Chinese venture capitalist Liu Qin has made a lot of bets in his life. None is likely to pay off better than his investment in Xiaomi, the Chinese smartphone maker that is preparing for one of the most anticipated tech IPOs of this year.

Mr. Liu is the co-founder of Morningside Venture Capital, the earliest backer and now largest institutional investor in Xiaomi. Morningside will be the biggest winner among investors in the Xiaomi IPO because of its large stake, people with knowledge of the shareholding said. When Xiaomi raised money in 2014 and was valued at $46 billion, Mr. Liu had already made about 40 times his initial investment. Bankers pitching the startup’s initial public offering are aiming for a valuation of $100 billion. Mr. Liu declined to comment on how much his fund stands to gain or on the IPO generally.