Hyper-fundings Of Startups In India As The Next China Have Led To Shutdowns


[Silicon Dragon Weekly News Digest: May 8, 2016]

book cover, The Golden Tap, IndiaINDIA
For startups in India, 2014 was a turning point: global investors deployed billions of dollars, touting India as the next China. However, that influx of capital led to the hyper-funding of startups: too much money, too soon. This trend has indirectly led to today, in which Indian startups are shutting down. Writing for The Quint, Shelly Walia provides an overview of some of the startups that have shut down within the past year (13 startups closed in 2015), and the additional contributing factors, such as investor pressure, heavy discounts, and difficulty recruiting talent for non-traditional roles.
The article echoes a book by Kashyap Deorah, The Golden Tap: The Inside Story of Hyper-Funded Indian Startups. “Investors wanted to replicate the Chinese success story,” author Deorah told The Quint. They saw “market potential”, with India being home to over a billion smartphone users. It led to a gold rush. But now that gold rush has expired. These startups were hyper-funded — too much money too soon. After the brouhaha of the initial years, investors are now looking at “classical, traditional companies,” and asking tough questions on spending and valuations.

GMO from Japan and Mediatech in Taiwan led the $50 million Series C funding for India-based mobile wallet company MobiKwik. Sequoia Capital India and Treeline Asia joined in. The funding comes at a highly competitive time. Paytm, a rival to MobiKwik in India that is backed by Alibaba and Ant Financial, recently disclosed that had 122 million users at the start of the year and is processing 52 million transactions a month. MobiKwik has stated that it intends to reach 150 million users.

IDG Ventures has joined the $60 million funding round of India-based eyeglasses ecommerce company LensKart, alongside lead investor International Finance Corp. and other groups including TPG Growth and Adveq Management. LensKart plans to use the funds to expand its products in third- and fourth-tier cities in India.

In 2010, Beijing-based Bona Film Group became the first Chinese entertainment company to be listed on NASDAQ. Now, it is delisting, a difficult decision influenced in part by a government-led campaign to distance China from foreign influence. Alibaba Pictures, Sequoia Capital and Fosun International are part of a consortium formed in December to take Bona private. Others investors include SAIF Partners, All Gain Ventures, Willow Investment (a Tencent affilitate), and Orrick Investments (a Fosun affiliate). Bona joins a growing number of Chinese companies seeking to privatize, with an eye to listing again domestically—where the bet is that local investors better understand their business. Indeed, Bona, which recently set up an office in Los Angeles, plans to relist on China’s A-share market within three years.

Shenzhen Valley Ventures (SVV), based in Palo Alto, is launching an incubator for hardware startups in partnership with Zowee, a factory that works with hardware giants such as Xiaomi and Samsung. Zowee is one of SVV’s largest limited partners.

Hesong Tang, former head of business development at Baidu, and previously an executive with both Microsoft and Cisco, has launched a new fund Xiang He Fund, in Palo Alto. Tang seeks upwards of $250 million for the debut fund, according to a regulatory filing.

Uber and Alipay have expanded their partnership, allowing Chinese travelers to pay their Uber fares using Alipay in any of the 68 countries where Uber does business, as well as allowing riders to hail Uber cabs directly from the Alipay app. Uber’s original partnership with Alipay, a payment app owned by Alibaba that claims 450 million active users, began as an Uber China-Alipay collaboration. The ability to process Alipay payments has been a critical component of Uber’s explosive growth in China, where the ride-sharing company went from 1 percent of the market in early 2015 to roughly 33 percent by the end of the year.

Kaiser Kuo, Baidu’s former Director of International Communications, sounds off about winding down work in preparation for a relocation to the U.S. after 20 years in Beijing. He talks about the dualities and contrasts in China, about the bridge between China and the West; how Baidu has impacted Chinese society, and on how foreign correspondents have covered China. Read the full interview by the Asia Society Northern California, here.

Ride-hailing app Didi Kuaidi, Uber’s largest competitor in China with three-quarters share of the Chinese market, is nearing the close of an additional $2 billion in funding. Following the close of the round, the company’s valuation will be $25 billion. Didi Kuaidi is backed by Internet companies Alibaba and Tencent, and has a partnership with American taxi app Lyft.

Sequoia China is part of a consortium of investors that has issued a competing offer for a takeover of NYSE-listed Chinese online recruitment platform Zhaopin. Other members of the consortium include the company’s CFO and three of its vice presidents. Zhaopin is already the target of an initial $1.1 billion take-private bid.

GV Capital and Qiming Venture Partners plan to lead the $100 million funding round for Musical.ly, with participation from Greylock Partners and DCM. The round would value the Shanghai-based company at $500 million post-money. The startup claims 60 million users, mostly young teens across the globe, with popularity in the U.S.

Alibaba’s Hong Kong startup fund has made its initial investments, in three e-commerce companies: Shopline, Yeechoo and GoGo Van. Shopline, which previously raised $1.6 million from 500 Startups and others, helps online sellers use the internet for marketing. Yeechoo is an online fashion store focused on renting clothing. GoGoVan is a delivery and logistics on-demand service with substantial funding already: $6.5 million Series A, $10 million Series B, and current Series C round from PE firm New Horizon Capital and Singapore Press Holdings. These are the first investments from the $130 million Alibaba had committed to early-stage investing in Hong Kong last year, designed to increase Alibaba’s reach in the startup space and especially in early-stage deals. The fund is managed by Gobi Partners.

CRV led the $3.3 million seed round for Roam, a New-York based international network of communal living spaces. Collaborative Fund, NextView Ventures, and angel investors participated. The funding is in line with a trend towards spaces designed around location-independent work and flexible lifestyles.

Singapore’s Temasek, China-based IDG Capital Partners, and French investment firm Eurazeo have led the $110 million Series F round of U.K.-based high-end online fashion retailer Farfetch. Existing investors including Advent Venture Partners, Index Ventures joined the round. Farfetch has a focus on the APAC region, which represents 14% of its sales.

The role of the tech press in the meteoric rise of Theranos and wunderkind CEO Elizabeth Holmes is spelled out by special correspondent Nick Bilton of Vanity Fair. “Ironically, Theranos’s alleged improprieties suggest that the venture capitalist system really worked this time… none of the big V.C. outlets invested in Theranos.” Although Holmes had met with most top venture firms, she would often deign to share how her technology worked, even with potential investors. In this recent piece, Bilton argues that “Maybe the tech press should have chosen to do the same thing” by declining to write about Theranos if Holmes didn’t fully explain how the technology worked.

More than one-third of area residents say they are ready to leave the San Francisco Bay Area in the next few years, citing high housing costs and traffic, according to a recent poll by the Bay Area Council. Some observers said that the Bay Area’s challenges, amid the job boom in Silicon Valley’s tech hubs is pushing low- and middle-income people out and transforming the region into a Manhattan-like megalopolis.

Foundry Group led a $27 million Series B funding round for ROLI, a London-based developer of connected music devices. This marks Foundry’s first-ever deal outside the U.S. BGF Ventures and Founders Fund participated, alongside existing backers Balderton Capital, FirstMark Capital, Index Ventures, Horizon Ventures and Universal Music Group.

– Silicon Dragon weekly digest by contributor Ying-Ying Lu

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