Futu’s stock price has risen 21 times in a year. Market conditions are unpredictable, but there are traces to the growth of a company.
Text| Peng Xiaoqiu
Edit| Qiao Qian
Saern, who speculates in US stocks, has established a WeChat group called “Futu earns ten times and resigns”-Hong Kong and US stock brokerage “Futu” is his daily stock trading app and also his heavy stocks— -He invited netizens with large positions in Futu to join the group. At present, there are more than 100 people in this group. There are more than 1,000 daily discussion messages in the group. Many group friends spend more time in Futu than WeChat.
After all, Futu’s stock price has risen by more than 20 times since 2020. No wonder investors like Saern believe that Futu can help them realize their dream of wealth freedom.
An investor showed the income of his heavyweight Futu: “Starting from 60,000 US dollars, starting from the bottom 8 US dollars for fixed-investment purchases, and now holding 50,000 shares, the profit is about 5 million US dollars. .”
The change seems to be overnight. “Futu’s voice will rise in 2020. Everyone who wants to make new listings or buy Hong Kong and US stocks will think of Futu. Many of our users who want to allocate overseas assets have been robbed.” A domestic brokerage business The department manager told.
Even a year ago, there are far fewer people who are familiar with stock trading software and contribute to it. This is of course because the “big water release” after the catastrophe has ushered in the market as a whole, and brokers are always big winners in the bull market. Its financial report for the fourth quarter of 2020 shows that Futu’s net profit has increased by 10 times year-on-year.
Futu stock price
The general environment is fair to all brokerage firms, but Futu still widens a huge gap in the competition with brokerage firms.
Competition cannot be said to be less fierce. Futu’s competitors include both overseas Robinhood and Hong Kong local brokerage firms, as well as Chinese-funded brokerage Tiger Securities and mainland brokerages represented by Oriental Fortune.
Compared with No. 1 Futu, which is also the second place of Internet brokers, the difference between the number of customers and the total transaction amount of its deposit (real deposit in the account) remains about twice, and the revenue is more than three times that. . Futu’s user retention rate is even closer to 98%.
The market is always changing, but the growth of a company can be traced. We tryThe graph answers, in addition to hitting the dividends of the times, what did Futu, which was founded 9 years ago, do right? And whether its outstanding performance can be sustained?
There is no doubt that Futu’s trump card is the founder Li Hua (Leaf). The former No. 18 employee of Tencent achieved financial freedom when he was less than 30 years old. As an active investor in Hong Kong and US stocks, as early as 2010, Li Hua led several traders to achieve an annual turnover of more than 70. 100 million Hong Kong dollars, the number of assets has tripled-he has his own insights into transactions and traders.
Self-hosted cards and “Mr. Key”
The brokerage is a strongly regulated business. This means that whoever can win the license will take the lead.
However, the licenses approved by the regulatory agencies are very limited, but there are ways to do transactions. A large number of companies on the market obtain income through affiliated brokers and cooperative distribution with licensed brokers. Obtaining a license by yourself is a more difficult path.
In Li Hua’s view, the distribution model seems to have taken a shortcut, but it actually got stuck. “The users on your platform are actually not your own users, and customer assets have nothing to do with you. You are completely a diversion tool. Once there are fluctuations in the upstream, there is nothing you can do.” Li Hua told. From the first day of its establishment, Futu realized that in order to become a mainstream player, it must take the initiative to accept supervision.
It is not difficult to realize the importance of licenses, but how to get the most important first license.
According to Li Hua’s recollection, he had almost failed to obtain the No. 1 license of the Hong Kong Securities Regulatory Commission. If it were not for the help of “Mr. Key”, there might not be the current Futu.
In fact, as early as June 2011, before the establishment of Futu Securities, Li Hua led the team and completed the research and development of the Hong Kong stock trading system in only three months. At that time, Li Hua didn’t have much industry knowledge, thinking that he could directly introduce the system to the market. In fact, users have to go through some procedures of the Hong Kong Stock Exchange before using the trading system.
This includes testing in a simulated environment, end-to-end testing (connecting a dedicated line with the simulated environment of the exchange), and finally a simulation test, and this link must be connected to a securities company-Li Hua needs to find a company willing to cooperate Brokerage.
No one doubts Li Hua’s team about Internet research and development capabilities. However, almost no one believes in Li Hua’s product development capabilities on the financial side and whether it can be a good brokerage firm. He went to all the brokerage firms, and no one was willing to cooperate.
“In order to fight for another one last, I also proposed that Futu could use 5 million as a risk deposit for brokers, but none of the brokers was willing to take the risk. I was really desperate, and I was in a group of QQ stocks. Ask for help. In fact, it is an attitude of giving it a try, there is no way anyway.” Li Hua recalled the hardships at the time.
UnexpectedlyLi Hua’s request for help was answered by “Mr. Key” Wu Biwei. Wu Biwei was the managing director of the state-owned China Eastern Airlines Finance at that time. Li Hua seized this opportunity and prepared a PPT report very seriously. As a result, at the debriefing meeting, Wu Biwei readily agreed to Li Hua, and the PPT had no chance to start. Even if Wu Biwei’s colleagues in charge of business compliance kept interrupting on the sidelines, they were all rejected by Wu Biwei. Today, Wu Biwei is a senior partner of Futu, responsible for the Futu comfort part of the B-side business.
In addition to the difficulties in applying for a license, Li Hua also encountered funding difficulties. The several million yuan angel round financing of several old colleagues in the previous period has been spent, and the exchange has also begun to call for the license deposit. Only one investment institution throws an olive branch, and this institution has no more articles after several postponements. Since then, Li Hua’s external funding channels have been completely broken.
In addition to being firmly optimistic about things, and in order to prevent the team from disbanding, Li Hua went home to discuss with his wife, and the two decided to take the money first-this forced them to sell a large amount of Tencent stock to raise money. The couple once Looking at the rising stock price of Tencent, I was sighed-before and after it took out more than 40 million Hong Kong dollars.
The pressure during that period of time was directly transmitted to Li Hua’s physical examination indicators: triglycerides soared more than ten times that of normal people, and his weight soared by more than 20 kilograms.
Finally, in October 2012, Futu obtained the No. 1 license through the Futu International Hong Kong company established in Hong Kong, and in 2014 it also received a US$10 million financing led by Tencent. And in the following three years, Futu continued to get two rounds of more than 210 million US dollars in financing led by Tencent, followed by Jingwei and Sequoia. On the eve of its listing, Pan Atlantic received US$70 million in financing.
In terms of path selection for new brokers, one is Hong Kong stocks before US stocks like Futu, and the other is US stocks before Hong Kong stocks. Fortunately for Futu, the wave of Chinese concept stocks returning to Hong Kong since last year has attracted a large number of new users. Hong Kong stock licenses will undoubtedly help Futu seamlessly participate in this grand market.
Up to now, in addition to Type 1 licenses, Futu Hong Kong has successively won Type 2/3/4/5/7/9 licenses. In addition to the Hong Kong market, Futu has won 11 licenses in the United States, 3 licenses in Singapore, and 2 licenses in the pan-European region.
Barriers to self-developed systems
During the development of Futu, There have been huge disputes over whether to be a tool or a platform.
Li Hua told that the predecessor of Futu Niuniu was called Futu Trader, which was a pure trading tool. At that time, the team thought it could be directly used in the market, but Li Hua firmly disagreed. The quarrel was so intense that the office door was broken. Li Hua finally convinced the team to be a platform.
Being a platform means being able to participate in more links, thereby gaining stronger user stickiness.”It’s a simple thing to make tools, but it’s the right thing to make a platform.” Li Hua said.
Today, Futu’s business map covers the C-end trading software Futu Niuniu, the wealth management platform Elephant Fortune, the international trading software moomoo, the B-end option management and IPO underwriting Futu Anyi.
“For the platform, for example, Leaf thought about the platform as the bottom layer, which should carry wealth management business, international business, export business, etc., which is equivalent to overturning the work in our hands. At that time, we thought No need. Now it seems that he is right, especially with the development of our international business.” A former No. 30 employee of Futu said to him.
Futu has always insisted on launching a self-developed system as a higher business barrier than doing a platform. There are complicated systems behind this, including market quotation, trading, settlement, risk control, account, BOSS, etc., including the more difficult self-developed dark market system for Hong Kong stocks. According to Li Hua’s plan, the self-developed system of U.S. stocks is expected to be launched in the near future.
Among all the licenses in Hong Kong, the most difficult ones to obtain are Type 3 licenses (leveraged foreign exchange trading, only 37 companies in Hong Kong) and Type 7 licenses (dark disk access to third-party intermediaries, which was first released 7 years later ). In particular, the acquisition of Type 7 licenses means that Futu can obtain benefits by exporting its own R&D system to other brokers.
In addition to improving the transaction speed and guaranteeing the transaction experience, the self-developed system is also beneficial to profits. Take the Futu US stock clearing system as an example. Once its own switching is completed, it can generate operating profits of over US$50 million.
This is also why Futu continued to spend 15 million Hong Kong dollars to urgently expand 300 trading channels in the latest upgrade, so that 1,000 orders per second can reach the Hong Kong Stock Exchange-if the expansion channel is analogous to a highway, it means The current order congestion problem has been solved, and 2 lanes have been changed to 5 lanes. More customers come to trade, Futu will also be able to get more transaction commissions and financing fees.
A user who has experienced 100 Hong Kong and U.S. stock brokerages because of the launch of new products said, “From the experience point of view, Hong Kong local brokerages are still at the level of the 90s. They still make calls when placing orders, and they often fail to place orders. Go in. Mainland brokerages have a better experience, but they don’t pay much attention to Hong Kong and US stocks, and they don’t know much about the Internet. Futu’s products are a dimensionality reduction blow to them.” It is understood that Futu released 119 versions in the first three quarters of last year. There are more than 3000 functions.
The emphasis on products is engraved in the genes of Futu: 70% of Futu’s employees are product R&D personnel, followed by financial talents.
“People cannot always be trading”
Li Hua, who was born in Tencent, has a deep understanding of social interaction. Therefore, there must be quotations, transactions, and information on his platform, as well as communities and social interactions. “People cannot alwaysIt’s trading, and there will be ignorant, helpless, and boring needs when you are free. “
So socializing is not Futu’s first creation. The mainstream brokerages on the market are generally divided into emotional and news platforms represented by “stock bar”, and relatively rational and in-depth viewpoint platforms represented by Xueqiu. Both of these are tools first and then socializing. The risk of the latter is that the community atmosphere is good, but commercialization is not easy.
However, Futu chose to be a platform first and then social, and social networking uses real trading as a starting point to produce more quality discussion content.
In creating a sense of community, Li Hua can be said to be personally active. He led the development of the personal IP of Futu Niuniu, and it often appears in the real exchange community of “Niuniuquan”. When looking through all of Li Hua’s cattle pens, he found that when he encountered a user @叶哥, he would reply “I am”, and then either directly answer the question or forward it to the relevant colleague.
The surroundings collected by Niuyou
Today, the Futu app, which has more than 1 million daily activities, generates more than 150,000 UGC content every day, of which more than 10,000 actual orders are posted. Moreover, Li Hua will deliberately use traditional characters if he is a Hong Kong user when answering questions.
As a result, Li Hua gained the industry reputation of “Billions of dollars worth of customer service online at any time”. At 12:18 pm on January 23, Li Hua responded to the question of the line upgrade to the cycle right in the WeChat group. On the afternoon of January 26, Futu caused system congestion due to the new financing quota of Kuaishou, and many investors were crazy at him to make suggestions.
In Li Hua’s circle of friends, I saw a set of data-he logged on to Futu on average 65 times a day in 2020, 364 days a year, and the latest log on time was 4:29.
Interacting with users often, of course, can shorten the distance between users. But as a founder and CEO, is it overkill for answering questions every day?
“The founder is not only conducive to continuous iteration of the product, but also can increase the stickiness of users, and naturally the cost of acquiring customers is very low. This intangible also constitutes a moat of Futu.” Futu holds more than 300,000 shares. Investors said to the analysis.
This is also proved in the financial report. In Q3 of 2020, the average customer acquisition cost of Futu’s new paying subscribers dropped significantly to 967 yuan from 3250 yuan in the same period last year.At the same time, the number of users, especially the number of paying users, has maintained a three-digit rapid growth. More importantly, Futu’s financial report disclosed that its retention rate exceeded 98%.
“Behind this moat is the precipitation of relationship chains, behaviors, and content.” The aforementioned investor said. He believes in Futu co-founder Li Lei’s statement that if a person makes friends in private domain traffic, the migration cost will be high. As long as the emotional relationship exists, social data can also be precipitated.
Who is Li Hua?
“Although I haven’t met Li Hua, he is indeed a very good competitor.” A Futu company founder commented on this. “At the same time, so many players, such as the once famous 8 Securities, have strong technical strength, but only Futu has become the first echelon.”
Li Hua
Li Hua’s Niuniuquan’s signature is in Sun Tzu’s Art of War, “Be invincible first, and be victorious by the enemy. The invincibility is in yourself, and the enemy is victorious.” It means that those who are good at fighting in the past always come first. Create your own invincible conditions and wait for the opportunity to defeat the enemy. To prevent yourself from being defeated, the initiative is in your own hands.
Looking back, self-holding license, self-developed system, platform, and social interaction are the invincible conditions that Futu has always created for itself.
A proof of Futu’s “invincibility” is the launch of Futu Dark Disk.
The so-called dark market refers to an early trading period for retail investors to buy and sell new stocks in Hong Kong stocks in a small range. Usually 4:14-6:30 in the afternoon of the day before a Hong Kong stock company goes public is the dark trading time. For retail investors who are new but not optimistic, they can seize the opportunity to sell, and at this time, whoever has a higher price on the dark disk will naturally have an advantage.
After experiencing the dark trading of many brokers, I found several problems: once you encounter popular stocks, you may not be able to place an order, and the system will be down; some brokers need to call to place an order, and the phone is still If it is not connected, the stock price has changed drastically; the price of the same stock is very different, and the income that investors can get is also very different.
Futu’s first access was also a third-party dark disk, but it has not given up on self-research. Now this dark market has become a powerful tool for Futu to launch new business. According to Futu officials, there are currently 30Four companies entered the Futu ten billion new club, Kuaishou is 42.6 billion Hong Kong dollars, Nongfu Spring is 35.2 billion Hong Kong dollars, and JD Health is 20.7 billion Hong Kong dollars.
Another early Futu employee also gave a new example of financing. “Before there were peers in the industry who claimed to have 30 times leverage, but there was no quota in an instant. Many users also called for Futu to release 30 times, but Leaf believes that 30 times not only cannot allow more people to participate, if there is a break, the risk is very high. .”
A number of Futu users also mentioned an example: In the case of Ant Financial’s new refund, Futu immediately initiated a move to waive all subscription fees and all bank interest in the industry, tens of millions The loss of Yuan shall be borne by Futu itself. However, many peers did not choose to fully refund. In the end, the subscription fee is more refunded, and the interest can only be borne by the investor. For a time, Futu’s style of play won a good reputation among users.
Li Hua first started his business when he was in college. He provided thesis and resume printing and fax reception for seniors who were about to graduate, so as to solve the problem of difficulty in queuing and expensive. This entrepreneurship not only allowed him to accumulate some savings, for example, he had his own mobile phone in the 1990s, but also mainly got business training.
After graduating from university, Li Hua recommended to Shenzhen Development Bank as an excellent graduate, and later got an offer from Huawei. But in the end, I chose Tencent because QICQ (the predecessor of QQ) gave him access to the world outside Hunan. In this way, Li Hua joined Tencent in 2000 and became the first college student recruited by Tencent.
During this period, after Tencent’s Hong Kong IPO in 2004, the number of employees has increased from a dozen to 10,000. Li Hua also achieved financial freedom in his 30s. The listing of Tencent allowed Li Hua to start speculating in stocks and sowed the seeds for the creation of Futu.
“Tencent’s experience gave me the ability to believe. When you start to believe in yourself, you will be more willing to plan for the long-term. The second is the continuity of team management and business training.” Li Hua said.
It was discovered that among the 6 colleagues who had been following Li Hua since coming out of Tencent, 5 of them still remain in Futu. He has strong learning ability and hardly made any mistakes in key decisions. This is also the evaluation of Li Hua by many people close to him.
Outside Hong Kong
In Futu, 2021 is regarded as the first year of internationalization.
It is not so much that Li Hua’s international ambitions started from the “Vavigator Plan” formulated in 2020, it is better to start preparations as early as 2018. He once wrote in Niuniuquan: At 3:18 am on March 7, 2018, Beijing time, this day will be a very important day in Futu’s history. On this day, Futu America was officially launched and Futu stepped out. An important step in internationalization.
At present, Futu users are distributed in more than 200 countries and regions around the world. An internal brokerage conference callAccording to the discussion, Futu has about 200,000 users in Hong Kong, accounting for about 10% of Hong Kong’s 2 million retail investors. Futu plans to expand its market share to 30-40% within 2-3 years. Singapore has about 1 million retail investors and the US has 3 million, which is a huge potential market and the focus of Futu’s internationalization.
In addition, according to data from Oliver Wyman, a third-party consulting company, in 2018, more than 20 million people in Mainland China had overseas asset allocation needs. Futu’s latest data shows that daily active users exceed 1 million, which is still huge compared with such a large number of target users. Especially in the US market, WeChat MAU exceeds 2 million, and Futu has the support of this part of overseas users.
So, can we successfully win the two markets of Singapore and the United States?
Many overseas Chinese users interviewed said that they are looking forward to Futu’s entry. A New Zealand user said, “According to Futu’s development speed in Hong Kong, I believe it will not be bad overseas. Its average age of users is 35 years old, not a pure white, but also younger than traditional financial institution users, with high IQ, Highly educated and high-income groups.”
Futu’s future valuation increase will be driven by internationalization.
In the view of the stock market, the expanding middle class has a strong demand for overseas asset allocation, coupled with the money-making effect of Hong Kong and US stocks, it will surely attract more investors. In the financial circuit, stocks are the most frequent entry point. Once the ecological construction is completed, imagination is great.
According to Li Hua’s plan, what Futu really wants to do is to help investors discover investment opportunities. They only need one account to invest in the world, including Hong Kong stocks, US stocks, A shares, funds, bonds, etc.
But the risk point of Futu is that after a wave of big market, investors’ enthusiasm for investment decreases, whether it can acquire new users at low cost and promote their frequent transactions, which will also directly affect Futu Performance and stock price.
When he resigned in 2008, Li Hua deliberately did not go to the company for a month, but worked from home. He tried to use this method to carefully consider whether to leave Tencent. “I regretted leaving Tencent.” Li Hua said with a smile. But he has never regretted being able to start a company with user value by himself.
(The stock market is risky, this article does not constitute any investment advice.)