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Yesterday — January 21st 2020Your RSS feeds

African fintech firm Flutterwave raises $35M, partners with Worldpay

By Jake Bright

San Francisco and Lagos-based fintech startup Flutterwave has raised a $35 million Series B round and announced a partnership with Worldpay FIS for payments in Africa.

With the funding, Flutterwave will invest in technology and business development to grow market share in existing operating countries, CEO Olugbenga Agboola — aka GB — told TechCrunch.

The company will also expand capabilities to offer more services around its payment products.

More than payments

“We don’t just want to be a payment technology company, we have sector expertise around education, travel, gaming, e-commerce, fintech companies. They all use our expertise,” said GB.

That means Flutterwave will provide more solutions around the broader needs of its clients.

The Nigerian-founded startup’s main business is providing B2B payments services for companies operating in Africa to pay other companies on the continent and abroad.

Launched in 2016, Flutterwave allows clients to tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber, Booking.com and e-commerce company Jumia.

In 2019, Flutterwave processed 107 million transactions worth $5.4 billion, according to company data.

Flutterwave did the payment integration for U.S. pop-star Cardi B’s 2019 performances in Nigeria and Ghana. Those are two of the countries in which the startup operates, in addition to South Africa, Uganda, Kenya, Tanzania, Zambia, the U.K. and Rwanda.

Flutterwave Cardi B Nigeria“We want to scale in all those markets and be the payment processor of choice,” GB said.

The company will hire more business development staff and expand its developer team to create more sector expertise, according to GB.

“Our business goes beyond payments. People don’t want to just make payments, they want to do something,” he said. And Fluterwave aims to offer more capabilities toward what those clients want to do in Africa.

GB Flutterwave disrupt

Olugbenga Agboola, aka GB

“If you are a charity that wants to raise money for cancer research in Ghana, or you want to sell online, or you’re Cardi B…who wants to do concerts in Africa…we want to be able to set up payments, write the code and create the platform for those needs,” GB explained.

That also means Flutterwave, which built its early client base across global companies, aims to serve smaller African businesses, including startups. Current customers include African-founded tech companies, such as moto ride-hail venture Max.ng.

Worldpay partnership

The new round makes Flutterwave the payment provider for Worldpay in Africa.

“With this partnership, any Worldpay merchant in Europe or the U.S. can accept any African payment. If someone goes to pay Netflix with an African card, it just works,” GB said.

In 2019, Worldpay was acquired for a reported $35 billion by FIS, a U.S. financial services provider. At the time of the purchase, it was projected the two companies would generate revenues of $12 billion annually, yet neither has notable presence in Africa.

Therein lies the benefit of collaborating with Flutterwave.

FIS’s Head of Ventures Joon Cho confirmed the partnership with TechCrunch. FIS also backed Flutterwave’s $35 million Series B. US VC firms Greycroft and eVentures led the round, with participation of Visa, Green Visor and African fund CRE Venture Capital.

Flutterwave’s latest funding brings the company’s total investment to $55 million and follows a year in which the fintech venture announced a series of weighty partnerships.

In July 2019, the startup joined forces with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.

The Alipay collaboration followed one between Flutterwave and Visa to launch a consumer payment product for Africa, called GetBarter.

Flutterwave and African fintech

Flutterwave’s $35 million round and latest partnership are among the reasons the startup has become a standout in Africa’s digital-finance landscape.

As a sector, fintech gains the bulk of dealflow and the majority of startup capital flowing to African startups annually. VC to Africa totaled $1.35 billion in 2019, according to WeeTracker’s latest stats.

While a number of payment startups and products have scaled — see Paga in Nigeria and M-Pesa in Kenya — the majority of the continent’s fintech companies are P2P in focus and segregated to one or two markets.

Flutterwave’s platform has served the increased B2B business payment needs spurred by the decade of growth and reform that has occurred in Africa’s core economies.

The value the startup has created is underscored not just by transactional volume the company generates, but the partnerships it has attracted.

A growing list of the masters of the payment universe — Visa, Alipay, Worldpay — have shown they need Flutterwave to do finance in Africa.

Gartner: 2020 device shipments to grow 0.9% to 2.16B thanks to 5G, before 2 further years of decline

By Ingrid Lunden

The analysts at Gartner have published their annual global device forecast, and while 2020 looks like it may be partly sunny, get ready for more showers and poor weather ahead. The analysts predict that a bump from new 5G technology will lead to total shipments of 2.16 billion units — devices that include PCs, mobile handsets, watches, and all sizes of computing devices in between — working out to a rise of 0.9% compared to 2019.

That’s a modest reversal after what was a rough year for hardware makers who battled with multiple headwinds that included — for mobile handsets — a general slowdown in renewal cycles and high saturation of device ownership in key markets; and — in PCs — the wider trend of people simply buying fewer of these bigger machines as their smartphones get smarter (and bigger).

As a point of comparison, last year Gartner revised its 2019 numbers at least three times, starting from “flat shipments” and ending at nearly four percent decline. In the end, 2019 saw shipments of 2.15 billion units — the lowest number since 2010. All of it is a bigger story of decline. In 2005, there were between 2.4 billion and 2.5 billion devices shipped globally.

“2020 will witness a slight market recovery,” writes Ranjit Atwal, research senior director at Gartner . “Increased availability of 5G handsets will boost mobile phone replacements, which will lead global device shipments to return to growth in 2020.”

(Shipments, we should note, do not directly equal sales, but they are used as a marker of how many devices are ordered in the channel for future sales. Shipments precede sales figures: overestimating results in oversupply and overall slowdown.)

The idea that 5G will drive more device sales, however, is still up for debate. Some have argued that while carriers are going hell for leather in their promotion of 5G, the idea of special 5G apps and services — versus using it to connect machines in an IoT play — that will spur adoption of those devices is not as apparent, and that’s leading to it being more of an abstract concept, and not one that is leading the charge when it comes to apps and services, especially for the mass consumer market and for (human) business users.

In 6 years of hearing pitches in Silicon Valley, I heard '5G' maybe once. That's not from ignorance – the utility network layer is not very important to innovation at the top of the stack.

— Benedict Evans (@benedictevans) January 20, 2020

Still, it may be that hardware might march on ahead regardless. Gartner predicts that 5G devices will account for 12% of all mobile phone shipments in 2020 as handset makers make their devices “5G ready,” with the proportion increasing to 43% by 2022. “From 2020, Gartner expects an increase in 5G phone adoption as prices decrease, 5G service coverage increases and users have better experiences with 5G phones,” writes Atwal. “The market will experience a further increase in 2023, when 5G handsets will account for over 50% of the mobile phones shipped.” That may in part be simply because handset makers are making their devices “5G ready”

Drilling down into the numbers, Gartner believes that worldwide, phones will see a bump of 1.7% this year, up to 1.78 billion before declining again in 2021 to 1.77 billion and then further in 2022 to 1.76 billion. Asia and in particular China and emerging markets will lead the charge.

Another analyst firm, Counterpoint, has been tracking marketshare for individual handset makers and notes that Samsung remains the world’s biggest handset maker going into Q4 2019 (final numbers on that quarter should be out in the coming weeks), with 21% of all shipments and slight increases over the year, but with the BBK group (which owns OPPO, Vivo, Realme, and OnePlus) likely to pass it, Huawei and Apple to become the world’s largest, as it’s growing much faster. Numbers overall were dragged down by declines for Apple, the world’s number-three handset maker, which saw a slump last year in its handset sales.

Although the market was generally lower across all devices, PC shipments actually saw some growth in 2019. That is set to turn down again this year, to 251 million units, and declining further to 247 million in 2021 and 242 million in 2022.

Part of that is due to slower migration trends — Windows 10 adoption was the primary driver for people switching up and buying new devices last year, but now that’s more or less finished. That will see slower purchasing among enterprise end users, although later adopters in the SME segment will finally make the change when support for Windows it 7 finally ends this month (it’s been on the cards for years at this point). In any case, the upgrade cycle is changing because of how Windows is evolving.

“The PC market’s future is unpredictable because there will not be a Windows 11. Instead, Windows 10 will be upgraded systematically through regular updates,” writes Atwal “As a result, peaks in PC hardware upgrade cycles driven by an entire Windows OS upgrade will end.”

Two trends that might impact shipments — or at least highlight other currents in the hardware market — should also be noted. The first is the role that Chromebooks might play in the PC market. These were one of the faster-growing categories last year, and this year we will see even more models rolled out, with what hardware makers hope will be even more of a boost in functionality to drive adoption. (Google and Intel’s collaboration is one example of how that will work: the two are working on a set of standards that will fit with chips made by Intel to produce what the companies believe are more efficient and compelling notebooks, with tablet-like touchscreens, better battery life, smaller and lighter form factors, and more.)

The second is whether or not smartwatches will make a significant dent into the overall device market. Q3 of last year saw growth of 42% to 14 million shipments globally. And while there have been a number of smartwatch hopefuls, but one of the biggest successes has been the Apple Watch, whose growth outstripped that of the wider watch market, at 51%. Indeed, looking at the results of the last several quarters, Apple’s product category that includes Watch sales (wearables, home and accessories) even appears to be on track to outstrip another hardware category, Macs. Whether that will continue, and potentially see others joining in, will be an interesting area to “watch.”

Before yesterdayYour RSS feeds

China Roundup: Tencent’s new US gaming studio and WeChat’s new paywall

By Rita Liao

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

The spotlight this week is back on Tencent, which has made some interesting moves in gaming and content publishing. There will be no roundup next week as China observes the Lunar New Year, but the battle only intensifies for the country’s internet giants, particularly short-video rivals Douyin (TikTok’s Chinese version) and Kuaishou, which will be vying for user time over the big annual holiday. We will surely cover that when we return.

‘Honor of Kings’ creator hiring for U.S. studio

Tencent’s storied gaming studio TiMi is looking to accelerate international expansion by tripling its headcount in the U.S. in 2020, the studio told TechCrunch this week, though it refused to reveal the exact size of its North American office. Eleven-year-old TiMi currently has a team working out of Los Angeles on global business and plans to grow it into a full development studio that “helps us understand Western players and gives us a stronger global perspective,” said the studio’s international business director Vincent Gao.

Gao borrowed the Chinese expression “riding the wind and breaking the wave” to characterize TiMi’s global strategy. The wind, he said, “refers to the ever-growing desire for quality by mobile gamers.” Breaking the wave, on the other hand, entails TiMi applying new development tools to building high-budget, high-quality AAA mobile games.

The studio is credited for producing one of the world’s most-played mobile games, Honor of Kings, a mobile multiplayer online battle arena (MOBA) game, and taking it overseas under the title Arena of Valor. Although Arena of Valor didn’t quite take off in Western markets, it has done well in Southeast Asia in part thanks to Tencent’s publishing partnership with the region’s internet giant Garena.

Honor of Kings and a few other Tencent games have leveraged the massive WeChat and QQ messengers to acquire users. That raises the question of whether Tencent can replicate its success in overseas markets where its social apps are largely absent. But TiMi contended that these platforms are not essential to a game’s success. “TiMi didn’t succeed in China because of WeChat and QQ. It’s not hard to find examples of games that didn’t succeed even with [support from] WeChat and QQ.”

Call of Duty: Mobile is developed by Tencent and published by Activision Blizzard (Image: Call of Duty: Mobile via Twitter) 

When it comes to making money, TiMi has from the outset been a strong proponent of game-as-a-service whereby it continues to pump out fresh content after the initial download. Gao believes the model will gain further traction in 2020 as it attracts old-school game developers, which were accustomed to pay-to-play, to follow suit.

All eyes are now on TiMi’s next big move, the mobile version of Activision Blizzard’s Call of Duty. Tencent, given its experience in China’s mobile-first market, appears well-suited to make the mobile transition for the well-loved console shooter. Developed by Tencent and published by Blizzard, in which Tencent owns a minority stake, in September, Call of Duty: Mobile had a spectacular start, recording more worldwide downloads in a single quarter than any mobile game except Pokémon GO, which saw its peak in Q3 2016, according to app analytics company Sensor Tower.

The pedigreed studio has in recent times faced more internal competition from its siblings inside Tencent, particularly the Lightspeed Quantum studio, which is behind the successful mobile version of PlayerUnknown’s Battlegrounds (PUBG). While Tencent actively fosters internal rivalry between departments, Gao stressed that TiMi has received abundant support from Tencent on the likes of publishing, business development and legal matters.

WeChat erects a paywall – with Apple tax

Ever since WeChat rolled out its content publishing function — a Facebook Page equivalent named the Official Account — back in 2012, articles posted through the social networking platform have been free to read. That’s finally changing.

This week, WeChat announced that it began allowing a selected group of authors to put their articles behind a paywall in a trial period. The launch is significant not only because it can inspire creators by helping them eke out additional revenues, but it’s also a reminder of WeChat’s occasionally fraught relationship with Apple.

WeChat launched its long-awaited paywall for articles published on its platform 

Let’s rewind to 2017 when WeChat, in a much-anticipated move, added a “tipping” feature to articles published on Official Account. The function was meant to boost user engagement and incentivize writers off the back of the popularity of online tipping in China. On live streaming platforms, for instance, users consume content for free but many voluntarily send hosts tips and virtual gifts worth from a few yuan to the hundreds.

WeChat said at the time that all transfers from tipping would go toward the authors, but Apple thought otherwise, claiming that such tips amounted to “in-app purchases” and thus entitled it to a 30% cut from every transaction, or what is widely known as the “Apple tax.”

WeChat disabled tipping following the clash over the terms but reintroduced the feature in 2018 after reaching consensus with Apple. The function has been up and running since then and neither WeChat nor Apple charged from the transfers, a spokesperson from WeChat confirmed with TechCrunch.

If the behemoths’ settlement over tipping was a concession on Apple’s end, Tencent has budged on paywalls this time.

Unlike tipping, the new paywall feature entitles Apple to its standard 30% cut of in-app transactions. That means transfers for paid content will go through Apple’s in-app purchase (IAP) system rather than WeChat’s own payments tool, as is the case with tipping. It also appears that only users with a Chinese Apple account are able to pay for WeChat articles. TechCrunch’s attempt to purchase a post using a U.S. Apple account was rejected by WeChat on account of the transaction “incurring risks or not paying with RMB.”

The launch is certainly a boon to creators who enjoy a substantial following, although many of them have already explored third-party platforms for alternative commercial possibilities beyond the advertising and tipping options that WeChat enables. Zhishi Xingqiu, the “Knowledge Planet”, for instance, is widely used by WeChat creators to charge for value-added services such as providing readers with exclusive industry reports. Xiaoe-tong, or “Smart Little Goose”, is a popular tool for content stars to roll out paid lessons.

Not everyone is bullish on the new paywall. One potential drawback is it will drive down traffic and discourage advertisers. Others voice concerns that the paid feature is vulnerable to exploitation by clickbait creators. On that end, WeChat has restricted the application to the function only to accounts that are over three months old, have published at least three original articles and have seen no serious violations of WeChat rules.

Shadows’ Dylan Flinn and Kombo’s Kevin Gould on the business of ‘virtual influencers’

By Eric Peckham

In films, TV shows and books — and even in video games where characters are designed to respond to user behavior — we don’t perceive characters as beings with whom we can establish two-way relationships. But that’s poised to change, at least in some use cases.

Interactive characters — fictional, virtual personas capable of personalized interactions — are defining new territory in entertainment. In my guide to the concept of “virtual beings,” I outlined two categories of these characters:

  • virtual influencers: fictional characters with real-world social media accounts who build and engage with a mass following of fans.
  • virtual companions: AIs oriented toward one-to-one relationships, much like the tech depicted in the films “Her” and “Ex Machina.” They are personalized enough to engage us in entertaining discussions and respond to our behavior (in the physical world or within games) like a human would.

Part 2 of 3: the business of virtual influencers

Today’s discussion focuses on virtual influencers: fictional characters that build and engage followings of real people over social media. To explore the topic, I spoke with two experienced entrepreneurs:

  • Dylan Flinn is CEO of Shadows, an LA-based animation studio that’s building a roster of interactive characters for social media audiences. Dylan started his career in VC, funding companies such as Robinhood, Patreon and Bustle, and also spent two years as an agent at CAA.
  • Kevin Gould is CEO of Kombo Ventures, a talent management and brand incubation firm that has guided the careers of top influencers like Jake Paul and SSSniperWolf. He is the co-founder of three direct-to-consumer brands — Insert Name Here, Wakeheart and Glamnetic — and is an angel investor in companies like Clutter, Beautycon and DraftKings.

Compound’s Mike Dempsey on virtual influencers and AI characters

By Eric Peckham

In films, TV shows and books — and even in video games where characters are designed to respond to user behavior — we don’t perceive characters as beings with whom we can establish two-way relationships. But that’s poised to change, at least in some use cases.

Interactive characters — fictional, virtual personas capable of personalized interactions — are defining new territory in entertainment. In my guide to the concept of “virtual beings,” I outlined two categories of these characters:

  • virtual influencers: fictional characters with real-world social media accounts who build and engage with a mass following of fans.
  • virtual companions: AIs oriented toward one-to-one relationships, much like the tech depicted in the films “Her” and “Ex Machina.” They are personalized enough to engage us in entertaining discussions and respond to our behavior (in the physical world or within games) like a human would.

Part 1 of 3: the investor perspective

In a series of three interviews, I’m exploring the startup opportunities in both of these spaces in greater depth. First, Michael Dempsey, a partner at VC firm Compound who has blogged extensively about digital characters, avatars and animation, offers his perspective as an investor hunting for startup opportunities within these spaces.

Chinese podcasting and audio content app Lizhi debuts on Nasdaq

By Catherine Shu

Lizhi, one of China’s biggest audio content apps, is debuting on Nasdaq today under the ticker symbol LIZI. It is the first of its major competitors, Ximalaya and Dragonfly, to go public (though Ximalaya is expected to also list in the United States later this year). Lizhi is offering 4.1 million shares at an IPO price of $11 per share.

Though Lizhi, Ximalaya and Dragonfly each host podcasts, audiobooks and livestreams, Lizhi, whose investors include Xiaomi, TPG, Matrix Partners China, Morningside Venture Capital and Orchid Asia, has differentiated itself by focusing on user-generated content created with the app’s recording tools.

According to market research firm iResearch, it has the largest community of user-generated audio content in China. The company said that in the third quarter of 2019, it had a base of 46.6 million average monthly active users on mobile and 5.7 million average monthly active content creators. While podcasts in the U.S. typically use revenue models based on ads or subscriptions, creators on Lizhi and other Chinese podcasting apps monetize through virtual gifts, similar to the ones given by viewers during video livestreams.

In an interview with TechCrunch, Lizhi CEO Marco Lai said the company plans to use proceeds from the IPO to invest in product development and its AI technology. Lizhi uses AI tech to distribute podcasts, which it says results in a 31% click rate on content. AI is also used to monitor content, give creators instant user engagement data and provide features that allow them to fine-tune recordings, reduce noise and create 3D audio.

Despite its quick growth, Lai says online audio in China is still an emerging segment. About 45.5% of total mobile internet users in China listened to online audio content in 2018, but adoption is expected to increase as IoT devices like smart speakers become more popular, especially in smaller cities. Lizhi has a partnership with Baidu for its Xiaodu smart speakers, and develop new ways of distributing content for IoT devices, says Lai.

Foxconn and Fiat Chrysler partner to develop EVs and an ‘internet of vehicles’ business

By Kirsten Korosec

Foxconn Technology Group, the Taiwanese electronics giant best known for its iPhone manufacturing contract, is forming a joint venture with Fiat Chrysler Automobiles to build electric vehicles in China.

The joint venture was disclosed in a regulatory filing. Nikkei was first to report the joint venture.

According to the filing, each party will own 50% of the venture to develop and manufacture electric vehicles and engage in an IOV, what Foxconn parent company Hon Hai calls the “internet of vehicles” business. Hon Hai’s direct shareholding in the subsidiary will not exceed 40%, the filing says.

The venture will initially focus on making electric vehicles for China. But these vehicles could be exported at a later date, according to Foxconn.

The wording in the regulatory filing suggests these will be new vehicles that are designed and built from the ground up and not a project to electrify any of the vehicles in FCA’s current portfolio.

The venture could give FCA a better path to capturing more business in China, the world’s largest market for electric vehicles.

Foxconn has invested in other electric vehicle ventures before, although this appears to be the first tie-up in which the company will develop and build the product. EV startup Byton was originally started as Future Mobility Corporation as a joint venture between Harmony Auto, Tencent and Foxconn. And Foxconn is also an investor in XPeng Motors, the Chinese electric vehicle startup that recently raised a fresh injection of $400 million in capital and has taken on Xiaomi  as a strategic investor.

Joby Aviation raises $590 million led by Toyota to launch an electric air taxi service

By Darrell Etherington

Joby Aviation has raised a $590 million Series C round of funding, including $394 million from lead investor Toyota Motor Corporation, the company announced today. Joby is in the process of developing an electric air taxi service, which will make use of in-house developed electric vertical take-off and landing (eVTOL) aircraft that will in part benefit from strategic partner Toyota’s vehicle manufacturing experience.

This brings the total number of funding in Joby Aviation to $720 million, and its list of investors includes Intel Capital, JetBlue Technology Ventures, Toyota AI Ventures and more. Alongside this new round of funding, Joby gains a new board member: Toyota Motor Corporation EVP Shigeki Tomoyama.

Founded in 2009, Joby Aviation is based in Santa Cruz, California. The company was founded by JoeBen Bevirt, who also founded consumer photo and electronics accessory maker Joby. Its proprietary aircraft is a piloted eVTOL, which can fly at up to 200 miles per hour for a total distance of over 150 miles on a single charge. Because it uses an electric drivetrain and multi rotor design, Joby Aviation says it’s “100 times quieter than conventional aircraft during takeoff and landing, and near-silent when flying overhead.”

These benefits make eVTOL craft prime candidates for developing urban aerial transportation networks, and a number of companies, including Joby as well as China’s EHang, Airbus and more are all working on this type of craft for use in this kind of city-based short-hop transit for both people and cargo.

The sizeable investment made by Toyota in this round is a considerable bet for the automaker on the future of air transportation. In a press release detailing the round, Toyota President and CEO Akio Toyoda indicated that the company is serious about eVTOLs and air transport in general.

“Air transportation has been a long-term goal for Toyota, and while we continue our work in the automobile business, this agreement sets our sights to the sky,” Toyoda is quoted as saying. “As we take up the challenge of air transportation together with Joby, an innovator in the emerging eVTOL space, we tap the potential to revolutionize future transportation and life. Through this new and exciting endeavor, we hope to deliver freedom of movement and enjoyment to customers everywhere, on land, and now, in the sky.”

Joby Aviation believes that it can achieve significant cost benefits vs. traditional helicopters for short aerial flights, eventually lowering costs through maximizing utilization and fuel savings to the point where it can be “accessible to everyone.” To date, Joby has completed sub-scale testing on its aircraft design, and begun full flight tests of production prototypes, along with beginning the certification process for its aircraft with the Federal Aviation Administration (FAA) at the end of 2018.

Mobileye takes aim at Waymo

By Kirsten Korosec

Mobileye has built a multi-billion-dollar business supplying automakers with computer vision technology that powers advanced driver assistance systems. It’s a business that last year generated nearly $1 billion in sales for the company. Today, 54 million vehicles on the road are using Mobileye’s computer vision technology.

In 2018, the company made what many considered a bold and risky move when it expanded its focus beyond being a mere supplier to becoming a robotaxi operator. The upshot: Mobileye wants to compete directly with the likes of Waymo and other big players aiming to deploy commercial robotaxi services.

TechCrunch sat down with Amnon Shashua, Mobileye’s president and CEO and Intel senior vice president, to find out why and how — yep, acquisitions are in the future — the company will hit its mark.

2019 Africa Roundup: Jumia IPOs, China goes digital, Nigeria becomes fintech capital

By Jake Bright

2019 brought more global attention to Africa’s tech scene than perhaps any previous year.

A high profile IPO, visits by both Jacks (Ma and Dorsey), and big Chinese startup investment energized that.

The last 12 months served as a grande finale to 10 years that saw triple digit increases in startup formation and VC on the continent.

Here’s an overview of the 2019 market events that captured attention and capped off a decade of rapid growth in African tech.

IPOs

The story of the year is the April IPO on the NYSE of Pan-African e-commerce company Jumia. This was the first listing of a VC backed tech company operating in Africa on a major global exchange —  which brought its own unpredictability.

Founded in 2012, Jumia pioneered much of its infrastructure to sell goods to consumers online in Africa.

With Nigeria as its base market, the Rocket Internet backed company created accompanying delivery and payments services and went on to expand online verticals into 14 Africa countries (though it recently exited a few). Jumia now sells everything from mobile-phones to diapers and offers online services such as food-delivery and classifieds.

Seven years after its operational launch, Jumia’s stock debut kicked off with fanfare in 2019, only to be followed by volatility.

The online retailer gained investor confidence out of the gate, more than doubling its $14.95 opening share price post IPO.

That lasted until May, when Jumia’s stock came under attack from short-seller Andrew Left,  whose firm Citron Research issued a report accusing the company of fraud. The American activist investor’s case was bolstered, in part, by a debate that played out across Africa’s tech ecosystem on Jumia’s legitimacy as an African startup, given its (primarily) European senior management.

The entire affair was further complicated by Jumia’s second quarter earnings call when the company disclosed a fraud perpetrated by some of its employees and sales agents. Jumia’s CEO Sacha Poignonnec emphasized the matter was closed, financially marginal and not the same as Andrew Left’s short-sell claims.

Whatever the balance, Jumia’s 2019 ups and downs cast a cloud over its stock with investors. Since the company’s third-quarter earnings-call, Jumia’s NYSE share-price has lingered at around $6 — less than half of its original $14.95 opening, and roughly 80% lower than its high.

Even with Jumia’s post-IPO rocky road, the continent’s leading e-commerce company still has heap of capital and is on pace to generate over $100 million in revenues in 2019 (albeit with big losses).

The company plans reduce costs by generating more revenue from higher-margin internet services, such as payments and classifieds.

There’s a fairly simple equation for Jumia to rebuild shareholder confidence in 2020: avoid scandals, increase revenues over losses. And now that the company’s publicly traded — with financial reporting requirements — there’ll be four earnings calls a year to evaluate Jumia’s progress.

Jumia may not be the continent’s standout IPO for much longer. Events in 2019 point to Interswitch becoming the second African digital company to list on a global exchange in 2020.  The Nigerian fintech firm confirmed to TechCrunch in November it had reached a billion-dollar unicorn valuation, after a (reported) $200 million investment by Visa.

Founded in 2002 by Mitchell Elegbe, Interswitch created much of the initial infrastructure to digitize Nigeria’s (then) predominantly cash-based economy. Interswitch has been teasing a public listing since 2016, but delayed it for various reasons. With the company’s billion-dollar valuation in 2019, that pause is likely to end.

“An [Interswitch] IPO is still very much in the cards; likely sometime in the first half of 2020,” a source with knowledge of the situation told TechCrunch .

China-Africa goes digital

2019 was the year when Chinese actors pivoted to African tech. China is known for its strategic relationship with Africa based (largely) on trade and infrastructure. Over the last 10 years, the country has been less engaged in the continent’s digital-scene.

china africa techThat was until a torrent of investment and partnerships this past year.

July saw Chinese-owned Opera raise $50 million in venture spending to support its growing West African digital commercial network, which includes browser, payments and ride-hail services.

In August, San Francisco and Lagos-based fintech startup Flutterwave partnered with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.

In September, China’s Transsion  — the largest smartphone seller in Africa — listed in an IPO on Shanghai’s new STAR Market. The company raised ≈ $394 million, some of which it is directing toward venture funding and operational expansion in Africa.

The last quarter of 2019 brought a November surprise from China in African tech. Over 15 Chinese investors placed over $240 million in three rounds. Transsion backed consumer payments startup PalmPay raised a $40 million seed, stating its goal to become “Africa’s largest financial services platform.”

Chinese investors also backed Opera-owned OPay’s $120 million raise and East-African trucking logistics company Lori Systems’ (reported) $30 million Series B.

In the new year, TechCrunch will continue to cover the business arc of this surge in Chinese tech investment in Africa. There’ll surely be a number of fresh macro news-points to develop, given the debate (and critique) of China’s engagement with Africa.

Nigeria and fintech

On debate, the case could be made that 2019 was the year when Nigeria become Africa’s unofficial capital for fintech investment and digital finance startups.

Kenya has held this title hereto, with the local success and global acclaim of its M-Pesa mobile-money product. But more founders and VCs are opting for Nigeria as the epicenter for digital finance growth on the continent.Nigeria naira

A rough tally of 2019 TechCrunch coverage — including previously mentioned rounds — pegs fintech related investment in the West African country at around $400 million over the last 12 months. That’s equivalent to roughly one-third of all startup VC raised for the entire continent in 2018, according to Partech stats.

From OPay to PalmPay to Visa — startups, big finance companies and investors are making Nigeria home-base for their digital finance operations and Africa expansion strategies.

The founder of early-stage payment startup ChipperCash, Ham Serunjogi, explained the imperative to operating there. “Nigeria is the largest economy and most populous country in Africa. Its fintech industry is one of the most advanced in Africa, up there with Kenya  and South Africa,” he told TechCrunch in May.

When all the 2019 VC numbers are counted, it will be worth matching up fintech stats for Nigeria to Kenya to see how the countries compared.

Acquisitions

Tech acquisitions continue to be somewhat rare in Africa, but there were several to note in 2019. Two of the continent’s powerhouse tech incubators joined forces in September, when Nigerian innovation center and seed-fund CcHub acquired Nairobi based iHub, for an undisclosed amount.

CChub ihub Acquisition

The acquisition brought together Africa’s most powerful tech hubs by membership networks, volume of programs, startups incubated and global visibility. It also elevated the standing of CcHub’s Bosun Tijani across Africa’s tech ecosystem, as the CEO of the new joint-entity, which also has a VC arm.

CcHub CEO Bosun Tijani1

CcHub/iHub CEO Bosun Tijani

In other acquisition activity, French television company Canal+ acquired the ROK film studio from Nigerian VOD company IROKOtv, for an undisclosed amount. The deal put ROK founder and producer Mary Njoku in charge of a new organization with larger scope and resources.

Many outside Africa aren’t aware that Nigeria’s Nollywood is the Hollywood of the continent and one of the largest film industries in the world (by production volume). Canal+ told TechCrunch it looks to bring Mary and the Nollywood production ethos to produce content in French speaking African countries.

Other notable 2019 African tech takeovers included Kenyan internet company BRCK’s acquisition of ISP Surf, Nigerian digital-lending startup OneFi’s Amplify buy and Merck KGaa’s purchase of Kenya-based online healthtech company ConnectMed.

Moto ride-hail mania

In 2019, Africa’s motorcycle ride-hail market — worth an estimated $4 billion — saw a flurry of investment and expansion by startups looking to scale on-demand taxi services. Uber and Bolt got into the motorcycle taxi business in Africa in 2018.

Ampersand Africa e motorcycle

Ampersand in Rwanda

A number of local and foreign startups have continued to grow in key countries, such as Nigeria, Uganda and Kenya.

A battle for funding and market-share emerged in Nigeria in 2019, between key moto ride-hail startups Max.ng, Gokada, and Opera owned ORide.

The on-demand motorcycle market in Africa has attracted foreign investment and moved toward EV development. In May, MAX.ng raised a $7 million Series A round with participation from Yamaha and is using a portion to pilot renewable energy powered e-motorcycles in Africa.

In August, the government of Rwanda announced a national policy to phase out gas-motorcycle taxis altogether in favor of e-motos, in partnership with early-stage EV startup Ampersand.

New funds

The past year saw several new funding initiatives for Africa’s startups. Senegalese VC investor Marieme Diop spearheaded Dakar Network Angels, a seed-fund for startups in French-speaking Africa — or 24 of the continent’s 54 countries.

Africinvest teamed up with Cathay Innovation to announce the Cathay Africinvest Innovation Fund, a $100+ million capital pool aimed at Series A to C-stage startup investments in fintech, logistics, AI, agtech and edutech.

Accion Venture Lab launched a $24 million fintech fund open to African startups.

And Naspers offered more details on who can pitch to its 1.4 billion rand (≈$100 million) Naspers Foundry fund, which made its first investment in online cleaning services company SweepSouth.

Closed up shop

Like any tech ecosystem, not every startup in Africa killed it or even continued to tread water in 2019. Two e-commerce companies — DealDey in Nigeria and Afrimarket in Ivory Coast — closed up digital shop.

Southern Africa’s Econet Media shut down its Kwese TV digital entertainment business in August.

And South Africa based, Pan-African focused cryptocurrency payment startup Wala ceased operations in June. Founder Tricia Martinez named the continent’s poor infrastructure as one of the culprits to shutting down. A possible signal to the startup’s demise could have been its 2017 ICO, where Wala netted only 4% of its $30 million token-offering.

Africa’s startups go global

2019 saw more startups expand products and business models developed in Africa to new markets abroad. In March, Flexclub — a South African venture that matches investors and drivers to cars for ride-hailing services — announced its expansion to Mexico in a partnership with Uber.

In May, ExtraCrunch profiled three African founded fintech startups — Flutterwave, Migo and ChipperCash — developing their business models strategically in Africa toward plans to expand globally.

By December, Migo (formerly branded Mines) had announced its expansion to Brazil on a $20 million Series B raise.

2020 and beyond

As we look to what could come in the new year and decade for African tech, it’s telling to look back. Ten years ago, there were a lot of “if” questions on whether the continent’s ecosystem could produce certain events: billion dollar startup valuations, IPOs on major exchanges, global expansion, investment from the world’s top VCs.

All those questionable events of the past have become reality in African tech, even if some of them are still in low abundance.

There’s no crystal ball for any innovation ecosystem — not the least Africa’s — but there are several things I’ll be on the lookout for in 2020 and beyond.

Two In the near term, start with what Twitter/Square CEO Jack Dorsey may do around Bitcoin and cryptocurrency on his return to Africa (lookout for an upcoming TechCrunch feature on this).

I’ll also follow the next-phase of e-commerce in Africa, which could pit Jumia more competitively against DHL’s Africa eShop, Opera and China’s Alibaba (which hasn’t yet entered Africa in full).

On a longer-term basis, a development to follow is how the continent’s first wave of millionaire and billionaire tech-founders could disrupt 21st century dynamics in Africa around politics, power, and philanthropy —  hopefully for the better.

More notable 2019 Africa-related coverage @TechCrunch

China nears completion of its GPS competitor, increasing the potential for internet Balkanization

By Jonathan Shieber

On Friday, China announced that it would complete its competitor to the U.S.-operated global positioning system network by the first half of next year, increasing the pace of its decoupling from U.S. technologies.

China’s Beidou network of satellites — named after the “Big Dipper” constellation — will be the first service to compete with the U.S. Air Force’s global positioning system and already has a potentially massive user base as more than 70% of Chinese smartphones are now ready to use its positioning services, according to a report in the Nikkei Asian Review.

The Beidou network is integral to China’s long-term plans to dominate the next generation of telecommunications services and — coupled with China’s advances in fifth-generation wireless communications technology — represents a significant challenge to the U.S. hegemony over telecommunications infrastructure.

China plans to launch by June 2020 the final two satellites needed to make the Beidou system operational, according to a statement from the project’s director, Ran Chengqi quoted by The Associated Press.

Envisioning a system where China’s global positioning system and fifth-generation wireless networking technologies work in tandem, China could command a lion’s share of the market for new telecommunications services.

A test of how these technologies could work in tandem is being developed in Wuhan, where both 5G and Beidou’s mapping technologies will be used to create an autonomous vehicle testbed on a 28-kilometer stretch of road.

Beidou already has 120 partners signed up to work with the service — all linked to agreements made under China’s expanding Belt and Road infrastructure initiative, according to Nikkei.

Chinese smartphone manufacturers accounted for more than 40% of sales worldwide as of the second quarter of 2019, the latest data from Counterpoint Research shows.

China’s GPS rolled out in phases, beginning with a domestic service launched in 2000 and a regional service for Asia Pacific coming online in 2012.

By 2020, the nation’s network of 35 satellites will exceed the U.S. system that’s currently in place.

“There is certainly an aspect of this that is about expanding influence, but part of it is likely also about economic security,” Alexandra Stickings, from the Royal United Services Institute for Defense and Security Studies, told the BBC last year. “The main advantage of having your own system is security of access, in the sense that you are not relying on another country to provide it. The US could deny users access over certain areas, for example in times of conflict.”

Space is an area of strategic importance for the Chinese government. The country has already achieved significant milestones, including quantum communications powered by its space capabilities and the first exploration of the far side of the Moon. And current plans are in place for China to send a probe to Mars in 2020 as it prepares to complete a space station by 2022.

It’s against this backdrop of increasing activity in space — even as tensions mount terrestrially — that the U.S. created the latest branch of its armed forces under the moniker of the Space Force.

Citing Chinese state media, the Nikkei Times reported that the value of goods and services tied to Beidou will reach $57 billion by 2020. The figure itself is nebulous, but points to the kind of economic power Beijing hopes to yield through the new satellite positioning service.

The development of these alternative internet realities matters a great deal.

As Eric Schmidt, the former chief executive officer of Google — and no stranger to the operations of Chinese technology companies — noted last year at a private dinner (first reported by CNBC):

[The] Chinese Internet is a greater percentage of the GDP of China, which is a big number, than the same percentage of the US, which is also a big number. If you think of China as like ‘Oh yeah, they’re good with the Internet,’ you’re missing the point. Globalization means that they get to play too. I think you’re going to see fantastic leadership in products and services from China. There’s a real danger that along with those products and services comes a different leadership regime from government, with censorship, controls, etc. Look at the way BRI works – their Belt and Road Initiative, which involves 60-ish countries – it’s perfectly possible those countries will begin to take on the infrastructure that China has with some loss of freedom.

 

Tesla to begin delivering China-built Model 3 cars next week

By Darrell Etherington

Tesla will start making the first deliveries of its Shanghai-built Model 3 sedans on Monday, Bloomberg reports. The cars are rolling off the assembly line at the new Tesla Shanghai Gigafactory, which is operational but which will also be expanding in future thanks to a fresh $1.4 billion injection in local funding reported earlier this week.

The Shanghai gigafactory’s construction only began earlier this year, and its turnaround time in terms of construction and actually producing vehicles is impressive. The Model 3 vehicles built in China will provide a price break vs. imported vehicles, since cars made in-country enjoy exemption from a 10% tax applied to imported cars. Tesla Model 3s build in China will also get a government purchase incentive of as much as $3,600 per car, which should drive even higher sales.

Tesla’s Shanghai factory is its first manufacturing facility outside of the country, though there’s also a gigafactory in the works in Germany just outside of Berlin, and Tesla has teased plans for at least a fifth gigafactory with a location to be revealed later.

Tesla’s production capacity in Shanghai probably isn’t ver high-volume to begin with, although the company has said previously it was targeting a production rate of around 1,000 cars per week by year’s end, with potential to ramp up to around 3,000 cars per week. Tax breaks and incentives have helped demand for the Model 3 in China grow significantly in 2019, so any progress on production in-country is bound to help lift global vehicle sales.

Huawei reportedly got by with a lot of help from the Chinese government

By Brian Heater

For those following Huawei’s substantial rise over the past several years, it’ll come as no surprise that the Chinese government played an important role in fostering the hardware maker. Even so, the actual numbers behind the ascent are still a bit jaw-dropping. Huawei reportedly had “access to as much as $75 billion in state support,” according to a piece published by The Wall Street Journal on Christmas Day.

That massive figure is culled from poring over various forms, including grants and tax breaks. Huawei, for its part, isn’t denying any government support, but said in response that what it received was “small and non-material,” in line with the usual variety of grants awarded to tech startups and companies.

Per WSJ’s accounting of public records, Huawei got around $46 billion in loans and other support, coupled with $25 billion in tax cuts used to accelerate tech advances. There’s also a billion or two here and there for things like land discounts and grants. At the very least, it seems China had a vested interest in the rise of a hardware company that could go head to head with the likes of Apple and Samsung. Certainly it’s not unheard of that a government would foster some growth in the form of grants, but there’s a clear question of how much. 

The phone maker’s alleged close ties to its government have been a major sticking point in its swift international expansion. Such notions have raised flags in the United States, where the company has been barred from providing mobile hardware for government bodies. Many leaders have also raised concerns over use of Huawei telecom equipment, as the company looks to be a linchpin in a global 5G rollout.

Due to such perception and central role in U.S./China trade tensions, it’s no surprise the company was quick to deny any such ties. Huawei has, of course, been hampered by a U.S. trade ban that has barred the use of U.S.-originated hardware and software. A domestic push and patriotic ad campaign, however, have helped its sales figures in China, even as it has struggled to expand in other parts of the world.

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

By Devin Coldewey

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

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

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

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

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

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

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

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

China shows off its newest satellite’s high-resolution 3D imagery

By Devin Coldewey

China launched the Gaofen-7 imaging satellite in November, and the country has just shared the first of its high-resolution, 3D shots. The satellite is sensitive enough to height that it should be able to spot a single person from 500 kilometers up.

Gaofen-7 is the latest in a planned series of 14 satellites intended to overhaul China’s orbital imaging capabilities. Companies like Planet are lofting hundreds of satellites to provide terrestrial businesses with up-to-date imagery, so it’s natural that China, among other countries, would want to have their own.

Already the Gaofen project has led to a huge reduction in reliance on foreign sources for this critical data, which as frictions in other areas of technology have shown, may not always be possible to rely on.

Each new satellite has added unique or improved capabilities to the constellation, using different orbits and equipment to provide different data to the surface. Gaofen-7 combines multispectral cameras with highly precise laser altimetry to provide extremely detailed 3D images of structures and land forms.

Obviously this isn’t full resolution, but you get a sense of the level of detail provided.

Under ideal conditions, the satellite can produce color imagery at a sub-meter resolution, meaning objects less than a meter across can be detected, and with about 1.5 meter resolution for depth. So if a person is lying down, it’ll see them — and if they stand up, they’ll see them too.

Of course it’s nowhere near the sensitivity of a scientific instrument like NASA’s ICESat-2, which can detect height down to an inch or so. But Gaofen-7 is a more general-purpose satellite, intended for things like surveying and construction.

“It’s like a precise ruler for measuring the land,” the satellite’s lead designer, Cao Haiyi, told China’s state-run Xinhua news agency. “In the past, surveying and mapping work was labor-intensive and lasted for months or even years. With the new satellite, these tasks can be completed in minutes. Before the launch of Gaofen-7, we could only precisely locate super-highways, but now Gaofen-7 can help us accurately locate rural roads.”

Gaofen-7 has already taken thousands of images and is intended to last at least eight years in orbit. Some of the imagery from the project will be made globally available, but Gaofen-7’s will probably be proprietary for some time to come.

China Roundup: Y Combinator’s short-lived China dream

By Rita Liao

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. Last week, we looked at how Alibaba and Tencent fared in the last quarter; the talk in Silicon Valley and Beijing this week is on Y Combinator’s sudden retreat from China. We will also discuss the enduring food delivery war in the country later.

Brief adventure in the East

The storied Silicon Valley accelerator Y Combinator announced the closure of its China unit just a little over a year after it entered the country. In a vague statement posted on its official blog, the organization said the decision came amid a change in leadership. Sam Altman, its former president who hired legendary artificial intelligence scientist Lu Qi to initiate the China operation, recently left his high-profile role to join research outfit OpenAI. With that, YC has since refocused its energy to support “local and international startups from our headquarters in Silicon Valley.”

What was untold is the insurmountable challenge that multinationals face in their attempt to win in a wildly different market. Lu Qi, who wore management hats at Baidu and Microsoft before joining YC, was clearly aware of the obstacles when he said in an interview (in Chinese) in May that “multinational corporations in China have almost been wiped out. They almost never successfully land in China.” The prescription, he believes, is to build a local team that’s given full autonomy to make decisions around products, operations, and the business.

A former executive at an American company’s China branch, who asked to remain anonymous, argued that Lu Qi’s one-man effort can’t be enough to beat the curse of multinationals’ path in China. “All I can say is: Lu has taken a detour. Going independent is the best decision. When it comes to whether Chinese startups are suited for mentorship, or whether incubators bring value to China, these are separate questions.”

What’s curious is that YC China seemed to have been given a meaningful level of freedom before the split. “Thanks to Sam Altman and the U.S. team, who agreed with my view and supported with much preparation, YC China is not only able to enjoy key resources from YC U.S. but can also operate at a completely independent capacity,” Lu said in the May interview.

Moving on, the old YC China team will join Lu Qi to fund new companies under a newly minted program, MiraclePlus, announced YC China via a Wechat post (in Chinese). The initiative has set up its own fund, team, entity and operational team. The deep ties that Lu has fostered with YC will continue to benefit his new portfolio, which will receive “support” from the YC headquarters, though neither party elaborated on what that means.

Alibaba’s food delivery nemesis

The food delivery war in China is still dragging on two years after the major consolidation that left the market with two major players. Meituan, the local services company backed by Tencent, has managed to attain an expanding share against Alibaba-owned Ele.me. According to third-party data (in Chinese) provided by Trustdata, Meituan accounted for 65.1% of China’s overall food delivery orders during the second quarter, steadily rising from just under 60% a year ago. Ele.me, on the other hand, has lost nearly 10% of the market, slumping to 27.4% from 36% a year ago.

In terms of monetization, Meituan generated 15.6 billion yuan ($2.2 billion) in revenue from its food delivery segment in the quarter ended September 30. That dwarfs Ele.me, which racked up 6.8 billion yuan ($970 million) during the same period. Both are growing north of 30% year-over-year.

meituan dianping

Source: Meituan

This may not be all that surprising given Alibaba has arguably more imminent battles to fight. The e-commerce leader has been consumed by the rise of Pinduoduo, which has launched an assault on China’s low-tier cities with its ultra-cheap products and social-driven online shopping experience. Meituan, on the other hand, is fixated on beefing up its main turf of on-demand neighborhood services after divesting its costly bike-sharing endeavor. 

When both contestants have the capital to burn through — as they have demonstrated through heavily subsidizing customers and restaurants — the race comes down to which has greater control of user traffic. Meituan holds a competitive edge thanks to its merger with Dianping, a leading restaurant review app akin to Yelp, back in 2015. Dianping today operates as a standalone brand but its food app is deeply integrated with Meituan’s delivery services. For example, hundreds of millions of users are able to place Meituan-powered food delivery orders straight from Dianping.

Alibaba and Meituan used to be on more friendly terms just a few years ago. In 2011, the e-commerce giant participated in Meituan’s $50 million Series B financing. Before long, the two clashed over control of the company. Alibaba is known to impose a heavy hand on its portfolio companies by taking up majority stakes and reshuffling the company with new executives. That’s because Alibaba believes that “only when you operate can you generate synergies and really create exponential value,” said vice chairman Joe Tsai in an interview. Whereas if you just make a financial investment, you’re counting an internal rate of return. You’re not creating real value.”

Ele.me lived through that transformation. As of September, Alibaba has reportedly (in Chinese) completed replacing Ele.me’s management with its pool of appointed personnel. Ele.me’s founder Zhang Xuhao left the company with billions of yuan in cash and joined a venture capital firm (in Chinese).

Meituan’s founder Wang Xing had more unfettered pursuits. In a later financing round, he refused to accept Alibaba’s condition for portfolio companies to eschew Tencent investments, a strategy of the giant to hobble its archrival. That botched the partnership and Alibaba has since been gradually offloading its Meituan shares but still held onto small amounts, according to Wang in 2017, “to create trouble” for Meituan going forward.

Chinese spy defects to Australia, alleging election interference and cybercrimes

By Devin Coldewey

A purported agent of the Chinese intelligence service is seeking asylum in Australia, bringing with him explosive allegations of widespread interference in political affairs in that country, Taiwan, and elsewhere. He claims also to have run a cyberterrorism campaign against supporters of Hong Kong independence.

Wang “William” Liqiang, indicated to Australian news outlet The Age that during a deep cover assignment intended to manipulate the 2020 presidential election in Taiwan, he decided to defect and expose the Chinese networks from abroad.

In addition to The Age, Wang spoke with the Sydney Morning Herald and 60 Minutes; the various outlets appear to be planning a broader release of the contents of his interviews on Monday.

Wang has reportedly explained in detail the inner workings of a Hong Kong-listed company called China Innovation Investment Limited, which the government has allegedly been using as a front to infiltrate various universities, political groups, and media companies.

He claims to have personally been involved in the infamous kidnapping of Lee Bo and other booksellers in Hong Kong whose disappearance prompted widespread protests.

He also says that he helped direct a “cyber army” to dox, attack, and otherwise harass Hong Kong’s independence protestors, and that he was working on establishing one to affect the 2020 election in Taiwan.

Operations in Australia and other countries were implied but not detailed in initial reports of Wang’s defection. He is reportedly currently at an undisclosed location in Sydney pending formal protections from the Australian government.

More information is expected to be revealed on Monday by the outlets Wang spoke to, so stay tuned.

FCC bans spending on Huawei, ZTE and other ‘national security threats’

By Devin Coldewey

The FCC has finally put the seal of approval on its plan to cut funding going to equipment from companies it deems a “national security threat,” currently an exclusive club of two: Huawei and ZTE.

No money from the FCC’s $8.5 billion Universal Service Fund, used to subsidize purchases to support the rollout of communications infrastructure, will be spent on equipment from these companies.

“We take these actions based on evidence in the record as well as longstanding concerns from the executive and legislative branches,” said FCC Chairman Ajit Pai in a statement. “Both companies have close ties to China’s Communist government and military apparatus. Both companies are subject to Chinese laws broadly obligating them to cooperate with any request from the country’s intelligence services and to keep those requests secret. Both companies have engaged in conduct like intellectual property theft, bribery, and corruption.”

The Chinese companies have faced federal scrutiny for years and vague suspicions of selling compromised hardware that the government there could take advantage of, but it was only at the beginning of 2019 that things began to heat up with the controversial arrest of Huawei CFO Meng Wanzhou. The companies, it hardly needs mentioning, have vehemently denied all allegations.

Increasingly complicated relations between China and the U.S. generally compounded the difficulty of ZTE and Huawei operating in the States, as well as selling to or purchasing from American companies.

The FCC’s new rule was actually proposed well before things escalated, a fact that Commissioner Jessica Rosenworcel, though she supported the measure, emphasized.

“This is not hard,” she wrote in a statement accompanying the new rule. “It should not have taken us eighteen months to reach the conclusion that federal funds should not be used to purchase equipment that undermines national security.”

Working out the details may have been difficult, however, given the generally chaotic state of the federal government right now. For instance, one month this summer it was going to be illegal for U.S. firms to sell their products to Huawei — and then it wasn’t. Just yesterday several Senators wrote to protest the Department of Commerce issuing licenses to firms doing business with Huawei.

Furthermore, it may be a financial burden for smaller carriers to comply with these rules. There’s a plan for that, though, as Chairman Pai explained: “To mitigate the financial impact of this requirement, particularly on small, rural carriers, we propose to establish a reimbursement program to help offset the cost of transitioning to more trusted vendors.”

Another, earlier proposal, to make communications companies actively remove hardware purchased from those companies, was not considered at November’s open FCC meeting. I’ve asked the agency about this and will update if I hear back.

VTEX, an e-commerce platform used by Walmart, raises $140M led by SoftBank’s LatAm fund

By Ingrid Lunden

E-commerce now accounts for 14% of all retail sales, and its growth has led to a rise in the fortunes of startups that build tools to enable businesses to sell online. In the latest development, a company called VTEX — which originally got its start in Latin America helping companies like Walmart expand their business to new markets with an end-to-end e-commerce service covering things like order and inventory management, front-end customer experience and customer service — has raised $140 million in funding, money it will be using to continue taking its business deeper into more international markets.

The investment is being led by SoftBank, specifically via its Latin American fund, with participation also from Gávea Investimentos and Constellation Asset Management. Previous investors include Riverwood and Naspers; Riverwood continues to be a backer, the company said.

Mariano Gomide, the CEO who co-founded VTEX with Geraldo Thomaz, said the valuation is not being disclosed, but he confirmed that the founders and founding team continue to hold more than 50% of the company. In addition to Walmart, VTEX customers include Levi’s, Sony, L’Oréal and Motorola . Annually, it processes some $2.4 billion in gross merchandise value across some 2,500 stores, growing 43% per year in the last five years.

VTEX is in that category of tech businesses that has been around for some time — it was founded in 1999 — but has largely been able to operate and grow off its own balance sheet. Before now, it had raised less than $13 million, according to PitchBook data.

This is one of the big rounds to come out of the relatively new SoftBank Innovation Fund, an effort dedicated to investing in tech companies focused on Latin America. The fund was announced earlier this year at $2 billion and has since expanded to $5 billion. Other Latin American companies that SoftBank has backed include online delivery business Rappi, lending platform Creditas and property tech startup QuintoAndar.

The common theme among many SoftBank investments is a focus on e-commerce in its many forms (whether that’s transactions for loans or to get a pizza delivered), and VTEX is positioned as a platform player that enables a lot of that to happen in the wider marketplace, providing not just the tools to build a front end, but to manage the inventory, ordering and customer relations at the back end.

“VTEX has three attributes that we believe will fuel the company’s success: a strong team culture, a best-in-class product and entrepreneurs with profitability mindset,” said Paulo Passoni, managing investment partner at SoftBank’s Latin America fund, in a statement. “Brands and retailers want reliability and the ability to test their own innovations. VTEX offers both, filling a gap in the market. With VTEX, companies get access to a proven, cloud-native platform with the flexibility to test add-ons in the same data layer.”

Although VTEX has been expanding into markets like the U.S. (where it acquired UniteU earlier this year), the company still makes some 80% of its revenues annually in Latin America, Gomide said in an interview.

There, it has been a key partner to retailers and brands interested in expanding into the region, providing integrations to localise storefronts, a platform to help brands manage customer and marketplace relations, and analytics, competing against the likes of SAP, Oracle, Adobe and Salesforce (but not, he said in answer to my question, Commercetools, which builds Shopify -style API tools for mid and large-sized enterprises and itself raised $145 million last month).

E-commerce, as we’ve pointed out, is a business of economies of scale. Case in point: While VTEX processes some $2.5 billion in transactions annually, it makes a relatively small return on that — $69 million, to be exact. This, plus the benefit of analytics on a wider set of big data (another economy of scale play), are two of the big reasons VTEX is now doubling down on growth in newer markets like Europe and North America. The company now has 122 integrations with localised payment methods.

“At the end of the day, e-commerce software is a combination of knowledge. If you don’t have access to thousands of global cases you can’t imbue the software with knowledge,” Gomide said. “Companies that have been focused on one specific region are now realising that trade is a global thing. China has proven that, so a lot of companies are now coming to us because their existing providers of e-commerce tools can’t ‘do international.’ ” There are very few companies that can serve that global approach and that is why we are betting on being a global commerce platform, not just one focused on Latin America.”

Y Combinator abruptly shutters YC China

By Devin Coldewey

Prolific startup accelerator Y Combinator has abandoned plans to establish a branch of the program in China. The company cites a general change in strategy, but a deafening silence on the complexity and controversy of working with China right now suggests there’s more at play.

In a short blog post, YC leadership explained that “as we worked to establish YC China, we had a change in leadership,” viz. the replacement of CEO Sam Altman with Geoff Ralston in May. This apparently led to a complete about-face on YC’s China strategy.

Qi Lu, hired a little more than a year ago to lead the YC China effort, is departing to run his own program, MiraclePlus. And Chinese companies will still be welcome at Y Combinator “— but as part of our U.S. program.”

A Y Combinator representative confirmed that it has no involvement with MiraclePlus or Qi Lu whatsoever, and that the company will no longer have any local presence in China at all.

It’s hard to accept at face value this vague explanation for such a costly, high-profile retreat.

Altman said when announcing Qi’s hiring that he had been trying to recruit him “for years.” As for the program itself, Altman said that “China has been an important missing piece of our puzzle” and that they would be building “a long-term local organization that will combine the best of Silicon Valley and China.”

That there is no mention of the uncertain international politics and U.S.-China relations right now, nor the explosive situation in Hong Kong, or ongoing human rights issues elsewhere in the country, seems a deliberate choice to make this move seem as ordinary as possible. But those things are major questions for anyone looking to do business in China, and it’s hard to believe none had any bearing on the decision to abruptly pack up and leave a major enterprise behind.

It seems like with a company like Y Combinator, it would be easy enough to provide a modicum of transparency and say that there was a mismatch in culture, or the logistics weren’t working out, or they ended up forwarding too many of the companies to the YC prime location anyway.

Perhaps that information was not deemed material for a public statement, but it only leaves inquiring minds to speculate. Was there pressure from this or that quarter? Is the culture at YC changing? Are other Altman-era projects being abandoned? Did the company gain anything at all by this boondoggle?

For such a major endeavor by one of the most prominent tech communities in Silicon Valley, this highly guarded and obviously incomplete account of its total abandonment seems strange and inadequate. We’ll be looking into it further.

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