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China’s digital yuan tests leap forward in Shenzhen

Shenzhen, known for its maker community and manufacturing resources, is taking the lead in trialing China’s digital yuan.

Last week, the city issued 10 million yuan worth of digital currency to 50,000 randomly selected residents. The government doled out the money through mobile “red envelopes,” a tool designed to digitize the custom of gifting money in red packets and first popularized by WeChat’s e-wallet.

The digital yuan is not to be mistaken as a form of cryptocurrency. Rather, it is issued and managed by the central bank, serving as the statutory, digital version of China’s physical currency and giving Beijing a better grasp of its currency circulation. It’s meant to supplement, not replace, third-party payments apps like WeChat Pay and Alipay in a country where cash is dying out.

For example, the central government may in the future issue subsidies to local offices by sending digital yuan, which can help tackle issues like corruption.

Shenzhen is one of the four Chinese cities to begin internal testing of the digital yuan, announced a government notice in August without going into the specifics. The latest distribution to consumers is seen as the country’s first large-scale, public test of the centrally issued virtual currency.

Nearly 2 million individuals in Shenzhen signed up for the lottery, according to a post from the local government. Winners could redeem the 200 yuan red envelope within the official digital yuan app and spend the virtual money at over 3,000 retail outlets in the city.

As its next step, Shenzhen will launch a (vaguely defined) “fintech innovation platform” through its official digital currency institute, said a new central government document detailing the city’s five-year development measures, including attracting more foreign investment in cutting-edge technologies. The city will also play a key role in furthering the digital yuan’s research and development, application and international collaboration.

In April, the city’s digital currency vehicle launched a wave of recruiting for technical positions like mobile app architects and Android developers.

Shenzhen was established in 1980 as China’s first special economic zones and is now home to tech behemoths like Tencent, Huawei and DJI and innovation hubs like HAX and Trouble Maker. President Xi Jinping is scheduled to visit the city this week to commemorate the city’s 40th anniversary.

While the central bank provides logic and infrastructure undergirding the digital yuan, there’s much room for commercial banks and private firms to innovate on the application level. Both ride-hailing platform Didi and JD’s fintech arm have recently unveiled steps to help accelerate the digital yuan’s real-life implementation.

Hong Kong logistics unicorn Lalamove unveils foray into the US

Lalamove, an on-demand logistics service active in China, Southeast Asia, and Latin America, has officially entered the U.S. seven years after launch.

As the COVID-19 pandemic keeps millions of Americans home, Hong Kong-based Lalamove believes it can seize the growing demand for delivery services in the country. It makes its debut in the Dallas Fort-Worth area, a major hub for distribution and logistics in the U.S. In days the service will launch in Chicago and Houston.

The startup was one of the first in Hong Kong to hit the $1 billion unicorn valuation mark alongside its archrival GoGoVan. Its business is multifold and highly localized, but essentially it works as an Uber for businesses and individuals that need to move goods within the city.

In China, where it’s known as Huolala (货拉拉), it primarily serves as a broker between shippers who need to send cargo and a network of truck drivers. In Southeast Asia, the business functions similarly with the addition of food delivery for restaurants, a crowded and cash-burning space. In the U.S., its fleet of sedans, SUVs and pickup trucks are available 24/7, allowing it to target customers spanning catering, retail, e-commerce, manufacturing and construction, with fees starting at $8.90.

“Delivery is essential, especially during the pandemic. But many local businesses don’t have or cannot afford in-house fleets, so we’re excited to work with businesses in the Dallas Fort-Worth area to provide same-day, on-demand delivery services to their customers,” said Blake Larson, international managing director at Lalamove and formerly co-founder of Rocket Internet’s Asia-focused e-hailing startup Easy Taxi.

Like GoGoVan, Lalamove was founded by a Hong Kong entrepreneur who was educated in the U.S. Both companies have scored fundings from heavyweight institutions from China and elsewhere.

Lalamove’s investors included Hillhouse Capital, Sequoia Capital China and Xiaomi founder’s Shunwei Capital. Through a merger with China’s 58 Suyun, GoGoVan counts Tencent, Alibaba, KKR and New Horizon Capital amongst its backers.

The Hong Kong startup’s global expansion comes at a time when TikTok stumbles in the U.S. due to its links to China. In the logistics startup’s case, a Chinese team operates the Chinese division Huolala, while separate international teams manage the overseas segments of Lalamove, TechCrunch understands. The core of TikTok’s challenge in the U.S. is the video app’s dependence on its Chinese parent ByteDance’s technological capabilities.

To date, Lalamove has verified and onboarded more than 500 partner drivers in Dallas Fort-Worth, with plans to add another 500 in the area by the end of this year. It’s also hiring for its regional operational office at a time when the U.S. is struck by widespread virus-induced layoffs, furloughs and slowdown in hiring.

Lalamove claims it has to date matched more than 7 million users with a pool of over 700,000 delivery partners in 22 markets around the world.

WeWork sells majority stake in Chinese entity, seeks localization

Four years after its foray into the Chinese market followed by rapid and cash-hemorrhaging expansion, WeWork decided to wind down its involvement in the country.

WeWork’s Chinese unit has secured a $200 million investment led by Shanghai-based equity firm Trustbridge Partners, which first backed WeWork China in its Series B round in 2018, the American co-working giant announced. What the release didn’t emphasize is that the latest financing effectively makes Trustbridge Partners the controlling shareholder, leaving WeWork with a minority stake in its Chinese entity.

The investment marks WeWork China’s transition from a subsidiary of a multinational into a Chinese-owned company — with a globally recognized brand, sort of like franchising.

WeWork China will continue its close cooperation with WeWork’s global headquarters to “ensure the consistency of the WeWork brand and satisfication of global members and employees,” a spokesperson said in a statement to TechCrunch.

Other changes are already underway, though. There have been layoffs as part of the sale and “many things remain uncertain,” said the person with knowledge of the matter. WeWork China declined to comment on the matter.

WeWork arrived in China at the height of the country’s co-working boom. Its brand, service and chic design have long attracted well-financed startups and open-minded big corps. Since 2016, more than 100 WeWork spaces have sprung up across 12 cities in China, including dozens it acquired from local rival Naked Hub. It now claims 65,000 members in the country.

It’s also launched a range of initiatives in China, including an on-demand service for customers who don’t want to commit to long-term leases, which could help drive in more revenue.

Globally, WeWork serves 612,000 members in 843 offices across 38 countries. China accounts for roughly one-eight of its locations, down from a share of one-sixth in 2018.

WeWork China is not only competing with cheaper, home-grown alternatives — both private and government-subsidized — but also dealing with a weakening economy in COVID-19 times and uncertain U.S.-China relations. Relinquishing operational control in a cash-burning market seems logical, given all the troubles it already faces back home.

Ahead of its planned initial public offering, which was later postponed, WeWork said trade policy uncertainty could have an adverse impact on its business. It also highlighted China, a lower-priced market, as a drag on its profit margin.

Following the investment, Trustbridge Partners will launch an extensive localization makeover for WeWork China, from “decision-making and management, product and business, through to operations and productivity,” said the WeWork China representative. The new owner will also seek partnerships with local communities, real estate firms and Chinese enterprises during the process.

WeWork China gets a new boss as a result of the sale. Michael Jiang, ann operating partner at Trustbridge Partners, will serve as the acting chief executive. Jiang was previously a senior vice presidnet at Meituan, China’s food delivery and on-demand services giant.

China’s electric carmaker WM Motor pulls in $1.47 billion Series D

Chinese electric vehicle startup WM Motor just pocketed an outsize investment to fuel growth in a competitive landscape increasingly coveted by foreign rival Tesla. The five-year-old company raised 10 billion yuan ($1.47 billion) in a Series D round, it announced on Tuesday, which will pay for research and development, branding, marketing and expansion of sales channel.

WM Motor, backed by Baidu and Tencent, is one of the highest funded EV startups in China alongside NIO, Xpeng and Li Auto, all of which have gone public in New York. With its latest capital boost, WM Motor could be gearing up for an initial public offering. As Bloomberg’s sources in July said, the company was weighing a listing on China’s Nasdaq-style STAR board as soon as this year.

Days before its funding news, WM Motor unveiled its key partners and suppliers: Qualcomm Snapdragon’s cockpit chips will power the startup’s in-cabin experience; Baidu’s Apollo autonomous driving system will give WM vehicles self-parking capability; Unisplendour, rooted in China’s Tsinghua University, will take care of the hardware side of autonomous driving; and lastly, integrated circuit company Sino IC Leasing will work on “car connectivity” for WM Motor, whatever that term entails.

It’s not uncommon to see the new generation of EV makers seeking external partnerships given their limited experience in manufacturing. WM Motor’s rival Xpeng similarly works with Blackberry, Desay EV and Nvidia to deliver its smart EVs.

WM Motor was founded by automotive veteran Freeman Shen, who previously held executive positions at Volvo, Fiat and Geely in China.

The startup recently announced an ambitious plan for the next 3-5 years to allocate 20 billion yuan ($2.95 billion) and 3,000 engineers to work on 5G-powered smart cockpits, Level-4 driving and other futuristic auto technologies. That’s a big chunk of the startup’s total raise, which is estimated to be north of $3 billion, based on Crunchbase data and its latest funding figure.

Regional governments are often seen rooting for companies partaking in China’s strategic industries such as semiconductors and electric cars. WM Motor’s latest round, for instance, is led by a state-owned investment platform and state-owned carmaker SAIC Motor, both based in Shanghai where the startup’s headquarters resides. The city is also home to Tesla’s Gigafactory where the American giant churns out made-in-China vehicles.

In July, the Chinese EV upstart delivered its 30,000th EX5 SUV vehicle, which comes at about $22,000 with state subsidy and features the likes of in-car video streaming and air purification. The company claimed that parents of young children account for nearly 70% of its customers.

TikTok CEO Kevin Mayer resigns after 100 days

Kevin Mayer, the chief executive of TikTok, announced on Wednesday that he is resigning, just over 100 days after the former Disney executive joined the world’s largest short video app in mid-May.

The news came just days came on the heel of TikTok’s move to sue the U.S. government over its forthcoming ban. The app, owned by Chinese internet upstart ByteDance, is caught in tensions between Beijing and Washington, which accuses the app of posing a national security threat to the U.S.

On August 6, President Donal Trump signed an executive order to shut down TikTok if ByteDance doesn’t sell the app’s U.S. operations. The app has until mid-November to divest itself.

“We appreciate that the political dynamics of the last few months have significantly changed what the scope of Kevin’s role would be going forward, and fully respect his decision. We thank him for his time at the company and wish him well,” said a TikTok spokesperson in a statement to TechCrunch.

The New York Times reported earlier that Mayer announced his decision in a note to employees as TikTok came under pressure from the Trump administration over its links to China. Mayer “did not anticipate the extent to which TikTok would become involved in tensions between China and the U.S.,” sources told the Financial Times, and the executive “didn’t sign up for this.”

Vanessa Pappas, currently general manager of TikTok, will reportedly become the interim head.

The looming TikTok sale has attracted investor interest across the board, from Microsoft which publicly announced its intention through to the less expected bidder Oracle.

This is an updating story…

BlackBerry makes China push as the OS for Xpeng smart cars

The once-pioneering BlackBerry is pretty much out of the smartphone manufacturing game, but the Canadian company has been busy transitioning to providing software for connected devices, including smart cars. Now it’s brought that section of its business to China.

This week, BlackBerry announced that it will be powering the Level 3 driving domain controller of Xpeng, one of the most-funded electric vehicle startups in China and Tesla’s local challenger. Baked in Xpeng’s intelligent cockpit is BlackBerry’s operating system called QNX, which competes with the likes of Android and Linux to enter automakers’ next-gen models.

Sitting between BlackBerry and Xpeng’s tie-up is middleman Desay SV, which specializes in automotive system integrators like Aptiv. Desay SV, founded in 1986, has an illustrious past as a previously Sino-German joint venture that involved Siemens. The Huizhou-based company today supplies to Tier 1 automotive brands and original equipment manufacturers (OEMs) in China and around the world.

The kernel of Xpeng’s domain controller is NVIDIA’s Xavier cockpit chip for automated cars, so a good amount of software and hardware in Xpeng’s new car is based on foreign technologies.

The mass-produced Xpeng model in the spotlight is an electric sports sedan numbered P7. It features a processing unit that can calculate “the vehicle’s driving status and provides 360-degree omnidirectional perception with real-time monitoring of the surrounding environment to make safe driving decisions,” according to the announcement.

“Desay SV Automotive has extensive experience in intelligent cockpits, smart driving and connected services. Augmented with the safety expertise of BlackBerry QNX, together we can address the diverse needs of an auto industry that is undergoing meaningful transformation,” said John Wall, senior vice president and co-head of BlackBerry Technology Solutions, in a statement.

“To that end, it’s a real privilege to have BlackBerry technology powering the intelligent driving system within Xpeng Motors innovative new P7 system.”

The partnership arrives as Alibaba and Xiaomi backed-Xpeng is looking to raise up to $1.1 billion from its initial public offering in New York. Its Chinese rivals Li Auto and NIO raised similar amounts from their U.S. IPOs.

Taiwan set to bar Chinese streaming services like iQiyi and Tencent’s WeTV

iQiyi and Tencent’s WeTV, two of China’s most popular streaming services, may be banned in Taiwan next month as the government prepares to close regulatory loopholes that enabled them to operate through local partnerships.

In an announcement posted this week, Taiwan’s Ministry of Economic Affairs said Taiwanese companies and individuals will be prohibited from providing services for OTT firms based in mainland China. The proposed regulation will be open to public comment for two weeks before it takes effect on Sept. 3.

Though Taiwan, which has a population of about 24 million people, is self-governed, the Chinese government claims it as a territory. The proposed regulations means Taiwan is joining other countries, including India and the United States, in taking a harsher stance against Chinese tech companies.

iQiyi and Tencent’s WeTV set up operations in Taiwan through “illegal” partnerships, the Ministry of Economic Affairs said in its announcement, working through their Hong Kong subsidiaries to strike agreements with Taiwanese companies.

In April, the NCC declared that mainland Chinese OTT firms are not allowed to operate in Taiwan under the Act Governing Relations between People of the Taiwan Area and the Mainland Area. Cabinet spokesperson Kolas Yotaka said at the time that Chinese firms and their Taiwanese partners were operating at “the edges of the law.”

But NCC spokesperson Wong Po-Tsung said the proposed regulation isn’t targeted solely at Chinese OTT operators. According to the Taipei Times, he stated “the act was necessary because the cable television service operators have asked that the commission apply across-the-board standards to regulate all audiovisual service platforms, which should include OTT services. It was not stipulated just to address the problems caused by iQiyi and other Chinese OTT operators.”

Wong added that Taiwan is a democratic country and its government would not block people from watching content from iQiyi and other Chinese streaming services.

Once the act is passed, Taiwanese companies that break it will face fines of NTD $50,000 to NTD $5 million [about USD $1,700 to USD $170,000].

TechCrunch has contacted iQiyi and Tencent for comment.

Tencent wants to take full control of long-time search ally Sogou

It’s been seven years since Tencent picked up a 36.5% stake in Sogou to fend off rival Baidu in the online search market. The social and gaming giant is now offering to buy out and take private its long-time ally.

NYSE-listed Sogou said this week it has received a preliminary non-binding proposal from Tencent to acquire its remaining shares for $9 each American depositary share (ADS) it doesn’t already own. That means Sohu, a leading web portal in the Chinese desktop era and the controlling shareholder in Sogou, will no longer hold an interest in the search firm.

Sohu’s board of directors has not yet had an opportunity to review the proposal or determine whether or not to take the offer, the company stated. Sogou’s shares leaped 48% on the news to $8.51 on Monday, yet still far below its all-time high at $13.85 at the time of its initial public offering.

Founded in 2005, Sogou went public in late 2017 billing itself as a challenger to China’s biggest search service Baidu, though it has long been a distant second. The company also operates the top Chinese input software, which is used by 482 million people every day to type and convert voice to text, according to its Q1 earnings report.

Ever since the strategic partnership with Tencent kicked off, Sogou, which means “Search Dog” in Chinese, has been the default search engine for WeChat and benefited immensely from the giant’s traffic, though WeChat has also developed its own search feature.

The potential buyout will add Sogou to a list of Chinese companies to delist from the U.S. as tensions between the countries heighten in recent times. It will also allay concerns amongst investors who worry WeChat Search would make Sogou redundant. So far WeChat’s proprietary search function appears to be gleaning data mainly within the app’s enclave, from users’ news feed, user-generated articles, e-commerce stores, through to lite apps integrated into WeChat.

That’s a whole lot of content and services targeted at WeChat’s 1.2 billion active users. Many people need not look beyond the chat app to consumer news, order food, play games, or purchase groceries. But there remains information outside the enormous ecosystem, and that’s Sogou’s turf — to bring what’s available on the open web (of course, subject to government censorship like all Chinese services) to WeChat users.

The arrangement reflects an endemic practice on the Chinese internet — giants blocking each other or making it hard for rivals to access their content. The goal is to lock in traffic and user insights. For instance, articles published on WeChat can’t be searched on Baidu. Consumers can’t open Alibaba shopping links without leaving WeChat.

Sogou is hardly WeChat’s sole search ally. To capture a full range of information needs, the messenger has also struck deals to co-opt fellow microblogging platform Weibo, Quora-like Zhihu, and social commerce service Xiaohongshu into its search pool.

Jack Ma’s fintech giant tops 1.3 billion users globally

The speculation that Alibaba’s fintech affiliate Ant Group will go public has been swirling around for years. New details came to light recently. Reuters reported last week that the fintech giant could float as soon as this year in an initial public offering that values it at $200 billion. As a private firm, details of the payments and financial services firm remain sparse, but a new filing by Alibaba, which holds a 33% stake in Ant, provides a rare glimpse into its performance.

Alipay, the brand of Ant’s consumer finance app, claims to earmark 1.3 billion annual active users as of March. The majority of its users came from China, while the rest were brought by its nine e-wallet partners in India, Thailand, South Korea, the Philippines, Bangladesh, Hong Kong, Malaysia, Indonesia, and Pakistan.

In recent years Ant has been striving to scale back its reliance on in-house financial products in response to Beijing’s tightening grip on China’s fledgling fintech industry. Tencent, Alibaba’s nemesis, is considered a lot more reserved in the financial space but its WeChat Pay app has been slowly eating away at Alipay’s share of the payments market.

In a symbolic move in May, the Alibaba affiliate changed its name from Ant Financial to Ant Group. Even prior to that, Ant had been actively publicizing itself as a “technology” company that offers payments gateways and sells digital infrastructure to banks, insurance groups, and other traditional financial institutions — rather than being a direct competitor to them. On the Alipay app, users can browse and access a raft of third-party financial services including wealth management, microloans, and insurance.

As of March, Ant’s wealth management unit facilitated 4 trillion yuan ($570 billion) of assets under management for its partners offering money market funds, fixed income products, and equity investment services. During the same period, total insurance premiums facilitated by Ant more than doubled from the year before.

In June, Ant’s new boss Hu Xiaoming set the goal for the firm to generate 80% of total revenues from technology service fees, up from about 50% in 2019. He anticipated the monetary contribution of Ant’s own proprietary financial services to shrink as a result.

Ant grew out of Alipay, the payments service launched by Alibaba as an escrow service to ensure trust between e-commerce buyers and sellers. In 2011, Alibaba spun off Ant, allegedly to comply with local regulations governing third-party payments services. Ant has since taken on several rounds of equity financing. Today, Alibaba founder Jack Ma still controls a majority of Ant’s voting interests.

Huawei posts revenue growth in H1 despite sanctions and pandemic

Huawei reported a 13.1% year-over-year revenue growth in the first half of 2020, even if countries around the world continued to weigh up bans on its equipment and smartphone sales shrink amid the pandemic, the telecom giant said in a brief on Monday.

The firm’s revenue reached 454 billion yuan ($64.88 billion) in the period, with its carrier, enterprise, and consumer businesses accounting for 35%, 8% and 56% of total revenue, respectively. It finished with a net profit margin of 9.2%, a slight increase from 8.7% in the same period last year.

The privately-owned company did not specify what contributed to its H1 growth, but said in the release that amid the COVID-19 pandemic, “information and communications technologies” — the main focus of its business — “have become not only a crucial tool for combatting the virus, but also an engine for economic recovery.”

The growth came amid the U.S.’s ongoing campaign urging allies to remove Huawei from their network infrastructure. The U.K. is reportedly scheduled to phase out Huawei gear in its 5G network as soon as this year, a plan that critics warn could cause network outages and other security risks.

Though Huawei does not break down its regional sales, it’s reasonable to expect China to be its bedrock of growth as it stumbles abroad. The company and its local competitor ZTE — which is also on the U.S. trade blacklistdivide up the bulk of 5G base station contracts from China’s main carriers. The network operators have also agreed to procure 5G phones from Huawei, which would naturally give the company a boost in sales.

Microsoft spins out 5-year-old Chinese chatbot Xiaoice

Microsoft is shedding its empathetic chatbot Xiaoice into an independent entity, the U.S. software behemoth said (in Chinese) Monday, confirming an earlier report by the Chinese news site Chuhaipost in June.

The announcement came several months after Microsoft announced it would close down its voice assistant app Cortana in China among other countries late last year.

Xiaoice has over the years enlisted some of the best minds in artificial intelligence and ventured beyond China into countries like Japan and Indonesia. Microsoft said it called the shots to accelerate Xiaoice’s “localized innovation” and buildout of the chatbot’s “commercial ecosystem.”

The spinoff will see the new entity license technologies from Microsoft for subsequent research and development in Xiaoice and continue to use the Xiaoice brand (and Rinna in Japanese), while Microsoft will retain its stakes in the new company.

In 2014, a small team of Microsoft’s Bing researchers unveiled Xiaoice, which means “Little Bing” in Chinese. The bot immediately created a sensation in China and was regarded by many as their virtual girlfriend. The chatbot came just a few weeks after Microsoft rolled out Cortana in the country. Modeled on the personality of a teenage girl, Xiaoice aims to add a more human and social element to chatbots. In Microsoft’s own words, she wants to be a user’s friend.

Like all foreign companies, Microsoft has to grapple with China’s censorship. In 2017, Xiaoice was removed by Tencent’s instant messenger QQ over suspicions of politically sensitive speech.

The project has involved some of the most prestigious scientists in the AI land, ranging from Lu Qi, who went on to join Baidu as its chief operating officer and brought Y Combinator to China; Jing Kun, who took up a post at Baidu to head the search giant’s smart devices; and Harry Shum, a former executive at Microsoft’s storied Artificial Intelligence and Research unit and now sits on the board of fledgling news app News Break.

Shum will serve as chairman at Xiaoice’s new standalone entity. Li Di, general manager of Xiaoice, will serve as chief executive officer. Chen Zhan, a developer of the Japanese chatbot Rinna, is appointed general manager of the Japanese office.

The new company will retain the right to use the “Xiaoice” and “Rinna” brands, with a mission to further develop its client base across the Greater China region, Japan and Indonesia.

Microsoft claimed that Xiaoice has a reach of 660 million users and 450 million third-party smart devices globally at the last count. The chatbot has found applications in such areas as finance, retail, auto, real estate and fashion, in which it claimed it can “mine context, tonality and emotions from text to create unique patterns within seconds.”

Google reportedly cancelled a cloud project meant for countries including China

After reportedly spending a year and a half working on a cloud service meant for China and other countries, Google cancelled the project, called “Isolated Region,” in May due partly to geopolitical and pandemic-related concerns. Bloomberg reports that Isolated Region, shut down in May, would have enabled it to offer cloud services in countries that want to keep and control data within their borders.

According to two Google employees who spoke to Bloomberg, the project was part of a larger initiative called “Sharded Google” to create data and processing infrastructure that is completely separate from the rest of the company’s network. Isolated Region began in early 2018 in response to Chinese regulations that mean foreign tech companies that want to enter the country need to form a joint venture with a local company that would hold control over user data. Isolated Region was meant to help meet requirements like this in China and other countries, while also addressing U.S. national security concerns.

Bloomberg’s sources said the project was paused in China in January 2019, and focus was redirected to Europe, the Middle East and Africa instead, before Isolated Region was ultimately cancelled in May, though Google has since considered offering a smaller version of Google Cloud Platform in China.

After the story was first published, a Google representative told Bloomberg that Isolated Region wasn’t shut down because of geopolitical issues or the pandemic, and that the company “does not offer and has not offered cloud platform services inside China.”

Instead, she said Isolated Region was cancelled because “other approaches we were actively pursuing offered better outcomes. We have a comprehensive approach to addressing these requirements that covers the governance of data, operational practices and survivability of software. Isolated Region was just one of the paths we explored to address these requirements.”

Alphabet, Google’s parent company, broke out Google Cloud as its own line item for the first time in its fourth-quarter and full-year earnings report, released in February. It revealed that its run rate grew 53.6% during the last year to just over $10 billion in 2019, making it a more formidable rival to competitors Amazon and Microsoft.

Tesla’s U.S.-made Model 3 vehicles now come equipped with wireless charging, USB-C ports

Tesla Model 3 vehicles produced at its Fremont, Calif. factory will reportedly come standard with a wireless charging pad and USB-C ports, upgrades that were first spotted by Drive Tesla Canada.

Electrek also reported on the changes.

The upgrades now put U.S.-made Model 3s on par with the same vehicles made at Tesla’s factory in China.

The wireless phone charger and USB-C ports first appeared in the newer Model Y, which customers began to receive in March. Tesla has since taken steps to bring some of these new Model Y features into the older Model 3. The upgrades initially showed up in vehicles assembled in China. Drive Tesla Canada said the upgrades became standard in Model 3 vehicles assembled after June 4.

Tesla still offers a $125 upgrade (seen below) for those who own pre-June 4 2020 Model 3 vehicles. Aftermarket company Jeda Products also sells a Qi wireless phone charger for about $99.

tesla wireless charging pad

Image Credits: Tesla

The upgrades are likely part of Tesla’s aim to make its automotive assembly more efficient as well as make its vehicles more attractive to potential customers who have slowed purchases during COVID-19 pandemic.

Tesla delivered 88,400 vehicles in the first quarter, beating most analysts expectations despite a 21% decrease from the previous quarter as the COVID-19 pandemic put downward pressure on demand and created logistical challenges. Tesla produced 103,000 electric vehicles in the first quarter, about 2% lower than the previous period.

COVID-19 disrupted the supply chain and global sales in China and Europe in the first quarter, which ended March 31. The pandemic spread its economic gloom to the U.S. towards the end of the first quarter, and then dug in its heels in the second period. Tesla typically reports quarter production and delivery figures a few days after the end of the quarter. The second quarter ends June 30.

Work collaboration unicorn Notion is blocked in China

Notion, the fast-growing work collaboration tool that recently hit a $2 billion valuation, said on Twitter Monday that its service is blocked in China.

The productivity app has attracted waves of startups and tech workers around the world — including those in China — to adopt its all-in-one platform that blends notes, wikis, to-dos, and team collaboration. The four-year-old San Francisco-based app is widely seen as a serious rival to Evernote, which started out in 2004.

Notion said it is “monitoring the situation and will continue to post updates,” but the timing of the ban noticeably coincides with China’s annual parliament meeting, which began last week after a two-month delay due to the COVID-19 pandemic. Internet regulation and censorship normally toughen around key political meetings in the country.

Notion could not be immediately reached for comment.

For Notion and other apps that have entered the public eye in China but remained beyond the arm of local laws, a looming crackdown is almost certain. The country’s cybersecurity watchdog could find Notion’s free flow of note-sharing problematic. Some users have even conveniently turned the tool’s friendly desktop version into personal websites. If Notion were to keep its China presence, it would have to bow to the same set of regulations that rule all content creation platforms in China.

Its predecessor Evernote, for example, established a Chinese joint venture in 2018 and released a local edition under the brand Yinxiang Biji, which comes with compromised features and stores user data within China.

Rivalry in work collaboration

Just before its ban in China, Notion surged on May 21 to become the most-downloaded productivity app in the domestic Android stores, according to third-party data from App Annie. The sudden rise appears to be linked to its Chinese copycat Hanzhou (寒舟), which stirred up controversy within the developer community over its striking resemblance to Notion.

In an apologetic post published on May 22, Xu Haihao, the brain behind Hanzhou and a former employee of ByteDance-backed document collaboration app Shimo, admitted to “developing the project based on Notion.”

“We are wrong from the beginning,” wrote Xu. “But I intended to offend nobody. My intention was to learn from [Notion’s] technology.” As a resolution, the developer said he would suspend Hanzou’s development and user registration.

Some of the largest tech firms in China are gunning for the workplace productivity industry, which received a recent boost during the coronavirus crisis. Alibaba’s Dingtalk claimed last August that more than 10 million enterprises and over 200 million individual users had registered on its platform. By comparison, Tencent’s WeChat Work said it had logged more than 2.5 million enterprises and some 60 million active users by December.

6 investment trends that could emerge from the COVID-19 pandemic

Rocio Wu
Contributor

Rocio Wu is a venture partner at F-Prime Capital who focuses on early-stage investments in software/applied AI, fintech and frontier tech investments.

While some U.S. investors might have taken comfort from China’s rebound, we still find ourselves in the early innings of this period of uncertainty.

Some epidemiologists have estimated that COVID-19 cases will peak in April, but PitchBook reports that dealmaking was down -26% in March, compared to February’s weekly average. The decline is likely to continue in coming weeks — many of the deals that closed last month were initiated before the pandemic, and there is a lag between when deals are made and when they are announced.

However, there’s still hope. A recent report concluded that because valuations are lower and there’s less competition for deals, “the best-performing vintages tend to be those that invest at the nadir of a downturn and into the early stage of recovery.” There are countless examples from the 2008 recession, including many highly valued VC-backed businesses such as WhatsApp, Venmo, Groupon, Uber, Slack and Square. Other early-stage VCs seem to have arrived at a similar conclusion.

Also, early-stage investing seems more resilient. During the last recession, angel and seed activity increased 34% as interest in the stage boomed during a period of prolonged growth.

Furthermore, there is still capital to be deployed in categories that interested investors before the pandemic, which may set the new order in a post-COVID-19 world. According to data provider Preqin Ltd., VC dry powder rose for a seventh consecutive year to roughly $276 billion in 2019, and another $21 billion were raised last quarter. And looking at the deals on the early-stage side that were made year to date, especially in March, the vertical categories that garnered the most funding were enterprise SaaS, fintech, life sciences, healthcare IT, edtech and cybersecurity.

Image Credits: PitchBook

That said, if VCs have the capital to deploy and are able to overcome the obstacle of “having never met in person,” here are six investment trends that could emerge when the pandemic is over.

1. Future of work: promoting intimacy and trust

Zoom admits some calls were routed through China by mistake

Hours after security researchers at Citizen Lab reported that some Zoom calls were routed through China, the video conferencing platform has offered an apology and a partial explanation.

To recap, Zoom has faced a barrage of headlines this week over its security policies and privacy practices, as hundreds of millions forced to work from home during the coronavirus pandemic still need to communicate with each other.

The latest findings landed earlier today when Citizen Lab researchers said that some calls made in North America were routed through China — as were the encryption keys used to secure those calls. But as was noted this week, Zoom isn’t end-to-end encrypted at all, despite the company’s earlier claims, meaning that Zoom controls the encryption keys and can therefore access the contents of its customers’ calls. Zoom said in an earlier blog post that it has “implemented robust and validated internal controls to prevent unauthorized access to any content that users share during meetings.” The same can’t be said for Chinese authorities, however, which could demand Zoom turn over any encryption keys on its servers in China to facilitate decryption of the contents of encrypted calls.

Zoom now says that during its efforts to ramp up its server capacity to accommodate the massive influx of users over the past few weeks, it “mistakenly” allowed two of its Chinese data centers to accept calls as a backup in the event of network congestion.

From Zoom’s CEO Eric Yuan:

During normal operations, Zoom clients attempt to connect to a series of primary datacenters in or near a user’s region, and if those multiple connection attempts fail due to network congestion or other issues, clients will reach out to two secondary datacenters off of a list of several secondary datacenters as a potential backup bridge to the Zoom platform. In all instances, Zoom clients are provided with a list of datacenters appropriate to their region. This system is critical to Zoom’s trademark reliability, particularly during times of massive internet stress.”

In other words, North American calls are supposed to stay in North America, just as European calls are supposed to stay in Europe. This is what Zoom calls its data center “geofencing.” But when traffic spikes, the network shifts traffic to the nearest data center with the most available capacity.

China, however, is supposed to be an exception, largely due to privacy concerns among Western companies. But China’s own laws and regulations mandate that companies operating on the mainland must keep citizens’ data within its borders.

Zoom said in February that “rapidly added capacity” to its Chinese regions to handle demand was also put on an international whitelist of backup data centers, which meant non-Chinese users were in some cases connected to Chinese servers when data centers in other regions were unavailable.

Zoom said this happened in “extremely limited circumstances.” When reached, a Zoom spokesperson did not quantify the number of users affected.

Zoom said that it has now reversed that incorrect whitelisting. The company also said users on the company’s dedicated government plan were not affected by the accidental rerouting.

But some questions remain. The blog post only briefly addresses its encryption design. Citizen Lab criticized the company for “rolling its own” encryption — otherwise known as building its own encryption scheme. Experts have long rejected efforts by companies to build their own encryption, because it doesn’t undergo the same scrutiny and peer review as the decades-old encryption standards we all use today.

Zoom said in its defense that it can “do better” on its encryption scheme, which it says covers a “large range of use cases.” Zoom also said it was consulting with outside experts, but when asked, a spokesperson declined to name any.

Bill Marczak, one of the Citizen Lab researchers that authored today’s report, told TechCrunch he was “cautiously optimistic” about Zoom’s response.

“The bigger issue here is that Zoom has apparently written their own scheme for encrypting and securing calls,” he said, and that “there are Zoom servers in Beijing that have access to the meeting encryption keys.”

“If you’re a well-resourced entity, obtaining a copy of the internet traffic containing some particularly high-value encrypted Zoom call is perhaps not that hard,” said Marcak.

“The huge shift to platforms like Zoom during the COVID-19 pandemic makes platforms like Zoom attractive targets for many different types of intelligence agencies, not just China,” he said. “Fortunately, the company has (so far) hit all the right notes in responding to this new wave of scrutiny from security researchers, and have committed themselves to make improvements in their app.”

Zoom’s blog post gets points for transparency. But the company is still facing pressure from New York’s attorney general and from two class-action lawsuits. Just today, several lawmakers demanded to know what it’s doing to protect users’ privacy.

Will Zoom’s mea culpas be enough?

The Station: Bird and Lime layoffs, pivots in a COVID-19 era and a $2.2 trillion deal

Hello folks, welcome back (or hi for the first time) to The Station, a weekly newsletter dedicated to the all the ways people and packages move around this world. I’m your host, Kirsten Korosec, senior transportation reporter at TechCrunch.

I also have started to publish a shorter version of the newsletter on TechCrunch . That’s what you’re reading now. For the whole enchilada — which comes out every Saturday — you can subscribe to the newsletter by heading over here, and clicking “The Station.” It’s free!

Before I get into the thick of things, how is everyone doing? This isn’t a rhetorical question; I’m being earnest. I want to hear from you (note my email below). Maybe you’re a startup founder, a safety driver at an autonomous vehicle developer, a venture capitalist, engineer or gig economy worker. I’m interested in how you are doing, what you’re doing to cope and how you’re getting around in your respective cities.

Please reach out and email me at kirsten.korosec@techcrunch.com to share thoughts, opinions or tips or send a direct message to @kirstenkorosec.

Micromobbin’

the station scooter1a

It was a rough week for micromobility amid the COVID-19 pandemic. Bird laid off about 30% of its employees due to the uncertainty caused by the coronavirus.

In a memo obtained by TechCrunch, Bird CEO Travis VanderZanden said:

The unprecedented COVID-19 crisis has forced our leadership team and the board of directors to make many extremely difficult and painful decisions relating to some of your teammates. As you know, we’ve had to pause many markets around the world and drastically cut spending. Due to the financial and operational impact of the ongoing COVID-19 crisis, we are saying goodbye to about 30% of our team.

The fallout from COVID-19 isn’t limited to Bird. Lime is also reportedly considering laying off up to 70 people in the San Francisco Bay Area.

Meanwhile, Wheels deployed e-bikes with self-cleaning handlebars and brake levers to help reduce the risk of spreading the virus. NanoSeptic’s technology, which is powered by light, uses mineral nano-crystals to create an oxidation reaction that is stronger than bleach, according to the company’s website. NanoSeptic then implements that technology into skins and mats to turn anything from a mousepad to door handles to handlebars into self-cleaning surfaces.

The upshot to all of this: COVID-19 is turning shared mobility on its head. That means lay offs will continue. It also means companies like Wheels will try to innovate or pivot in hopes of staying alive.

While some companies pulled scooters off city streets, others changed how they marketed services. Some turned efforts to gig economy workers delivering food. Others, like shared electric moped service Revel, are focusing on healthcare workers.

Revel is now letting healthcare workers in New York rent its mopeds for free. To qualify, they just need to upload their employee ID. For now, the free rides for healthcare workers is limited to Brooklyn, Queens and a new service area from upper Manhattan down to 65th street. Revel expanded the area to include hospitals in one of the epicenters of the disease.

Revel is still renting its mopeds to the rest of us out there, although they encourage people to only use them for essential trips. As you might guess, ridership is down significantly. The company says it has stepped up efforts of disinfecting and cleaning the mopeds and helmets. Revel also operates in Austin, New York City, Oakland, and Washington. It has suspended service in Miami per local regulations.

Megan Rose Dickey (with a cameo from Kirsten Korosec)

Deal of the week

money the station

Typically, I would highlight a large funding round for a startup in the “deal of the week” section. This week, I have broadened my definition.

On Friday, the House of Representatives passed a historic stimulus package known as the Coronavirus Aid, Relief, and Economic Security or “CARES” act. President Donald Trump signed it hours later. The CARES act contains an unprecedented $2.2 trillion in total financial relief for businesses, public institutions and individuals hit hard by the COVID-19 pandemic.

TechCrunch has just started what will be a multi-day dive into the 880-page document. And in the coming weeks, I will highlight anything related or relevant to the transportation industry or startups here.

I’ll focus today on three items: airlines, public transit and small business loans.

U.S. airlines are receiving $58 billion. It breaks down to about $25 billion in loans for commercial carriers, $25 billion in payroll grants to cover the 750,000 employees who work in the industry.  Cargo carriers will receive $4 billion in loans and $4 billion in grants. These loans come with some strings attached. Airlines will have to agree not to lay off workers through the end of September. The package forbids stock buybacks and issuing dividends to shareholders for a year after paying off one of the loans.

Public transit has been allocated $24.9 billion. The CARES Act provides almost three times the FY 2020 appropriations for this category, according to the American Public Transportation Association. The funds are distributed through a formula that puts $13.79 billion to urban, $2 billion to rural, $7.51 billion towards state of good repair and $1.71 billion for high-density state transit. APTA notes that these funds are for operating expenses to prevent, prepare for, and respond to COVID-19 beginning on January 20, 2020.

Amtrak received an additional $1 billion in grants, that directs $492 million of those funds towards the northeast corridor. The remaining goes to the national network.

Small business loans are a critical piece of the bill, and an area where many startups may be focused. There is a lot to unpack here, but in basic terms the act provides $350 billion in loans that will be administered by the Small Business Administration to businesses with 500 or fewer employees. These loans are meant to cover an eligible borrower’s payroll, rent, utilities expenses and mortgage interest for up to eight weeks. If the borrower maintains its workforce, some of the loan may be forgiven.

Venture-backed startups seeking relief may run into problems qualifying. It all comes down to how employees are counted. Normally, SBA looks at a company’s affiliates to determine if they qualify. So, a startup owned by a private equity firm is considered affiliated with the other companies in that firm’s portfolio, which could push employment numbers far beyond 500. That rule also seems to apply to venture-backed startups, in which more than 50% of voting stock is held by the VC.

The guidance on this is still spotty. But Fenwick & West, a Silicon Valley law firm, said in recent explainer that the rule has the “potential to be problematic for startups because the SBA affiliation rules are highly complex and could cause lenders to group together several otherwise unaffiliated portfolio companies of a single venture capital firm in determining whether a borrower has no more than 500 employees.”

One final note: The SBA has waived these affiliation rules for borrowers in the food services and food supply chain industry. It’s unclear what that might mean for those food automation startups or companies building autonomous vehicles for food delivery.

More deal$

COVID-19 has taken over, but deals are still happening. Here’s a rundown of some of partnerships, acquisitions and fundraising round that got our attention.

  • Lilium, the Munich-based startup that is designing and building vertical take-off and landing (VTOL) aircraft and aspires to run in its own taxi fleet, has raised $240 million in a funding round led by Tencent. This is being couched as an inside round with only existing investors, a list that included participation from previous backers such as Atomico, Freigeist and LGT. The valuation is not being disclosed. But sources tell us that it’s between $750 million and $1 billion.
  • Wunder Mobility acquired Australia-based car rental technology provider KEAZ. (Financial terms weren’t disclosed, but as part of the deal KEAZ founder and CTO Tim Bos is joining Wunder Mobility) KEAZ developed a mobile app and back-end management tool that lets rental agencies, car dealerships, and corporations provide shared access to vehicles.
  • Cazoo, a startup that buys used cars and then sells them online and delivers to them your door, raised $116 million funding. The round was led by DMG Ventures with General Catalyst, CNP (Groupe Frère), Mubadala Capital, Octopus Ventures, Eight Roads Ventures and Stride.VC also participating.
  • Helm.ai came out of stealth with an announcement that it has raised $13 million in a seed round that includes investment from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners and SV Angel. Helm.ai says it developed software for autonomous vehicles that can skip traditional steps of simulation, on-road testing and annotated data set — all tools that are used to train and improve the so-called “brain” of the self-driving vehicle.
  • RoadSync, a digital payment platform for the transportation industry, raised a $5.7 million in a Series A led by Base10 Partners with participation from repeat investor Hyde Park Venture Partners and Companyon Ventures. The company developed cloud-based software that lets businesses invoice and accept payments from truck drivers, carriers and brokers. Their platform is in use at over 400 locations nationwide with over 50,000 unique transactions monthly, according to RoadSync.
  • Self-driving truck startup TuSimple is partnering with automotive supplier ZF to develop and produce autonomous vehicle technology, such as sensors, on a commercial scale. The partnership, slated to begin in April, will cover China, Europe and North America.

A final word

Remember, the weekly newsletter features even more mobility news and insights. I’ll leave ya’ll with this one chart from Inrix. The company has launched a U.S. traffic synopsis that it plans to publish every Monday. The chart shows traffic from the week of March 14 to March 20. The upshot: COVID-19 reduced traffic by 30% nationwide.

inrix traffic drop from covid

Detroit Auto Show canceled in preparation for FEMA to turn venue into field hospital

The North American International Auto Show, which was scheduled for June in Detroit, has been canceled as the COVID-19 pandemic continues to spread and the city prepares to repurpose the TCF Center into a temporary field hospital.

NAIAS is held each year in the TCF Center, formerly known as the Cobo Center. Organizers said they expected the Federal Emergency Management Agency to designate the TCF Center as a field hospital.

“Although we are disappointed, there is nothing more important to us than the health, safety and well-being of the citizens of Detroit and Michigan, and we will do what we can to support our community’s fight against the coronavirus outbreak,” NAIAS Executive Director Rod Alberts said in an emailed statement.

The NAIAS is the latest in a long line of events and conventions that have been canceled as COVID-19, the disease caused by the coronavirus, has spread from China to Europe, and now the U.S. and the rest of the world.

More than 100 convention centers and facilities around the country are being considered to potentially serve as temporary hospitals. Alberts said it became clear that TCF Center would be an inevitable option to serve as a care facility.

The NAIAS, also known as the Detroit Auto Show, will be held in June 2021. Organizers are discussing plans for a fundraising activity later this year to benefit the children’s charities that were designated as beneficiaries of the 2020 Charity Preview event.

This year’s show was highly anticipated because it had moved from January to summer, following years of encouragement to schedule it during the warmer months.

All tickets purchased for the 2020 NAIAS show, including tickets for the Public Show, Industry Preview and Charity Preview will be fully refunded, organizers said. Charity Preview ticket holders will be given the option of a refund, or the opportunity to donate the proceeds of their refund to one of the nine designated Charity Preview beneficiaries. The NAIAS ticket office will be in contact with all ticket holders, according to the organizers.

Nigeria is becoming Africa’s unofficial tech capital

Africa has one of the world’s fastest growing tech markets and Nigeria is becoming its unofficial capital.

While the West African nation is commonly associated with negative cliches around corruption and terrorism — which persist as serious problems, and influenced the Trump administration’s recent restrictions on Nigerian immigration to the U.S.

Even so, there’s more to the country than Boko Haram or fictitious princes with inheritances.

Nigeria has become a magnet for VC, a hotbed for startup formation and a strategic entry point for Silicon Valley. As a frontier market, there is certainly a volatility to the country’s political and economic trajectory. The nation teeters back and forth between its stereotypical basket-case status and getting its act together to become Africa’s unrivaled superpower.

The upside of that pendulum is why — despite its problems — so much American, Chinese and African tech capital is gravitating to Nigeria.

Demographics

“Whatever you think of Africa, you can’t ignore the numbers,” Africa’s richest man Aliko Dangote told me in 2015, noting that demographics are creating an imperative for global businesses to enter the continent.

Latin America Roundup: Loft raises $175M, SoftBank invests in Mexico’s Alphacredit and Rappi pulls back

Sophia Wood
Contributor

Sophia Wood is a principal at Magma Partners, a Latin America-focused seed-stage VC firm with offices in Latin America, Asia and the U.S. Sophia is also the co-founder of LatAm List, an English-language Latin American tech news source.

Brazil’s famously tricky real estate market has long drawn international investors to the region in search of tech solutions. This time, Brazilian startup Loft brought in a $175 million Series C from first-time investor in the region, Vulcan Capital (Paul Allen’s investment arm), alongside Andreessen Horowitz. Loft is also a16z’s first and only Brazilian investment. 

Co-founded by serial entrepreneurs and investors Mate Pencz and Florian Hagenbuch in 2018, Loft uses a proprietary algorithm to process transaction data and provide more transparent pricing for both buyers and sellers. The startup uses two models to help clients sell properties; either Loft will value the apartment for listing on the site, or they will offer to purchase the property from the buyer immediately. Many real estate platforms in the U.S. are shifting toward a similar iBuyer model; however, this system may be even more apt for the Latin American market, where property sales are notoriously untransparent, bureaucratic and tedious.

Loft will use the capital to expand to Rio de Janeiro in Q1 2020 and to Mexico City in Q2, bringing on at least 100 new employees in the process. It also plans to scale its financial products to include mortgages and insurance by the end of the year. 

AlphaCredit raises $125M from SoftBank

Mexican consumer lending startup AlphaCredit became SoftBank’s new Mexico bet this month, with a $125 million Series B round. AlphaCredit uses a programmed deduction system to provide rapid, online loans to individuals and small businesses in Mexico. To date, the startup has granted more than $1 billion in loans to small business clients in Mexico and Colombia, many of whom have never previously had access to financing. 

AlphaCredit’s programmed deductions system enables the startup to lower default rates, which in turn lowers interest rates. For more than eight years, AlphaCredit has encouraged financial inclusion in Mexico and Colombia through technology; this round of investment will enable the platform to consolidate its holding as one of the top lending platforms in the region. The investment is still subject to approval by Mexico’s competition authority, COFECE, which has previously blocked startup deals such as the Cornershop acquisition in 2019. 

SoftBank’s biggest bets back off in Latin America

While SoftBank is still rapidly deploying its Latin America-focused Innovation Fund, some of its largest companies are stepping on the brakes. In particular, SoftBank’s largest LatAm investment, Rappi, recently announced that it would lay off up to 6% of its workforce in an effort to cut costs and focus on their technology. The Colombian unicorn has been expanding at a breakneck pace throughout the region using a blitzscaling technique that has helped it reach nine countries, with 5,000 employees in just two years, including Ecuador in November 2019.

Rappi has stated that it will focus on technology and UX in 2020, explaining that the job cuts do not reflect its long-term growth strategy. However, Rappi is also facing legal action for alleged intellectual property theft. Mauricio Paba, José Mendoza and Jorge Uribe are suing Rappi CEO Simon Borrero and the company for stealing the idea for the Rappi platform while providing consulting for the three founders through his firm, Imaginamos. The case is currently being processed in Colombia and the U.S. 

One of SoftBank’s biggest bets in Asia, Oyo Rooms, is facing similar challenges. Just months after announcing their expansion into Mexico, Oyo fired thousands of employees in China and India. Oyo plans to be the largest hotel chain in Mexico by the end of 2020, according to a local spokesperson.

Argentina’s Agrofy breaks regional agtech records

With a $23 million Series B from SP Ventures, Fall Line Capital and Acre Venture Partners, Argentine agricultural supply marketplace Agrofy has raised the region’s largest round for an agtech startup to date. The platform provides transparency and ease for the agricultural industry, where users can buy everything from tractors to seeds. In four years, Agrofy has established itself as the market leader in agricultural e-commerce; it was also Fall Line Capital’s first investment outside of the U.S.

Agrofy is active in nine countries and receives more than five million visits per month, 60% of which come from Brazil. However, the startup faces the challenge of low connectivity in rural areas, where most of its customers live. The investment will go to improving the platform, as well as integrating new payment types directly into the site to help clients process their transactions more smoothly. 

News and Notes: Fanatiz, Pachama, Moons, Didi and IDB

The Miami-based sports-streaming platform Fanatiz raised $10 million in a Series A round from 777 Partners in January 2020 after registering 125% user growth since July 2019. Founded by Chilean Matias Rivera, Fanatiz provides legal international streaming of soccer and other sports through a personalized platform so that fans can follow their teams from anywhere in the world. The startup provided the Pope with an account so that he could follow his beloved team, San Lorenzo, from the Vatican. Fanatiz has previously received investment from Magma Partners and participated in 500 Startups’ Miami Scale program.

Conservation-tech startup Pachama raised $4.1 million from Silicon Valley investors to continue developing a carbon offset marketplace using drone and lidar data. Pachama was founded by Argentine entrepreneur Diego Saez-Gil in 2019 after he noticed the effects of deforestation in the Peruvian Amazon. After participating in Y Combinator in 2019, Pachama now has 23 sites in the U.S. and Latin America where scientists are working alongside the startup’s technology to certify forests for carbon sequestration projects. 

Mexico’s Moons, an orthodontics startup that provides low-cost invisible aligners, has raised $5 million from investors such as Jaguar Ventures, Tuesday Capital and Foundation Capital and was recently accepted into Y Combinator, bringing the startup to the U.S. Moons provides a free consultation and 3D scan to patients in Mexico to determine if they are a good fit for the program, then supplies them with a year-long invisible braces regime for around $1,200. With 18 locations in Mexico and two in Colombia, Moons is expanding rapidly across the region, with ambitions for providing low-cost healthcare across several verticals in Latin America. 

Chinese ride-hailing startup Didi Chuxing recently launched a sustainable fleet of over 700 electric and hybrid cars for its Mexico City operations. After two years operating in Mexico, Didi announced that it would establish its headquarters in the capital city to manage its new low-emissions fleet. The company will provide financing to help its drivers acquire and use the vehicles, in an effort to reduce Didi’s environmental impact.

The IDB Lab released a report on female entrepreneurs in Latin America, finding that 54% of female founders have raised capital and 80% plan to scale internationally in the next five years. The study, entitled “wX Insights 2020: The Rise of Women STEMpreneurs,” finds that female entrepreneurship is on the rise in Latin America, particularly in the areas of fintech, edtech, healthtech and biotech. Nonetheless, 59% of the 1,148 women surveyed still see access to capital as the most significant limitation for their companies. However, as women take center stage in Latin American VC, such as Antonia Rojas Eing joining ALLVP as Partner, we may see funding tilt toward female-founded firms.

This month has set 2020 on a course to continue the strong growth we saw in the Latin American ecosystem in 2019. It is always exciting to see international investors make their first bets in the region, and we expect to continue seeing new VCs entering the region over the coming year.

Impossible adds ‘ground pork’ and ‘sausages’ to its lineup of plant-based foods

Impossible Foods made huge waves in the food industry when it came up with a way of isolating and using “heme” molecules from plants to mimic the blood found in animal meat (also comprised of heme), bringing a new depth of flavor to its vegetarian burger.

This week at CES, the company is presenting the next act in its mission to get the average consumer to switch to more sustainable, plant-based proteins: it unveiled its version of pork — specifically ground pork, which will be sold as a basic building block for cooking as well as in sausage form. It’s a critical step, given that pork is the most-eaten animal product in the world.

Impossible has set up shop in CES’s outdoor area, situated near a line of food trucks, and it will be cooking food for whoever wants to come by. (I tasted a selection of items made from the new product — a steamed bun, a meatball, some noodles and a lettuce wrap — and the resemblance is uncanny, and not bad at all.) And after today, the new product will be making its way first to selected Burger King restaurants in the US before appearing elsewhere.

It may sound a little far-fetched to see a food startup exhibiting and launching new products at a consumer electronics show, attended by 200,000 visitors who will likely by outnumbered by the number of TVs, computers, phones, and other electronic devices on display. Indeed, Impossible is the only food exhibitor this year.

But if you ask Pat Brown, the CEO and founder of Impossible Foods (pictured right, at the sunny CES stand in the cold wearing a hat), the company is in precisely the right place.

“To me it’s very natural to be at CES,” he said in an interview this week at the show. “The food system is the most important technology on earth. It is absolutely a technology, and an incredibly important one, even if it doesn’t get recognised as such. The use of animals as a food technology is the most destructive on earth. And when Impossible was founded, it was to address that issue. We recognised it as a technology problem.”

That is also how Impossible has positioned itself as a startup. Its emergence (it was founded 2011) dovetailed with an interesting shift in the world of tech. The number of startups were booming, fuelled by VC money and a boom in smartphones and broadband. At the same time, we were starting to see a new kind of startup emerging built on technology but disrupting a wide range of areas not traditionally associated with technology. Technology VCs, looking for more opportunities (and needing to invest increasingly larger funds), were opening themselves up to consider more of the latter opportunities.

Impossible has seized the moment. It has raised around $777 million to date from a list of investors more commonly associated with tech companies — they include Khosla, Temasek, Horizons Ventures, GV, and a host of celebrities — and Impossible is now estimated to be valued at around $4 billion. Brown told me it is currently more than doubling revenues annually.  

With his roots in academia, the idea of Brown (who has also done groundbreaking work in HIV research) founding and running a business is perhaps as left-field a development as a food company making the leap from commodity or packaged good business to tech. Before Impossible, Brown said that he had “zero interest” in becoming an entrepreneur: the bug that has bitten so many others at Stanford (where he was working prior to founding Impossible) had not bitten him.

“I had an awesome job where I followed my curiosity, working on problems that I found interesting and important with great colleagues,” he said.

That changed when he began to realise the scale of the problem resulting from the meat industry, which has led to a well-catalogued list of health, economic and environmental impacts (including increased greenhouse gas emissions and the removal of natural ecosystems to make way for farming land. “It is the most important and consequential issue for the future of the world, and so the solution has to be market-based,” he said. “The only way we can replace themes that are this destructive is by coming up with a better technology and competing.”

Pork is a necessary step in that strategy to compete. America, it seems, is all about beef and chicken when it comes to eating animals. But pigs and pork take the cake when you consider meat consumption globally, accounting for 38% of all meat production, with 47 pigs killed on average every second of every day. Asia, and specifically China, figure strongly in that demand. Consumption of pork in China has increased 140% since 1990, Impossible notes.

Pigs’ collective footprint in the world is also huge: there are 1.44 billion of them, and their collective biomass totals 175 kg, twice as much as the biomass of all wild terrestrial vertebrates, Impossible says.

Whether Impossible’s version of pork will be enough or just an incremental step is another question. Ground meat is not the same as creating structured proteins that mimic the whole-cuts that are common (probably more common) when it comes to how pork is typically cooked (ditto for chicken and beef and other meats).

That might likely require more capital and time to develop.

For now, Impossible is focused on building out its business on its own steam: it’s not entertaining any thoughts of selling up, or even of licensing out its IP for isolating and using soy leghemoglobin — the essential “blood” that sets its veggie proteins apart from other things on the market. (I think of licensing out that IP, as the equivalent of how a tech company might white label or create APIs for third parties to integrate its cool stuff into their services.)

That means there will be inevitable questions down the line about how Impossible will capitalise to meet demand for its products. Brown said that for now there are no plans for IPOs or to raise more externally, but pointed out that it would have no problem doing either.

Indeed, the company has built up an impressive bench of executives and other talent to meet those future scenarios. Earlier this year, Impossible hired Dennis Woodside — the former Dropbox, Google and Motorola star– as its first president. And its CFO, David Lee, joined from Zynga back in 2015, with a stint also in the mass-market food industry, having been at Del Monte prior to that.

Lee told me that the company has essentially been running itself as a public company internally in preparation for a time when it might follow in the footsteps of its biggest competitor, Beyond Meat, and go public.

“From a tech standpoint I’m absolutely confident that we can outperform what we get from animals in affordability, nutrition and deliciousness,” said Brown. “This entire industry is most destructive by far and has major responsibility in terms of climate and biodiversity, but it going to be history and we are going to replace it.”

CES 2020 coverage - TechCrunch

DJI patents an off-road rover with a stabilized camera on top

DJI is easily the leading brand when it comes to camera drones, but few companies have even attempted a ground-based mobile camera platform. The company may be moving in that direction, though, if this patent for a small off-road vehicle with a stabilized camera is any indication.

The Chinese patent, first noted by DroneDJ, shows a rather serious-looking vehicle platform with chunky tires and a stabilized camera gimbal. As you can see in the image above, the camera mount is protected against shock by springs and pneumatics, which would no doubt react actively to sudden movements.

The image is no simple sketch like those you sometimes see of notional products and “just in case” patents — this looks like a fleshed-out mechanical drawing of a real device. Of course, that doesn’t mean it’s coming to market at all, let alone any time soon. But it does suggest that DJI’s engineers have dedicated real time and effort to making this thing a reality.

Why have a “drone” on the ground when there are perfectly good ones for the air? Battery life, for one. Drones can only be airborne for a short time, even less when they’re carrying decent cameras and lenses. A ground-based drone could operate for far longer — though naturally from a rather lower vantage.

Perhaps more importantly, however, a wheeled drone makes sense in places where an aerial one doesn’t. Do you really want to fly a drone through narrow hallways in security sweeps, or in your own home? And what about areas where you might encounter people? It would be better not to have to land and take off constantly for safety’s sake.

It’s likely that DJI has done its homework and knows that there are plenty of niches to which they could extend if they diversified their offerings a bit. And like so many situations where drones have become commonplace, we’ll all think of these robot-powered industries as obvious in retrospect. For instance, the winner of our Startup Battlefield at Disrupt Berlin, Scaled Robotics, which does painstaking automated inspections of construction sites.

In fact DJI already makes a ground-based robotic platform, the RoboMaster S1. This is more of an educational toy, but may have served as a test bed for technologies the company hopes to apply elsewhere.

Whether this little vehicle ever sees the light of day or not, it does make one think seriously about the possibility of a wheeled camera platform doing serious work around the home or office.

Huawei sues FCC over “unconstitutional” ban on the use of federal subsidies to buy its equipment

Huawei said today it is suing the Federal Communications Commission, asking to overturn a ban on carriers from using money from the Universal Service Fund (USF) to buy equipment from Huawei and ZTE.

The $8.5 billion USF supports the purchase of equipment to build communications infrastructure, especially in rural communities. Huawei is asking the United States Court of Appeals for the Fifth Circuit to overrule the FCC’s order, passed on Nov. 22.

Small carriers buy equipment from Huawei and ZTE because it is dependable and cheap. According to a Reuters report, some carriers are considering Nokia and Ericsson for replacements, but their equipment is priced less competitively.

During a press conference in Shenzhen today, Glen Nager, Huawei’s lead counsel for the lawsuit, claimed the ban goes beyond the FCC’s authority and violates the constitution. “The order fails to give Huawei constitutionally required due process before stigmatizing it as a national security threat, such as an opportunity to confront supposed evidence and witnesses, and a fair and neutral hearing process,” he said.

Huawei chief legal officer Song Liuping claims that FCC chairman and Ajit Pai and other commissioners did not present evidence to back its claim that Huawei is a security threat.

“This is a common trend in Washington these days. ‘Huawei is a Chinese company.’ That’s his only excuse,” Song said. He also claimed that the FCC ignored 21 rounds of “detailed comments” submitted by Huawei to explain how the order would harm businesses in rural areas, adding “This decision, just like the Entity List decision in May, is based on politics, not security.”

In March, Huawei also cited the Constitution in another lawsuit filed against the U.S. government arguing that a ban on the use of its products by federal agencies and contractors violate due process.

Huawei and ZTE were first identified as potential national security threats in 2012 by a U.S Congressional panel, but federal actions against Huawei and ZTE have intensified over the past year as the trade war between the U.S. and China escalates.

Earlier this year, it was placed on the U.S. Entity List and the Department of Justice announced it was pursuing several criminal charges against Huawei, including conspiracy to steal trade secrets. Huawei’s chief financial officer, Meng Wanzhou also faces fraud charges in New York. In response, Huawei has dramatically increased the amount it spends on lobbying in the U.S.

In China, Huawei’s announcement today about its FCC lawsuit was overshadowed by controversy about a former employee, Li Hongyuan who was arrested and detained for eight months after demanding severance pay. Li was arrested on extortion charges and released because of insufficient evidence and his treatment has triggered controversy and anger over the treatment of workers by Huawei and other tech companies.

Africa Roundup: Nigerian fintech gets $360M, mints unicorn, draws Chinese VC

November 2019 could mark when Nigeria (arguably) became Africa’s unofficial capital for fintech investment and digital finance startups.

The month saw $360 million invested in Nigerian focused payment ventures. That is equivalent to roughly one-third of all the startup VC raised for the entire continent in 2018, according to Partech stats.

A notable trend-within-the-trend is that more than half — or $170 million — of the funding to Nigerian fintech ventures in November came from Chinese investors. This marks a pivot in China’s engagement with Africa to tech. We’ll get to that.

Before the big Chinese backed rounds, one of Nigeria’s earliest fintech companies, Interswitch, confirmed its $1 billion valuation after Visa took a minority stake in the company. Interswitch would not disclose the amount to TechCrunch, but Sky News reporting pegged it at $200 million for 20%.

Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly paper-ledger and cash-based economy.

The company now provides much of the tech-wiring for Nigeria’s online banking system that serves Africa’s largest economy and population. Interswitch offers a number of personal and business finance products, including its Verve payment cards and Quickteller payment app.

The financial services firm has expanded its physical presence to Uganda, Gambia and Kenya . The Nigerian company also sells its products in 23 African countries and launched a partnership in August for Verve cardholders to make payments on Discover’s global network.

Visa and Interswitch touted the equity investment as a strategic collaboration between the two companies, without a lot of detail on what that will mean.

One point TechCrunch did lock down is Interswitch’s (long-awaited) and imminent IPO. A source close to the matter said the company will list on a major exchange by mid-2020.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, as e-commerce venture Jumia’s volatile share-price and declining market-cap — since an April IPO — have dropped the company’s valuation below $1 billion.

Circling back to China, November was the month that signaled Chinese actors are all in on African tech.

In two separate rounds, Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent.

PalmPay, a consumer oriented payments product, went live last month with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phone seller — China’s Transsion.

The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company release.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones.

PalmPay also launched in Ghana in November and its UK and Africa based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

OPay’s $120 million Series B was announced several days after the PalmPay news and came only months after the mobile-based fintech venture raised $50 million.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera developed internet based commercial products in Nigeria. These include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay announced it would expand in Kenya, South Africa, and Ghana.

Though it wasn’t fintech, Chinese investors also backed a (reported) $30 million Series B for East African trucking logistics company Lori Systems in November.

With OPay, PalmPay, and Lori Systems, startups in Africa have raised a combined $240 million from 15 Chinese investors in a span of months.

There are a number of things to note and watch out for here, as TechCrunch reporting has illuminated (and will continue to do in follow-on coverage).

These moves mark a next chapter in China’s engagement in Africa and could raise some new issues. Hereto, the country’s interaction with Africa’s tech ecosystem has been relatively light compared to China’s deal-making on infrastructure and commodities.

There continues to be plenty of debate (and critique) of China’s role in Africa. This new digital-phase will certainly add a fresh component to all that. One thing to track will be data-privacy and national-security concerns that may emerge around Chinese actors investing heavily in African mobile consumer platforms.

We’ve seen lines (allegedly) blur on these matters between Chinese state and private-sector actors with companies such as Huawei.

As OPera and PalmPay expand, they may need to do some reassuring of African regulators as countries (such as Kenya) establish more formal consumer protection protocols for digital platforms.

One more thing to follow on OPay’s funding and planned expansion is the extent to which it puts Opera (and its entire suite of consumer internet products) in competition with multiple actors in Africa’s startup ecosystem. Opera’s Africa ventures could go head to head with Uber, Jumia, and M-Pesa — the mobile money-product that put Kenya out front on digital finance in Africa before Nigeria.

Shifting back to American engagement in African tech, Twitter and Square CEO Jack Dorsey was on the continent in November. No sooner than he’d finished his first trip, Dorsey announced plans to move to Africa in 2020, for 3 to 6 months, saying on Twitter “Africa will define the future (especially the bitcoin one!).”

We still don’t know much about what this last trip — or his future foray — mean in terms of concrete partnerships, investment, or market moves in Africa from Dorsey and his companies.

He visited Nigeria, Ghana, South Africa and Ethiopia and met with leaders at Nigeria’s CcHub (Bosun Tijani), Ethiopia’s Ice Addis (Markos Lemming), and did some meetings with fintech founders in Lagos (Paga’s Tayo Oviosu).

I know most of the organizations and people Dorsey talked to pretty well and nothing has shaken out yet in terms of partnership or investment news from his recent trip.

On what could come out of Dorsey’s 2020 move to Africa, per his tweet and news highlighted in this roundup, a good bet would be it will have something to with fintech and Square.

More Africa-related stories @TechCrunch

African tech around the ‘net

TikTok apologizes for removing viral video about abuses against Uighurs, blames a “human moderation error”

TikTok has issued a public apology to a teenager who had her account suspended shortly after posting a video that asked viewers to research the persecution of Uighur people and other Muslim groups in Xinjiang. TikTok included a “clarification on the timeline of events,” and said that the viral video was removed four days after it was posted on November 23 “due to a human moderation error” and did not violate the platform’s community guidelines (the account @getmefamouspartthree and video have since been reinstated).

But the user, Feroza Aziz, who describes herself in her Twitter profile as “just a Muslim trying to spread awareness,” rejected TikTok’s claims, tweeting “Do I believe they took it away because of an unrelated satirical video that was deleted on a previous deleted account of mine? Right after I finished posting a 3 part video about the Uyghurs? No.”

In the video removed by TikTok, Aziz begins by telling viewers to use an eyelash curler, before telling them to put it down and “use your phone, that you’re using right now, to search up what’s happening in China, how they’re getting concentration camps, throwing innocent Muslims in there, separating families from each other, kidnapping them, murdering them, raping them, forcing them to eat pork, forcing them to drink, forcing them to convert. This is another Holocaust, yet no one is talking about it. Please be aware, please spread awareness in Xinjiang right now.”

TikTok is owned by ByteDance and the video’s removal led to claims that the Beijing-based company capitulated to pressure from the Chinese Communist Party (Douyin, ByteDance’s version of TikTok for China, is subject to the same censorship laws as other online platforms in China).

Though the government-directed persecution of Muslim minority groups in China began several years ago and about a million people are believed to be detained in internment camps, awareness of the crisis was heightened this month after two significant leaks of classified Chinese government documents were published by the New York Times and the International Consortium of Investigative Journalists, confirming reports by former inmates, eyewitnesses and researchers.

Aziz told BuzzFeed News she has been talking about the persecution of minority groups in China since 2018 because “as a Muslim girl, I’ve always been oppressed and seen my people be oppressed, and I’ve always been into human rights.”

In the BuzzFeed News article, published before TikTok’s apology post, the company claimed Aziz’s account suspension was related to another video she made that contained an image of Osama Bin Laden. The video was created as a satirical response to a meme about celebrity crushes and Aziz told BuzzFeed News that “it was a dark humor joke that he was at the end, because obviously no one in their right mind would think or say that.” A TikTok spokesperson said it nonetheless “violated its policies on terrorism-related content.”

“While we recognize that this video may have been intended as satire, our policies on this front are currently strict. Any such content, when identified, is deemed a violation of our Community Guidelines and Terms of Service, resulting in a permanent ban of the account and associated devices,” a TikTok spokesperson told BuzzFeed, adding that the suspension of Aziz’s second account, which the makeup tutorial video was posted on, was part of the platform’s blocking of 2,406 devices linked to previously suspended accounts.

In TikTok’s apology post today, TikTok US head of safety Eric Tan wrote that the platform relies on technology to uphold community guidelines and human moderators as a “second line of defense.”

“We acknowledge that at times, this process will not be perfect. Humans will sometimes make mistakes, such as the one made today in the case of @getmefamouspartthree’s video,” he added. “When those mistakes happen, however, our commitment is to quickly address and fix them, undertake trainings or make changes to reduce the risk of the same mistakes being repeated, and fully own the responsibility for our errors.”

Aziz told the Washington Post, however, that “TikTok is trying to cover up this whole mess. I won’t let them get away with this.”

The controversy comes as TikTok faces an inquiry by the U.S. government into how it secures the personal data of users. Reuters reported yesterday that TikTok plans to separate its product and business development, and marketing and legal teams from Douyin in the third quarter of this year.

 

Opera’s Africa fintech startup OPay gains $120M from Chinese investors

Africa focused fintech startup OPay has raised a $120 million Series B round backed by Chinese investors.

Located in Lagos and founded by consumer internet company Opera, OPay will use the funds to scale in Nigeria and expand its payments product to Kenya, Ghana and South Africa — Opera’s CFO Frode Jacobsen confirmed to TechCrunch.

Series B investors included Meituan-Dianping, GaoRong, Source Code Capital, Softbank Asia, BAI, Redpoint, IDG Capital, Sequoia China and GSR Ventures.

OPay’s $120 million round comes after the startup raised $50 million in June.

It also follows Visa’s $200 million investment in Nigerian fintech company Interswitch and a $40 million raise by Lagos based payments startup PalmPay — led by China’s Transsion.

There are a couple quick takeaways. Nigeria has become the epicenter for fintech VC and expansion in Africa. And Chinese investors have made an unmistakable pivot to African tech.

Opera’s activity on the continent represents both trends. The Norway based, Chinese (majority) owned company founded OPay in 2018 on the popularity of its internet search engine.

Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.

The company has built a hefty suite of internet-based commercial products in Nigeria around OPay’s financial utility. These include motorcycle ride-hail app ORide, OFood delivery service, and OLeads SME marketing and advertising vertical.

“Opay will facilitate the people in Nigeria, Ghana, South Africa, Kenya and other African countries with the best fintech ecosystem. We see ourselves as a key contributor to…helping local businesses…thrive from…digital business models,” Opera CEO and OPay Chairman Yahui Zhou, said in a statement.

Opera CFO Frode Jacobsen shed additional light on how OPay will deploy the $120 million across Opera’s Africa network. OPay looks to capture volume around bill payments and airtime purchases, but not necessarily as priority.  “That’s not something you do ever day. We want to focus our services on things that have high-frequency usage,” said Jacobsen.

Those include transportation services, food services, and other types of daily activities, he explained. Jacobsen also noted OPay will use the $120 million to enter more countries in Africa than those disclosed.

Since its Series A raise, OPay in Nigeria has scaled to 140,000 active agents and $10 million in daily transaction volume, according to company stats.

Beyond standing out as another huge funding round, OPay’s $120 million VC raise has significance for Africa’s tech ecosystem on multiple levels.

It marks 2019 as the year Chinese investors went all in on the continent’s startup scene. OPay, PalmPay, and East African trucking logistics company Lori Systems have raised a combined $240 million from 15 different Chinese actors in a span of months.

OPay’s funding and expansion plans are also harbinger for fierce, cross-border fintech competition in Africa’s digital finance space. Parallel events to watch for include Interswitch’s imminent IPO, e-commerce venture Jumia’s shift to digital finance, and WhatsApp’s likely entry in African payments.

The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector. But it’s becoming a notably crowded sector where startup attrition and failure will certainly come into play.

And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa.

This places OPay and its Opera-supported suite of products on a competitive footing with other ride-hail, food delivery and payments startups across the continent. That means inevitable competition between Opera and Africa’s largest multi-service internet company, Jumia.

 

 

 

 

 

Chinese EV startup Xpeng Motors raises $400 million, takes on Xiaomi as strategic investor

Xpeng Motors, the Chinese electric vehicle startup backed by Alibaba and Foxconn, has raised a fresh injection of $400 million in capital and has taken on Xiaomi as a strategic investor, the company announced.

The Series C includes an unidentified group of strategic and institutional investors. XPeng Motors Chairman and CEO He Xiaopeng, who also participated in the Series C, said the received strong support from many of its current shareholders. Xiaomi founder and CEO Lei Jun previously invested in the company.

“Xiaomi Corporation and Xpeng Motors have achieved significant progress through in-depth collaboration in developing technologies connecting smart phones and smart cars,” Xiaomi’s Jun said in a statement. “We believe that this strategic investment will further deepen our partnership with Xpeng in advancing innovation for intelligent hardware and the Internet of Things.”

The company didn’t disclose what its post-money valuation is now. However, a source familiar with the deal said it is “better” than the 25 billion yuan valuation it had in its last round in August 2018.

The announcement confirms an earlier report from Reuters that cited anonymous sources.

XPeng also said it has garnered “several billions” in Chinese yuan of unsecured credit lines from institutions such as China Merchants Bank, China CITIC Bank and HSBC. XPeng didn’t elaborate when asked what “several billions” means.

Brian Gu, Xpeng Motors Vice Chairman and President added that the company has been able to hit most of its business and financing targets despite economic headwinds, uncertainties in the global markets and government policy changes that have had direct impact on overall auto sales in China.

The round comes as XPeng prepares to launch its electric P7 sedan in spring 2020. Deliveries of the P7 are expected to begin in the second quarter of 2020.

Xpeng began deliveries of its first production model the G3 2019 SUV in December and shipped 10,000 models by mid-June. The company has since released an enhanced version of the G3 with a 520 km NEDC driving range.

The company plans to launch the P7 sedan in the spring 2020 and will start delivery in 2Q 2020.

XPeng has said it wants to IPO, but it’s unclear when the company might file to become a public company. No specific IPO timetable has been set and a spokesperson said the company is monitoring market conditions closely, but its current focus is on building core businesses.

Apple’s China stance makes for strange political alliances, as AOC and Ted Cruz slam the company

In a rare instance of bipartisanship overcoming the rancorous discord that’s been the hallmark of the U.S. Congress, senators and sepresentatives issued a scathing rebuke to Apple for its decision to take down an app at the request of the Chinese government.

Signed by Senators Ron Wyden, Tom Cotton, Marco Rubio, Ted Cruz, and Congressional Representatives Alexandria Ocasio-Cortez, Mike Gallagher and Tom Malinowski, the letter was written to “express… strong concern about Apple’s censorship of apps, including a prominent app used by protestors in Hong Kong, at the request of the Chinese government.”

Tim Cook gets a letter from @RonWyden @SenTomCotton @marcorubio @AOC @tedcruz @RepGallagher & @Malinowski re: China censorship. pic.twitter.com/dJlEAlheMX

— Jessica Smith (@JessicaASmith8) October 18, 2019

In 2019, it seems the only things that can unite America’s clashing political factions are the decisions made by companies in one of its most powerful industries.

At the heart of the dispute is Apple’s decision to take down an app called HKMaps that was being used by citizens of the island territory to track police activity.

For several months protestors have been clashing with police in the tiny territory over what they see as the undue influence being exerted by China’s government in Beijing over the governance of Hong Kong. Citizens of the former British protectorate have enjoyed special privileges and rights not afforded to mainland Chinese citizens since the United Kingdom returned sovereignty over the region to China on July 1, 1997.

“Apple’s decision last week to accommodate the Chinese government by taking down HKMaps is deeply concerning,” the authors of the letter wrote. “We urge you in the strongest terms to reverse course, to demonstrate that Apple puts values above market access, and to stand with the brave men and women fighting for basic rights and dignity in Hong Kong.”

Apple has long positioned itself as a defender of human rights (including privacy and free speech)… in the United States. Abroad, the company’s record is not quite as spotless, especially when it comes to pressure from China, which is one of the company’s largest markets outside of the U.S.

Back in 2017, Apple capitulated to a request from the Chinese government that it remove all virtual private networking apps from the App Store. Those applications allowed Chinese users to circumvent the “Great Firewall” of China, which limits access to information to only that which is approved by the Chinese government and its censors.

Over 1,100 applications have been taken down by Apple at the request of the Chinese government, according to the organization GreatFire (whose data was cited in the Congressional letter). They include VPNs, and applications made for oppressed communities inside China’s borders (like Uighurs and Tibetans).

Apple isn’t the only company that’s come under fire from the Chinese government as part of their overall response to the unrest in Hong Kong. The National Basketball Association and the gaming company Blizzard have had their own run-ins resulting in self-censorship as a result of various public positions from employees or individuals affiliated with the sports franchises or gaming communities these companies represent.

However, Apple is the largest of these companies, and therefore the biggest target. The company’s stance indicates a willingness to accede to pressure in markets that it considers strategically important no matter how it positions itself at home.

The question is what will happen should regulators in the U.S. stop writing letters and start making legislative demands of their own.

Alibaba acquires NetEase Kaola in deal worth $2 billion

Alibaba Group has acquired NetEase Kaola for $2 billion, the two companies said today, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China. The announcement follows weeks of media reports about a potential deal, which was said to have stalled in the middle of August after the companies reportedly disagreed on transaction details.

Tmall Import and Export general manager Alvin Liu has been named as Kaola’s new CEO, replacing Zhang Lei, but Kaola will continue to operate independently under its own brand.

Tmall Global and Kaola are China’s largest and second-largest cross-border e-commerce platforms, respectively, holding 31.7% and 24.5% of the market, and their union means they will create a business that will far outstrip in size rivals like JD Worldwide, VIP International and Amazon China. (Earlier this year, NetEase was reportedly in talks to merge Kaola with Amazon China).

Alibaba and Yunfeng, the investment firm launched by Alibaba founder Jack Ma, also agreed to invest $700 million into NetEase Cloud Music’s latest funding round. This will give Alibaba a minority stake in the streaming music service, with NetEase remaining its controlling shareholder.

In a press release, NetEase CEO William Ding said “We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services. At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages.”

Daniel Zhang, Alibaba Group’s CEO, said “Alibaba is confidence about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential.”

WeChat restricts controversial video face-swapping app Zao, citing “security risks”

Zao went viral in China this weekend for its realistic face-swapping videos, but after controversy about its policies, WeChat restricted access to the app on its messaging platform.

Developed by a unit of Momo, one of China’s most popular dating apps, Zao creates videos that replace the faces of celebrities in scenes from popular movies, shows and music videos with a selfie uploaded by the user.

The app, currently available only in China, went viral as users shared their videos through WeChat and other social media platforms in China. But concerns about the potential misuse of deepfake technology coupled with a clause (now deleted) in Zao’s terms of use that gave it full ownership and copyright to content uploaded or created on it, in addition to “completely free, irrevocable, perpetual, transferrable, and re-licensable rights,” caused controversy.

In case you haven’t heard, #ZAO is a Chinese app which completely blew up since Friday. Best application of ‘Deepfake’-style AI facial replacement I’ve ever seen.

Here’s an example of me as DiCaprio (generated in under 8 secs from that one photo in the thumbnail) 🤯pic.twitter.com/1RpnJJ3wgT

— Allan Xia (@AllanXia) September 1, 2019

By going viral quickly and being very easy to use (Zao’s videos can be generated from a single selfie, though it suggests that users upload photos from several angles for better results), the app has also focused more attention on deepfake technology and how it can potentially be used to spread misinformation or harass people.

Users can still upload videos they created with Zao to WeChat, but if they try to download the app or send an invite link to another WeChat user, a message is displayed that says “this web page has been reported multiple times and contains security risks. To maintain a safe online environment, access to this page has been blocked.”23011567479434 .pic

Zao was released last Friday and quickly became the top free iOS app in China, according to App Annie. A statement posted on Sept. 1 to Zao’s Weibo account says “we completely understand everybody’s concerns about the privacy issue. We are aware of the issue and we are thinking about how to fix the problems, we need a little time.” Its terms and conditions now say user-generated content will only be used by the company to improve the app and that all deleted content will be removed from its servers.

TechCrunch has contacted Zao for comment.

The Hong Kong Internet Service Providers Association warns that restricting online access would be ruinous for the region

After Hong Kong’s leader suggested she may invoke emergency powers that could potentially include limiting Internet access, one of city’s biggest industry groups warned that “any such restrictions, however slight originally, would start the end of the open Internet of Hong Kong.”

While talking to reporters on Tuesday, Hong Kong Chief Executive Carrie Lam suggested the government may use the Emergency Regulations Ordinance in response to ongoing anti-government demonstrations. The law, which has not been used in more than half a century, would give the government a sweeping array of powers, including the ability to restrict or censor publications and communications. In contrast to China’s “Great Firewall” and routine government censorship of internet services, Hong Kong’s internet is currently open and mostly unrestricted, with the exception of laws to prevent online crime, copyright infringements and the spread of obscene material like child pornography.

In an “urgent statement” addressed to Hong Kong’s Executive Council, the Hong Kong Internet Service Providers Association (HKISPA) said that because of technology like VPNs, the cloud and cryptographies, the only way to “effectively and meaningfully block any services” would entail putting all of Hong Kong’s internet behind a large-scale surveillance firewall. The association added that this would have huge economic and social consequences and deter international organizations from doing business in Hong Kong.

Furthermore, restricting the internet in Hong Kong would also have implications in the rest of the region, including in mainland China, the HKISPA added. There are currently 18 international cable systems that land, or will land, in Hong Kong, making it a major telecommunications hub. Blocking one application means users will move onto another application, creating a cascading effect that will continue until all of Hong Kong is behind a firewall, the association warned.

In its statement, the HKISPA wrote that “the lifeline of Hong Kong’s Internet industry relies in large part on the open network,” adding “Hong Kong is the largest core node of Asia’s optical fiber network and hosts the biggest Internet exchange in the region, and it is now home to 100+ data centers operated by local and international companies, and it transits 80%+ of traffic for mainland China.”

“All these successes rely on the openness of Hong Kong’s network,” the HKISPA continued. “Such restrictions imposed by executive orders would completely ruin the uniqueness and value of Hong Kong as a telecommunications hub, a pillar of success as an international financial centre.”

The HKISPA urged the government to consult the industry and “society at large” before placing any restrictions in place. “The HKISPA strongly opposes selective blocking of Internet Services without consensus of the community,” it said.

More than 130 U.S. companies have reportedly applied to sell to Huawei, but the Commerce Department has approved none of them

Trump said in July that some U.S. suppliers would be allowed to sell to Huawei while it remains blacklisted, but so far no vendors have been allowed to do so. Reuters reports that more than 130 applications have been submitted by companies that want to do business with Huawei, but the U.S. Commerce Department has not approved any of them yet.

Huawei has served as a bargaining chip in the U.S.-China trade war, which escalated again last week when Trump said he would adds tariffs to $550 billion worth of Chinese imports, after China said it would impose duties of $75 billions on U.S. goods. Trump’s mixed signals during this weekend’s G7 summit also created confusion on Wall Street.

When both presidents met at the G20 Summit in June, Donald Trump told Chinese leader Xi Jinping that he would allow some American companies to sell to Huawei, even though it remains on the Commerce Department’s Entity List. Secretary of Commerce Wilbur Ross said the Commerce Department would begin accepting applications again, requiring companies to prove that the tech they sell to Huawei would not pose a national security risk.

But one of the reasons no licenses have been granted yet is because the Commerce Department is unclear about what it is supposed to do. Former Commerce department official William Reinsch told Reuters that “nobody in the executive branch knows what [Trump] wants and they’re all afraid to make a decision without knowing that.”

In addition to providing telecom equipment, Huawei is an important customer for many U.S. tech firms, including Qualcomm, Intel and Micron. Out of the $70 billion in parts it bought last year, $11 billion of that went to U.S. suppliers. The U.S. claims Huawei is a national security risk, a charge the company has repeatedly denied.

China’s Transsion and Kenya’s Wapi Capital partner on Africa fund

Chinese mobile-phone and device maker Transsion is teaming up with Kenya’s Wapi Capital to source and fund early-stage African fintech startups.

Headquartered in Shenzhen, Transsion is a top-seller of smartphones in Africa that recently confirmed its imminent IPO.

Wapi Capital is the venture fund of Kenyan fintech startup Wapi Pay—a Nairobi based company that facilitates digital payments between African and Asia via mobile money or bank accounts.

Investments for the new partnership will come from Transsion’s Future Hub, an incubator and seed fund for African startups opened by Transsion in 2019.

Starting September 2019, Transsion will work with Wapi Capital to select early-stage African fintech companies for equity-based investments of up to $100,000, Transsion Future Hub Senior Investor Laura Li told TechCrunch via email.

Wapi Capital won’t contribute funds to Transsion’s Africa investments, but will help determine the viability and scale of the startups, including due diligence and deal flow, according to Wapi Pay co-founder Eddie Ndichu.

Wapi Pay and Transsion Future Hub will consider ventures from all 54 African countries and interested startups can reach out directly to either organization, Ndichu and Li confirmed.

The Wapi Capital fintech partnership is not Transsion’s sole VC focus in Africa. Though an exact fund size hasn’t been disclosed, the Transsion Future Hub will also make startup investments on the continent in adtech, fintech, e-commerce, logistics, and media and entertainment, according to Li.

Transsion Future Hub’s existing portfolio includes Africa focused browser company Phoenix, content aggregator Scoop, and music service Boomplay.

Wapi Capital adds to the list of African located and run venture funds—which have been growing in recent years—according to a 2018 study by TechCrunch and Crunchbase. Wapi Capital will also start making its own investments and is looking to raise $1 million this year and $10 million over the next three years, according to Ndichu, who co-founded the fund and Wapi Pay with his twin brother Paul.

Transsion’s commitment to African startup investments comes as the company is on the verge of listing on China’s new Nasdaq-style STAR Market tech exchange. Transsion confirmed to TechCrunch this month the IPO is in process and that it could raise up to 3 billion yuan (or $426 million).

Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.

Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also has a manufacturing facility in Ethiopia.

Transsion’s move into venture investing tracks greater influence from China in African tech.

China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities.

Transsion’s Wapi Pay partnership is the second recent event — after Chinese owned Opera’s big venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.

 

 

 

 

 

 

 

Through a new partnership and $72 million in funding, LanzaTech expands its carbon capture tech

For nearly fifteen years LanzaTech has been developing a carbon capture technology that can turn waste streams into ethanol that can be used for chemicals and fuel.

Now, with $72 million in fresh funding at a nearly $1 billion valuation and a newly inked partnership with biotechnology giant, Novo Holdings, the company is looking to expand its suite of products beyond ethanol manufacturing, thanks, in part, to the intellectual property held by Novozymes (a Novo Holdings subsidiary).

“We are learning how to modify our organisms so they can make things other than ethanol directly,” said LanzaTech chief executive officer, Jennifer Holmgren.

From its headquarters in Skokie, Ill., where LanzaTech relocated in 2014 from New Zealand, the biotechnology company has been plotting ways to reduce carbon emissions and create a more circular manufacturing system. That’s one where waste gases and solid waste sources that were previously considered to be un-recyclable are converted into chemicals by LanzaTech’s genetically modified microbes.

The company already has a commercial manufacturing facility in China, attached to a steel plant operated by the Shougang Group, which produces 16 million gallons of ethanol per-year. LanzaTech’s technology pipes the waste gas into a fermenter, which is filled with genetically modified yeast that uses the carbon dioxide to produce ethanol. Another plant, using a similar technology is under construction in Europe.

Through a partnership with Indian Oil, LanzaTech is working on a third waste gas to ethanol using a different waste gas taken from a Hydrogen plant.

The company has also inked early deals with airlines like Virgin in the UK and ANA in Japan to make an ethanol-based jet fuel for commercial flight. And a third application of the technology is being explored in Japan which takes previously un-recyclable waste streams from consumer products and converts that into ethanol and polyethylene that can be used to make bio-plastics or bio-based nylon fabrics.

Through the partnership with Novo Holdings, LanzaTech will be able to use the company’s technology to expand its work into other chemicals, according to chief executive Jennifer Holmgren. “We are making product to sell into that [chemicals market] right now. We are taking ethanol and making products out of it. Taking ethylene and we will make polyethylene and we will make PET to substitute for fiber.”

Holmgren said that LanzaTech’s operations were currently reducing carbon dioxide emissions by the equivalent of taking 70,000 cars off the road.

“LanzaTech is addressing our collective need for sustainable fuels and materials, enabling industrial players to be part of building a truly circular economy,” said Anders Bendsen Spohr, Senior Director at Novo Holdings, in a statement. “Novo Holdings’ investment underlines our commitment to supporting the bio-industrials sector and, in particular, companies that are developing cutting-edge technology platforms. We are excited to work with the LanzaTech team and look forward to supporting the company in its next phase of growth.”

Holmgren said that the push into new chemicals by LanzaTech is symbolic of a resurgence of industrial biotechnology as one of the critical pathways to reducing carbon emissions and setting industry on a more sustainable production pathway.

“Industrial biotechnology ca unlock the utility of a lot of waste carbon emissions. ” said Holmgren. “[Municipal solid waste] is an urban oil field. And we are working to find new sources of sustainable carbon.”

LanzaTech isn’t alone in its quest to create sustainable pathways for chemical manufacturing. Solugen, an upstart biotechnology company out of Houston, is looking to commercialize the bio-production of hydrogen peroxide. It’s another chemical that’s at the heart of modern industrial processes — and is incredibly hazardous to make using traditional methods.

As the world warms, and carbon emissions continue to rise, it’s important that both companies find pathways to commercial success, according to Holmgren.

“It’s going to get much much worse if we don’t do anything,” she said.

Didi Chuxing and oil giant BP team up to build electric vehicle charging infrastructure in China

Ride-sharing and transportation platform Didi Chuxing announced today that it has formed a joint venture with BP, the British gas, oil and energy supermajor. to build electric vehicle charging infrastructure in China. The charging stations will be available to Didi and non-Didi drivers.

The news of Didi and BP’s joint venture comes one week after Didi announced that it had received funding totaling $600 million from Toyota Motor Corporation. As part of that deal, Didi and Toyota Motor set up a joint venture with GAC Toyota Motor to provide vehicle-related services to Didi drivers.

BP’s first charging site in Guangzhou has already been connected to XAS (Xiaoju Automobile Solutions), which Didi spun out in April 2018 to put all its vehicle-related services into one platform.

XAS is part of Didi Chuxing’s evolution from a ride-sharing company to a mobility services platform, with its services available to other car, transportation and logistics companies. In June, Didi also opened its ride-sharing platform to other companies, enabling its users to request rides from third-party providers in a bid to better compete with apps like Meituan Dianping and AutoNavi, which aggregate several ride-hailing services on their platforms.

Didi says it now offers ride-sharing, vehicle rental and delivery services to 550 million users and covers 1,000 cities through partnerships with Grab, Lyft, Ola, 99 and Bolt (Taxify). The company also claims to be the world’s largest electric vehicle operator with more than 600,000 EVs on its platform.

It also has partnerships with automakers and other car-related companies like Toyota, FAW, Dongfeng, GAC, Volkswagen and Renault-Nissan-Mitsubishi to collaborate on a platform that uses new energy, AI-based and mobility technologies.

In a press statement, Tufan Erginbilgic, the CEO of BP’s Downstream business, said “As the world’s largest EV market, China offers extraordinary opportunities to develop innovative new businesses at scale and we see this as the perfect partnership for such a fast-evolving environment. The lessons we learn here will help us further expand BP’s advanced mobility business worldwide, helping drive the energy transition and develop solutions for a low carbon world.”

Joy Capital closes $700M for early-stage investments in China

Joy Capital, the venture capital firm that’s backed Luckin, NIO, Mobike and other investor darlings in China, just raised $700 million for a new fund focusing on early-to-growth stage startups.

Launched in 2015 by a team of former investors at Legend Capital, the investment arm of PC maker Lenovo’s parent company, Joy Capital made the news official (in Chinese) on Monday. It didn’t identify the limited partners in this new corpus of funding but said they include “top” public pension funds and insurance companies. Its existing pool of investors counts those from sovereign wealth funds, education-focused endowment funds, family funds and parent funds.

The fresh money boosted Joy’s total tally to over 10 billion yuan ($1.45 billion) under management, with a focus on backing cutting edge technologies and companies involved in the digital upgrade of China’s traditional sectors, or what Joy’s founding partner Liu Erhai (pictured above) dubbed the “new infrastructure” in an op-ed for the China Securities Journal. Targets can include the likes of logistics companies, online car rental platforms or bike-sharing apps.

As a relatively young fund, Joy Capital has so far achieved a few large outcomes. One of its portfolio companies NIO became China’s first electric vehicle startup to go public in the U.S. as a rival to Tesla. It’s also funded Luckin, the Starbucks nemesis from China that floated in the U.S. only 18 months after inception. The fund’s other big wins include Mobike, the bike-sharing pioneer that was sold to Meituan Dianping for $2.7 billion and fast-growing house-sharing unicorn Danke Apartment.

Joy Capital’s new raise arrived at a time when Chinese venture investors are coping with a cash crunch amid a cooling economy exacerbated by the expansion of U.S. tariffs. We reported that private equity and venture capital firms in the country raised 30% less in the first six months of 2019 compared to a year earlier, and the number of investors that managed to attract fundings was down 52% in the same period.

Alibaba to help Salesforce localize and sell in China

Salesforce, the 20-year-old leader in customer relationship management (CRM) tools, is making a foray into Asia by working with one of the country’s largest tech firms, Alibaba.

Alibaba will be the exclusive provider of Salesforce to enterprise customers in mainland China, Hong Kong, Macau, and Taiwan, and Salesforce will become the exclusive enterprise CRM software suite sold by Alibaba, the companies announced on Thursday.

The Chinese internet has for years been dominated by consumer-facing services such as Tencent’s WeChat messenger and Alibaba’s Taobao marketplace, but enterprise software is starting to garner strong interest from businesses and investors. Workflow automation startup Laiye, for example, recently closed a $35 million funding round led by Cathay Innovation, a growth-stage fund that believes “enterprise software is about to grow rapidly” in China.

The partners have something to gain from each other. Alibaba does not have a Salesforce equivalent serving the raft of small-and-medium businesses selling through its e-commerce marketplaces or using its cloud computing services, so the alliance with the American cloud behemoth will fill that gap.

On the other hand, Salesforce will gain sales avenues in China through Alibaba, whose cloud infrastructure and data platform will help the American firm “offer localized solutions and better serve its multinational customers,” said Ken Shen, vice president of Alibaba Cloud Intelligence, in a statement.

“More and more of our multinational customers are asking us to support them wherever they do business around the world. That’s why today Salesforce announced a strategic partnership with Alibaba,” said Salesforce in a statement.

Overall, only about 10% of Salesforce revenues in the three months ended April 30 originated from Asia, compared to 20% from Europe and 70% from the Americas.

Besides gaining client acquisition channels, the tie-up also enables Salesforce to store its China-based data at Alibaba Cloud. China requires all overseas companies to work with a domestic firm in processing and storing data sourced from Chinese users.

“The partnership ensures that customers of Salesforce that have operations in the Greater China area will have exclusive access to a locally-hosted version of Salesforce from Alibaba Cloud, who understands local business, culture and regulations,” an Alibaba spokesperson told TechCrunch.

Cloud has been an important growth vertical at Alibaba and nabbing a heavyweight ally will only strengthen its foothold as China’s biggest cloud service provider. Salesforce made some headway in Asia last December when it set up a $100 million fund to invest in Japanese enterprise startups and the latest partnership with Alibaba will see the San Francisco-based firm actually go after customers in Asia.

China plans e-cigarette regulation as industry booms

China is taking steps to regulate its blossoming vaping market as health concerns over electronic cigarettes increase in recent times.

China’s National Health Commission has begun research into e-cigarettes and plans to issue legislation for the industry, said the head of the health authority Mao Qunan at a press conference this week. The attempt came as Chinese e-cigarette startups raised loads of venture capital over the past year in their fight to vie for attention in the world’s largest market of smokers.

Vaping suppliers in China range from little-known workshops that have come under legal attack from industry giant Juul, which is reportedly mulling a China entry itself, to venture-backed startups operating out of manufacturing hub Shenzhen. At least 20 e-cigarette companies in China have raised fundings since the beginning of 2019, according to data collected by Crunchbase.

These players are in effect up against state monopoly China Tobacco, which is the world’s biggest cigarette maker and provides the government with colossal tax revenues.

Some researchers support the use of vaping to help adults quit smoking while others have shown that e-cigarettes are just as addictive as traditional ones. The other major controversy is the growing use of e-cigarettes among teenagers, which has led to California’s plan to ban vaping product sales.

China is also applying more scrutiny to the new smoking technology. Research shows that the aerosol produced by heating up e-cigarettes can contain “a lot of harmful substances” and additives in e-cigarettes can “pose health risks,” said Mao. He also noted that equivocal labeling of nicotine level can misguide smokers and sloppy device standards can result in battery explosion and other safety incidents.

Like the U.S., China has seen a worryingly high vaping rate among young people, which is another reason that urges Beijing to hold the industry in check. The use of e-cigarettes by kids, teens and young adults has been proven unsafe because nicotine, which is highly addictive, can harm brain development.

In May, China drew up a set of standards (in Chinese) for e-cigarettes that specify the level of nicotine, the type of additives and other components and designs allowed in battery-powered cigarette devices.

China’s new Nasdaq-style board for tech shares starts trading with 25 companies listed

Trading on China’s new Nasdaq-style stock market began today, with 25 tech companies listed on the Science and Technology Innovation Board, operated by the Shanghai Stock Market. Called the STAR Market, the board is an initiative by the government to encourage more Chinese tech companies to list domestically by addressing concerns about governance.

Traders cautioned that initial trading may be volatile as investors buy and trade stocks, however, and that warning was borne out today with trading by several companies paused after a surge of buying triggered their circuit breakers, or measures put into place that temporarily halt buying and selling to prevent stock crashes.

Plans for the STAR Market were announced in November as part of the Chinese government’s efforts to launch capital market reforms and make listing in mainland China more appealing to tech companies by easing profitability requirements. Some of the highest-profile Chinese tech IPOs, including Alibaba, Tencent, Xiaomi, JD.com and Pinduoduo, have taken place in New York City or Hong Kong, and the STAR Market may encourage more local stock debuts and investment—a goal that holds especially high stakes as China’s trade war with the U.S. continues.

But CNBC notes that the success of the STAR Market is far from a sure thing, since China has launched two other equity markets (the ChiNext in 009 and the New Third Board in 2013) that still receive far less attention than its two primary stock exchanges in Shanghai and Shenzhen.

Hellobike, survivor of China’s bike-sharing craze, goes electric

Just two years ago, investors were heavily pouring money into China’s dockless bike-sharing startups. Now that boom has busted with derelict bikes littering the streets of cities.

Meanwhile, a new race has started for two-wheelers with motors — and one of the main players is a survivor from the bike-sharing craze. Blessed with fundings from the world’s most valuable fintech company Ant Financial through its Series D to F funding rounds, Hellobike provides a range of mobility services such as shared e-bikes and rented electric scooters to its 230 million registered users.

Electric push

Hellobike first launched in 2016 by deploying shared bikes in smaller cities and towns — where Ofo and Mobike were largely absent early on — rather than large urban centers like Beijing and Shanghai. This allowed Hellobike to largely avoid the cash splurging competition against Ofo and Mobike.

Ofo is now battling a major financial crisis as it struggles to repay user deposits. Its archrival Mobike has slowed down expansion since it was sold to Hong Kong-listed local services giant Meituan. And Hellobike, which boasts about its operational efficiency, has begun an electric push.

“When the two major powers were at war, neither of them went after electric bikes. They were fighting over bicycles,” Hellobike’s chief financial officer Fischer Chen (pictured above) recently told TechCrunch at Rise conference in Hong Kong, referring to the feud between Mobike and Ofo. “As such, there was no price war for e-bikes from the outset. The competition is rational.”

Electric two-wheeled vehicles are in high demand in the country where nearly 1.4 billion people live. According to data collected by Hellobike, nearly 300 million rides are completed on analog bikes every day in China. What many don’t realize is that pedal-assist electric bikes and pedal-free scooters together more than double that number, generating 700 million rides per day.

As with bicycles, there are benefits to rent rather than buy an electric bike in China. For one, users don’t need to worry about getting their assets stolen. Second — and, this is specific to electric vehicles — finding a safe, convenient charging spot can be a challenge in China.

That’s why Hellobike put up charging stations as it went about offering shared ebikes in 2017. At these kiosks, riders swap their battery out for a new one without having to plug in and wait. They then have the option to pay with Alipay, Ant’s mobile wallet with a one-billion user base.

hellobike

Hellobike’s bike (left and middle) and e-bike (right) models / Photo: Hellobike via Weibo

Of all the monthly two-wheeler electric bikes activity in China, Hellobike has captured 80% of the market share, Chen claims. For bike-sharing, it accounts for 60-70%. It’s hard to verify the share by looking at data compiled by third-party app trackers, for they don’t usually break out the user number for individual features. The Hellobike app is a one-stop-shop for bicycles, e-bikes, e-scooters as well as carpooling, a service complementary to its main two-wheeler business intended to “capture price-sensitive small-town consumers” according to Chen.

Similarly, Mobike has been folded into Meituan’s all-in-one service app. What further complicates the inquiry is some of Hellobike’s rides are accessed directly on Alipay rather than its own app.

When it comes to competition in electric two-wheelers, Chen maintained that other challengers are “relatively small” and that acquiring online users has become “very difficult.” For Hellobike, getting existing customers to try out new features takes as much effort as “adding a new tab to its app,” Chen suggested.

But other internet giants have also set their sight on plugged-in micromobility. Both Mobike and ride-sharing leader Didi Chuxing have their own e-bike sharing programs. It won’t be an easy game, as all contenders need to cope with China’s increasingly strict rules for electric bicycles.

Scooter rental is next

What’s for certain is that Hellobike has big ambitions for electric micromobility. While shared bikes and e-bikes are meant for one-off uses, Hellobike plans to rent out e-scooters for longer swathes of time as many people might want the powered-up vehicles for their daily commute.

hellobike

Hellobike’s electric scooter. Caption: “App-enabled lock. Smart anti-theft. Real-time location tracking for checking the vehicle’s status.” / Photo: Hellobike homepage  

Hellobike founded a new joint venture last month to fulfill that demand. Joining forces with Ant — which is controlled by Alibaba founder Jack Ma — and China’s top battery manufacturer CATL, Hellobike is launching a rental marketplace for its 25 km/h e-scooters targeted at millions of migrant workers in Chinese cities.

“People might be able to afford an e-scooter that costs several thousand yuan [$1 = 6.88yuan], but they might be leaving the city after a year, so why would they buy it? So we come in as a third-party partner with a new rental model through which people pay about 200 yuan a month to use the scooter,” explained Chen. “By doing so, we convert people from buying vehicles to paying for services, renting the vehicles.”

The three shareholders will also work to install more battery-swapping stations nationwide that not only recharge Hellobike’s shared e-bikes but also its e-scooters, that will be made by manufacturing partners.

“We function as a platform and won’t compete with traditional scooter manufacturers,” suggested Chen. “They still get to use their own designs and SKUs [stock keeping units], but we will put smart hardware into their models… so users know where their vehicles are… and they can unlock the scooters with a QR code just like they do with a shared bike or e-bike.”

Hellboke has raised at least $1.8 billion to date, according to public data compiled by Crunchbase. Bloomberg reported in April that it was seeking to raise at least $500 million in a new funding round. The company declined to comment on its fundraising progress.

When it comes to financial metrics, Chen, a veteran investment banker, declined to disclose whether Hellobike overall is profitable but said the company “performs much better than its competitors” financially. The most profitable segment, according to the executive, is the electric bike business.

As for bicycles, Chen noted that China’s main bike-sharing companies are “no longer burning money” since they’ve raised prices in recent times. Hellobike’s bike unit has achieved cash-flow positive during the warmer, peak seasons, Chen added.

The Commerce Department will accept applications from companies that want to supply Huawei, but it remains blacklisted

About two months after Huawei was placed on the Commerce Department’s Entity List, the Chinese telecom equipment and smartphone giant will be able to do business with American suppliers again–but only if they get a license from the U.S. government. Commerce Secretary Wilbur Ross made the announcement during a department conference, adding that companies must first demonstrate that the technology they sell to Huawei will not put national security at risk.

Huawei will remain on the entity list, however, and license applications will be reviewed under a “presumption of denial,” making it likely that most will not be approved.

Last month while both presidents were in Japan for the G20 Summit, Donald Trump told Chinese leader Xi Jinping that he would allow U.S. companies to sell equipment to Huawei again, but the promise created confusion about how it would be carried out, with the Commerce Department instructing staff to continue acting as if the blacklist is still in place. Huawei, the world’s largest telecom equipment maker and second-largest smartphone vendor, is a major bargaining chip in the ongoing trade war between the U.S. and China.

The blacklist has had a major impact on Huawei, with important suppliers like Qualcomm, Intel and Google severing ties after it was placed on the entity list. Huawei, which has repeatedly denied being a threat to U.S. national security, said that being blacklisted would cost the company about $30 billion in revenue, though founder and CEO Ren Zhengfei later downplayed the impact in an interview with CNBC. It also means U.S. companies have lost an important customer. Out of the $70 billion Huawei spent buying components last year, $11 billion went to American companies like Qualcomm, Intel and Micron.

Despite Trump’s promised reprieve, Commerce Department tells staff to continue treating Huawei as blacklisted

President Donald Trump recently promised to ease the ban on American companies doing business with Huawei, but the Commerce Department is requiring its staff to treat Huawei as if the blacklist is still in place, reports Reuters.

Enforcement staff were sent an internal letter this week by John Sonderman, the Deputy Director of the Office of Export Enforcement, to continue treating Huawei as blacklisted. The letter, viewed by Reuters, said applications from companies that want to sell to Huawei should be considered on merit and flagged with language that notes Huawei is on the entity list. The applications should also still be viewed under a “presumption of denial” policy that applies to companies on the blacklist. This means license applications are scrutinized more closely and most of them are rejected.

Along with 70 other companies, Huawei was added in May to an “entity list” of companies that U.S. companies are forbidden to do business with. As a result, many of Huawei’s most important component suppliers, including Qualcomm and Intel, severed ties with Huawei, while Google cut off its access to Android--a major headache for Huawei, which is the third-largest smartphone maker in the world. Huawei founder and CEO Ren Zhengfei said the ban would result in $30 billion in lost revenue.

According to Reuters, this is the only guidance enforcement officials have received since Trump’s surprise announcement, made after he met with Chinese premier Xi Jinping at the G20 summit. In an apparent concession to China, which sees Huawei as major sticking point in the U.S.-China trade war, Trump suggested that the U.S. will allow American companies to resume selling hardware to Huawei as long as it doesn’t pose a “great national emergency problem,” and would hold meetings about Huawei’s trade status.

After Trump’s announcement, Ren downplayed the effect of the promised partial reprieve, telling the Financial Times that the ban has helped the company “become more united than ever.” He added “if we aren’t allowed to use U.S. components, we are very confident in our ability to use components made in China and other countries.”

India reportedly wants to build its own WhatsApp for government communications

India may have plans to follow France’s footsteps in building a chat app and requiring government employees to use it for official communications.

The New Delhi government is said to be pondering about the need to have homegrown email and chat apps, local news outlet Economic Times reported on Thursday.

The rationale behind the move is to cut reliance on foreign entities, the report said, a concern that has somehow manifested amid U.S.’s ongoing tussle with Huawei and China.

“We need to make our communication insular,” an unnamed top government official was quoted as saying by the paper. The person suggested that by putting Chinese giant Huawei on the entity list, the U.S. has “set alarm bells ringing in New Delhi.”

India has its own ongoing trade tension with the U.S. Donald Trump earlier this month removed the South Asian nation from a special trade program after India did not assure him that it will “provide equitable and reasonable access to its markets.” India called the move “unfortunate”, and weeks later, increased tariffs on some U.S. exports.

The move to step away from foreign communication apps, if it comes to fruition, won’t be the first time a nation has attempted to cautiously restrict usage of popular messaging apps run by foreign players in government offices.

France launched an encrypted chat app — called Tchap — for use in government offices earlier this year. Only those employed by the French government offices can sign up to use the service, though the nation has open sourced the app’s code for the world to see and audit.

Of course, a security flaw in Tchap came into light within the first 24 hours of its release. Security is a real challenge that the government would have to tackle and it might not have the best resources — talent, budget, and expertise — to deal with it.

China, which has restricted many foreign companies from operating in the nation, also maintains customized versions of popular operating systems for use in government offices. So does North Korea.

It won’t be an unprecedented step for India, either. The nation has been trying to build and scale its own Linux-based desktop operating system called BOSS for several years with little success as most government agencies continue to use Microsoft’s Windows operating system.

Even as India has emerged as the third-largest startup hub in the world, the country has failed to build local alternatives for many popular services. Facebook’s WhatsApp has become ubiquitous for communication in India, while Google’s Android and Microsoft’s Windows power most smartphones and computers in the nation.

Semiconductor startup CNEX Labs alleged Huawei’s deputy chairman conspired to steal its intellectual property

A San Jose-based semiconductor startup being sued by Huawei for stealing trade secrets has hit back in court documents, accusing the Chinese firm’s deputy chairman of conspiring to steal its intellectual property, reports the Wall Street Journal. In court filings, CNEX Labs, which is backed by the investment arms of Dell and Microsoft, alleges that Eric Xu, who is also one of Huawei’s rotating CEOs, worked with other Huawei employees to steal its proprietary technology.

The lawsuit, set for trial on June 3 in federal court in the Eastern District of Texas, started in 2017 when Huawei sued CNEX and one of its founders, Yiren “Ronnie” Huang, a former employee at Huawei’s Santa Clara office, for stealing its technology and using unlawful means to poach 14 other Huawei employees. CNEX filed a countersuit the following year. Huawei has denied the startup’s allegations in court filings.

The lawsuit is happening at a fraught time for Huawei. Last week, the Chinese telecom equipment maker (and the world’s second-largest smartphone brand), was placed on a trade blacklist by the Trump administration, which also signed an executive order that would make it possible to block American companies from doing business with Huawei and other companies it deems a national security threat. As a result, several companies have suspended business with Huawei, including Google, Qualcomm, Intel and ARM.

Court filings said that after being directed by Xu to analyze CNEX’s technical information, a Huawei engineer met with the startup’s officials in June 2016, pretending to be a potential customer. But then the engineer produced a report about CNEX’s tech and put it into a database of information about competitors run by Huawei’s chip development unit.

CNEX’s lawyers also say that Xu knew about a partnership between Huawei and Xiamen University that was allegedly part of plan to steal the startup’s trade secrets. They claim Xiamen obtained a memory board from CNEX in 2017 under a licensing agreement, saying it would be used for academic research. But CNEX lawyer Eugene Mar said that “what was hidden from CNEX was that Xiamen was working with Huawei and had entered into an agreement separately with Huawei to provide them with all of their research test reports,” according to court transcripts viewed by the Wall Street Journal.

Information from the university’s study was then allegedly used for Huawei chip projects, including one that is expected to be released this year. Huawei’s lawyers refuted CNEX’s charges, claiming that the partnership between Huawei and the university did not involve reverse engineering or CNEX’s trade secrets and was meant to design database software instead of developing chips. A Huawei lawyer said that Xu was part of “the chain of command that had requested” information about CNEX and that a CNEX document had been placed into its chip development unit’s database, but denied allegations that anything was stolen.

CNEX co-founder Huang claimed in court filings that he offered to sell his intellectual property to Huawei when he started working at Futurewei, its research and development unit. Huawei refused his offer, but then later tried to get Huang to give them his IP under an employee agreement, which Huang refused to sign, he claims. Huang left Futurewei in 2013 and founded CNEX Labs soon after.

TikTok owner ByteDance’s long-awaited chat app is here

In WeChat -dominated China, there’s no shortage of challengers out there claiming to create an alternative social experience. The latest creation comes from ByteDance, the world’s most valuable startup and the operator behind TikTok, the video app that has consistently topped the iOS App Store over the last few quarters.

The new offer is called Feiliao (飞聊), or Flipchat in English, a hybrid of an instant messenger plus interest-based forums, and it’s currently available for both iOS and Android. It arrived only four months after Bytedance unveiled its video-focused chatting app Duoshan at a buzzy press event.

Screenshots of Feiliao / Image source: Feiliao

Some are already calling Feiliao a WeChat challenger, but a closer look shows it’s targeting a more niche need. WeChat, in its own right, is the go-to place for daily communication in addition to facilitating payments, car-hailing, food delivery and other forms of convenience.

Feiliao, which literally translates to ‘fly chat’, encourages users to create forums and chat groups centered around their penchants and hobbies. As its app description writes:

Feiliao is an interest-based social app. Here you will find the familiar [features of] chats and video calls. In addition, you will discover new friends and share what’s fun; as well as share your daily life on your feed and interact with close friends.

Feiliao “is an open social product,” said ByteDance in a statement provided to TechCrunch. “We hope Feiliao will connect people of the same interests, making people’s life more diverse and interesting.”

It’s unclear what Feiliao means by claiming to be ‘open’, but one door is already shut. As expected, there’s no direct way to transfer people’s WeChat profiles and friend connections to Feiliao, and there’s no option to log in via the Tencent app. As of Monday morning, links to Feiliao can’t be opened on WeChat, which recently crossed 1.1 billion monthly active users.

On the other side, Alibaba, Tencent’s long-time nemesis, is enabling Feiliao’s payments function through the Alipay digital wallet. Alibaba has also partnered with Bytedance elsewhere, most notably on TikTok’s Chinese version Douyin where certain users can sell goods via Taobao stores.

In all, Flipchat is more reminiscent of another blossoming social app — Tencent-backed Jike — than WeChat. Jike (pronounced ‘gee-keh’) lets people discover content and connect with each other based on various topics, making it one of the closest counterparts to Reddit in China.

Jike’s CEO Wa Nen has taken noticed of Feiliao, commenting with the 👌 emoji on his Jike feed, saying no more.

Screenshot of Jike CEO Wa Ren commenting on Feiliao

“I think [Feiliao] is a product anchored in ‘communities’, such as groups for hobbies, key opinion leaders/celebrities, people from the same city, and alumni,” a product manager for a Chinese enterprise software startup told TechCrunch after trying out the app.

Though Feiliao isn’t a direct take on WeChat, there’s little doubt that the fight between Bytedance and Tencent has heated up tremendously as the former’s army of apps captures more user attention.

According to a new report published by research firm Questmobile, ByteDance accounted for 11.3 percent of Chinese users’ total time spent on ‘giant apps’ — those that surpassed 100 million MAUs — in March, compared to 8.2 percent a year earlier. The percentage controlled by Tencent was 43.8 percent in March, down from 47.5 percent, while the remaining share, divided between Alibaba, Baidu and others, grew only slightly from 44.3 percent to 44.9 percent over the past year.

Tech stocks slide on US decision to blacklist Huawei and 70 affiliates

The United States has been lobbying for months to prevent its western allies from using Huawei equipment in their 5G deployment, and on Wednesday, Washington made it more difficult for the Chinese telecom titan to churn out those next-gen products.

The U.S. Department of Commerce announced that it will add Huawei and its 70 affiliates to the so-called ‘Entity List,’ a move that will prevent the telecom giant from buying parts and components from U.S. companies without approval from Washington. That confirms reports of the potential ban a day before.

Despite being the largest telecom equipment maker around the world, Huawei relies heavily on its American suppliers, giving the U.S. much leeway to hobble the Chinese firm’s production.

Following the dramatic move, shares of a gauge of Huawei affiliates slumped on Wednesday. Tatfook Technology, which sells to Huawei as well as Ericsson and Bosch, dropped 2.84 percent in Shenzhen in morning trading. New Sea Union Telecom, a supplier to China’s ‘big three’ telecom network operators and Huawei, slid 4.88 percent. Another Huawei key partner Chunxing Precision Mechanical dropped as much as 5.37 percent.

Huawei did not comment directly on the Commerce Department’s blacklist when reached out by TechCrunch, but said it’s “ready and willing to engage with the U.S. government and come up with effective measures to ensure product security.”

“Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployment, and eventually harming the interests of U.S. companies and consumers,” Huawei hit back in the statement.

This view is congruent with some of the harshest criticisms of Washington’s backlash against Huawei. Scholars and industry observers warn that Chinese tech firms have become such an integral part to the global economy that severing ties with Huawei will do ham to 5G advancement worldwide.

In addition, the Chinese company said the U.S.’s “unreasonable restrictions will infringe upon Huawei’s rights and raise other serious legal issues,” though it did not spell out what those rights and legal concerns are.

The announcement dropped on the same day U.S. President Donald Trump declared “a national emergency” over technology supply chain threats from the country’s “foreign adversaries”.

The Commerce Department said it has a reasonable basis to conclude that “Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest.”

Some of the U.S’s allies including the U.K. are still investigating Huawei’s possible security threat and deciding how close a link they should keep with Huawei, but the Shenzhen-based company has already taken a bold step to give its potential clients some assurance.

Just this Tuesday, Huawei told reporters in London that it’s “willing to sign no-spy agreements with governments, including the U.K. government,” and commit itself to making its equipment “meet the no-spy, no-backdoors standard.”

The U.S.’s tit-for-tat with Huawei also includes the push to arrest the company’s CFO Meng Wanzhou on charges that Huawei did business in Iran in breach of U.S. sanctions.

Huawei launches AI-backed database to target enterprise customers

China’s Huawei is making a serious foray into the enterprise business market after it unveiled a new database management product on Wednesday, putting it in direct competition with entrenched vendors like IBM, Oracle and Microsoft.

The Shenzhen-based company, best known for making smartphones and telecom equipment, claims its newly minted database uses artificial intelligence capabilities to improve tuning performance, a process that traditionally involves human administrators, by over 60 percent.

Called the GaussDB, the database works both locally as well as on public and private clouds. When running on Huawei’s own cloud, GaussDB provides data warehouse services for customers across the board, from the financial, logistics, education to automotive industries.

The database launch was first reported by The Information on Tuesday citing sources saying it is designed by the company’s secretive database research group called Gauss and will initially focus on the Chinese market.

The announcement comes at a time when Huawei’s core telecom business is drawing scrutiny in the West over the company’s alleged ties to the Chinese government. That segment accounted for 40.8 percent of Huawei’s total revenues in 2018, according to financial details released by the privately-held firm.

Huawei’s consumer unit, which is driven by its fast-growing smartphone and device sales, made up almost a half of the company’s annual revenues. Enterprise businesses made up less than a quarter of earnings, but Huawei’s new push into database management is set to add new fuel to the segment.

Meanwhile, at Oracle, more than 900 employees, most of whom worked for its 1,600-staff research and development center in China, were recently let go amid a major company restructuring, multiple media outlets reported earlier this month.

Data provided to TechCrunch by Boss Zhipin offers clues to the layoff: The Chinese recruiting platform has recently seen a surge in newly registered users who work at Oracle China. But the door is still open for new candidates as the American giant is currently recruiting for more than 100 positions through Boss, including many related to cloud computing.

U.S. slams Alibaba and its challenger Pinduoduo for selling fakes

China’s biggest ecommerce company Alibaba was again on the U.S. Trade Representative’s blacklist over suspected counterfeits sold on its popular Taobao marketplace that connects small merchants to consumers.

Nestling with Alibaba on the U.S.’s annual “notorious” list that reviews trading partners’ intellectual property practice is its fast-rising competitor Pinduoduo . Just this week, Pinduoduo founder Colin Huang, a former Google engineer, wrote in his first shareholder letter since listing the company that his startup is now China’s second-biggest ecommerce player by the number of “e-way bills”, or electronic records tracking the movement of goods. That officially unseats JD.com as the runner-up to Alibaba.

This is the third year in a row that Taobao has been called out by the U.S. government over IP theft, despite measures the company claims it has taken to root out fakes, including the arrest of 1,752 suspects and closure of 1,282 manufacturing and distribution centers.

“Although Alibaba has taken some steps to curb the offer and sale of infringing products, right holders, particularly SMEs, continue to report high volumes of infringing products and problems with using takedown procedures,” noted the USTR in its report.

In a statement provided to TechCrunch, Alibaba said it does “not agree with” the USTR’s decision. “Our results and practices have been acknowledged as best-in-class by leading industry associations, brands and SMEs in the United States and around the world. In fact, zero industry associations called for our inclusion in the report this year.”

Pinduoduo is a new addition to the annual blacklist. The Shanghai-based startup has over the course of three years rose to fame among China’s emerging online shoppers in smaller cities and rural regions, thanks to the flurry of super-cheap goods on its platform. While affluent consumers may disdain Pinduodou products’ low quality, price-sensitive users are hooked to bargains even when items are subpar.

“Many of these price-conscious shoppers are reportedly aware of the proliferation of counterfeit products on pinduoduo.com but are nevertheless attracted to the low-priced goods on the platform,” the USTR pointed out, adding that Pinduoduo’s measures to up the ante in anti-piracy technologies failed to fully address the issue.

Pinduoduo, too, rebutted the USTR’s decision. “We do not fully understand why we are listed on the USTR report, and we disagree with the report,” a Pinduoduo spokesperson told TechCrunch. “We will focus our energy to upgrade the e-shopping experience for our users. We have introduced strict penalties for counterfeit merchants, collaborated closely with law enforcement and employed technologies to proactively take down suspicious products.”

The attacks on two of China’s most promising ecommerce businesses came as China and the U.S. are embroiled in on-going trade negotiations, which have seen the Trump administration repeatedly accused China of IP theft. Tmall, which is Alibaba’s online retailer that brings branded goods to shoppers, was immune from the blacklist, and so was Tmall’s direct rival JD.com.

Taobao has spent over a decade trying to revive its old image of an online bazaar teeming with fakes and “shanzhai” items, which are not outright pirated goods but whose names or designs intimate those of legitimate brands. Pinduoduo is now asked to do the same after a few years of growth frenzy. On the one hand, listing publicly in the U.S. subjects the Chinese startup to more scrutiny. On the other, small-town users may soon demand higher quality as their purchasing power improves. And when the countryside market becomes saturated, Pinduoduo will need to more aggressively upgrade its product selection to court the more sophisticated consumers from Chinese megacities.

Douyu, China’s Twitch backed by Tencent, files for a $500M U.S. IPO

Douyu, a Chinese live streaming service focused on video games, has filed with the U.S. Securities and Exchange Commission as it prepares to raise up to $500 million on the NYSE less than a year after its archrival floated on the same stock market.

Wuhan-based Douyu, whose name translates as “fighting fish”, is the second Twitch -like service backed by Tencent to go public in the United States. Its direct competitor Huya, who has a similarly fierce name “tiger’s teeth” and also counts Tencent as a major investor, raised $180 million from its NYSE listing last May.

It’s not surprising for Tencent to hedge its bets in esports streaming, given the giant relies heavily on video games to make money. For example, Tencent can use some of its portfolio companies’ ad slots to get the word out about its new releases. Indeed, Douyu’s filing shows it received a hefty 27.48 million yuan ($4.09 million) in advertising fees from Tencent last year.

As Douyu warns in its prospectus, its alliance with Tencent can be tenuous.

“Tencent may devote resources or attention to the other companies it has an interest in, including our direct or indirect competitors. As a result, we may not fully realize the benefits we expect from the strategic cooperation with Tencent. Failure to realize the intended benefits from the strategic cooperation with Tencent, or potential restrictions on our collaboration with other parties, could materially and adversely affect our business and results of operations.”

But there are nuances in the giant’s ties to China’s top two live streaming services that could mean more affinity between Tencent and Douyu. The social media and gaming behemoth is currently Douyu’s largest shareholder with a 40.1 percent stake owned through its wholly-owned subsidiary Nectarine. Over at Huya, Tencent is the second-largest stakeholder behind YY, the pioneer in China’s live streaming sector that had spun off Huya.

When it comes to the financial terms, the rivaling pair is in a head-on race. In 2018, Douyu doubled its net revenues to $531.5 million. Huya held an edge as it earned $678.3 million in the same period, also doubling the amount from a year ago.

Huya may have learned a few things about monetizing live streaming from 14-year-old YY as it managed to pull in more revenues despite owning a smaller user base. While Douyu claimed 153.5 million monthly active users in the fourth quarter, Huya had 116.6 million.

How the two make money also diverge slightly. In the fourth quarter, 86 percent of Douyu’s revenues originated from virtual items that users tipped to their favorite streaming hosts, with the remaining earnings derived from advertising and more. By contrast, Huya relied almost exclusively on live streaming gifts, which made up 95.3 percent of total revenues.

douyu

Screenshot of a Douyu live streaming session 

As Douyu grows its coffers to spend on content as well as technologies following the impending IPO, competition in China’s live streaming landscape is set to heat up. Just earlier this month, Huya raised $327 million in a secondary offering to invest in content and R&D. Like many other businesses anchored in content, Huya and Douyu depend tremendously on quality creators to keep users loyal. Both have offered sizable checks to live streaming hosts, promising to grow the internet celebrities into bigger stars.

And they’ve extended the battlefield outside China as emerging media forms, most exemplified by short video services Douyin (TikTok’s China version) and Kuaishou, threaten to steal people’s eyeball time away. Both bite-size video apps now enjoy a much bigger user base than their live streaming counterparts.

“We intend to further explore overseas markets to expand our user base through both organic expansion and selective investments,” noted Douyu in its IPO filing.

In a similar move, Huya’s overseas expansion is also well underway. “In addition to our vigorous domestic growth, we have successfully leveraged our unique business model to enter new overseas markets. We believe we are delivering long-term value through strategic investments in overseas markets in 2019 and beyond,” said Huya chief executive Rongjie Dong in the company’s Q4 earnings report.

Hong Kong-based fintech startup Qupital raises $15M Series A to expand in mainland China

Qupital, a fintech startup that bills itself as Hong Kong’s largest trade financing platform for SMEs, has closed a $15 million Series A led by CreditEase FinTech Investment Fund (CEFIF), with participation from returning investors Alibaba Hong Kong Entrepreneurs Fund and MindWorks Ventures, both participants in its seed round. To date, Qupital has raised $17 million, including a seed round two years ago, and will use its latest funding to expand its supply chain financing products, launch in mainland Chinese cities and hire more people for its tech development and risk management teams.

CreditEase, which provides loans and other financial services for SMEs in China, will act as a strategic investor, aiding with Qupital’s geographic expansion. Existing investor Alibaba has already helped Qupital reach small businesses on its platform. Qupital will open branches in Chinese cities including Shanghai, Hangzhou, Guangzhou and Shenzhen, along with setting up a new technology center in the Guangdong-Hong Kong-Macau Greater Bay Area for talent and tech development. In total, it will hire about 100 people for its Hong Kong office this year.

Founded in 2016, Qupital offers lending for SMEs that frequently have cash flow issues because they are in a cycle of waiting for invoices to be paid. Qupital’s loans cover most of the value of an invoice, then matches that with investors and funders who cover the cash with the expectation of a return. The company makes money by charging SMEs a service fee that is a fixed percentage of the total invoice value and then a discount fee, and taking a percentage of net gains made by investors.

Qupital has now processed 8,000 trades, totaling HKD $2 billion in value. It won’t disclose how many SMEs it has worked with, but co-founder and chairman Andy Chan says that number is in the hundreds.

Chan tells TechCrunch that in China, Qupital will not compete directly against traditional financial institutions, because it focuses on financing the Hong Kong business entities of Chinese companies in U.S. and Hong Kong currency, instead of onshore renminbi. It will also target SMEs underserved by traditional lenders, by using alternative data sources to determine their creditworthiness.

In a prepared statement, CEFIF managing director Dennis Cong said “The growing volume of SME and cross-border trading drives a huge demand for alternative financing for SME’s who are underserved in the market and opportunities for investors to earn a decent risk-adjusted return. We look forward to working with Qupital to broaden its source of capital base and create unparalleled investment opportunities for CreditEase.”