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Westward plans a $30M debut fund to take Chinese indie games global

By Rita Liao

In Hefei, a Chinese city known for its relics from the Three Kingdoms period and its manufacturing industry today, Maxim Rate was thrilled to find a small studio crafting a Western role-playing game, a genre that attracts lovers of gritty aesthetics and dark storylines.

“The design and computer graphics are really good. You can’t tell they are a Chinese team,” said Rate.

Rate’s mission is to find Chinese studios like the bootstrapped Hefei team and help them woo international players. As Chinese regulators tighten rules on game publishing and make licenses hard to obtain in recent years, small studios find themselves struggling. Since last year, Apple has pulled thousands of unlicensed games from its Chinese App Store at the behest of local authorities. Small-time developers begin to look beyond their home turf.

“The problem is these startups have no experience in overseas expansion,” said Rate.

An avid gamer himself, Rate quit his job at a Chinese cross-border payment firm last year and launched a part-incubator, part-investment vehicle to take Chinese games abroad. The firm, called Westward Gaming Ventures, took inspiration from Zheng He, a Chinese diplomat and explorer who embarked on state-sponsored naval expeditions to the “Western Oceans” during the Ming Dynasty.

Westward plans to raise 200 million yuan ($30 million) for its debut fund, Rate told TechCrunch in an interview. It plans to deploy the capital over the next three years with an intended check size of 2-4 million yuan per studio. It’s currently in talks with 20-30 teams that span a wide range of genres.

The Chinese fund being established is a so-called Qualified Foreign Limited Partners Fund, which, for the first time, will enable foreign investors (USD and EUR) to invest directly in Chinese gaming firms. Only a few institutions own a license for QFLP, and while Westward itself doesn’t hold one, it gains legitimacy for direct foreign investment by partnering with the private equity arm of a major Chinese financial conglomerate, which declined to be named at this stage.

To navigate such regulatory complications, Westward also seeks help from its advisors, including one that oversaw the legal and financial process of one of the largest joint ventures established between Chinese and foreign gaming firms in recent years. The partnership, which can’t be named, was also the first time a foreign entity has become the majority shareholder in a gaming joint venture in China.

China limits foreign investments in areas it considers sensitive, such as value-added services, so many companies resort to setting up elaborate offshore entities to receive overseas funding. The restriction makes it difficult for resource-strapped studios to land foreign investors, who could help them venture into global markets. They are left with the option of getting backed or bought by Chinese giants like Tencent or ByteDance.

Rise of Chinese plays

The idea of Westward is not just to lower the barriers for independent Chinese games to secure foreign capital but also better prepare them for overseas expansion.

“Chinese gaming studios, big or small, used to rely heavily on ads for user acquisition when they went abroad,” said Rate. “Sometimes a game would take off, but the team had no idea why, so they continued to test. Those who failed may just give up.”

But taking a game abroad is not as simple as translating it, hitting the publish button and launching an ad campaign on Facebook.

Westward’s plan is to get involved in a game’s early development phase and help them position: Is it an RPG? Is the targeted user a casual or serious player? What’s the graphic style? In addition, the firm also plans to supply developers with workspace, technical assistance, marketing and localization expertise, connection to publishers, and overseas operation help.

Image Credits: Westward Gaming Ventures

To provide post-investment support, Westward has partnered up with V+ Gaming Society, an incubator for games headquartered Shenzhen, which Westward also calls home.

Chinese tech companies are facing mounting challenges in the West as geopolitical tensions rise. Many now prefer calling themselves “global firms” and even deny their Chinese roots outright.

But for Westward, the games it helps doesn’t need to pretend they are non-Chinese. “Most players don’t consider where a game is from if it is a really good game,” said Rate.

“We actually hope to see elements of Chinese culture in these games that can be understood by overseas players.”

Amy Ho, a partner at Westward along with Rate and Edward He, said one of the few Chinese games that have managed to be both “Chinese” and transcend cultural boundaries is Chinese Parents. The simulation game became a global hit by letting users experience what it is like to raise a child in China.

The benchmark Rate gave was the generation of Japanese games that began exporting 20-30 years ago, which he described as “Japanese” in spirit but “globalized” in graphics and game design.

There have already been globally successful titles from Chinese makers like Tencent and rising studios Lilith and Mihoyo. In the past, many Chinese users on Steam would be asking foreign titles to rush out Chinese versions. Now, it’s not uncommon to see Western users demanding English editions of Chinese games, Rate observed.

Rather than politics, the bigger challenge, especially for small studios, is how to “collect key data for product iteration while complying with local privacy laws,” said Ho.

50-70% of Westward’s capital will come from Chinese institutions. The presence of Chinese investments inevitably leads to questions around censorship. Ho said while Westward provides resources and capital to studios, it will work to ensure their independence from investor influence.

If things go well, Westward could help facilitate cultural exchange between China and the rest of the world. Beijing has been trying to export the country’s soft power, and games may be a suitable conduit, suggested Rate. Amid the ongoing trade war, having foreign fundings in Chinese companies may also do good to China’s “brand”, he said.

China’s Xpeng in the race to automate EVs with lidar

By Rita Liao

Elon Musk famously said any company relying on lidar is “doomed.” Tesla instead believes automated driving functions are built on visual recognition and is even working to remove the radar. China’s Xpeng begs to differ.

Founded in 2014, Xpeng is one of China’s most celebrated electric vehicle startups and went public when it was just six years old. Like Tesla, Xpeng sees automation as an integral part of its strategy; unlike the American giant, Xpeng uses a combination of radar, cameras, high-precision maps powered by Alibaba, localization systems developed in-house, and most recently, lidar to detect and predict road conditions.

“Lidar will provide the 3D drivable space and precise depth estimation to small moving obstacles even like kids and pets, and obviously, other pedestrians and the motorbikes which are a nightmare for anybody who’s working on driving,” Xinzhou Wu, who oversees Xpeng’s autonomous driving R&D center, said in an interview with TechCrunch.

“On top of that, we have the usual radar which gives you location and speed. Then you have the camera which has very rich, basic semantic information.”

Xpeng is adding lidar to its mass-produced EV model P5, which will begin delivering in the second half of this year. The car, a family sedan, will later be able to drive from point A to B based on a navigation route set by the driver on highways and certain urban roads in China that are covered by Alibaba’s maps. An older model without lidar already enables assisted driving on highways.

The system, called Navigation Guided Pilot, is benchmarked against Tesla’s Navigate On Autopilot, said Wu. It can, for example, automatically change lanes, enter or exit ramps, overtake other vehicles, and maneuver another car’s sudden cut-in, a common sight in China’s complex road conditions.

“The city is super hard compared to the highway but with lidar and precise perception capability, we will have essentially three layers of redundancy for sensing,” said Wu.

By definition, NGP is an advanced driver-assistance system (ADAS) as drivers still need to keep their hands on the wheel and take control at any time (Chinese laws don’t allow drivers to be hands-off on the road). The carmaker’s ambition is to remove the driver, that is, reach Level 4 autonomy two to four years from now, but real-life implementation will hinge on regulations, said Wu.

“But I’m not worried about that too much. I understand the Chinese government is actually the most flexible in terms of technology regulation.”

The lidar camp

Musk’s disdain for lidar stems from the high costs of the remote sensing method that uses lasers. In the early days, a lidar unit spinning on top of a robotaxi could cost as much as $100,000, said Wu.

“Right now, [the cost] is at least two orders low,” said Wu. After 13 years with Qualcomm in the U.S., Wu joined Xpeng in late 2018 to work on automating the company’s electric cars. He currently leads a core autonomous driving R&D team of 500 staff and said the force will double in headcount by the end of this year.

“Our next vehicle is targeting the economy class. I would say it’s mid-range in terms of price,” he said, referring to the firm’s new lidar-powered sedan.

The lidar sensors powering Xpeng come from Livox, a firm touting more affordable lidar and an affiliate of DJI, the Shenzhen-based drone giant. Xpeng’s headquarters is in the adjacent city of Guangzhou about 1.5 hours’ drive away.

Xpeng isn’t the only one embracing lidar. Nio, a Chinese rival to Xpeng targeting a more premium market, unveiled a lidar-powered car in January but the model won’t start production until 2022. Arcfox, a new EV brand of Chinese state-owned carmaker BAIC, recently said it would be launching an electric car equipped with Huawei’s lidar.

Musk recently hinted that Tesla may remove radar from production outright as it inches closer to pure vision based on camera and machine learning. The billionaire founder isn’t particularly a fan of Xpeng, which he alleged owned a copy of Tesla’s old source code.

In 2019, Tesla filed a lawsuit against Cao Guangzhi alleging that the former Tesla engineer stole trade secrets and brought them to Xpeng. XPeng has repeatedly denied any wrongdoing. Cao no longer works at Xpeng.

Supply challenges

While Livox claims to be an independent entity “incubated” by DJI, a source told TechCrunch previously that it is just a “team within DJI” positioned as a separate company. The intention to distance from DJI comes as no one’s surprise as the drone maker is on the U.S. government’s Entity List, which has cut key suppliers off from a multitude of Chinese tech firms including Huawei.

Other critical parts that Xpeng uses include NVIDIA’s Xavier system-on-the-chip computing platform and Bosch’s iBooster brake system. Globally, the ongoing semiconductor shortage is pushing auto executives to ponder over future scenarios where self-driving cars become even more dependent on chips.

Xpeng is well aware of supply chain risks. “Basically, safety is very important,” said Wu. “It’s more than the tension between countries around the world right now. Covid-19 is also creating a lot of issues for some of the suppliers, so having redundancy in the suppliers is some strategy we are looking very closely at.”

Taking on robotaxis

Xpeng could have easily tapped the flurry of autonomous driving solution providers in China, including Pony.ai and WeRide in its backyard Guangzhou. Instead, Xpeng becomes their competitor, working on automation in-house and pledges to outrival the artificial intelligence startups.

“The availability of massive computing for cars at affordable costs and the fast dropping price of lidar is making the two camps really the same,” Wu said of the dynamics between EV makers and robotaxi startups.

“[The robotaxi companies] have to work very hard to find a path to a mass-production vehicle. If they don’t do that, two years from now, they will find the technology is already available in mass production and their value become will become much less than today’s,” he added.

“We know how to mass-produce a technology up to the safety requirement and the quarantine required of the auto industry. This is a super high bar for anybody wanting to survive.”

Xpeng has no plans of going visual-only. Options of automotive technologies like lidar are becoming cheaper and more abundant, so “why do we have to bind our hands right now and say camera only?” Wu asked.

“We have a lot of respect for Elon and his company. We wish them all the best. But we will, as Xiaopeng [founder of Xpeng] said in one of his famous speeches, compete in China and hopefully in the rest of the world as well with different technologies.”

5G, coupled with cloud computing and cabin intelligence, will accelerate Xpeng’s path to achieve full automation, though Wu couldn’t share much detail on how 5G is used. When unmanned driving is viable, Xpeng will explore “a lot of exciting features” that go into a car when the driver’s hands are freed. Xpeng’s electric SUV is already available in Norway, and the company is looking to further expand globally.

ConsenSys raises $65M from JP Morgan, Mastercard, UBS to build infrastructure for DeFi

By Mike Butcher

ConsenSys, a key player in crypto and a major proponent of the Ethereum blockchain, has raised a $65 million funding round from J.P. Morgan, Mastercard, and UBS AG, as well as major blockchain companies Protocol Labs, the Maker Foundation, Fenbushi, The LAO and Alameda Research. Additional investors include CMT Digital and the Greater Bay Area Homeland Development Fund. As well as fiat, several funds invested with Ethereum-based stablecoins, DAI and USDC, as consideration.

Sources told TechCrunch that this is an unpriced round because of the valuation risk, and the funding instrument is “full”, so the round is being closed now.

The fundraise looks like a highly strategic one, based around the idea that traditional institutions will need visibility into the increasingly influential world of ‘decentralized finance’ (DeFi) and the Web3 applications being developed on the Ethereum blockchain.

In a statement on the fundraise, ConsenSys said it has been through a “period of strategic evolution and growth”, but most outside observers would agree that this is that’s something of an understatement.

After a period of quite a lot of ‘creative disruption’ to put it mildly (at one point a couple of years ago, ConsenSys seemed to have everything from a VC fund, to an accelerator, to multiple startups under its wing), the company has restructured to form two main arms: ConsenSys, the core software business; and ConsenSys Mesh, the investment arm, incubator, and portfolio. It also acquired the Quorum product from J.P. Morgan which has given it a deeper bench into the enterprise blockchain ecosystem. This means it now has a very key product suite for the Etherum platform, including products such as Codefi, Diligence, Infura, MetaMask, Truffle, and Quorum.

This suite allows it to serve both public and private permissioned blockchain networks. It can also support Layer 2 Ethereum networks, as well as facilitate access to adjacent protocols like IPFS, Filecoin, and others. ConsenSys is also a major contributor to the Ethereum 2.0 project, for obvious reasons.

Commenting on the fundraise, Joseph Lubin, founder of ConsenSys and co-founder, Ethreum said in a statement: “When we set out to raise a round, it was important to us to patiently construct a diverse cap table, consistent with our belief that similar to how the web developed, the whole economy would join the revolutionaries on a next-generation protocol. ConsenSys’ software stack represents access to a new automated objective trust foundation enabled by decentralized protocols like Ethereum. We are proud to partner with preeminent financial firms alongside leading crypto companies to further converge the centralized and decentralized financial domains at this particularly exciting time of growth for ConsenSys and the entire industry.”

With financial institutions able to see, ‘in public’ DeFi happening on Ethereuem, because of the public chain, they can see how much of the financial system is gradually starting to merge with the blockchain world. So it’s becoming clearer what attracts these major institutions.

Mike Dargan, Head of Group Technology at UBS said: “Our investment in ConsenSys adds proven expertise in distributed ledger technology to our UBS Next portfolio.”

For MasterCard this appears to be not just a pure investment – Consensys has been working with it on a private permissioned network.

Raj Dhamodharan, executive vice president of digital asset and blockchain products and partnerships at Mastercard said: “Enterprise Ethereum is a key infrastructure on which we and our partners are building payment and non-payment applications to power the future of commerce… Our investment and partnership with ConsenSys helps us bring secure and performant Enterprise Ethereum capabilities to our customers.”

Colleen Sullivan, Co-Founder and CEO of CMT Digital said: “ConsenSys is the pioneer in bridging the gaps across traditional finance, centralized crypto, and DeFi, and more broadly, between Web 2.0 and Web 3.0. We are proud to participate in this funding round as the ConsenSys team continues to pave the way for global users  — retail and institutional — to easily access the crypto ecosystem.”

TechCrunch understands that the fundraise was started around the time of the Quorum acquisition, last June. The $65 million round is in majority fiat currency as opposed to cryptocurrency and is an adjunct to the round done with JP Morgan last summer.

The presence of significant crypto players such as Maker Protocol Labs shows the significance of the fund-raise, beyond the simple transaction. The announcement also comes just ahead of the Coinbase IPO, which makes for interesting timing.

ConsenSys’ products have become highly significant in the world where developers, enterprises, and consumers meet blockchain and crypto. In its statement, the company claims MetaMask now has over three million monthly active users across mobile and desktop, a 3x increase in the last five or six months, it says. This is roughly the same amount of monthly active customers as Coinbase.

The ConsenSys announcement comes just ahead of the Coinbase IPO. While Coinbase is acting as an exchange to turn fiat into crypto and vice versa, it has also been getting into DeFi of late. Where there are also resemblances with ConsenSys, is that Coinbase, with 3 million users, is used as a wallet, and MetMask, which also has 3 million users, can also be used as a wallet. The comparison ends there, but it’s certainly interesting, given Coinbase’s $100 billion valuation.

As Jeremy Millar, Chief Development Officer, told me: “Coinbase has pioneered an exchange, in one of the world’s was regulated financial markets, the US. And it has helped drive significant interest in the space. We enjoy a very positive relationship with Coinbase, trying to further enable the ecosystem and adoption of the technology.”

The background to this raise is that a lot of early-stage blockchain and crypto companies have been raising a lot of money recently, but much of this has been through crypto investment firms. Only a handful of Silicon Valley VCs are backing blockchain, such as Andreessen Horowitz.

What’s interesting about this announcement is that these incumbent financial giants are not only taking an interest, but working alongside ConsenSys to both invest and build products on Ethereum.

It’s ConsenSys’ view that every payment service provider, banks will need this financial infrastructure in the future, especially for DeFI.

Given there is roughly $43 billion collateralized in DeFi, it’s increasingly the case that major investors are involved, and there are increasingly higher returns than traditional yield and bond or bond yields.

The moves by Central Banks into digital currencies is also forcing companies and governments to realize digital currency, and the ‘blockchain rails’ on which it runs, is here to stay. This is what is suggested by the Greater Bay Area Homeland Development Fund’s (a Shenzhen / Hong Kong joint partnership) decision to get involved.

Another aspect of this story is that ConsenSys is sitting on some extremely powerful products. Consensys has six products that serve three different types of people.

Service developers who are building on Ethereum are using Truffle to develop smart contracts. Users joining the NFT hype are using MetaMask underneath it all.

The MetaMask wallet allows users to swap one token for another. This has proved quite lucrative for ConsenSys, which says it has resulted in $1.8 billion in volume in decentralized exchange use. ConsenSys takes a 0.875 percent cut on every swap that it serves.

And institutions are using Consensys’ products. The company says more than 150,000 developers use Infura’s APIs, and 4.5 million developers create and deploy smart contracts using Truffle, while its Protocols group — developer of Hyperledger Besu and ConsenSys Quorum — are building Central Bank Digital Currencies (CBDCs) for six central banks, says Consensys.

Consensys is also making hay with the NFT boom. Developers are using Consensys products for the nodes and infrastructure on Ethereum which stores the NFT files.

Consensys is also riding two waves. One is the developer eave and the other is the financial system wave.

As a spokesperson said: “Where the interest in money and invention started happening was on public networks like Ethereum. So we really believe that these are converging and they will continue to, and every one of our products offers public main net compatibility because we think this is the future.”

Millar added: “If we want to help the world adopt the technology we need to meet it at its adoption point, which for many large enterprises means inside the firewall first. But similarly, we think, just like the public Internet, the real value – the disruptive value – changes the ability to do this on a broader permissionless basis, especially when you have sufficient privacy and authentication available.”

Chinese hardware makers turn to crowdfunding as they look to go global

By Rita Liao

China’s tech giants have had a rough time in Western markets over the last few years. Huawei and DJI have been hit by trade restrictions, while TikTok and WeChat are threatened with their apps being banned in the U.S. Overall, Chinese companies with an overseas footprint are increasingly wary of rising geopolitical tensions.

But at an event hosted by California-based crowdfunding platform Indiegogo for Chinese consumer product makers in Shenzhen, businesses from sizes ranging from a startup making portable power stations to 53-year-old home appliances behemoth Midea, listened attentively as Indiegogo’s China managers shed light on how to court Western consumers.

“The first stage is to let ourselves be heard by the world. We have done that,” Li Yongqin, general manager of Indiegogo China, exhorted a room of entrepreneurs. “Next, we will bravely ride the tide and accept the challenge of coming the brands loved by users around the world.”

For Midea, “crowdfunding gives us a very direct way to understand consumers,” said Chen Zhenrui, who oversees the group’s overseas e-commerce initiative. Platforms like Indiegogo and Kickstarter are ways for individuals and organizations to raise capital from a large number of people to fund a project. In most cases, backers get perks or rewards from the project they fund.

Midea raised $1.5 million last year for a new air conditioner unit launched on Indiegogo, an almost negligible amount compared to the 280 billion yuan ($42 billion) annual revenue it generated in 2019. But the support from its 3,600 backers on Indiegogo was more a proof of concept.

Within a few weeks, Midea learned that a compact air conditioner that saddles snugly on the window sill, blocks out noise and saves energy could entice many American consumers. Like other established Chinese home appliances makers, Midea had been exporting for several decades.

But “in the past, much of our overseas business was in the traditional, B2B export realm. I think we are still far from being a world-class brand,” said Chen.

When Midea first launched on Indiegogo, a user left comments on its campaign page calling the project a scam: How could a Fortune Global 500 company be on Indiegogo?

“Through rounds of communication, we got to know each other. That user gave us a big push,” Chen recalled, adding that Midea used a dozen of suggestions from Indiegogo backers to improve its product.

Li Yongqin, general manager of Indiegogo China, exhorted a room of entrepreneurs to develop brands loved by global users. Photo: TechCrunch

More and more traditional manufacturers from China are giving crowdfunding a shot. Padmate, based in the southern coastal city of Xiamen, built a new earbud brand called Pamu from its foundation as a white-label maker of sound systems.

Edison Shen, a director at Padmate, said that traditional export was getting harder as old-school distributors became squeezed by new retail channels like e-commerce. By creating their own brands and reaching consumers directly, factories could also improve profit margins. Padmate went on Indiegogo in 2018 and raised over $6.6 million in one of its wireless headphone campaigns.

Most of the projects on Indiegogo will go beyond the 9-million-backer crowdfunding site onto mainstream platforms, listing on Amazon as well as advertising on Google and Facebook. Though the core services of these American Big Tech firms aren’t available in China, they have all set up some form of operational presence in China, whether it’s stationing staff in the country like Amazon or working through local ad resellers like Facebook.

Indiegogo itself opened its China office in Shenzhen five years ago and has since seen China-based projects raise over $300 million through its platform, according to Lu Li, general manager for Indiegogo’s global strategy. China is now the company’s fastest-growing market and accounted for over 40% of the campaigns that raised over $1 million in 2020.

Kickstarter, a rival to Indiegogo, also saw a surge in projects from China, which reached a record $60.5 million in funding in 2020. The Brooklyn-based company recently began looking for a contractor in Shenzhen or the adjacent city Hong Kong to help it research the Chinese market.

“In recent years, more Chinese companies are getting the hang of crowdfunding and taking their brand global, so ‘blockbuster’ campaigns [from China] are also on the rise,” observed Li.

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