China’s fast-rising Bullet Messenger hit with copyright complaint

Bullet Messenger, a fast-rising Chinese messaging upstart that’s gunning to take on local behemoth, WeChat, has been pulled from the iOS App Store owing to what its owners couch as a copyright complaint. Reuters reported the development earlier, saying Bullet’s owner, Beijing-based Kuairu Technology, claimed in a social media posting that the app had been taken down […]

Bullet Messenger, a fast-rising Chinese messaging upstart that’s gunning to take on local behemoth, WeChat, has been pulled from the iOS App Store owing to what its owners couch as a copyright complaint.

Reuters reported the development earlier, saying Bullet’s owner, Beijing-based Kuairu Technology, claimed in a social media posting that the app had been taken down from Apple’s app store because of a complaint related to image content provided by a partner.

“We are verifying the situation with the partner and will inform you as soon as possible when download capabilities are resumed,” it said in a statement on its official Weibo account.

The company did not specify which part of the app has been subject to a complaint.

We’ve reached out to Apple to ask if it can provide any more details.

According to checks by Reuters earlier today, the Bullet Messenger app was still available on China’s top Android app stores — including stores owned by WeChat owner Tencent, as well as Baidu and Xiaomi stores — which the news agency suggests makes it less likely the app has been pulled from iOS as a result of censorship by the state, saying apps targeted by regulators generally disappear from local app stores too.

Bullet Messenger only launched in August but quickly racked up four million users in just over a week, and also snagged $22M in funding.

By September it had claimed seven million users, and Chinese smartphone maker Smartisan — an investor in Bullet — said it planned to spend 1 billion yuan (~$146M) over the next six months in a bid to reach 100M users. Though in a battle with a competitive Goliath like WeChat (1BN+ active users) that would still be a relative minnow.

The upstart messenger has grabbed attention with its fast growth, apparently attracting users via its relatively minimal messaging interface and a feature that enables speech-to-text transcription text in real time.

Albeit the app has also raised eyebrows for allowing pornographic content to be passed around.

It’s possible that element of the app caught the attention of Chinese authorities which have been cracking down on Internet porn in recent years — even including non-visual content (such as ASMR) which local regulators have also judged to be obscene.

Although it’s equally possible Apple itself is responding to a porn complaint about Bullet’s iOS app.

Earlier this year the Telegram messaging app fell foul of the App Store rules and was temporarily pulled, as a result of what its founder described as “inappropriate content”.

Apple’s developer guidelines for iOS apps include a section on safety that proscribes “upsetting or offensive content” — including frowning on: “Apps with user-generated content or services that end up being used primarily for pornographic content.”

In Telegram’s case, the App Store banishment was soon resolved.

There’s nothing currently to suggest that Bullet’s app won’t also soon be restored.

SoftBank and Toyota team up to develop services powered by self-driving vehicles

SoftBank is getting into self-driving car services after the Japanese tech giant announced a joint-venture with Toyota in its native Japan. SoftBank is invested in Uber and a range of other ride-hailing startups like Didi in China and Grab in Southeast Asia, but this initiative with Toyota is not related to those deals. Instead, it […]

SoftBank is getting into self-driving car services after the Japanese tech giant announced a joint-venture with Toyota in its native Japan.

SoftBank is invested in Uber and a range of other ride-hailing startups like Didi in China and Grab in Southeast Asia, but this initiative with Toyota is not related to those deals. Instead, it is designed to combine SoftBank’s focus on internet-of-things technology and Toyota’s connected vehicle services platform to enable new types of services that run on autonomous vehicle tech.

Called MONET — after ‘mobility network’ — the joint venture will essentially assign autonomous vehicles to various different “just in time” services. That just in time caveat essentially means more than on-demand. SoftBank suggests it’ll mean that services are performed in transit. That could be food prepared as it is delivered, hospital shuttles that host medical examinations, or mobile offices, according to examples given by SoftBank.

The plan is to use Toyota’s battery-based e-Palette electric vehicles and begin a roll “by the second half of the 2020s.” SoftBank said that the business will be focused on the Japanese market with “an eye to future expansion on the global market.”

Toyota has made strong progress on self-driving vehicles, having debuted its 3.0 self-driving research car earlier this year and then, in March, created a new $2.8 billion business that’s focused on developing requisite software systems. That latter program is designed to work alongside the Toyota Research Institute which, fueled by a $1 billion grant, is pushing the firm’s autonomous tech strategy.

Toyota is also aligned with Uber on ride-hailing. The firm invested $500 million in Uber and $1 billion in Grab via deals this year.

Back in January at CES, Toyota said that it is working with Amazon, Uber, Didi, Mazda and Pizza Hut to develop an electric autonomous shuttle that can be used to deliver people or packages. The business alliances were created to focus on the development of the e-Palette.

SoftBank’s autonomous vehicle projects including a bus that it is developing in partnership with China’s Baidu.

Tencent Music, China’s largest streaming service with 800M users, files for US IPO

This year has seen a number of tech companies that are majority or substantially owned by Chinese giant going public in the U.S. Baidu’s iQiyi service, Xiaomi-backed Huami and Viomi are a few examples, and now Tencent Music — the music division of Tencent, as you can guess — is making its run after plenty of […]

This year has seen a number of tech companies that are majority or substantially owned by Chinese giant going public in the U.S. Baidu’s iQiyi service, Xiaomi-backed Huami and Viomi are a few examples, and now Tencent Music — the music division of Tencent, as you can guess — is making its run after plenty of speculation.

TME — Tencent Music Entertainment — filed initial paperwork to go public in the U.S. (exchange not specified) overnight and the initial target is a $1 billion raise, although that is subject to change. We know that Tencent Music is valued at least at $12 billion, based on data from Spotify’s IPO earlier this year, so it’ll be interesting to note how much that rises from this listing.

Hardly a startup, TME is a spunout subsidiary that houses four Tencent music streaming services, Q Music, Kugou Music, Kuwo Music and WeSing. Those include orthodox streaming services, karaoke apps and live-streaming services. They are generally recognized to be China’s top four music apps and together they claim over 800 million monthly users.

Unlike Apple Music, Spotify or Pandora, TME is a profitable business, but its gross revenue and the way it makes money is quite different to its Western brethren. Spotify and co rely on subscriptions and ad-supported free tiers, Tencent Music draws the majority of its revenue from social activities, advertising and song sales.

Tencent Music’s 2017 revenue was $1.7 billion (RMB 11 billion) with a $199 million (RMB 1.3 billion) profit. Already the first half of 2018 has seen it clock $1.3 billion (RMB 8.6 billion) in revenue with a $263 million (RMB 1.7 billion) profit. Subscriptions accounted for just 30 percent of those sales, with the remainder gathered from virtual gifts that are sent to live streamers and premium memberships.

A large part of that success is its connection to Tencent services — in particularly WeChat, which counts one billion users, and QQ but also Tencent Video — which give Tencent Music’s services an avenue to reach users and spread across friend graphs and networks. That’s helped keep marketing expenses down and ultimately make the company profitable. Tencent Music’s cost of revenue is 60 percent, versus nearly 75-85 percent for Spotify which has to do a lot more work to bring users in.

Interestingly, Tencent Music notes in its prospectus that it expects revenue from subscriptions to increase over time.

“We had a paying ratio of 3.6 percent in the second quarter of 2018, which is still very low compared to the paying ratios of online games and video services in China and other online music services globally as quoted by iResearch, which indicates significant growth potential,” the company wrote.

That’s not a given though when you consider how rife privacy is in China. Those in the industry claim it is changing, it’s in their own interests to say that, but it is unclear whether the alternative ‘social’ monetization models that Tencent Music taps cannibalize potential subscription-based revenue.

Either way, the company might be able to learn from the West, too. Spotify holds a 9.1 percent stake in the business courtesy of a share swap last year — Tencent owns 7.5 percent of Spotify — which could yet lead to synergies between both sides, although Spotify competes with Tencent-owned Joox (not part of TME) in markets like Southeast Asia.

For now, the main takeaway is that Tencent Music is China’s top streaming dog and it is leaning on WeChat, the country’s dominant messaging platform. That bodes well, but, as repeated numerous times in its prospectus, monetizing music is still a new concept in China so there are few parallels to look at for guidance.

Still, this is a rare example of Chinese tech IPO that isn’t hemorrhaging cash — for example, Nio — which, coupled with the Tencent connection, is likely to make it a popular one.

India’s new technology infrastructure has created a platform to build domestic tech giants

In the two years since Indian social media app ShareChat raised $4 million in funding from Lightspeed Ventures the converging trends of increasing smartphone use, wireless internet connectivity, and cashless banking have combined to create a new social media juggernaut. Now Lightspeed has confirmed that the company has raised an additional $100 million in financing […]

In the two years since Indian social media app ShareChat raised $4 million in funding from Lightspeed Ventures the converging trends of increasing smartphone use, wireless internet connectivity, and cashless banking have combined to create a new social media juggernaut.

Now Lightspeed has confirmed that the company has raised an additional $100 million in financing at roughly a half billion dollar valuation alongside investment partners including India Quotient, Jesmond Holdings, Morningside, SAIF Partners, Shunwei Ventures, Venture Highway and Xiaomi. 

In the years since that first Lightspeed investment, ShareChat has gone from a company with 1 million monthly active users to 25 million monthly active users — and while the company lags behind the messaging giant WhatsApp (whose app is used by more than 200 million people in India) its growth in India is remarkable.

“ShareChat is really looking to tap into the next billion users in India,” says Ravi Mhatre, a partner at Lightspeed, whose investment dollars helped architect the ShareChat rise.

What’s giving this startup the ability to connect to those next billion users is one strategy of a 9-year-old plan to develop what’s been called the “India Stack” — an entirely new digital infrastructure for a country with a population of 1.32 billion spread across an area of nearly 1.3 million square miles.

The push began in 2009 with the launch of Aadhaar, India’s (recently amended) national biometric recording scheme. Seven years later it took a huge leap forward with the implementation of the nation’s massive demonetization plan and the near-simultaneous rollout of a 4G high speed mobile network across the country.

While the demonetization strategy ate into growth rates across the country, and likely didn’t reduce the amount of money in circulation, according to Indian financial publication LiveMint, the 4G rollout was a huge success.

Since Jio, the telecommunications arm of the giant industrial conglomerate Reliance Group, launched its 4G service in September 2016, adoption rates across the country have skyrocketed.

According to a report from the telecommunications analysis firm, OpenSignal, Jio’s contribution to networking India has been massive.

During the quarter ending June 2017, total data usage stood at over 4.2 million terabytes, out of which 4G data accounted for 3.9 million TBs, according to TRAI. The growth is most visible when checking the numbers from a year ago, when 4G data usage stood at a mere 8,050 TBs; that’s a 500-fold increase… [And] LTE availability in India is remarkable: users were able to connect to an LTE signal over 84% of the time, a rise of over 10 percentage points from a year earlier. This places India ahead of more established countries in the 4G landscape such as Sweden, Taiwan, Switzerland or the U.K.

Disrupt telco Reliance Jio laid the foundation for India’s phone owners to switch to using mobile data packages (Photo by Arun Sharma/Hindustan Times via Getty Images)

For a startup like ShareChat that means tens of millions of daily active users, according to Mhatre.

Those users are drawn to ShareChat’s broadcast chat feature, which allows users on mobile phones to broadcast conversations and commentary about any topic they wish. “It’s a platform where content that is relevant to you is surfaced to you and you engage with it,” Mhatre says.

The company was founded by three Bangalore-based developers. Farid Ahsan, 26, Ankush Sachdeva, 25, and Bhanu Pratap Singh, also 26 — all graduates from India’s famous IIT Kanpur University — had worked up 17 different prototypes for a product before they finally settled on the version that would become ShareChat.

The company’s founders are also taking a page from the popular Chinese app WeChat and hope to turn their broadcast chat service into a platform for micropayments, education, and other types of entertainment.

What started as a niche site for people to communicate in their local dialects could now become the first true domestic social media giant in India.

There are other Chinese corollaries to ShareChat’s business that may be informative. Toutiao, the news aggregation service owned by Bytedance, is perhaps the closest in kind to ShareChat at the moment, but even that is only accurate to a point.

China’s infrastructure is still somewhat based on personal computers and landlines, whereas India’s is wholly mobile-first. For Mhatre, it’s the first country to make the leap to a digital economy based entirely on mobile computing.

At Lightspeed the opportunity that presents is similar to the mid-90s birth of the Internet in the U.S. and the late 2000 technology boom that created billions of dollars in value for companies like Alibaba, Baidu, and Tencent.

ShareChat is built to support India’s plethora of local languages, as opposed to English-first services like WhatsApp

What makes this feat even more impressive was that until two or three years ago, it looked like India wouldn’t be living up to the expectations that had been set for it and emerging market countries like Russia and Brazil that comprise three-fourths of the BRICs that were supposed to be the foundational building blocks of the 21st century global economy.

“If you look at China — the GDP in China is $12 to $13 trillion… India is about $2.5 trillion [but] infrastructure got developed there earlier than in India,” Mhatre said. India is at the same inflection point now, where the infrastructure boom is contributing to the development of new business models. 

The constraints of that infrastructure have also informed the business ShareChat has built as well. Because while digital penetration rates in the country are high, the download speeds are exceptionally low (due in part to overwhelming demand).

Again, the OpenSignal report is informative.

While LTE availability saw a meteoric rise, the same cannot be said of 4G speeds. In our latest State of LTE report, India occupied the lowest spot among the 77 countries we examined, with average download speeds of 6.1 Mbps, over 10 Mbps lower than the global average.

ShareChat’s focus on messaging and sharing data light images is a platform that’s suited to the current strengths and limitations of India’s infrastructure. “You have half a billion people with a high speed internet terminal in their hand and they want to do things with it,” Mhatre said. And ShareChat isn’t just localized in its tech stack. The company also is localized by language. 

As the investors at Lightspeed noted in their thoughts on the deal.

The “next billion” users in India speak 22 different languages and are spread out over an area the size of Europe. ShareChat’s founders Ankush, Bhanu and Farid blew us away with their insight into this new user base. Their first brush with this user base came in 2015 when they noticed that sharing of photos, videos, poetry, jokes and even good morning messages was at epidemic levels on WhatsApp. Yet there was no easy one-stop shop for finding this content.  ShareChat was born to solve this problem. As they developed the idea, they also saw that this audience hungered for connection and content about their cities and villages of origin. They noticed emergent behavior around users wanting to “look cool” to their friends by finding the best content, solving for loneliness by finding friends in their own language, and even wanting to drive fame and celebrity in their own geographies.  

China splits the internet while the U.S. dithers

There are few stories as important right now as the internet being ripped asunder by the increasing animosity between the U.S. and China. Eric Schmidt, the former chairman of Alphabet, said last week at a private event in San Francisco that “I think the most likely scenario now is not a splintering, but rather a […]

There are few stories as important right now as the internet being ripped asunder by the increasing animosity between the U.S. and China. Eric Schmidt, the former chairman of Alphabet, said last week at a private event in San Francisco that “I think the most likely scenario now is not a splintering, but rather a bifurcation into a Chinese-led internet and a non-Chinese internet led by America.”

He should know: Alphabet and its Google subsidiary are on the front lines of that split, experiencing a massive furor over the company’s Project Dragonfly to launch a censored search engine in the Middle Kingdom. It’s hardly alone though, with Apple facing militant criticism from Chinese netizens over its iPhone presentation and Facebook finding its application for a corporate entity on the mainland being returned and rejected.

At the heart of this split is the death of the internet as we once knew it: a unified layer for the transfer of human knowledge. As the internet has gained more and more power over society and our everyday lives, the need by governments worldwide to tame its engineering to political and moral ends has increased dramatically.

About four years ago, I wrote a piece called “From internet to internets” in which I argued that this sort of split was obvious. As I wrote at the time: “Across the world, it is becoming abundantly clear that the internet is no longer the independent and self-reliant sphere it once was, immune to the peculiarities of individual countries and their laws. Rather, the internet is firmly under the control of every government, simultaneously.”

Yet, the rules that countries like Spain put in place around media and news didn’t split the internet as I had predicted. The economic power of the U.S. and China did. Alibaba, Tencent, and Baidu may have declined in value this year, but their combined market caps is still in the trillions of dollars. WeChat, which is owned by Tencent, has more than a billion users, and while only 10% of its user base is estimated to be outside China, the ties are growing as more countries build economic bridges with the mainland.

Sometimes, those bridges are quite literal. Through the Belt and Road initiative and fledgling institutions like the Asian Infrastructure Investment Bank, China has provided massive outlays to other nations primarily around infrastructure, building partnerships and deepening economic ties.

China and the U.S. are increasingly fighting a global battle for tech legitimacy (Photo by Jason Lee / AFP / Getty Images)

That infrastructure is sometimes roads, but it can also be in areas like telecommunications. Huawei has made massive inroads into Africa, both in smartphones and in core infrastructure. Chinese-owned Transsion, which most Westerners have probably never heard of, is the dominant smartphone manufacturer on the continent.

Chinese-made telecom infrastructure. Chinese handsets. Increasingly Chinese apps. For all of the concerns of Congress and national security officials about Huawei and ZTE equipment entering the American or Australian markets, the real fight for the future of the internet is going to be in precisely these developing regions which have no incumbent technology.

That’s what has made the Trump administration’s strategy toward trade negotiations with China so miserable to watch. The focus has been on repeated rounds of tariffs that will ensure that Chinese goods — particularly in high-tech industries — are more expensive to American consumers, allowing domestic manufacturers to better compete. Yet, the policies have done nothing to ensure that American values around the internet are exported to continents like Africa or South America, or that Cisco’s equipment will be chosen over Huawei’s.

That might be changing at long last. The Financial Times reported yesterday that the Trump administration is preparing to double down on the Overseas Private Investment Corporation, which offers commercial lending facilities to developing countries. It would be merged into another agency and given a much more rich budget (as high as $60 billion) to go and compete with Chinese financing around the world.

Maybe that measure will be successful in closing the strategic distance between the two countries. Maybe rumors that the administration is going to broadly double down on the trade war will lead to a much more comprehensive set of policies.

But along the way, regardless of what happens, these skirmishes will lead to a fracturing of the internet, and along with it, the death of the internet as a bastion and voice of freedom and knowledge for all people everywhere.

Lunewave is pitching a new sensor offering better vision for autonomous vehicles

The investment arms of BMW and the Chinese search technology giant, Baidu, along with a large original equipment manufacturer for the auto industry and a slew of technology investors have all come together to back Lunewave, a startup developing new sensor technologies for autonomous vehicles. The $5 million seed round which the company just closed […]

The investment arms of BMW and the Chinese search technology giant, Baidu, along with a large original equipment manufacturer for the auto industry and a slew of technology investors have all come together to back Lunewave, a startup developing new sensor technologies for autonomous vehicles.

The $5 million seed round which the company just closed will serve as a launching pad to get its novel radar technology, based on the concept of a Luneburg antenna, to market.

First developed in the 1940s, Lunewave’s spin the antenna technology involves leveraging 3D printing to create new architectures that enable more powerful antennas with greater range and accuracy than the sensing technologies currently on the market, according to the company’s chief executive John Xin.

Lunewave was co-founded by brothers John and Hao Xin and is based off of research that Hao had been conducting as a professor at the University of Arizona. Hao previously spent years working in the defense community for companies like Raytheon and Rockwell Scientific after graduating with a doctorate from the Massachusetts Institute of Technology in 2000.

Younger brother John took a more entrepreneurial approach, working in consulting and financial services for companies like PriceWaterhouseCoopers and Liberty Mutual.

Lunewave represents the culmination of nine years of research the elder Xin spent at the University of Arizona applying 3D printing to boost the power of the Luneburg antenna. With so much intellectual firepower behind it, Hao was able to convince his younger brother to join him on the entrepreneurial journey.

He has a strong desire to commercialize his inventions,” John Xin said of his older brother. “He wants to see it in everyday life.”

 Image courtesy of Driving-Tests.org

Now the company has $5 million in new funding to take the technology that Hao Xin has dedicated so much time and effort to develop and bring it to market. 

“With a single 3D printer in the laboratory version we can produce 100 per day,” John Xin told me. “With an industrial printer you can print 1000 per day.”

The first market for the company’s new technology will be autonomous vehicles — and more specifically autonomous cars.

Lunewave is focused on the eyes of the vehicle, says John Xin. Currently, autonomous technologies rely on a few different sensing systems. There are LIDAR technologies which use lasers to illuminate a target and measure the reflected pulses with a sensor; camera technologies which rely on — well — camera technologies; and radar which uses electromagnetic waves to detect objects.

Startups developing and refining these technologies have raised hundreds of millions of dollars to tackle the autonomous vehicle market. In June, the camera sensing technology developer Light raised over $120 million from SoftBank. Meanwhile, LIDAR technology developers like Quanergy and Leddartech have raised $134 million and $117 million respectively and some studies have claimed that the market for LIDAR technologies was already a $5.2 billion last year alone.

Most companies working with autonomous cars these days use some combination of these technologies, but the existing products on the market have significant limitations, according to Lunewave’s chief executive.

John Xin argues that the Lunewave technology can detect more objects in a wider field of view and at greater distances than existing products thanks to the unique properties of the Luneburg antenna.

Think of the antenna as a giant golf ball with a 360 field of “view” that can detect objects at greater distances than existing Lidar technologies because of the distance constraints on laser technologies.

Xin with a Lunewave prototype

“LIDAR right now is at the end of the day because of its short wavelength. It does not function as well in poor weather conditions. Penetration of shorter wave lengths would be very difficult in poor weather conditions,” Xin said. “Our radar technology has the ability to function across all weather conditions. Our hardware architecture of our Lunenberg antenna has the best distance and the spherical nature of the device has the 360 detection capacity.”

The company came out with its minimum viable product in 2017 — the same year that it launched. It was one of the early companies in the UrbanX accelerator — a collaboration between Mini and Urban.us — and is part of BMW’s startup garage program.

The company raised $5 million in two structures. Its seed financing was a $3.75 million equity round led by the automotive investment specialist McCombs Fraser with participation from Ekistic Ventures, Urban.us, Plug and Play, Shanda Capital, Lighthouse Ventures, Baidu Ventures and BMW iVentures. But a portion of its capital came in the form of a $1.25 million non-dilutive government grant through the National Science Foundation . “In late 2016 that’s what helped us to jumpstart the company,” said Xin.

Now, the company just needs to fulfill Hao Xin’s dream of taking the product to market.

“We have the product,” John Xin said. “It’s not just taking in money. Now it’s about [proof of concepts] and pilots.”

Google will struggle if it re-enters China, says its former country head

The odds are stacked against Google if the reports are true and the company is trying to bring its services back to China, according to the former head of Google China. News reports last month uncovered details of internal plans to introduce a search product and a news app in China, moves that would mark […]

The odds are stacked against Google if the reports are true and the company is trying to bring its services back to China, according to the former head of Google China.

News reports last month uncovered details of internal plans to introduce a search product and a news app in China, moves that would mark a re-entry to the consumer market which Google left in 2010. The plans, which follow a noticeable increase in activity in China from Google, were widely criticized by activists and also raised concern internally from Google employees.

Kaifu Lee left the search giant nine years following a four-year stint, and today he’s best-known as one of the world’s leading thinkers on AI and the founding partner of Chinese VC Sinovation Ventures. Speaking at TechCrunch Disrupt San Francisco this week, he shared his belief that China’s tech ecosystem is rapidly catching the U.S. on AI — that also spills over into more general tech, and the kind of competitors that Google would face were it to return to China.

“I think re-entry is always difficult,” Lee said. But “the bigger issue really is can an American multinational succeed in China now that China has bifurcated into this parallel universe.”

Lee helmed Google’s China business in its battle against domestic search firm Baidu . He said that Google’s market share jumped from nine percent to 24 percent during his tenure, while total revenue was “approaching” $1 billion, but now the outlook in China is less rosy in 2018.

While he admitted that Google “should have a higher chance than any other company” at succeeding in China, he isn’t optimistic that it — or indeed any U.S. firm — can.

“People [in China] aren’t looking for a new search engine or an app store, new companies are emerging addressing previously unknown customer needs [and] innovations are coming out,” Lee explained.

“The new graduates generally prefer to work for Chinese companies and then, lastly, the heads of multinationals are really just professional managers. If they were to compete against local entrepreneurs who are gladiators in this colosseum, I don’t think the American companies will have a high chance of succeeding in this environment,” he added.

Google isn’t the only U.S. firm looking at China, of course.

Facebook briefly received approval for a China-based subsidiary — it was later withdrawn following media reports — while it has tested local products in the past and engaged in dialogue with regulators. Uber was more successful, but it famously spent more than $1 billion per year to compete in China before being sold to local rival Didi. The only companies that could be credited with not failing in China are LinkedIn, Evernote and Airbnb, and, in each case, the actual impact is debatable. Certainly, each has strong/stronger local rivals that remain active.

“I think any American company would have a hard time in China now, Apple being the single exception,” Lee said.” And I think that’s because [Apple is] mostly a hardware product and the product has become a fashion symbol… so that’s different.”

In the case of Google, the challenge is far different. Even local social media companies struggle to adhere to adequately police online content according to the whim of authorities. New media firm Toutiao, for example, had numerous apps temporarily suspended from local app stores, while it massively strengthened its content checking teams and made a public apology. Tencent, Alibaba and others also employ in-house teams to police the content and users on their platforms.

That’s a huge challenge without even thinking about finding the right product-market fit or engaging an audience.

Cryptocurrency and blockchain bring Asia funds to the forefront of U.S. tech

Since early 2017, there’s been a new trend in the U.S. where a number of Asian funds have been actively involved in early-stage crypto investing. Many folks in traditional tech have not heard of them before, but these funds will only be growing more important as cryptocurrency and blockchain solidify their position in the American […]

Since early 2017, there’s been a new trend in the U.S. where a number of Asian funds have been actively involved in early-stage crypto investing. Many folks in traditional tech have not heard of them before, but these funds will only be growing more important as cryptocurrency and blockchain solidify their position in the American tech industry.

Funds with Asian money, primarily from China, have been in Silicon Valley for a long time. However, in the past, they were rarely heard or seen in the press, mostly because their assets under management (AUM) and investment check sizes were smaller in size and fewer in frequency than their American counterparts on average. These funds were often only found investing in later-stage rounds, since they weren’t able to compete against the top venture funds in the early rounds for highly-coveted startups, as many entrepreneurs weren’t familiar with them.

This has changed in the last few years and recent investment stats are very telling of a different trend. In 2017,  Asian investors directed 40% of the record $154bn in global venture financing, versus their American counterparts at 44%, according to an analysis by the Wall Street Journal. Specifically, deals led by U.S.-based venture capital and tech investment firms, such as Sequoia Capital or Andreessen Horowitz, made up of $67 billion in venture financing, just slightly more than the $61 billion led by Asian investors, including Tencent and SoftBank. Asia’s share is up from less than 5% just ten years ago.

Not only is there more money coming from Asia, but U.S. funds are also coming to realize the growing and massively underinvested tech opportunity in China and the rest of Asia. In a joint study issued by China’s Ministry of Science and Technology affiliate and a Beijing-based consultancy, the 2017 China Unicorn Enterprise Development Report showed that in the same year, China had 164 unicorns, worth a combined US$628.4 billion, while the most recent U.S. figures suggested 132 unicorns. Companies such as Meituan Dianping (the Yelp equivalent of China) and Didi (the Uber equivalent of China) are examples of large disruptive technology companies from China that have garnered massive valuations.

Subsequently, more U.S.-based funds are branching out geographically. In the past, some funds may have had an understanding of China’s large market opportunity and had a China-focused partner, team, or partnership relationships in Asia. But now, there is increasingly more focus on Asia from these funds than ever before, not only driven by the potential investment opportunities, but also by the untapped market opportunity for their portfolio companies.

Several funds have been ahead of the game. For example, Y Combinator recently made a big entrance into China with their announcement of a new China office headed by Qi Lu, the former COO of Baidu. Additionally, Connie Chan, who has been responsible for spearheading Andreessen Horowitz’s China network, was promoted to general partner earlier this year, the first to be promoted from within the company.

Cryptocurrency and blockchain accelerate West-East investment ties

Now, cryptocurrency and blockchain have accelerated this cross-border activity. The global, or rather, the censorship-resistance nature of cryptocurrency and blockchain have brought Asia – and specifically China – to the forefront of the focus. In the blockchain space, Chinese companies make up more than 80% share in mining compute power, while Asia in aggregate makes up a significant market share in cryptocurrency trading. The top Cryptocurrency exchanges, including Binance, OKex and Huobi, are also run by Chinese teams.

The cryptocurrency phenomenon began in Asia and the U.S. around the same time, but Asia got a head start due to a favorable set of regulations compared to the U.S. While certainly not laissez faire, blockchain technology has been hailed by regulators throughout countries such as China, Japan and Korea. Since the start of this year, blockchain has been highlighted as one of the most promising technologies by China’s President Xi Jingping, calling it “a breakthrough technology.” Japan has also placed a spotlight on the technology in an effort for the country to re-invigorate itself and its economy. And last but not least, Korean regulators have started debating the idea of using blockchain technology as part of the democratic process, with advocates calling for the introduction of blockchain-powered voting systems.

As a result, Chinese and Korean cryptocurrency and blockchain funds for the first time have an edge, with access to proprietary information and relationships, along with a massive market that cryptocurrency companies in the U.S. can no longer ignore.

Eric Ly, a former CTO and co-founder of LinkedIn, recently started a blockchain based company called Hub. And in our conversation, he has recognized the importance of Asia as a market: “it’s a region that is not to be dismissed, especially in the crypto world in terms of the interest and the activities that’s going on there.” With more funds coming from China and Asia, and many crypto projects coming out of Asia, there will be more cross-border activities on both the investment as well as business development front.

Given the global nature of cryptocurrencies and blockchain, it’s increasingly important for entrepreneurs to raise money from investors who are not just local to where their team is based but also globally useful to one’s success as a cryptocurrency and blockchain company. Not only can overseas investors bring a vastly different point of view to the table, but they can also provide access and market opportunities in the other half of the hemisphere that otherwise would have been difficult.

Strong examples of this fundraising pattern are emerging. Take Messari for instance, a company based out of New York with the mission to create an authoritative data resource for crypto assets. CEO Ryan Selkis has mentioned how he has made a conscious effort to raise from Asian and other global funds when he initially raised the company’s seed round.

Typically, regional investors will have better information and relationship with the local businesses and regulators, and that should prove to be useful as the company scales and grows overseas. Additionally, local investors will likely be more in touch with the policies and the regulators, which is crucial when it comes to treading through the gray areas in cryptocurrency and blockchain space. Having someone who recognizes and can predict regulatory inflection points would be hugely valuable for the company as they map out their global strategy.

Gaming in Asia may be crypto’s killer dApp

As money and talent flows into the crypto and blockchain worlds, a persistent question keeps coming up: what is going to be the “killer app” that drives adoption for these nascent technologies? The answer may well be quite simple: gaming in Asia. That’s the theory for Cryptokitties, the notable purveyor of cute cats. The company has […]

As money and talent flows into the crypto and blockchain worlds, a persistent question keeps coming up: what is going to be the “killer app” that drives adoption for these nascent technologies? The answer may well be quite simple: gaming in Asia.

That’s the theory for Cryptokitties, the notable purveyor of cute cats. The company has started expanding into China, Japan, and Korea as it attempts to capture a large market of gamer and crypto enthusiasts there, and it is building on the playbook pioneered by Uber when it launched in China in 2014.

Back in March, Andreessen and Union Square Ventures led a $12 million Series A round into Cryptokitties. A portion of that money went into Cryptokitties’ ambitions to expand into Asia. In fact, Cryptokitties’ largest user markets have been, and still are, the U.S. and China, followed by Russia.

For those unfamiliar with Cryptokitties, it’s often been alluded to as a digital version of Beanie Babies. Cryptokitties are virtual collectibles in the form of cute cats that can be bought, sold, collected and traded with cryptocurrency, with all the transactions listed on the blockchain. Owners who purchase these kitties can then breed them with other kitties to produce new baby kitties.

The company is part of Axiom Zen, the Vancouver and San Francisco-based design studio that originally built the game. Since its launch in 2017, Cryptokitties has also built a third-party app platform for crypto developers called the Kittyverse, open-sourced their digital asset licensing platform, and started a crypto gaming investment fund. The company currently has about 70 employees and is headquartered in Vancouver.

One of the main purposes why Cryptokitties raised venture capital was for geographical expansion. Having ample capital to not worry about cash flow as the company steps on the gas is certainly quite helpful. But as a business, Cryptokitties was already doing fine. Back in June when I was having a discussion with the company, Cryptokitties was already profitable starting in week three.

The company has successfully differentiated itself from many other crypto decentralized apps (dApps for short) companies out there by proving that they could make money first and have a sustainable user base. Jimmy Song from Blockchain Capital once said, you can make money three ways in crypto, and those are “selling mining machines, starting up Crypto exchanges, and organizing Crypto conferences.” Nonetheless, Cryptokitties was an outlier. With its newly raised money, the team was looking to deploy the capital for hiring, building out it’s Kittyverse, and expanding in Asia.

Asia and China has a Large and Untapped Crypto Gaming Market

Benny Giang, one of the co-founders of Cryptokitties, has been tasked with Cryptokitties Asia expansion since late 2017. Since then, the team has launched Cryptokitties in China, Hong Kong, and Taiwan. During the launch, in order to avoid another one of Ethereum’s network clogs like what happened in late 2017, the iOS app launch was initially limited to 5,000 new players, based on selected WeChat accounts.

Benny believes blockchain games in Asia are a huge untapped market but with increasing competition. Whereas the intersection of gaming and blockchain users is still pretty limited in the Americas, in Asia, that audience is significantly larger. This is primarily due to three reasons: 1) the awareness of cryptocurrency and blockchain is more prevalent in Asia, 2) the regulatory markets are more developed and sophisticated (for better or worse) in China, Korea, and Japan, and 3) there is a proportionally higher number of gamers in Asia than the U.S.

China is the biggest market in this intersection, but there have been challenges. As Cryptokitties launched and grew in the last year, the company saw competition and copycats (pun intended) from China moving quickly into the market. In the beginning of 2018, just as Cryptokitties was launching in China, Xiaomi, the mobile phone maker that recently IPO-ed on the Hong Kong Stock Exchange, launched their own crypto collectible called Cryptobunny. Baidu, the large search engine of China, also recently launched Cryptopuppy.

Go to Market Learnings from Uber in China – Identifying the Right Local Partners and Hires

As Benny and team began doing research on the Asia market, they realized that working in a market that’s twelve hours away is not easy. Taking some of its lessons from Uber’s experience in China, they decided that they needed to localize their go-to-market approach.

One of the reasons Uber ended up exiting the Chinese market was that it did not successfully build a product catered to Chinese citizens. Despite the large sum of money it was pouring into the Chinese market, Uber was still losing market share to Didi. Another suggested reason for the failure was that Uber should have gone to market with a local partner like Didi instead of going head to head with them. The Cryptokitties team knew that they wanted to expand correctly, and subsequently identified a local partner in China to target the market there.

In January 2018, Axiom Zen partnered with Animoca Brands to publish the Cryptokitties game on mobile in China, Hong Kong, and Taiwan. Animoca is a Hong Kong-based, privately-held developer and publisher of games, with a number of games using popular IP such as Garfield, Ultraman, and Doraemon. By working with Animoca, Cryptokitties was able to build out a localized website for its Chinese-speaking audience, provide native-speaker support services, and host numerous giveaway events.

In my discussion with him, Benny provided some insightful advice on go to market strategy in Asia. First, he mentioned that for a blockchain gaming company like themselves, it is best to find two local partners – one in blockchain and one in gaming – to help navigate the landscape. This kind of well-thought-out, go-to-market strategy requires hard work and local community understanding that very few cryptocurrency teams have achieved.

Currently, most Western crypto companies do not apply a traditional tech-oriented go-to-market strategy when trying to expand into other regions. Instead, most of them choose to leverage their “global communities.” They would incentivize these regional token holders to do local marketing and encourage them to find more token supporters and buyers in their region. Nonetheless, that type of marketing approach effectively identifies people who want to make a quick buck, rather than users who can sustain a platform.

Secondly, tasteful and culturally-appealing design is also very important when it comes to dApps. Cryptokitties originally differentiated themselves from other dApps by creating beautiful cats on the blockchain that immediately caught people’s attention. They have also decided to apply a similar local strategy in China.

Momo Wang is the creator of the highly popular Tuzki character, a black and white line drawing of a bunny that’s used widely across various instant messaging platforms, particularly WeChat .

The popular character Tuzki (Photo courtesy WeChat)

Cryptokitties hired Momo as a brand ambassador and contributor to the Artist Series to design kitties for them. By doing so, they are able to appeal to an audience who may have a different local taste.

Benny adds that it is essential for dApp companies to create beautiful websites and great user experiences that appeal to local communities. However, there are also cons when building beautiful websites for a blockchain company that is decentralized by nature. Smooth user interfaces in the form of a traditional website or an app fall under the jurisdiction of a traditional tech business. Internet companies in China, for example, require approval and licensing from the government to be able to operate and serve its citizens.

China has become the wild west of crypto and blockchain, and there will continue to be unforeseen obstacles. It certainly isn’t easy for Cryptokitties to be the first western dApp company to venture into China, but in the next five years, we’ll see a significant number of Western companies heading east – and these early learnings will be invaluable.

Y Combinator is launching a startup program in China

U.S. accelerator Y Combinator is expanding to China after it announced the hiring of former Microsoft and Baidu executive Qi Lu who will develop a standalone startup program that runs on Chinese soil. Shanghai-born Lu spent 11 years with Yahoo and eight years with Microsoft before a short spell with Baidu, where he was COO and […]

U.S. accelerator Y Combinator is expanding to China after it announced the hiring of former Microsoft and Baidu executive Qi Lu who will develop a standalone startup program that runs on Chinese soil.

Shanghai-born Lu spent 11 years with Yahoo and eight years with Microsoft before a short spell with Baidu, where he was COO and head of the firm’s AI research division. Now he becomes founding CEO of YC China while he’s also stepping into the role of Head of YC Research. YC will also expand its research team with an office in Seattle, where Lu has plenty of links.

There’s no immediate timeframe for when YC will launch its China program, which represents its first global expansion, but YC President Sam Altman told TechCrunch in an interview that the program will be based in Beijing once it is up and running. Altman said Lu will use his network and YC’s growing presence in China — it ran its first ‘Startup School’ event in Beijing earlier this year — to recruit prospects who will be put into the upcoming winter program in the U.S..

Following that, YC will work to launch the China-based program as soon as possible. It appears that the details are still being sketched out, although Altman did confirm it will run independently but may lean on local partners for help. The YC President he envisages batch programming in the U.S. and China overlapping to a point with visitors, shared mentors and potentially other interaction between the two.

China’s startup scene has grown massively in recent years, numerous reports peg it close to that of the U.S., so it makes sense that YC, as an ‘ecosystem builder,’ wants to in. But Altman believes that the benefits extend beyond YC and will strengthen its network of founders, which spans more than 1,700 startups.

“The number one asset YC has is a very special founder community,” he told TechCrunch. “The opportunity to include a lot more Chinese founders seems super valuable to everyone. Over the next decade, a significant portion of the tech companies started will be from the U.S. or China [so operating a] network across both is a huge deal.”

Altman said he’s also banking on Lu being the man to make YC China happen. He revealed that he’s spent a decade trying to hire Lu, who he described as “one of the most impressive technologists I know.”

Y Combinator President Sam Altman has often spoken of his desire to get into the Chinese market

Entering China as a foreign entity is never easy, and in the venture world it is particularly tricky because China already has an advanced ecosystem of firms with their own networks for founders, particularly in the early-stage space. But Altman is confident that YC’s global reach and roster of founders and mentors appeals to startups in China.

YC has been working to add Chinese startups to its U.S.-based programs for some time. Altman has long been keen on an expansion to China, as he discussed at our Disrupt event last year, and partner Eric Migicovsky — who co-founder Pebble — has been busy developing networks and arranging events like the Beijing one to raise its profile.

That’s seen some progress with more teams from China — and other parts of the world — taking part in YC batches, which have never been more diverse. But YC is still missing out on global talent.

According to its own data, fewer than 10 Chinese companies have passed through its corridors but that list looks like it is missing some names so the number may be higher. Clearly, though, admission are skewed towards the U.S. — the question is whether Qi Lu and creation of YC China can significantly alter that.