Blokees, a Chinese builder of construction toys, has recently filed for an IPO in Hong Kong, aiming to become a significant player in the global toy market.
Blokees stands as the largest construction toy company in China and the third-largest globally in the construction character category. Its products are sold across 150,000 physical retail locations, including major toy stores and retailers like Toys “R” Us, Children’s King, Cool Play, and Walmart, covering all first-tier and second-tier cities, as well as approximately 80% of third-tier and lower cities.
The man leading Blokees, Zhu Weisong, is an experienced serial entrepreneur and a former partner of the A-share gaming giant, Youzu Interactive. He co-founded Youzu Interactive with Lin Qi in 2009, focusing on product development, and successfully took the company public through a reverse merger five years later. At its peak, Lin Qi was ranked fifth among Asia’s top young billionaires with a net worth of $2.2 billion, and Zhu Weisong was listed on the Hurun Post-80s Rich List. In 2014, Zhu left Youzu Interactive to establish Blokees.
Zhu Weisong’s entrepreneurial venture has been supported by a host of investment institutions, including Gaorong Capital, Legend Capital, Source Code Capital, Yunfeng Fund, Jinyi Chuangpin, Bowen Investment, Zhenyi Investment, Junjin Investment, and Zhongshi Jinqiao, among others.
From Game Developer to China’s LEGO
Hailing from Shaoxing, Zhu Weisong shares his roots with Chen Tianqiao, the founder of Shanda, and Qiu Bojun, the founder of Kingsoft. After graduating from university in 2004, he moved from Shenzhen to Shanghai and embarked on a continuous journey of entrepreneurship.
His decision to venture into the construction toy industry was influenced by his role as a father. Zhu Weisong, with two children of his own, always looked for gifts for his kids when returning from business trips, which led him to focus on LEGO toys.
Noticing that while various toys had evolved, construction toys remained largely the same, Zhu Weisong decided to integrate smart and technological elements into traditional toys. Thus, he established Grape Technology and launched the new brand Blokees. In 2016, Blokees began developing construction toys, transforming small pieces into larger ones, adding soft rubber construction pieces, stickers, and enhancing the technological aspect. Blokees later introduced 10cm and 18cm construction figures, a first in the industry.
In 2017, Blokees launched its own IPs and built construction toys based on them. Today, its original IPs “Transforming Blokees” and ” Blokees Heroes Infinity” have garnered over 13.1 billion views online.
Blokees now holds over 50 licenses, including popular IPs such as Ultraman, Transformers, Naruto, Minions, Detective Conan, and Hello Kitty, with a total of 431 SKUs on sale.
Starting in 2019, the company began developing construction character toys, turning beloved IPs into tangible, engaging physical entities.
“China is the world’s second-largest toy consumer, yet there are not enough well-known Chinese toy brands,” Zhu Weisong noted, aiming to create a renowned Chinese toy brand to compete with international giants like LEGO that dominate the Chinese market.
Blokees has also expanded into overseas markets, including the United States, Southeast Asia, and Europe, through online and offline channels such as Amazon and Walmart, with a portion of the raised funds allocated for international market development.
Zhu Weisong has grown his construction toy business to a GMV of 1.8 billion, making it the fastest-growing scaled toy company globally, with a GMV growth rate exceeding 170% in 2023.
Ultraman Drives 1 Billion Yuan in Sales in H1 2024
Blokees’s products range from 19.9 to 399 yuan, with the majority of popular products priced at 19.9 and 39 yuan. The company’s revenue has seen rapid growth in recent years.
From 2021 to the first half of 2024, Blokees achieved revenues of 330 million yuan, 326 million yuan, 877 million yuan, and 1.05 billion yuan, respectively. It is evident that the revenue for the first half of 2024 has already surpassed the annual revenue of 2023, with a year-on-year increase of 237.6% as of June 30, 2024.
However, the company only turned profitable in 2024, with net profits of -507 million yuan, -423 million yuan, -207 million yuan, and 292 million yuan from 2021 to the first half of 2024. The gross profit increased by 306.5%, reaching a 52.9% gross margin.
The shift in Blokees’s fortunes was led by offline sales of IP-based construction toys. Since the company began selling IP toys in 2022, it has driven rapid revenue growth.
During the reporting period, the revenue from construction character toys was 117 million yuan, 769 million yuan, 107 million yuan, and 1.023 billion yuan, accounting for 36.1%, 87.7%, 74.7%, and 97.8% of the respective period’s revenue.
Among them, the “Ultraman” IP was the most popular. In 2023 and the first half of 2024, most of Blokees’s revenue came from the sale of Ultraman IP products, accounting for 63.5% and 57.4% of total revenue, respectively.
In 2021, Blokees entered into a licensing agreement with the IP licensor to gain the right to develop and sell Ultraman IP products. In 2023, Blokees’s “Ultraman” series saw a surge in sales, with the first quarter breaking a million, reaching 1.2749 million units.
Since then, the sales of each “Ultraman” series launched by Blokees in 2023 have continued to climb, exceeding 2 million units, with the tenth series selling 4.2268 million units in the first quarter alone. The prospectus indicates that its Ultraman IP license in China has been extended to 2027.
With the high sales of IP toys come high licensing fees. In 2021, 2022, and 2023, Blokees’s licensing fees were 2.5 million yuan, 14.85 million yuan, and 72.98 million yuan, respectively. In the first half of 2024, the licensing fee reached 91.23 million yuan, surpassing the total of the past three years.
Valuation of $7.2 Billion, Cloud Peak, Gaorong, and Legend Capital are Here
In 2014, after achieving financial freedom, Zhu Weisong founded Blokees, and four years later, the company began financing.
In 2018, Blokees secured a substantial angel round of 857 million yuan, with his former partner Lin Qi investing 100 million yuan. The round also included several individual investors, Chen Weirui contributed 100 million yuan, and Qi Dahong invested 10 million yuan. Additionally, Jinyi Chuangpin invested 40 million yuan, and Bowen Investment invested 10 million yuan, with other shareholders including Zhenyi Investment, Junjin Investment, and Zhongshi Jinqiao Advertising.
In 2020, Blokees completed a 330 million yuan Pre-A round of financing, with investors including Gaorong Capital, Legend Capital, and Source Code Capital.
Legend Capital stated that it is optimistic about the structural opportunities represented by Chinese children’s consumer goods and content brands like Blokees in the future children’s consumer field. Blokees is deeply involved in products, technology, design, IPs, and channels, expected forming a rare ecosystem-level solution in the industry, creating a great vision of a Chinese children’s brand from China, and is expected to guide the Chinese children’s consumer technology industry into the next brand-new stage.
In April 2021, Blokees raised nearly 600 million yuan in Series A funding, led by Alibaba’s Yunfeng Fund and Legend Capital, with Gaorong Capital and Jinyi Chuangpin, among other old shareholders, continuing to follow.
Zhu Weisong completed three rounds of significant financing, totaling 1.787 billion yuan, and Blokees’s latest valuation reached 7.2 billion yuan.
Currently, Zhu Weisong holds 54.95% of Blokees’s shares, either directly or indirectly, making him the largest shareholder. Legend Capital holds a total of 7.03%, Source Code Capital holds 5.64%, Yunfeng Fund holds 3.15%, and Gaorong Capital holds 1.19%.
The toy manufacturing industry, favored by many capitals, is undoubtedly a good business with a huge global toy market. In terms of GMV, the global toy market has grown from 631.2 billion yuan in 2019 to 773.1 billion yuan in 2023, with a compound annual growth rate of 5.2%. By 2028, the market size is expected to reach 993.7 billion yuan.
IP toys, which have driven Blokees’s development, are undoubtedly a popular innovative play in recent years, with the penetration rate of global and Chinese IP toy markets continuing to increase, expected to reach 73.8% and 74.5% by 2028, respectively.
Taking Pop Mart, which has made a splash in the IP toy market, as an example, its “performance myth” continues.
Entering the third quarter of 2024, Pop Mart’s overall revenue achieved a significant increase of 120% to 125% year-on-year. In overseas markets, Pop Mart’s revenue achieved a leap of 440% to 445% year-on-year, marking its expansion strategy in emerging markets such as Southeast Asia and North America has also achieved remarkable results. Affected by the growth performance, Pop Mart’s stock price soared in a short period, and its market value returned to 100 billion Hong Kong dollars.
In addition, another card game manufacturer “Ka You” also submitted a listing application to the Hong Kong Stock Exchange at the beginning of 2024. As a social currency for post-10s, Ka You sold nearly 7.8 billion yuan in less than three years, mainly selling Ultraman cards, with a gross profit margin as high as 70%. In 2022, Ka You had become a unicorn enterprise valued at 1 billion US dollars, with investment institutions including Sequoia and Tencent behind it.
It is evident that the “gold content” of IP toys is still on the rise.
