzhou Tuya Technology Co., Ltd. through a series of contractual arrangements. As a result of these contractual arrangements, we have control over, and are the primary beneficiary of, Hangzhou Tuya Technology Co., Ltd.
The following chart illustrates our corporate structure, including our significant subsidiaries as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, our VIE and certain other subsidiaries, as of the date of this prospectus:
Our Corporate Information
Our principal executive offices are located at Huace Center, Building A, 10/F, Xihu District, Hangzhou City, Zhejiang Province, 310012, People’s Republic of China. Our telephone number at this address is +86 0571-86915981. Our registered office in the Cayman Islands is located at Maricorp Services Ltd., P.O. Box 2075, George Town, Grand Cayman KY1-1105, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor New York, NY 10168.
Investors should contact us for any inquiries through the address and telephone number of our principal executive office. Our principal website is www.tuya.com. The information contained on our website is not a part of this prospectus.
Implications of Being an Emerging Growth Company
As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected to take advantage of such exemptions. As a result, our consolidated financial statements contained in this prospectus may not be directly comparable to those of other public companies.
We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. See “Risk Factors—Risks Related to the ADSs and This Offering—We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.”
Conventions Which Apply to This Prospectus
Unless we indicate otherwise, all information in this prospectus reflects the following:
Except where the context otherwise requires and for purposes of this prospectus only:
This prospectus contains information derived from various public sources, including International Data Corporation, or IDC, and certain information from an industry report commissioned by us and prepared by CIC, a third-party industry research firm, to provide information regarding our industry and market position. Such information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors” section. These and other factors could cause results to differ materially from those expressed in these publications and reports.
The Offering
Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the option granted to the underwriters to purchase up to additional ADSs to cover over-allotments, if any, in connection with the offering.