Silicon Dragon News: Cheetah Invests $50M in Robotics, DCM Moves, Baidu’s Car, Flying Camera Deal

CHINA-U.S.
Silicon Dragon hosted its Beijing 2016 event this past week at DayDayUp in the city’s vibrant Sanlitun District. The program featured 18 speakers and moderators including Forbes-recognized young entrepreneurs, experienced cross-border dealmakers, and an expert book author. Key themes included the intersections of social impact and technology, increasing technology and financial ties between China and the U.S., the unexpected performance of some foreign mobile apps in China, and the challenges and opportunities of raising money during a funding downturn. Silicon Dragon returns to China, with its annual event in Shanghai, September 15.

Ruby Lu, long-time DCM general partner in Beijing and backer of several high-profile Chinese tech companies, has teamed up with ex-Tiger Global managing director Xiaohong Chen, at H Capital in Beijing. This makes for a highly dynamic duo for H Capital, which is raising a $500 million third fund, an amount that includes H Capital’s parallel funds, according to a SEC filing. H Capital reportedly raised a $300 million in early 2015. H Capital has a Cayman Islands offshore structure, according to the SEC filing.

DCM Ventures has exited portfolio company Happy Elements, a Beijing-based developer of social media games, through a management buy-out. DCM partner Osuke Honda led the initial funding in 2010 and helped to guide the company into the Japanese market. The transaction yielded more than $100 million in gross proceeds to DCM, yielding an overall gross deal multiple of approximately 10 times and a gross deal IRR of 53% on DCM’s $10 million investment.

Beijing-based mobile Internet company Cheetah Mobile plans to invest $50 million in robotics, especially deep learning and AI intelligence research and development, through a new Cheetah Robotics R&D and investment venture. Cheetah also is launching a data-driven content strategy that will begin with Toupai, a short video service designed for online influencers and fans. Cheetah Mobile CEO Sheng Fu unveiled the news at its mobile industry conference Cheetah Connect Summit, held in Beijing on April 27.

Alibaba and Fitbit have announced the signing of an MoU to expand Fitbit’s reach in China. Fitbit is to establish a major retail presence on Alibaba’s Tmall.com, including launching its newest devices in China through Tmall. Alibaba seeks to further establish itself as the gateway to China for international brands seeking access to Chinese consumers.

Shenzhen-listed Chinese firm Focus Media plans to team up with Hong Kong’s private equity firm FountainVest Partners to launch a $400 million fund to invest in sports companies in China and overseas. The partners intend to build quality sports companies targeting the Chinese market.

Search giant Baidu has taken a huge step by bringing its autonomous car ambitions to Silicon Valley, creating a self-driving car unit that plans to employ more than 100 engineers by the end of 2016. The move sees Baidu join major automakers such as Ford and GM in building outposts in the Valley, and in establishing itself on Google’s home turf.
Bloomberg Gadfly’s Tim Culpan and David Fickling put Baidu’s recent move in context: China’s state-led push to develop and commercialize self-driving cars have meant support for companies such as Baidu, Alibaba, Changan Auto and BAIC Motor. In contrast, U.S. companies such as Google and GM have wrestled with regulations at both a national and local level. Read more about the effects of the two contrasting policies here.
In one of the China tech scene’s worst-kept secrets, Baidu’s Director of International Communications, Kaiser Kuo, is leaving the search company and exiting Beijing after more than 20 years in China. More and more expats are making similar moves as Beijing life becomes more intense. No word yet on Kaiser’s next post.

CHINA – FUNDINGS
Chinese networking service Renren has participated in the $72 million investment round in Israel-based smartphone maker Sirin Labs. Against a backdrop of concerns about digital security, the startup’s mission is to create a phone that ensures privacy and security while meeting the needs of an international business manager. Other investors in the round include Kazakh businessman Kenges Kakishev and Singulariteam founder Moshe Hogeg.

IDG Capital Partners, GSR Ventures, and ZhenFund are among the investors in the $23 million funding round of Zero Zero Robotics, bringing the startup’s total funding to $25 million. The company has released its first product, Hover Camera, an autonomous flying camera that uses Embedded AI and the Qualcomm Snapdragon Flight drone platform. The flying camera drew crowds at a recent tech conference in Beijing.

Baidu Video, a Beijing-based spinoff from search giant Baidu which claims 300 million monthly viewers, has raised $155 million in new capital from Baidu, Shanghai New Culture Media Group, Tianshen Yule, Softbank Asia Infrastructure Fund and Redpoint Ventures. The raise comes at a time when Alibaba is in the process of finalizing its $3.5 billion acquisition of Youku Tudou. Other major players in the domestic video streaming market include LeEco’s video streaming site, and Baidu’s own iQiyi, which it plans to take private in a deal worth up to $2.8 billion.

CHINA – TRENDS
Shanghai’s government has set a new regulation that will offset as much as $1 million of a VC firm’s losses, from public funds via the city’s Science and Technology Commission. The idea is that compensating bad investments will boost innovation in the sector by encouraging VCs to take risk and look at a broader number of startups—an ideal in line with China’s national priorities to boost innovation. The policy has drawn much criticism, however, from VCs and finance experts who assert that Shanghai should instead be investing in the right nurturing grounds for good startups. William Bao Bean, managing director of Chinaacelerator, calls the policy of subsidizing bad investments a “horrible idea.”

In a related development and a reflection of the domestic downturn in VC, Chinese investor Tsinghua Unigroup is reportedly withholding funds from Hong Kong-based Acadine Technologies, which seeks to modernize old school flip phones. Acadine, whose parent company Tsinghua Holdings is run by the Chinese government and funded by Beijing’s Tsinghua University, is involved with several computing companies and has pledged to become the third-largest chipmaker within five years through a $47 billion spending effort.

Ant Financial, Alibaba’s finance arm, is now valued at $60 billion following a record-breaking $4.5 billion funding round. The round was led by sovereign-wealth fund China Investment Corp. and Chinese state lender China Construction Bank, underscoring the increasing importance of Ant Financial in China’s financial system. Ant Financial’s Alipay service handles an estimated 58% of all online payments in China.

Xiaomi plans to slow its pace of investment going forward, following an aggressive period of deal-making. Over the past two years, the smartphone maker has invested in 55 companies, four of which are now valued at more than $1 billion. These four include Huami, Xiaomi’s fitness wearables partner, and Jiangsu Zimi Technology, a smartphone peripherals maker.

Countless manufacturers within China are planning to transform their production processes using robotics and automation at an unprecedented scale—and the Chinese government supports the change. The reasons for this include the rising cost of human labor, especially as compared with rival hubs such as Vietnam, Thailand, and Indonesia. Ambitions are strong, though currently the number of industrial robots in China lags behind is at 36 per 10,000 workers as compared with Japan’s 315 and the U.S.’s 164. The implications for this transformation are tremendous. Read more in MIT Technology Review’s piece on China’s Robot Army of Model Workers.

GLOBAL
Is the U.S. VC market in a downturn? Mattermark editor Alex Wilhelm takes on assertions that the market imploded during the first quarter by compiling data from four different sources, which collectively show that things were in fact flat from the fourth quarter to the first quarter. Wilhelm’s analysis indicates that deal flow grew less than half a percent between Q4 2014 and Q1 2016, and that VC capital cash deployment grew 1.6 percent—essentially, barely changing.

Entrepreneurial thinking comes in all shapes, sizes and places.  Massive entrepreneurial successes from outside Silicon Valley are shifting the story of humans and networks. Today’s Internet, currently at around 2.5 billion participants, will triple in size in less than 10 years. Thanks to the rise of China, India, and other developing countries, billions more people can work on idea and innovations that can eventually benefit all of humanity, regardless of where they originate. Entrepreneur Ben Casnocha, who co-wrote the book The Startup of You with LinkedIn CEO Reid Hoffman, explores these themes and the importance of exploring new cultures in his LinkedIn post, “Leading a Global Life.”

By 2015, at least 40 megacities will both serve as global hubs and represent a large percentage of national GDP. For example, within the U.S., Silicon Valley serves a connected urban enclave that is home to more than 6,000 technology companies that generate more than $200 billion in GDP. Within emerging markets, megacities act as magnets for regional wealth and talent. Research by the McKinsey Global Institute predicts that from now until 2025, one-third of world growth will come from key Western capitals and emerging market megacities, while another third will come from heavily populated middle-weight cities of emerging markets. In his book, global strategist Paragh Khanna argues that a quick move towards a future shaped less by countries than by connectivity.

Of the top 5 most active seed investors since 2010, four are based in the U.S.: SV Angel, Andreessen Horowitz, Google Ventures, and Lerer Hippeau Ventures. Only Kima Ventures, which has backed over 200 startups, is headquartered in Paris. PitchBook has compiled the data, including breakdown of seed-stage activity by industry, here.

INDIA
In a reflection of the difficulty of building a successful grocery delivery business, Sequoia-backed PepperTap has shut down its service, switching to e-commerce logistics. The startup is also backed by domestic online marketplace Snapdeal.

Mumbai-based digital payment startup TranServ has raised $15 million in Series C funding led by IDFC Spice Fund and Micromax Informatics, with participation from existing backers Nirvana and Faering Capital India. The funds will be used to invest in new product lines, including micro-credit.

PayPal cofounder Max Levchin has made his first investment in India, participating in the $1.3 seed round of New Delhi-based ClearTax, which helps customer file their income taxes electronically. Other investors include AngelList CEO Naval Ravikant, Scott Banister, and Ruchi Sanghvi.

Bertelsmann India Investments has put an additional $5 million in Series B funding into Relevant e-solutions, a Gurgaon-based startup which built the fashion discovery app Roposo. Tiger Global Management was an earlier investor in the now $20 million round.

India’s telecom ministry has announced that starting from 2017, all new mobile phones sold in India will be required to have a panic button that allows users to make emergency calls. The new rule, meant to provide emergency assistance to women, will require all manufacturers including Apple and Samsung to introduce software updates for their phones sold in India.

JAPAN
Japan-based bitcoin exchange BitFlyer has raised $27 million in Series C funding led by SBI Investment, with participation from existing backer Venture Labo Investments. The company plans to use a portion of the funds to expand its service overseas, including into Europe. The firm has set up a subsidiary in Luxemburg.

Yahoo Japan and East Ventures have partnered to create a new Tokyo-based accelerator called Code Republic. The structure of the three-month program, similar to that of Y Combinator, includes a $63,000 investment for a 7 percent state in the company. As one of the most prolific investors in Southeast Asia, East Ventures also offers the Japanese startups a means to expand internationally.

SOUTH KOREA
Woowa Brothers, which operates food delivery app Baedal Minjok, has raised $50 million in funding from a consortium led by Hillhouse Capital Group, run by China’s Hillhouse Capital. The startup seeks to expand its business into food logistics, such as food and drink delivery and fresh food delivery.

SINGAPORE
500 Startups has co-led a $335,000 seed round investment in Singaporean startup BoxGreen alongside local investor Expara Ventures. An undisclosed angel investor also participated. BoxGreen operates a healthy snack subscription service and plans to use the funds to expand into other regional markets, beginning with Malaysia.

THAILAND & VIETNAM
Rocket Internet-backed fashion-focused e-commerce site Zalora is selling its businesses in Thailand and Vietnam to Bangkok-headquartered retail giant Central Group. The Bangkok group’s assets include multiple shopping malls and department stores, collectively worth nearly $10 billion and employing some 70,000 people. TechCrunch reports that the group, which has been looking to enter the online commerce space for some time, has agreed to purchase the businesses from Zalora for roughly $10 million each.

ISRAEL
Sequoia Capital and New Enterprise Associates have participated in the $32 million Series C funding round of Forter, a Tel Aviv-based company that makes fraud prevention software for online retailers. The round was led by Scale Ventures Partners.
— Silicon Dragon weekly news digest by contributor Ying-Ying Lu