2024 INCCS Negotiation Case- Venture Capital Negotiation
Part A: SHEIN Group
Part B. Mubadala Investment Company
Background
Part A
SHEIN is a global online fashion and lifestyle retailer with a mission to make the beauty of fashion accessible to all. Shein is available through its website, and through dedicated mobile apps; it is distributed on the Google Play Store, App Store, Galaxy Store, and Huawei App Gallery. According to CNN, TikTok plays a large role in driving customers to the company website due to a TikTok trend of bulk buying clothes from Shein and presenting Shein clothes to their audience like a standard haul video. On May 17, 2021, the number of Shein's app downloads surpassed those of Amazon. Shein was the second most popular shopping app globally in 2021, and the most downloaded app in May 2022.Shein claims to utilize the psychology of the new generation and implements marketing strategies accordingly to achieve growth. In 2020, Shein was the most talked-about brand on TikTok and YouTube, and the 4th most talked-about brand on Instagram. Its low prices attract teenage internet shoppers with small budgets to post what they bought on social media.
Originally, Shein did not design its clothes. The company mainly sourced its clothing from China's wholesale clothing market in Guangzhou. However, Shein became a fully integrated retailer in 2014 when it secured its supply chain system. Now, the company utilizes a network of manufacturing partners and suppliers to make and deliver its products. Shein makes predictions on trends and produces items as quickly as three days after the identification of a trend. Shein also limits its orders to small batches of about 100 items to gauge customer interest. Order sizes are increased only if the small batches do well with consumers. In contrast, its competitors such as Zara order larger quantities (about 500), increasing their chances of losing profit if orders are not purchased in full. According to Bloomberg News, Shein's small- batch strategy is seen as key to its success. Suppliers working with Shein also saw their business grow as the scale increased.
In October 2022, The Wall Street Journal reported that Shein generated US$24 billion in revenue in 2022, becoming almost as large as traditional fast fashion brands such as Zara and H&M.
In 2023, The Information reported that Shein representatives had informal discussions with U.S.-based tech giants Amazon and Google about a potential investment in the company. The report notes that the company was expected to debut on the New York Stock Exchange (NYSE) in the future.
Part B
Mubadala Investment Company, or MIC for short is a state-owned global investment management holding company that acts as one of the sovereign wealth funds of the government of Abu Dhabi. Established in 1984, the International Petroleum Investment Company (IPIC) was created to advance Abu Dhabi’s natural petroleum wealth for the development of the emirate. Mubadala Development Company followed in 2002 to further diversify the economy. In June 2016, it was announced that Mubadala Development Company would merge with the International Petroleum Investment Company. In 2017, ownership of both MDC and IPIC was transferred to a newly-created parent company, Mubadala Investment Company. Headquartered in Abu Dhabi, Mubadala also has offices in London, Rio de Janeiro, New York, San Francisco and Beijing. Mubadala is investing and partnering at the leading edge of global growth and innovation to create opportunities for future generations. Mubadala owns stakes in numerous companies, including a share in the Carlyle Group, AMD, Injazat , Khazna, and En+ Group etc.
Negotiation Process
SHEIN hopes to go public with an Initial Public Offering (IPO) in the United States in 2024.In May 2023, SHEIN completed its final financing round, with a total amount of USD 2 billion, involving Sequoia Capital China, General Atlantic, and Mubadala Investment Company. This case simulates Mubadala Investment Company as an institutional investor participating in the financing negotiations of SHEIN Group in Guangzhou. During this negotiation, the important terms discussed by both parties are as follows
• Funding amount
• Liquidation Preference
• Founder Vesting
• Board of Directors
•Exclusivity(No Shop Agreement)
• Other terms
The Negotiating Objectives
SHEIN has reached an investment and financing negotiation agreement with Mubadala Investment Company.
Part A: SHEIN Group
Part B. Mubadala Investment Company
Background
Part A
SHEIN is a global online fashion and lifestyle retailer with a mission to make the beauty of fashion accessible to all. Shein is available through its website, and through dedicated mobile apps; it is distributed on the Google Play Store, App Store, Galaxy Store, and Huawei App Gallery. According to CNN, TikTok plays a large role in driving customers to the company website due to a TikTok trend of bulk buying clothes from Shein and presenting Shein clothes to their audience like a standard haul video. On May 17, 2021, the number of Shein's app downloads surpassed those of Amazon. Shein was the second most popular shopping app globally in 2021, and the most downloaded app in May 2022.Shein claims to utilize the psychology of the new generation and implements marketing strategies accordingly to achieve growth. In 2020, Shein was the most talked-about brand on TikTok and YouTube, and the 4th most talked-about brand on Instagram. Its low prices attract teenage internet shoppers with small budgets to post what they bought on social media.
Originally, Shein did not design its clothes. The company mainly sourced its clothing from China's wholesale clothing market in Guangzhou. However, Shein became a fully integrated retailer in 2014 when it secured its supply chain system. Now, the company utilizes a network of manufacturing partners and suppliers to make and deliver its products. Shein makes predictions on trends and produces items as quickly as three days after the identification of a trend. Shein also limits its orders to small batches of about 100 items to gauge customer interest. Order sizes are increased only if the small batches do well with consumers. In contrast, its competitors such as Zara order larger quantities (about 500), increasing their chances of losing profit if orders are not purchased in full. According to Bloomberg News, Shein's small- batch strategy is seen as key to its success. Suppliers working with Shein also saw their business grow as the scale increased.
In October 2022, The Wall Street Journal reported that Shein generated US$24 billion in revenue in 2022, becoming almost as large as traditional fast fashion brands such as Zara and H&M.
In 2023, The Information reported that Shein representatives had informal discussions with U.S.-based tech giants Amazon and Google about a potential investment in the company. The report notes that the company was expected to debut on the New York Stock Exchange (NYSE) in the future.
Part B
Mubadala Investment Company, or MIC for short is a state-owned global investment management holding company that acts as one of the sovereign wealth funds of the government of Abu Dhabi. Established in 1984, the International Petroleum Investment Company (IPIC) was created to advance Abu Dhabi’s natural petroleum wealth for the development of the emirate. Mubadala Development Company followed in 2002 to further diversify the economy. In June 2016, it was announced that Mubadala Development Company would merge with the International Petroleum Investment Company. In 2017, ownership of both MDC and IPIC was transferred to a newly-created parent company, Mubadala Investment Company. Headquartered in Abu Dhabi, Mubadala also has offices in London, Rio de Janeiro, New York, San Francisco and Beijing. Mubadala is investing and partnering at the leading edge of global growth and innovation to create opportunities for future generations. Mubadala owns stakes in numerous companies, including a share in the Carlyle Group, AMD, Injazat , Khazna, and En+ Group etc.
Negotiation Process
SHEIN hopes to go public with an Initial Public Offering (IPO) in the United States in 2024.In May 2023, SHEIN completed its final financing round, with a total amount of USD 2 billion, involving Sequoia Capital China, General Atlantic, and Mubadala Investment Company. This case simulates Mubadala Investment Company as an institutional investor participating in the financing negotiations of SHEIN Group in Guangzhou. During this negotiation, the important terms discussed by both parties are as follows
• Funding amount
• Liquidation Preference
• Founder Vesting
• Board of Directors
•Exclusivity(No Shop Agreement)
• Other terms
The Negotiating Objectives
SHEIN has reached an investment and financing negotiation agreement with Mubadala Investment Company.
