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What India’s TikTok ban means for China

By Manish Singh

For more than a decade, China has limited how foreign tech firms that operate inside its borders do business. The world’s largest internet market has used its Great Firewall to block Facebook, Twitter, Google and other services in the name of preserving its cyber sovereignty.

The walled-garden approach has helped homegrown giants like Tencent and Alibaba Group win the local market, while giving the Chinese government a better hold on what gets communicated on these platforms. China has even suggested that other nations deploy similar measures.

Be careful what you ask for: Last week, dozens of Chinese firms got a front-seat view to the challenges their global counterparts face in their territory. With a press release, India declared that the world’s second-largest internet market was shutting the door to dozens of Chinese firms for an indefinite period.

India said it would ban 59 apps and services, including ByteDance’s TikTok, Alibaba Group’s UC Browser and UC News, and Tencent’s WeChat over cybersecurity concerns.

New Delhi is open to meeting these firms and hear their defenses, but for now, local telecom operators and other internet service providers have been ordered to block access to these services. Google and Apple have already complied with India’s order and delisted the apps from their app stores.

India’s order is already shifting the market in favor of local firms, several of which have rushed to cash in on the app ban. A crop of recently launched short-form video sharing services have amassed tens of millions of users just this week.

But depending on how long the ban remains in place, the move could also derail a big funding source for thousands of Indian startups. The vast majority of India’s unicorns count Chinese VCs as some of their biggest and longest-term backers. New Delhi’s order could also change how American giants, many of which are already bullish on India, review the market moving forward.

Today, we will explore various ways India and China’s situation could play out and impact various stakeholders. But first, some background on how tension escalated between the two nuclear-armed nations.

The tech industry comes to grips with Hong Kong’s national security law

By Rita Liao

Scott Salandy-Defour used to make frequent stops at a battery manufacturer in southern China for his energy startup based in Hong Kong. The appeal of Hong Kong, he said, is its adjacency to the plentiful electronics suppliers in the Pearl River Delta, as well as the city’s amenities for foreign entrepreneurs, be it its well-established financial and legal system or a culture blending the East and West.

“It’s got the best of both worlds,” Salandy-Defour told TechCrunch. “But it’s not going to be the same.”

On July 1, Hong Kong’s sweeping new national security law came into effect, spelling the most profound change to the city’s way of life since the former British colony returned to Chinese rule in 1997.

The legislation will see Beijing set up an official security apparatus in the city to suppress what the authority defines as subversion, terrorism, separatism and collusion with foreign forces. Non-permanent residents can be expelled and companies can face fines if suspected of contravening the law.

Though the law doesn’t target the technology sector per se, speculation is rife about how it may affect entrepreneurs and larger companies as they go about their day-to-day operations and long-term plans. We talked to a handful of individuals in an attempt to parse out the ramifications of the law on internet freedom, data control, entrepreneurship, venture capital and other aspects pertaining to the tech industry. Several of our sources requested to have their names withheld in order to speak freely, an example of the law’s effect in action.

Part of the concern arises from the vagueness of the legislation. “We do not know anything concrete,” a Shanghai-based lawyer specializing in cross-border corporate cases told TechCrunch. “The national security law passed in Macau 11 years ago, but I heard there have been no enforcement cases. Hong Kong might be different. Police already prepared and carried banners warning against speech or gathering in violation of the new law.”

The bottom line is that the law impacts everyone in Hong Kong. “[It] will have a chilling effect as people try to understand its implementation,” reckoned Jeremy Daum, a senior research fellow at the Yale Law School Paul Tsai China Center.

Internet freedom

An outstanding concern is that the new rules could curtail internet freedom in the freewheeling city. Specifically, Article 9 stipulates that the Hong Kong government “shall employ necessary measures to strengthen publicity, guidance, oversight and management in schools, social organizations, media, networks and other matters related to national security,” with ‘networks’ here referring to the internet.

There are already signs of self-censorship. Some residents have started to delete their Twitter accounts and messages “out of fear of the national security law,” a Hong Kong-based media professor pointed out to TechCrunch.

While the law doesn’t give rise to “a Great Firewall situation overnight, it will be insidious nonetheless,” said a Hong Kong-based digital rights expert. “Platforms, publishers, and content hosts are likely to self-censor broadly given the vagueness of the law, and even then we’ll likely see more takedown requests and the like from the government.”

Shortly after the law took effect, an app called Eat With You, which labels local eateries supportive of the Hong Kong protesters, terminated its service. A source close to the app told us that the takedown was voluntary. Though the developer didn’t say whether it made the decision to preempt internet crackdown, it has “put other plans on hold.”

AppleCensorship.com told TechCrunch it’s monitoring potential removal of apps by Apple in Hong Kong, where the giant commands a 44% market share in the mobile handset market. The site is a project created by researchers at GreatFire.org, an organization that monitors internet censorship in China, to track what apps are unavailable in various App Stores.

“Apple has shown over and over again that they are willing to censor apps on their platform at the behest of government authorities,” said GreatFire.org’s Charlie Smith of Apple’s recent removal of TikTok in India.

A week after the law’s enactment, tech giants have come to reckon with the city’s new circumstances. Facebook and Twitter said they have suspended data requests from the Hong Kong authority. TikTok, on the other hand, announced it would exit Hong Kong. Reddit, which received an outsize investment from Tencent, provided a more evasive response: “All legal requests from Hong Kong are bound by careful review for validity and with a special attention to human rights implications.”

Residents in the city of seven million people have been bracing for censorship in recent weeks. Demand for virtual private networks (VPNs), which let users access otherwise banned apps, surged in Hong Kong after Beijing passed the national security law in late May.

“But a VPN is not a magic bullet,” the media professor argued. The tool has proven to be a short-lived solution. Back in 2017, Apple removed hundreds of VPNs from its Chinese App Store, stating it did so to comply with Chinese regulations.

Others who are more attuned to the Chinese internet are less wary. Hugo Cheuk, co-founder and chief operating officer of viAct.ai, a Hong Kong-based startup using computer vision to manage construction safety, said he already uses a wide range of apps, both Chinese and overseas ones, and can easily switch to alternatives.

“Let’s say if for whatever reasons WhatsApp cannot be used in Hong Kong one day, you still have other options like Messenger, Line, Dingtalk, WeChat,” he said. “Even apps like Slack or Snapchat weren’t popular just a few years ago, but we still communicate well back then.”

Data control

Some worry that the enforcement of the security law could lead to requests of user data by Beijing, making Hong Kong a less attractive place for tech companies resistant to China’s data review policies. As Daum noted, several provisions directly allow for the search of electronic devices and request service providers to delete information.

According to Article 43:

“When handling cases of crimes endangering national security, the Hong Kong Special Administrative Region government police department for the preservation of national security may employ the various measures that the extant laws of the Hong Kong Special Administrative Region allow the police and other law enforcement departments to take when investigating serious crimes, and may employ the following measures:

(1) search premises, vehicles, boats, aircraft and other relevant places and electronic devices that may contain evidence of an offence.

(4) Requiring persons who published information or the related service providers to remove information or provide assistance.”

“When setting up their APAC headquarters, foreign headquarters may no longer choose Hong Kong because the law overrides the original legal system,” partner of a Hong Kong venture capital firm told TechCrunch.

While Hong Kong is primarily known as a free trade and financial center, many international tech firms have set up offices there as a conduit into the APAC market.

Facebook and Twitter, whose main services are unavailable to mainland users, employ marketing staff in Hong Kong to court Chinese exporters with overseas advertising needs. Unicorns like delivery service Lalamove, logistics firm Gogovan and travel platform Klook, put their headquarters in Hong Kong for its strategic geographical location to attract customers across Asia.

“As a historic trading center, with ease of currency exchange, data and logistic flows, Hong Kong has played a key role in cross-border e-commerce. Many start-up tech companies service clients across Southeast Asia from a base in Hong Kong,” said Napoleon Biggs, a digital marketing consultant with over two decade’s experience in the region.

Though the new regulation may hit these sectors in terms of requests for government access to data, it will not affect their businesses otherwise, he reasoned.

Being in a key geographic location, as an internet hub for submarine cables and satellite dishes, Hong Kong also acts a top data center destination for multinationals, Biggs observed. The question now, he said, is how multinationals will perceive this new law and how it will affect their daily operations, if at all.

Startup hopes

Many entrepreneurs see Hong Kong as a springboard to its nearby resources rather than their main market. “Hong Kong investors are super risk-averse. The risk of being an entrepreneur doesn’t have the same level of respect here as in the U.S.,” reckoned Salandy-Defour, whose company Liquidstar deploys smart batteries primarily in Africa.

“But there are opportunities to network quickly,” he added. “We are also so close to Shenzhen and can speak to people [in tech] there who know what they are doing.”

Some Hong Kong entrepreneurs are hopeful that the law could accelerate the Greater Bay Area (GBA) initiative, which aims to stitch together Hong Kong, Macau and other cities around the Pearl River Delta, including economic powerhouses like Shenzhen and Guangzhou.

With its own set of laws and economic system in line with Western practices, Hong Kong has long been a top destination for multinational financial services. The special status was, however, not beneficial for technology companies targeting the Chinese market.

“If we want to do business in China, the first concern is the adaptation of different laws of China. Now, with the newly established national security law plus the GBA initiatives, more resources will be allocated to the 9+2 cities in the market and business perspectives, so we can more easily access the China market,” suggested Cheuk.

The integration can extend the potential reach of Hong Kong companies from seven million customers to 70 million in the GBA region, the entrepreneur said. “It’s good for startups trying to attract investment.”

His optimism is echoed by a Hong Kong-based investor for a Chinese venture capital firm. “After the law came into effect, there may be fewer technological exchanges between Hong Kong and the U.S. or Europe, but the GBA is more important to Hong Kong’s future development.”

For Hong Kong-based entrepreneurs who uphold freedom of information, the law may not bode well. Salandy-Defour, an American citizen, said he’s mulling a move to Singapore or Australia. In the long term, he plans to diversify his supply chain in other countries like Japan or Germany for sustainable batteries.

Relocation is less realistic for entrepreneurs who generate most of their revenues from the mainland. Several of them voiced concerns about the law’s adverse effect on freedom of speech, but have declined our interview requests due to concerns that their comment may violate the new law.

Decoupling spillover

The divide between Washington and Beijing is spilling into Hong Kong as the security law is seen as undermining the territory’s autonomy. In response, the U.S. declared Hong Kong is no longer autonomous from China and suspended the export of sensitive technologies to the city.

The impact of the split was evident. Shortly after China passed the national security for Hong Kong in late May, Hong Kong-based staff of China Mobile lost access to a piece of IBM data software, an employee at the Chinese telecom giant told TechCrunch. The staff has since switched to a Huawei substitute called TaiShan, which the source said comes with a user interface “very similar” to the IBM product.

China Mobile and IBM have not responded to our request for comment.

When it comes to picking promising local startups, the Hong Kong venture partner said he will avoid industries deemed ‘sensitive’ or susceptible to sanctions by the U.S. He’s also advised portfolio companies with an international plan to diversify their supply chain from China to nearby regions like Southeast Asia. Limited partners from the U.S. may start to shy away from Hong Kong VC funds, he speculated, as the city gets caught in the crossfire of trade tensions.

It’s notable that one of the most prominent VCs in Hong Kong, Horizons Ventures, which backs a lot of startups globally and is led by one of Asia’s richest men Li Ka-shing, has long kept a low profile. It continues to do now, perhaps very wisely. Some of the big names in its expansive portfolio include Spotify, Slack, Zoom, Impossible Foods and Skype. The firm did not respond to requests for comment for this article.

An unintended implication of Hong Kong’s loss of its special status is the potential inconvenience to mainland companies. It’s a common practice for Chinese companies to maintain a Hong Kong entity as a gateway to purchase U.S. technologies, tapping the region’s favorable trading terms, the venture partner said. Many Chinese exporters also take advantage of Hong Kong’s well-developed financial system and currency stability to handle international fund transfers.

“If that expediency is gone, Hong Kong is just another Chinese city,” said the investor.

Facebook expands Instagram Reels to India amid TikTok ban

By Manish Singh

As scores of startups look to cash in on the video content void that ban on TikTok and other Chinese apps has created in India, a big challenger is ready to try its hand.

Instagram said on Wednesday it is rolling out Reels — a feature that allows users to create short-form videos (up to 15 seconds long) set to music or other audio — to a “broad” user base in India. The Facebook -owned service first began testing Reels, which has been widely referred as “TikTok clone”, in select markets late last year.

Video is already a popular way how many Indians engage on Instagram. “Videos make up over a third of all posts in India,” said Ajit Mohan, the head of Facebook India, in a call with reporters Wednesday. And in general, about 45% of all videos posted on Instagram are of 15 seconds or shorter, said Vishal Shah, VP of Product at Facebook.

So a broad test of Reels, which is also currently being tested in Brazil, France, and Germany, in India was only natural, Mohan said, dismissing the characterisation that the new feature’s availability now had anything to do with a recent New Delhi order.

India banned 59 apps and services developed by Chinese firms citing privacy and security concerns last week. Among the apps that have been blocked in the country includes TikTok, ByteDance’s jewel service that has offered a similar functionality as Reels for years.

TikTok identified India as its biggest market outside of China. Late last year, TikTok said it had amassed over 200 million users in the country, and the firm was looking to expand that figure to at least 300 million this year.

In the event of TikTok’s absence, a number of startups including Twitter-backed Sharechat, Chingari, InMobi Group’s Roposo, and Mitron have ramped up their efforts and have claimed to court tens of millions of users. Sharechat said last week that it had doubled its daily active users in a matter of days to more than 25 million.

Gaana, a music streaming service owned by Indian conglomerate Times Internet, rolled out HotShots on Tuesday that curates user generated videos. Gaana had more than 150 million monthly active users as of earlier this year.

But Instagram, which has already attracted tens of thousands of influencers in India, is perhaps best positioned to replace TikTok’s relevance in the world’s second largest internet market.

Instagram had about 165 million monthly active users last month, up from 110 million in June last year, according to mobile insights firm App Annie, data of which an industry executive shared with TechCrunch. Mohan declined to comment on Instagram’s user base in India.

Mohan said he was hopeful that Instagram Reels would enable several content creators in India to gain followers worldwide. The platform has already courted several popular names including Ammy Virk, Gippy Grewal, Komal Pandey, Jahnavi Dasetty aka Mahathalli, Indrani Biswas aka Wondermunna, Radhika Bangia, RJ Abhinav and Ankush Bhaguna.

Reels videos will appear on Instagram’s Explore tab, enabling users to reach a broader audience than their own following base. Users can also share Reels as “Stories”, though, in that case the video will not appear in Explore tab and will disappear after 24 hours.

In recent years, platforms such as TikTok, YouTube, and Instagram have attracted more than a million content creators in India, several of whom have made it their livelihood. Just as equally impressive is who these creators are: Beauticians, dieticians, high school students from small towns in India, elderly who speak languages that very few people understand.

People who have been massively underrepresented in mainstream Bollywood movies and speeches of politicians have found a platform and gained a following that challenges the mainstream media’s reach. Many of these creators make thousands of dollars through advertisers and deals with brands.

Not everyone will, however, be able to find a replacement of TikTok, which had courted 1.2 million content creators on its platform in India.

Sajith Pai, Director at venture firm Blume, told TechCrunch in an interview that YouTube and Instagram would be able to court the top influencers from TikTok and other platforms. “But beyond a point, they won’t be bandying out much incentive to other creators,” he said.

In the run up to the launch of Reels, Facebook also secured deals with several Indian music labels including Saregama and T Series in India. Also ahead of Reels’ availability in India, Facebook announced it was shutting down Lasso, its yet another attempt at taking on short-form videos space. (That app was available in only select markets and failed to gain a foothold.)

For Facebook, which counts India as its biggest market by user count, there’s no shortage of apps it has in its arsenal to attract Indians. And it’s not afraid of doing a wide-range of experimentations.

Instagram Lite, another Facebook app that is aimed at developing markets, was pulled from Google Play Store in May. When asked about it, Shah said the company had identified some issues in it and was working to resolve those. Instagram Lite, however, never gained much traction in India. It was not among the top 1,000 Android apps in India in January or April this year, according to App Annie. More than half a dozen third-party apps with “Instagram” name in their title, however, made the list during this period.

Wednesday’s announcement comes days after Facebook partnered with Indian education board CBSE to coach thousands of educators and students about a range of things including “Instagram’s Guide for Building Healthy Digital Habits” which is aimed at helping youngsters better understand the “socio-emotional space” they operate in and engage in health conversations.

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Facebook-backed Unacademy acquires PrepLadder for $50 million

By Manish Singh

Indian online learning platform Unacademy said on Tuesday it has acquired Chandigarh-based startup PrepLadder for $50 million as the major edtech giant scouts for deals to expand its presence in the country.

PrepLadder offers courses aimed at nursing students. The two-year-old startup, which never raised any capital from external investors, has more than 80,000 subscribers, said Deepanshu Goyal, its founder on Tuesday.

The acquisition of PrepLadder comes as both Unacademy and Byju’s — the two edtech leaders in India — have engaged with several startups in recent months to further their dominance in the nation. In a call with reporters today, Gaurav Munjal, co-founder and chief executive of Unacademy, said he was open to talking with more startups to see opportunities to work together.

Facebook-backed Unacademy, which began as a YouTube channel in 2015, has amassed over 30 million learners on the platform, more than 200,000 of which are paid subscribers. More than 700,000 users access its app and website each day.

More to follow…

TikTok faces ban in the US; pulls out of Hong Kong

By Rita Liao

The world’s most popular short video app continues to be in the crosshairs of politicians globally.

On Monday night, Secretary of State Mike Pompeo told Fox News that the United States is “certainly looking at” banning TikTok over concerns that it could be used by the Beijing government as a surveillance and propaganda tool.

The potential ban would deal another blow to TikTok after it recently went down in its biggest market, India.

On the heel of Pompeo’s statement, TikTok announced that it would pull out of Hong Kong, which is facing an unprecedented wave of control from the Beijing government after the promulgation of the national security law.

“In light of recent events, we’ve decided to stop operations of the TikTok app in Hong Kong,” said a TikTok spokesperson. The company declined further comment on the decision.

The vagueness of the statement leaves many questions unanswered. One has to wonder whether ByteDance will relaunch a censored version of the app in Hong Kong, presumably replacing it with its sister app Douyin that’s operated by ByteDance’s Chinese team.

ByteDance, founded by Chinese serial entrepreneur Zhang Yiming, has been working to disassociate TikTok from its Chinese ownership and Beijing censorship. Efforts have ranged from keeping an overseas data center for TikTok that’s supposedly out of reach by the Chinese authority, giving outside experts a glimpse into its moderation process, through to hiring Disney’s Kevin Mayer as the app’s new global face.

But its response to Hong Kong’s circumstances, presumably made by Mayer who is now the app’s chief executive, is a stark contrast to the decisions by Western tech giants. Facebook, Google, Twitter, and Telegram uniformly said this week they would either stop or suspend data review requests from the Hong Kong government.

Many see their move as an outright rejection of Chinese censorship and surveillance, while others think they are simply buying time to ponder their next step in Hong Kong: exit voluntarily, wait and get banned, or comply with Beijing rules — which seems the least likely.

TikTok said it had 150,000 users in Hong Kong as of last September, a nearly neglectable share given the app had 2 billion downloads globally by April. TechCrunch understands that the app operates a very small team in Hong Kong, so the impact of this regional exit on staff looks to be limited across the company.

Sequoia announces $1.35 billion venture and growth funds for India and Southeast Asia

By Manish Singh

Sequoia Capital India on Monday announced it has secured $1.35 billion from LPs for two new funds as the storied venture firm looks to ramp up its investments in the world’s second-largest internet market and Southeast Asia.

The two new funds — a $525 million venture fund and a $825 million growth fund — will help the VC firm, which operates in India and Southeast Asia through one arm, more comprehensively serve the startup ecosystem in the region, said Shailendra Singh, a managing director at Sequoia Capital India.

“A fundraise represents a massive responsibility to deliver attractive returns to Sequoia’s Limited Partners, the majority of which are nonprofits, foundations and charities. We do this by partnering with outstanding founders who are building category defining companies,” he said.

Sequoia Capital India, which roped in former Google India head Rajan Anandan and former Uber India head Amit Jain last year, made more than 50 investments in 2019, more than any other firm in the country.

Top VC firms in India last year based on the number of investments they made. Image Credits: InnoVen

The firm, which began investing in India 14 years ago, closed its last fund, of $695 million, for India and Southeast Asia in 2018. That was its sixth fund for the region.

The VC firm’s India and SEA arm has made several high-profile investments over the years, including in edtech giant Byju’s, which is now valued at $10.5 billion, ride-hailing giant GoJek, e-commerce platform Tokopedia, Singapore e-commerce startup Zilingo, and fintech startup PineLabs, online learning startup Unacademy, fintech firm RazorPay and Khatabook, which offers bookkeeping services to merchants. Last year, Sequoia Capital India sold most of its stake in budget hotel startup Oyo. It has backed 11 unicorns in India and Southeast Asia to date.

The new funds from Sequoia come at a time when several investors have lost appetite as the coronavirus pandemic disrupts businesses. The per capita income of Indians, which remains some of the lowest across the globe, has also not improved over the years.

“Due to frequent cycles of intense competition, startups in our region have struggled to grow rapidly with good unit economics, often posting very high losses for the scale of business. This has prevented very large profitable technology businesses in our region from emerging. To add to these challenges, startups in India do not have the benefit of a regulatory framework that allows listing on foreign exchanges like Nasdaq. In this market context, most startups have chosen to remain private, and raising capital has become a proxy for success,” said Sequoia’s Singh.

“We believe there is an opportunity to choose a different path. Our ecosystem has arrived at a fork in the road.”

Image Credits: Sequoia India

Last year Sequoia Capital India launched an accelerator program, called Surge, for early-stage startups. Since then about 50 startups have participated in Surge, which some analysts told TechCrunch has reduced Y Combinator’s appeal in the region.

Several venture firms have ramped up their efforts in India, where startups raised a record $14.5 billion last year. Much of the infrastructure is still being built in India, giving giants an opportunity to make early bets on what could become major firms in the future.

Tiger Global, which made an early investment in Flipkart, has written several checks in the past one year to Indian startups building business-to-business. So have General Atlantic, which recently made a sizeable bet on the nation’s top telecom operator Reliance Jio Platforms; Prosus Ventures, an early investor in top food delivery startup Swiggy; and Accel, which closed its sixth venture fund — of size $550 million — for India late last year.

That is great news for Indian startups that are currently facing challenges in raising capital from Chinese investors. Zomato, which counts Sequoia as an early investor, announced in January that it had raised $150 million in a new financing round from Ant Financial. The food delivery startup has yet to receive $100 million of that capital, Info Edge, another investor in Zomato, said in an earnings call two weeks ago.

US tech giants halt Hong Kong police help

By Zack Whittaker

Facebook and Twitter have confirmed they have suspended processing demands for user data from Hong Kong authorities following the introduction of a new Beijing-imposed national security law.

A spokesperson for Facebook told TechCrunch it will “pause” the processing of data demands until it can better understand the new national security law, “including formal human rights due diligence and consultations with human rights experts.” The spokesperson added: “We believe freedom of expression is a fundamental human right and support the right of people to express themselves without fear for their safety or other repercussions.”

Facebook said its suspension will also apply to WhatsApp, which it owns.

News of the suspension was first reported by The Wall Street Journal.

Soon after, Twitter also confirmed it followed suit. “Given the rapid pace at which the new National Security Law in China has been passed and that it was only published in its entirety for the first time last week, our teams are reviewing the law to assess its implications, particularly as some of the terms of the law are vague and without clear definition,” said a Twitter spokesperson.

“Like many public interest organizations, civil society leaders and entities, and industry peers, we have grave concerns regarding both the developing process and the full intention of this law,” the spokesperson said.

Twitter said it suspended transfers of user data subject to Hong Kong demands immediately after the law went into effect.

Messaging app Telegram also reportedly said Monday that it will no longer process data requests from Hong Kong authorities.

Tech giants have long seen Hong Kong as a friendly outpost in Asia as a semi-independent city nation state, albeit under the control of Beijing under its “one country, two systems” principles. Hong Kong has far greater freedoms from mainland China, where government surveillance and censorship are widespread.

But the new national security law, imposed unilaterally by the Chinese government on June 30, effectively undermines any protections Hong Kong nationals had. The law removes provisions for authorities to require a court order before it can demand data from internet companies, like Facebook and Twitter.

One industry leader, who chairs the Hong Kong Internet Service Providers Association, said internet providers would have little choice but to comply with the new law.

The move is likely to put Silicon Valley tech giants — and other companies that follow in their footsteps — on notice with Beijing, which already has sweeping bans against some Western tech giants, including both Facebook and Twitter, on the mainland. WhatsApp is highly popular in Hong Kong, alongside Telegram and WeChat.

Updated with comment from Twitter.

Payfazz gets $53 million to give more Indonesians access to financial services

By Catherine Shu

Indonesia is not only Southeast Asia’s most populated country, but also one of the world’s fastest-growing economies. But many people, especially outside of major cities, still lack access to basic financial services like bank accounts. Payfazz is one of several tech startups focused on solving that problem by finding innovative ways to give more Indonesians access to financial services. The company announced today that it has raised a $53 million Series B led by B Capital and Insignia Ventures Partners.

Previous investors, including Tiger Global, Y Combinator and ACE & Company, also returned for the round. New backers include strategic investor BRI Ventures, the venture arm of BRI, one of Indonesia’s largest banks. Payfazz’s last round of funding was a $21 million Series A announced in September 2018, led by Tiger Global. Its total raised to date is now more than $74 million.

Founded in 2016 by Hendra Kwik, Jefriyanto Winata and Ricky Winata, Payfazz is an alum of Y Combinator’s accelerator program.

There is a growing list of Indonesian financial tech startups, including Modalku, KoinWorks and Kredivo, that focus on consumer and small business financing, while larger and more diversified tech companies like Gojek and Grab are working their own online payment tools and other services. Payfazz differentiates with a portfolio of mobile services that make it easier for Indonesians to handle routine financial tasks, including bill payments and loans, even if they live in rural areas without banks. The company says it currently serves 10 million monthly active users, and plans to expand its offerings to include more digital financial products.

The company uses a network of financial agents to reach customers because many banks don’t open branches in rural areas, Kwik told TechCrunch. “Due to high fixed costs, traditional banks find it economical to operate only in cities and urban areas with high density and foot traffic,” he said. “This leaves a huge unfulfilled and underserved banking need in rural areas where banking access is very difficult.”

Payfazz’s network currently includes about 250,000 agents, most of whom are located in small stores. Users deposit cash with the agents, who serve as go-betweens with banks. This allows Payfazz’s users to have a balance they can use to pay phone, electricity and other bills. Payfazz also recently launched loans and payments for offline retailers.

Kwik said Payfazz built an agent network because even though smartphone penetration is high in Indonesia, many people haven’t used direct digital banking services before, so talking to a Payfazz agent helps familiarize them with the process. Because most of its agents are based out of warung or kirana stores, or neighborhood shops that sell food and other necessities, they are easier for people in rural areas and small towns to access than banks, ATM machines or convenience store chains.

“Our agents are small businesses and people who have lots of traffic from rural areas’ populations in their places. It can be warung and kirana stores, telco stores, small restaurants or even someone’s house,” Kwik said. “They are the perfect profile to become our agents because they’re ubiquitously distributed and have high coverage in rural areas.”

He added that Payfazz also gives agents an opportunity to earn extra income. Payfazz takes a 0.5% to 1% commission on every transaction, and agents are allowed to set the margins they charge customers for transactions, usually between 5% to 9%. Before signing on an agent, Payfazz screens them using KYC (“know your customer”) and verification technology to gauge trustworthiness, traffic and sales potential.

While Grab Financial and other Southeast Asian fintech companies may eventually become Payfazz’s competitors, Kwik said he currently sees them as potential partners.

“The reason is simply because most of these providers still focus their market and resources in the cities and urban areas, like many of the traditional banks. Meanwhile, Payfazz focuses all its market and resources in rural areas,” he added. “Payfazz can help other banks and financial service providers to expand their reach to rural areas and capture hundreds of millions of users and billions of dollars of revenue opportunity there.”

In a statement about the funding, Insignia Ventures founding managing partner Yinglan Tan said, “We have been privileged to have supported Payfazz since their early days. We believe that this path to taking their fintech ecosystem from Indonesia to the rest of the region will meet the pressing needs of many more of Southeast Asia’s digital consumers, and are excited to see how Hendra and the Payfazz team will build on top of the portfolio of services that millions of Indonesians are already using.”

Paytm, Vijay Shekhar Sharma to acquire insurance firm Raheja QBE for $76M

By Manish Singh

Paytm, India’s most valuable startup, and its co-founder and chief executive, Vijay Shekhar Sharma, announced on Monday they have reached an agreement to acquire general insurer Raheja QBE for a sum of $76 million as the financial services startup looks to tap the nation’s booming insurance market.

Sharma is acquiring Raheja QBE through QorQl Pvt. Ltd, a firm in which he owns majority stake with Paytm owning the remainder. Raheja QBE, which offers insurance services to cover an individual’s health, home, vehicles, and also provides protection on commercial properties, and workplace injuries, is owned by Prism Johnson (51%) and QBE Australia (49%.) QorQl is acquiring 100% of Raheja QBE as part of the agreement, the two entities said.

Paytm, whose services are used by tens of millions of Indians each month, said the acquisition will help it “democratize general insurance services” in the country.

Raheja QBE’s “strong management team will help us accelerate our journey of taking insurance to the large population of India with the aim to create a tech-driven, multi-channel general insurance company with innovative and affordable insurance products,” said Amit Nayyar, President of Paytm, in a statement.

In India only a fraction of the nation’s 1.3 billion people currently have access to insurance and some analysts say that digital firms could prove crucial in bringing these services to the masses. According to rating agency ICRA, insurance products had reached less than 3% of the population as of 2017.

An average Indian makes about $2,100 in a year, according to World Bank. ICRA estimated that of those Indians who had purchased an insurance product, they were spending less than $50 on it in 2017.

In recent years, scores of startups and established banks have launched products to win this market. For Paytm, which runs a range of businesses including a digital bank and online lending, sachets of insurance could fit well in its overall offerings.

“This move will help the insurance business scale up to new heights by leveraging the large customer base and innovative products offered by Paytm,” said Vijay Aggarwal, Managing Director of Prism Johnson, in a statement.

Raheja QBE’s acquisition is subject to customary conditions, including approval from the Insurance Regulatory and Development Authority of India (IRDAI), the two firms cautioned. 

More to follow…

Facebook makes education push in India

By Manish Singh

Facebook, which reaches more users than any other international firm in India, has identified a new area of opportunity to further spread its tentacles in the world’s second largest internet market.

On Sunday, the social juggernaut announced it had partnered with the Central Board of Secondary Education, a government body that oversees education in private and public schools in India, to launch a certified curriculum on digital safety and online well-being, and augmented reality for students and educators.

Through these subjects, Facebook and CBSE aim to prepare secondary school students for current and emerging jobs, and help them develop skills to safely browse the internet, make “well informed choices,” and think about their mental health, they said.

Facebook said that it will provide these training in various phases. In the first phase, more than 10,000 teachers will be trained; in the second, they will coach 30,000 students. The three-week training on AR will cover fundamentals of the nascent technology, and ways to make use of Facebook’s Spark AR Studio to create augmented reality experiences.

“I encourage the teachers and students to apply for the programs commencing on July 6, 2020,” said Ramesh Pokhriyal, Union Minister of Human Resources Development, in a statement.

Instagram’s Guide for Building Healthy Digital Habits, which has been developed in collaboration with the Jed Foundation (JED) and YLAC (Young Leaders for Active Citizenship), aims to help youngsters better understand the “socio-emotional space” they operate in and engage in health conversations.

“I am proud to share that CBSE is the only Board that has introduced the modules of Digital Safety and Online Well-being, Instagram Toolkit for Teens and Augmented Reality. Incorporating technology and digital safety into school curriculum will ensure students are not only gaining knowledge to succeed in the digital economy but also learning and collaborating in a safe online environment,” said Manoj Ahuja, Chairperson of CBSE, in a statement.

The announcement today caps a remarkable week in India that started with New Delhi blocking nearly 60 services developed by Chinese firms over cybersecurity concerns. TikTok, one of the services that has been hit by India’s order, identified Asia’s third-largest economy as its biggest market outside of China.

The service, run by Chinese giant ByteDance, reaches more than 200 million users in India, most of whom live in small towns and cities. TikTok began working with scores of content creators and firms in India last year to populate its short-form video service with educational videos.

Facebook last year partnered with telecom giant Reliance Jio Platforms — in which it would eventually invest $5.7 billion — to launch “Digital Udaan,” the “largest ever digital literacy program” for first-time internet users in the country. The social juggernaut has in recent years ramped up its efforts to create awareness about the ill side of technology as its platform confronted misuse of its own services in the country. India is the biggest market for Facebook by users count.

US plans to rollback special status may erode Hong Kong’s startup ecosystem

By Catherine Shu

For two months, the people of Hong Kong waited in suspense after China’s legislature approved a new national security law. The legislation’s details were finally made public yesterday and almost immediately went into effect. As many Hong Kong residents feared, the broadly written new law gives Beijing extensive authority over the Special Administrative Region and has the potential to sharply curtail civil liberties.

In response, the United States began the first measures to end the special status it gives to Hong Kong, with the Commerce and State Departments suspending export license exceptions for sensitive U.S. technology and blocking the export of defense equipment.

Much remains uncertain. Hong Kong had also previously enjoyed many freedoms that do not exist in mainland China, under the “one country, two systems” principle put into place after the United Kingdom returned control to China. After announcing the new policies, the U.S. government said further restrictions are being considered. Under special status, Hong Kong had privileges including lower trade tariffs and a separate customs and immigration designation from mainland China, but now the future of those is unclear.

Equally opaque is how the erosion of special status and the new national security law will impact Hong Kong’s startups in the future. In conversations with TechCrunch, investors and founders said they believe the region’s ecosystem is resilient, partly because many companies offer online services — especially financial services — and have already established operations in other markets. But they are also keeping an eye on further developments and preparing for the possibility that key talent will want to relocate to other countries.

Intel to invest $253.5 million in India’s Reliance Jio Platforms

By Manish Singh

Intel said on Friday it will invest $253.5 million in Jio Platforms, joining a roster of high-profile investors including Facebook and Silver Lake that have backed India’s top telecom operator at the height of a global pandemic.

The chipmaker’s investment arm said it is acquiring a 0.39% stake in Jio Platforms, giving the Indian firm a valuation of $65 billion. Intel is the 12th investor to buy a stake in Jio Platforms, which has raised nearly $15.5 billion by selling 25% stake since April this year.

“Jio Platforms’ focus on applying its impressive engineering capabilities to bring the power of low-cost digital services to India aligns with Intel’s purpose of delivering breakthrough technology that enriches lives. We believe digital access and data can transform business and society for the better. Through this investment, we are excited to help fuel digital transformation in India, where Intel maintains an important presence,” said Wendell Brooks, Intel Capital President, in a statement.

More to follow…

India’s richest man takes on Zoom

By Manish Singh

India’s Reliance Jio Platforms, which recently concluded a $15.2 billion fundraise run, is ready to enter a new business: Video conferencing.

On Thursday evening, the firm — backed by Mukesh Ambani, India’s richest man — formally launched JioMeet, its video-conference service.

Like Zoom and Google Meet, JioMeet offers unlimited number of free calls in high definition (720p) to users and supports as many as 100 participants on a call. But interestingly, it’s not imposing a short time limit on a call’s duration. Jio Platforms says a call can be “up to 24 hours” long. The service currently has no paid plans and it’s unclear if Jio Platforms, which has a reputation of giving away services for free for years, plans to change that.

Jio Platforms, which began beta testing JioMeet in May this year, said the video conferencing service offers “enterprise-grade” host controls. These include: password protection on each call, multi-device login support (up to five devices), and ability to share screen and collaborate.

Other features include the ability to switch “seemingly” from one device to another, and a ‘Safe Driving Mode’ for when a participant is in commute. Hosts can also enable a ‘waiting room’ to ensure participants have to ask for permission to enter a call.

Reliance Jio Platforms is taking on Zoom with JioMeet, which looks a lot like Zoom

JioMeet is available for use through Chrome and Firefox browsers on desktop, as well as has standalone apps for macOS, Windows, iOS, and Android. It also has an Outlook plugin.

In a call with analysts earlier this year, Jio executives had described JioMeet as a platform that they think would some day have features to enable doctors to consult their patients, prescribe them medicine, and have a system in place to let them buy medicines online and get test results digitally. Similarly, they said JioMeet will allow teachers to host virtual classrooms for their students, with the ability to record sessions, assign and accept homework, and conduct tests digitally.

JioPlatforms, which is India’s top telecom operator with about 400 million customers, operates a number of digital services including JioMusic, a music streaming service; JioCinema, which offers thousands of TV shows and movies; and JioTV, which allows users to watch more than 500 TV channels. All of these services are available at no additional charge to Jio Platforms subscribers. It costs less than $2 a month to be a Jio subscriber.

The launch of JioMeet today comes as tens of millions of Indians are working from home and using video conferencing services for work and to stay in touch with friends.

Zoom app, currently the most popular video conference service in India, on Android had about 35 million monthly active users in the third week of July, up from about 4 million users during the same period in March, according to mobile insights firm App Annie, data of which an industry executive shared with TechCrunch. (Android powers nearly 99% of smartphones in India.)

Growth capital investor Kennet raises $250M fund, backed by Edmond de Rothschild

By Mike Butcher

Venture capital is “not the only fruit” for entrepreneurs, as the often quieter ‘Growth Capital’ can also see great returns for entrepreneurs who prefer to retain a lot of ownership and control but are also willing to bootstrap over a longer period in order to reach revenues and profits. With the COVID-19 pandemic pushing millions of people online, tech investors of all classes are now reaping the dividends in this accelerated, Coronavirus-powered transition to digital.

Thus it is that Kennet Partners, a leading European technology growth equity investor, has raised $250m (€223m) for its fifth fund, ‘Kennet V’, in partnership with Edmond de Rothschild Private Equity, the Private Equity division of the Edmond de Rothschild Group.

Kennet is perhaps best know for its involvement in companies such as Receipt Bank, Spatial Networks and its exist from Vlocity, IntelePeer, and MedeAnalytics. It’s also invested in Eloomi, Codility, Nuxeo and Rimilia. In raising this new fund, Kennet says it exceeded its target and secured new investors from across Europe and Asia.

The Kennet V fund has already started to deploy the capital into new investments in B2B, SaaS across the UK, Europe and the US.

Typically, Kennet invests in the first external funding that companies receive and is used to finance sales and marketing expansion, particularly internationally. It’s cumulative assets managed are approximately $1 billion.

Hillel Zidel, managing director, Kennet Partners, told me by phone that: “We were fortunate in that most of the capital was raised just before Covid hit. But we were still able to bring additional investors in. Had we been designing a fund for now, then this would have been it, because people have rushed towards technology out of necessity. So this has brought forward digitization but at least five years.”

Johnny El-Hachem, CEO, Edmond de Rothschild Private Equity said in a statement: “We partnered with Kennet, because we liked the dynamism of the team coupled with their strategy of financing businesses providing mission-critical technology solutions. The COVID crisis has underscored the importance of many of these tools to business continuity.”

Meet BukuWarung, the bookkeeping app built for Indonesia’s 60 million “micro-merchants”

By Catherine Shu

In Indonesia, there are about 60 million “micro-merchants,” typically small store owners who sell food and other staple items, and have close relationships with their customers. Many often extend informal lines of credit to shoppers, but much of their financial tracking is still done with pen and paper ledgers. Chinmay Chauhan and Abhinay Peddisetty, the co-founders of BukuWarung, want to digitize the process with a financial platform designed especially for small Indonesian businesses. Their goal is to start with bookkeeping tools, before expanding into services including access to working capital.

The startup is currently taking part in Y Combinator’s startup accelerator program. BukuWarung has also raised seed funding from East Ventures, AC Ventures, Golden Gate Ventures, Tanglin Ventures, Samporna, as well as strategic angel investors from Grab, Gojek, Flipkart, PayPal, Xendit, Rapyd, Alterra, ZEN Rooms and other companies.

Chauhan and Peddisetty met while working together at Singapore-based peer-to-peer marketplace Carousell, where they focused on developing monetization products for sellers. Chauhan also worked on products for merchants at Grab, the largest ride-sharing and on-demand delivery company in Southeast Asia. But the inspiration behind BukuWarung is also personal, because both Chauhan and Peddisetty’s families run small neighborhood stores.

“We can look at this more deeply given the experience we have monetizing merchants at Grab and Carousell,” Chauhan said. “We also know good potential exists in Indonesia, where we can help 60 million micro-merchants come online and digitize. From a macro-level, we felt this would be a huge opportunity, and there is also the personal element of being potentially being able to impact millions of merchants.”

Paper records not only make tracking finances a labor-intensive process, but also means it is harder for merchants to gain access to lines of credit. Chauhan and Peddisetty told TechCrunch that their goal is to expand the company to financial services as well, doing for Indonesian merchants what KhataBook and OKCredit have done in India. Since launching last year, BukuWarung has signed up 600,000 merchants across 750 cities and towns in Indonesia and currently has about 200,000 monthly average users. The founders say their goal is to reach all 60 million micro-, small- and medium-sized businesses in Indonesia. It has already made its first acquisition: Lunasbos, one of the first Indonesian credit tracking apps.

BukuWarung founders Chinmay Chauhan and Abhinay Peddisetty

While preparing to launch BukuWarung, the founders traveled through Indonesia, speaking to almost 400 merchants about their challenges with bookkeeping, credit tracing and accounting. Based on those conversations, the two decided to start by focusing on a bookkeeping app, which launched 10 months ago.

Despite a partial lockdown in Indonesia from April to June, BukuWarung continued to grow because most of its users sell daily necessities, like groceries. In smaller cities and villages, merchants often offer credit lines because their customers’ cash flow is very tight, and many do not have a regular monthly paycheck, Chauhan said. “Everyone is buying and selling on credit, that is something we validated in our research.”

Then there is the community aspect, where many merchants are close to their customers.

“This changes depending on the location of the business, but business owners have often known a lot of people in their neighborhoods for a long time, and when it comes to credit, they typically offer 500 Indonesian rupiah all the way up to about one million rupiah [about USD $70.56],” Chauhan said. But when it’s time to settle bills, which often means going to customers’ homes and asking for payment, many merchants feel hesitant, he added.

“They will never chase or call the person. The app we built sends automatic reminders to customers, and this ‘soft message’ really helps merchants not feel shy while at the same time professionally giving customer reminders.”

While talking to merchants, BukuWarung’s founders also realized that many were using pay-as-you-go data plans and lower-end smartphones. Therefore, their app needed to be as lightweight as possible, and work offline so users could access and update their records anytime. This focus on making their app take up as little data and space as possible differentiates them from other bookkeeping apps, the founders said, and helps them sign up and retain users in Indonesia.

Chauhan and Peddisetty said the company will partner with financial tech companies as it grows  to give users access to online payment systems, including digital wallets, and financing.

In a statement to TechCrunch, Y Combinator partner Gustaf Alströmer said, “Building digital infrastructure for emerging economies is a huge opportunity, especially in the post-COVID world. And we believe BukuWarung is a team that can take on this challenge. We have seen this journey before with Khatabook and OkCredit in India and see that BukuWarung is on a similar growth trajectory to empower micro-businesses in Indonesia.”

 

Zetwerk, an Indian B2B marketplace for manufacturing items, raises $21 million

By Manish Singh

Zetwerk, an Indian business-to-business marketplace for manufacturing items, has raised $21 million in a new financing round as it looks to scale its operations in the nation and help local businesses find customers overseas.

San Francisco-based investment firm Greenoaks led the two-year-old Indian startup’s Series C financing round. Existing investors Accel, Kae Capital, Lightspeed and Sequoia Capital India also participated in the round, which brings Zetwerk’s to-date raise to $62 million.

Founded by Amrit Acharya, Srinath Ramakkrushnan, Rahul Sharma and Vishal Chaudhary in 2018, Zetwerk connects OEMs (original equipment manufacturers) and EPC (engineering procurement construction) customers with manufacturing small-businesses and enterprises.

Unlike the more typical e-commerce firms, Zetwerk sells goods such as parts of a crane, doors, chassis of different machines and ladders. The startup operates to serve customers in fabrication, machining, casting and forging businesses.

These are all custom-made products. “Nobody has a stock of such inventories. You get the order, you find manufacturers and workshops that make them. Our customers are companies that are in the business of building infrastructure,” said Acharya, who serves as Zetwerk’s chief executive.

“We index these small workshops and understand the kinds of products they have built before. These indexes help bigger companies discover and work with them,” he added. Once a firm has placed an order, Zetwerk allows them to track the progress of manufacturing and then its shipping. In this line of business, this “hand-holding” is crucial as manufacturing and shipping of these items typically take more than two to three months.

Currently, Zetwerk works with more than 150 enterprises and 2,500 small and medium-sized businesses, it told TechCrunch. The startup delivers more than 30,000 parts each month, up 50% since December last year, and has enabled several manufacturers in India to discover clients overseas.

“Zetwerk is bringing Indian manufacturing to the global stage, and I’m proud to be part of their story,” said Prayank Swaroop of Accel.

Zetwerk has developed “unique software to enable an enormous global manufacturing marketplace connecting OEMs and EPCs with industrial suppliers,” said Neil Shah of Greenoaks Capital.

“Increasingly, companies are looking to diversify their supply chain globally and Zetwerk’s platform allows them to identify and collaborate with supplier partners to deliver projects on-time and with high quality. We are thrilled to continue to partner with the Zetwerk team,” he said.

Manufacturing contributes to 14% of India’s GDP, but the nation lacks a supporting ecosystem to execute projects more efficiently, said Acharya. The startup will deploy the fresh capital to fund its international expansion and launch new categories, he said.

Apple and Google block dozens of Chinese apps in India

By Manish Singh

Two days after India blocked 59 apps developed by Chinese firms, Google and Apple have started to comply with New Delhi’s order and are preventing users in the world’s second largest internet market from accessing those apps.

UC Browser, Shareit, and Club Factory and other apps that India has blocked are no longer listed on Apple’s App Store and Google Play Store. In a statement, a Google spokesperson said that the company had “temporarily blocked access to the apps”on Google Play Store as it reviews New Delhi’s interim order.

Apple, which has taken a similar approach as Google in complying with New Delhi, did not respond to a request for comment.

On Thursday, Indian Prime Minister Narendra Modi also shut his Weibo account.

More to follow…

 

Facebook is shutting down Lasso, its TikTok clone

By Manish Singh

Facebook is no longer betting on Lasso, an app it launched a year and a half ago, to take on TikTok . The social juggernaut’s TikTok clone is shutting down on July 10, Facebook said.

Launched in late 2018, Lasso was seen as Facebook’s answer to TikTok that’s gained ground with young users, both in China and in the West. Lasso allowed users shoot up to 15-second long videos and overlay popular songs. The app centered around an algorithmic feed of recommended videos, but also allowed users to tap through hashtags or a Browse page of themed collections.

As of February, Lasso was available in Colombia, Mexico, the U.S., Argentina, Chile, Peru, Panama, Costa Rica, El Salvador, Ecuador, and Uruguay, research firm Sensor Tower told TechCrunch. Earlier this year, Facebook added support for Hindi language in Lasso, suggesting that it may have had plans to bring Lasso to India, its biggest market by users account.

Lasso’s demise comes ahead of the launch of Instagram Reels — the new horse Facebook is counting on to steal TikTok’s lunch, said Josh Constine, who first spotted Lasso’s announcement.

Facebook’s TikTok clone lasso is shutting down ahead of the Instagram Reels launch, so basically Fb lost 2 years by half-assing. Brb, gotta go save my zero Lassos pic.twitter.com/VgKImjgWM4

— Josh Constine -SignalFire (@JoshConstine) July 2, 2020

It’s unclear why Facebook never expanded Lasso to more markets. But what is clear is that Lasso’s journey was troubled from the beginning. Brady Voss, who led the development of this app, left Facebook days after the launch of Lasso.

We have reached out to Facebook for comment.

Indian startups diversify their businesses to offset COVID-19 induced losses

By Manish Singh

E-commerce giant Flipkart is planning to launch a hyperlocal service that would enable customers to buy items from local stores and have those delivered to them in an hour and a half or less. Yatra, an online travel and hotel ticketing service, is exploring a new business line altogether: Supplying office accessories.

Flipkart and Yatra are not the only firms eyeing new business categories. Dozens of firms in the country have branched out by launching new services in recent weeks, in part to offset the disruption the COVID-19 epidemic has caused to their core offerings.

Swiggy and Zomato, the nation’s largest food delivery startups, began delivering alcohol in select parts of the country last month. The move came weeks after the two firms, both of which are seeing fewer orders and had to let go hundreds of employees, started accepting orders for grocery items in a move that challenged existing online market leaders BigBasket and Grofers.

Udaan, a business-to-business marketplace, recently started to accept bulk orders from some housing societies and is exploring more opportunities in the business-to-commerce space, the startup told TechCrunch.

These shifts came shortly after New Delhi announced a nationwide lockdown to contain the spread of the coronavirus. The lockdown meant that all public places including movie theaters, shopping malls, schools, and public transport were suspended.

Instead of temporarily halting their businesses altogether, as many have done in other markets, scores of startups in India have explored ways to make the most out of the current unfortunate spell.

“This pandemic has given an opportunity to the Indian tech startup ecosystem to have a harder look at the unit-economics of their businesses and become more capital efficient in the shorter and longer-term,” Puneet Kumar, a growth investor in Indian startup ecosystem, told TechCrunch in an interview.

Of the few things most Indian state governments have agreed should remain open include grocery shops, and online delivery services for grocery and food.

People buy groceries at a supermarket during the first day of the 21-day government-imposed nationwide lockdown as a preventive measure against the spread of the COVID-19 coronavirus, in Bangalore on March 25, 2020. (Photo by MANJUNATH KIRAN/AFP via Getty Images)

E-commerce firms Snapdeal and DealShare began grocery delivery service in late March. The move was soon followed by social-commerce startup Meesho, fitness startup Curefit, and BharatPe, which is best known for facilitating mobile payments between merchants and users.

Meesho’s attempt is still in the pilot stage, said Vidit Aatrey, the Facebook-backed startup’s co-founder and chief executive. “We started grocery during the lockdown to give some income opportunities to our sellers and so far it has shown good response. So we are continuing the pilot even after lockdown has lifted,” he said.

ClubFactory, best known for selling low-cost beauty items, has also started to deliver grocery products, and so has NoBroker, a Bangalore-based startup that connects apartment seekers with property owners. And MakeMyTrip, a giant that provides solutions to book flight and hotel tickets, has entered the food delivery market.

Another such giant, BookMyShow, which sells movie tickets, has in recent weeks rushed to support online events, helping comedians and other artists sell tickets online. The Mumbai-headquartered firm plans to make further inroads around this business idea in the coming days.

For some startups, the pandemic has resulted in accelerating the launch of their product cycles. CRED, a Bangalore-based startup that is attempting to help Indians improve their financial behavior by paying their credit card bill on time, launched an instant credit line and apartment rental services.

Kunal Shah, the founder and chief executive of CRED, said the startup “fast-tracked the launch” of these two products as they could prove immensely useful in the current environment.

For a handful of startups, the pandemic has meant accelerated growth. Unacademy, a Facebook-backed online learning startup, has seen its user base and subscribers count surge in recent months and told TechCrunch that it is in the process of more than doubling the number of exam preparation courses it offers on its platform in the next two months.

Since March, the number of users who access the online learning service each day has surged to 700,000. “We have also seen a 200% increase in viewers per week for the free live classes offered on the platform. Additionally there has been a 50% increase in paid subscribers and over 50% increase in average watchtime per day among our subscribers,” a spokesperson said.

As with online learning firms, firms operating on-demand video streaming services have also seen a significant rise in the number of users they serve. Zee5, which has amassed over 80 million users, told TechCrunch last week that in a month it will introduce a new category in its app that would curate short-form videos produced and submitted by users. The firm said the feature would look very similar to TikTok.

The pandemic “has also accelerated the adoption of online services in India across all demographics. Many who would not have considered buying goods and services online are starting to adopt the online platforms for basic necessities at a faster pace,” said venture capitalist Kumar.

“As far as expansion into adjacent categories is concerned, some of this was a natural progression and startups were slowly moving in that direction anyway. The pandemic has forced people to get there faster.”

Roosh, a Mumbai-based game developing firm founded by several industry veterans, launched a new app ahead of schedule that allows social influencers to promote games on platforms such as Instagram and TikTok, Deepak Ail, co-founder and chief executive of Roosh, told TechCrunch.

ShareChat, a Twitter-backed social network, recently acquired a startup called Elanic to explore opportunities in social-commerce. OkCredit, a bookkeeping service for merchants, has been exploring ways to allow users to purchase items from neighborhood stores.

And NowFloats, a Mumbai-based SaaS startup that helps businesses and individuals build an online presence without any web developing skills, is on-boarding doctors to help people consult with medical professionals.

Startups are not the only businesses that have scrambled to eye new categories. Established firms such as Carnival Group, which is India’s third-largest multiplex theatre chain, said it is foraying into cloud kitchen business.

Amazon, which competes with Walmart’s Flipkart in India, has also secured approval from West Bengal to deliver alcohol in the nation’s fourth most populated state. The e-commerce giant is also exploring ways to work with mom and pop stores that dot tens of thousands of cities and towns of India.

Last week, the American giant launched “Smart Stores” that allows shoppers to walk to a participating physical store, scan a QR code, and pick and purchase items through the Amazon app. The firm, which is supplying these mom and pop stores with software and QR code, said more than 10,000 shops are participating in the Smart Stores program.

Luckin Coffee’s board is forcing out its chairman (also, chairman is forcing out the rest of the board)

By Danny Crichton

Sometimes you can’t just get a [L]uckin’ break.

After announcing this morning that it is ending its fight to stay listed on Nasdaq, China-based coffee chain and delivery company Luckin Coffee announced that it is requiring that its chairman, Lu Zhengyao, resign in a filing with the SEC.

It also announced in its SEC filing that the chairman has requested the firing of independent director Sean Shao through a shareholders resolution, which will be voted upon at a shareholders meeting to be held on Sunday, July 5th.

My god.

It’s getting ugly at Luckin, which is struggling to turnaround in the aftermath of revelations of a $300 million accounting fraud that has seen its stock price plummet in recent months. Shao has been leading the board’s independent investigation over the accounting irregularity.

Now, at a shareholders meeting, the board will be up for grabs, with investors in the company (yes, there are still investors!) choosing who to keep and who to fire in a devolving case of corporate governance run amok.

In addition to voting on several current directors of the company, shareholders will also vote on installing two new independent directors, Zeng Ying and Yang Jie, who have long-time business and legal backgrounds.

We had previously known about the extraordinary shareholders meeting, but now the company has upped the ante, by voting to force out the chairman by July 2 — three days before the shareholders meeting is scheduled to take place.

Honestly, at this point, it’s impossible to say what comes next. But what I can say is that Luckin is currently trading down 54% at close this Friday, and is worth barely a few hundred million dollars — down from its peak market cap of over $12 billion. Wh ever wins is going to own some truly empty cups.

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