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Bzaar bags $4M to enable US retailers to source home, lifestyle products from India
Small businesses in the U.S. now have a new way to source home and lifestyle goods from new manufacturers. Bzaar, a business-to-business cross-border marketplace, is connecting retailers with over 50 export-ready manufacturers in India.
The U.S.-based company announced Monday that it raised $4 million in seed funding, led by Canaan Partners, and including angel investors Flipkart co-founder Binny Bansal, PhonePe founders Sameer Nigam and Rahul Chari, Addition founder Lee Fixel and Helion Ventures co-founder Ashish Gupta.
Nishant Verman and Prasanth Nair co-founded Bzaar in 2020 and consider their company to be like a “fair without borders,” Verman put it. Prior to founding Bzaar, Verman was at Bangalore-based Flipkart until it was acquired by Walmart in 2018. He then was at Canaan Partners in the U.S.
“We think the next 10 years of global trade will be different from the last 100 years,” he added. “That’s why we think this business needs to exist.”
Traditionally, small U.S. buyers did not have feet on the ground in manufacturing hubs, like China, to manage shipments of goods in the same way that large retailers did. Then Alibaba came along in the late 1990s and began acting as a gatekeeper for cross-border purchases, Verman said. U.S. goods imports from China totaled $451.7 billion in 2019, while U.S. goods imports from India in 2019 were $87.4 billion.
Bzaar screenshot. Image Credits: Bzaar
Small buyers could buy home and lifestyle goods, but it was typically through the same sellers, and there was not often a unique selection, nor were goods available handmade or using organic materials, he added.
With Bzaar, small buyers can purchase over 10,000 wholesale goods on its marketplace from other countries like India and Southeast Asia. The company guarantees products arrive within two weeks and manage all of the packaging logistics and buyer protection.
Verman and Nair launched the marketplace in April and had thousands users in three continents purchasing from the platform within six months. Meanwhile, products on Bzaar are up to 50% cheaper than domestic U.S. platforms, while SKU selection is growing doubling every month, Verman said.
The new funding will enable the company to invest in marketing to get in front of buyers and invest on its technology to advance its cataloging feature so that goods pass through customs seamlessly. Wanting to provide new features for its small business customers, Verman also intends to create a credit feature to enable buyers to pay in installments or up to 90 days later.
“We feel this is a once-in-a-lifetime shift in how global trade works,” he added. “You need the right team in place to do this because the problem is quite complex to take products from a small town in Vietnam to Nashville. With our infrastructure in place, the good news is there are already shops and buyers, and we are stitching them together to give buyers a seamless experience.”
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Extra Crunch roundup: BNPL bonanza, scraping Toast’s S-1/A, early-stage SaaS pricing
Are founders in fundraising mode short-sighted when it comes to working with Chinese venture funds?
Runa Capital’s Asia business development manager Denis Kalinin studied data from iTjuzi, a database of Chinese venture capitalists, and found:
“…Chinese funds invested around $250 billion in 2020 (three times higher than the figure reported in Crunchbase). This figure puts Chinese VC investments only 30% lower than investments by U.S. funds, but three times that of U.K. funds and 12.5 times more than German funds.”
The pandemic, geopolitical tensions and other factors led many Chinese venture funds to pare back their international investments, but that’s largely “because during COVID, China’s economy recovered much faster than other countries’,” writes Kalinin.
His analysis covers multiple angles: Chinese investments in Europe are catching up with those in Asia and the United States, half of China’s top cross-border investors are CVCs, and investors are particularly interested in fintech, deep tech and digital health at the moment.
“Chinese investors can bring value to foreign startups, but you need to study their expertise and how it can be useful for you.”
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Use discount code ECFriday to save 20% off a one- or two-year subscription
Today at 2 p.m. PT/5 p.m. ET on Twitter Spaces, Managing Editor Danny Crichton and immigration law attorney Sophie Alcorn will discuss whether remote work is making H-1B visas less critical for international founders.
It’s a provocative question: If remote teams are becoming the norm, tech hubs are decentralizing and investors are comfortable cutting checks after a Zoom call, how important is it to do business as a startup inside the U.S?
It’s sure to be an interesting conversation; to get a reminder, please follow @TechCrunch on Twitter.
Thanks very much for reading Extra Crunch this week!
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Toast looks toward $18B valuation in upcoming IPO
Image Credits: Nigel Sussman (opens in a new window)
Toast released an early IPO price range of $30 to $33 per share on Monday, and Alex Wilhelm digs into the S-1/A filing to “better understand how to value vertical SaaS startups that are pursuing a payments-and-SaaS business approach.”
Is the restaurant software startup worth the $18 billion valuation it’s aiming for?
3 keys to pricing early-stage SaaS products
Image Credits: Peter Dazeley (opens in a new window) / Getty Images
Every founder who launches an enterprise software startup has to figure out the “right” pricing model for their products.
It’s a consequential decision: Per-seat licenses are easy to manage, but what if customers prefer a concurrent licensing model?
“Early pricing discussions should center around the buyer’s perspective and the value the product creates for them,” says Ridge Ventures partner Yousuf Khan, who previously worked as a CIO.
“Of course,” he notes, “self-evaluation is hard, especially when you’re asking someone else to pay you for something you’ve created.”
Is India’s BNPL 2.0 set to disrupt B2B?
Image Credits: jayk7 / Getty Images
India’s mom-and-pop businesses are experiencing a digital transformation that’s creating new e-commerce opportunities; smartphones have replaced paper records, and a new government-backed instant payments system is disrupting how value is exchanged.
But instead of importing legacy credit systems, buy now, pay later systems are the “next step for solving the digital B2B puzzle,” writes Anubhav Jain, co-founder and CEO of Rupifi.
What to make of Freshworks’ first IPO price range
Image Credits: scyther5 / Getty Images
Freshworks, which develops and offers a variety of business software tools, set an IPO price range of $28 to $32 per share on Monday, meaning its valuation could reach nearly $10 billion, Alex Wilhelm writes.
“It appears that the Freshworks IPO is pretty reasonably priced as is, though a boost to its price range is not out of the question if public market investors decide that they are bullish on its future growth prospects. We just don’t see dramatic upside.”
ish on its future growth prospects. We just don’t see dramatic upside.”
Here’s what your BNPL startup could be worth
Image Credits: Nigel Sussman (opens in a new window)
The multibillion-dollar exits of Japanese startup Paidy (to PayPal) and Australian buy now, pay later company Afterpay (to Square) “provided hard market proof that what BNPL startups are building has value beyond simple operating results,” Alex Wilhelm writes in The Exchange.
He breaks down the value of Afterpay, Paidy and Klarna using a simple metric: What would you pay for $1 of BNPL GMV?
3 methodologies for automated video game highlight detection and capture
Image Credits: mikkelwilliam (opens in a new window) / Getty Images
Video game livestreaming is booming.
Twitch has an average of almost 3 million concurrent viewers; by comparison, on the night of the 2020 U.S. presidential election, CNN’s livestream averaged 1.1 million.
The most successful streamers use their ad revenue and sponsorship money to hire video editors and social media teams to make them look good, but new automated tools are giving part-time streamers the ability to spotlight their best moments as well.
Have ‘The Privacy Talk’ with your business partners
Image Credits: Boris Zhitkov (opens in a new window) / Getty Images
A data breach costs a company an average of $3.8 million, Marc Ellenbogen, Foursquare’s general counsel, notes in a guest post, adding up to a “concrete financial incentive to having The Privacy Talk.”
What is it?
“It’s the conversation that goes beyond the written, publicly posted privacy policy and dives deep into a customer, vendor, supplier or partner’s approach to ethics,” he writes.
If you think the talk doesn’t apply to you, think again.
Advanced rider assistance systems: Tech spawned by the politics of micromobility
Image Credits: Alexander Spatari (opens in a new window) / Getty Images
In an effort to “reassure local administrations that micromobility is safe, compliant and a good thing for cities,” scooter operators are “implementing technology similar to advanced driver assistance systems (ADAS) usually found in cars,” Rebecca Bellan writes.
She breaks down how the tech could help prevent unwanted behavior and explores the cost for scooter operators and opportunities for startups.
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Is it so bad to take money from Chinese venture funds?
China is becoming a superpower in the tech industry. According to Straits Times, China is the only place in the world where it takes less than six years for a startup to become a unicorn — it takes seven years in the U.S., eight years in the U.K. and 11 years in Germany. Despite geopolitical tensions and recent amendments in CFIUS, it is hard to ignore China.
When I joined Runa Capital almost a year ago, my task was to help our portfolio companies enter the Chinese market, find the right partners and raise funding from Chinese investors. And almost on every call with our startups, colleagues from Runa or other global VCs, I heard: Is it a good idea to raise from a Chinese VC? Is it OK to co-invest with Chinese investors? I was surprised to learn that there is little research answering such questions, as there is a lack of adequate information in English about Chinese investments.
Access to the Chinese market seems to be an obvious reason to invite Chinese funds aboard, but only about 20% of Western startups with Chinese capital have operations in China.
So as a Mandarin-speaking specialist, I decided to fill this gap by conducting a study based on Chinese VC database ITjuzi (the Chinese version of Crunchbase) with the help of our powerful data science resources developed by Danil Okhlopkov.
Below, I will try to answer the following questions using statistics and a case-based approach:
- How much do Chinese funds invest abroad?
- What is the current trend?
- Can Chinese investors bring any value to Western startups?
- Who are the most active Chinese investors abroad?
- In which areas can Chinese funds bring the most value?
- What value can Chinese investors bring?
- When is it better to invite a Chinese investor?
Chinese investors are interested in Western startups
After studying data from ITjuzi, we estimated that Chinese funds invested around $250 billion in 2020 (three times higher than the figure reported in Crunchbase). This figure puts Chinese VC investments only 30% lower than investments by U.S. funds, but three times that of U.K. funds and 12.5 times more than German funds.
Fig. 1 — Comparison of investment from different countries in 2020, $bn. Source: Crunchbase, ITjuzi. Image Credits: Denis Kalinin
However, only 15% of investments in 2020 and 17% of investments in the first half of 2021 were in companies outside China, significantly lower than in 2019. This appears to be because during COVID, China’s economy recovered much faster than other countries’, so many Chinese investors preferred to redirect their capital flows to the domestic market.
On the other hand, there is great potential for overseas investments to rebound as soon as the borders reopen and the global economy starts to recover.
Fig. 2 — Dynamics of Chinese investments. $bn. Source: Crunchbase, ITjuzi. Image Credits: Denis Kalinin
We can also see that Chinese investors are eyeing European startups favorably, which is related to U.S.-China geopolitical tensions as well as the fact that the European VC market is becoming mature.
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Extra Crunch roundup: China’s new data privacy law, fractional farming, debt vs. equity
China’s first data privacy laws go into effect on November 1, 2021. Will your company be in compliance?
Modeled after the EU’s GDPR, the new regulations “[introduce] perhaps the most stringent set of requirements and protections for data privacy in the world,” writes Scott W. Pink, special counsel in O’Melveny’s Data Security & Privacy practice.
In a comprehensive overview, he explains its key requirements and compliance steps for U.S.-based firms that service Chinese consumers.
“American firms doing business in China or with companies inside China will need to immediately start assessing how this new law will impact their activities,” he advises.
Now that the world has embraced remote work, are visas as critical for startup founders who want to succeed in the United States?
On Tuesday, September 14, at 2 p.m PT/5 p.m. ET, Managing Editor Danny Crichton and immigration law attorney Sophie Alcorn will discuss the matter on Twitter Spaces.
Join @DannyCrichton on Tuesday, September, 14 at 2 p.m. PT/5 p.m. ET as he discusses if remote work will make H-1B visas redundant with @Sophie_Alcorn https://t.co/SCMUiqUj8J
— TechCrunch (@TechCrunch) September 10, 2021
They’ll take questions from the audience, so mark your calendar and follow @techcrunch on Twitter to get a reminder before the chat.
Thanks very much for reading Extra Crunch; I hope you have a great weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Fintech is transforming the world’s oldest asset class: Farmland
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Whether or not he actually said it, “buy land, they ain’t making any more of it,” is one of Mark Twain’s best quotes on capitalism.
Past recessions and the ongoing pandemic have created real uncertainty about the future of commercial and residential real estate, but farmland is “historically stable,” says Artem Milinchuk, founder and CEO of FarmTogether.
Anatomy of a SPAC: Inside Better.com’s ambitious plans
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Online mortgage company Better.com isn’t waiting to complete its SPAC merger before making big moves: Ryan Lawler reported that it purchased Property Partners, a U.K.-based startup that offers fractional property ownership.
It’s the second company Better bought in recent months: In July, it snapped up digital mortgage brokerage Trussle.
“We aren’t so easily categorized,” said Better CEO Vishal Garg, who told Ryan that the company plans to soon expand into traditional financial services like auto loans and insurance.
Said CFO Kevin Ryan, “a lot of people have their niches in the way they’re attacking this, but we feel like we’re on a path to being full stack where everything’s embedded in the same flow.”
5 factors that can make or break a startup’s growth journey
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If you don’t have a good story to share, it doesn’t matter how big your marketing budget is.
“Paid marketing can be a useful tool in your toolkit to accelerate an already humming flywheel. Just don’t let it be the only one,” suggests Brian Rothenberg, a two-time founder who’s now a partner at Defy.
Drawing from his time as VP of growth for Eventbrite, he shares five critical factors for kick-starting, maintaining and measuring growth over the long term.
Debt versus equity: When do non-traditional funding strategies make sense?
Image Credits: Peter Dazeley (opens in a new window) / Getty Images
Many potential founders are well-versed in startup economics — and many are completely green.
When it comes to raising funds, understanding the relative benefits (and limitations) of debt and equity financing is required knowledge, however.
Founders who are less willing to dilute their control may be willing to use debt financing to fund their capital expenditures, “but it doesn’t make sense for everyone,” says six-time entrepreneur David Friend.
Investors are doubling down on Southeast Asia’s digital economy
Image Credits: Getty Images
Last year, startups based in Southeast Asia raised more than $8.2 billion, a 4x increase from 2015.
In the first half of 2021, regional M&A has increased 83% to a record $124.8 billion.
It’s not just venture capitalists and Big Tech who are beefing up their presence in the region.
“Over 229 family offices have been registered in Singapore since 2020, with total assets under management of an estimated $20 billion,” writes Amit Anand, a founding partner of Jungle Ventures.
Edtech leans into the creator economy with cohort-based classes
Image Credits: Bryce Durbin / TechCrunch
Natasha Mascarenhas examined the parallels between edtech and the creator economy, both of which boomed amid the pandemic — and blurred amid the rise of cohort-based classes.
“Edtech and the creator economy certainly differ in the problems they try to solve: Finding a VR solution to make online STEM classes more realistic is a different nut to crack than streamlining all of a creator’s different monetization strategies into one platform. Still, the two sectors have found common ground in the past year.”
Meet retail’s new sustainability strategy: Personalization
Image Credits: Liyao Xie (opens in a new window) / Getty Images
Were the shoes, jacket and makeup that looked so good on Instagram (and in your shopping cart) disappointing when you put them on for the first time?
Due to buyer’s remorse, it’s not uncommon for apparel or beauty products to languish in the back of a drawer or end up as gifts, but there are also serious consequences.
“The beauty industry produces over 120 billion units of packaging every year, little of which is recycled. Globally, an estimated 92 million tons of textile waste ends up in landfills,” Sindhya Valloppillil, founder and CEO of Skin Dossier, notes in a guest column.
The answer to bringing sustainability to the industry, she says, is using tech to personalize the retail experience:
- AR virtual try-on with shade matching
- Advanced virtual fitting rooms with VR/AR for fashion
- Smart packaging with IoT and distributed ledger technology
Plentywaka founder Onyeka Akumah on African startups and global expansion
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Twenty million people live in Lagos, Nigeria, and each day, 14 million of them use the city’s transit system.
Travelers rely on overcrowded public buses that navigate congested routes: What should be a 30-minute trip is often a three-hour journey, but Treepz CEO and co-founder Onyeka Akumah “has big plans to ameliorate the public transport infrastructure in Africa and beyond,” writes Rebecca Bellan.
“We wanted to give people a better way to commute with predictability, where they can know when the bus will get here, the certainty that they will have a seat in a vehicle, that it’s a decent vehicle and a safe one where you can bring your laptop,” said Akumah.
“Those are the things we said we wanted to change.”
Dear Sophie: When can I apply for my US work permit?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie,
My husband just accepted a job in Silicon Valley. His new employer will be sponsoring him for an E-3 visa.
I would like to continue working after we move to the United States. I understand I can get a work permit with the E-3 visa for spouses.
How soon can I apply for my U.S. work permit?
— Adaptive Aussie
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Investors are doubling down on Southeast Asia’s digital economy
Southeast Asian tech companies are drawing the attention of investors around the world. In 2020, startups in the region raised over $8.2 billion, about four times more than they did in 2015. This trend continued in 2021, with regional M&A hitting a record high of $124.8 billion in the first half of 2021, up 83% from a year earlier.
This begs the question: Who exactly is investing in Southeast Asia?
Let’s explore the three key types of investors pouring money into and driving the growth of Southeast Asia’s tech ecosystem.
Over 229 family offices have been registered in Singapore since 2020, with total assets under management of an estimated $20 billion.
Big tech
Southeast Asia has become an attractive market for U.S. and Chinese tech firms. Internet penetration here stands at 70%, higher than the global average, and digital adoption in the region remains nascent — it wasn’t until the pandemic that adoption of digital services such as e-wallets and online shopping took off.
China’s tech giants Tencent and Alibaba were among the first to support early e-commerce growth in Southeast Asia with investments in Sea Limited and Lazada, and have since expanded their footprint into other internet verticals. Alibaba has backed Akulaku, M-Pay (eMonkey), DANA, Wave Money and Mynt (GCash), while Tencent has invested in Voyager Innovations (PayMaya), SHAREit, iflix, Ookbee and Sanook.
U.S. tech firms have also recently entered the scene. In June 2020, Gojek closed a $3 billion Series F round from Google, Facebook, Tencent and Visa. Google, together with Singapore’s Temasek Holdings, invested some $350 million in Tokopedia in October. Meanwhile, Microsoft invested an undisclosed amount in Grab in 2018 and has invested $100 million in Indonesian e-commerce firm Bukalapak.
Venture capitalists
In Q1 2021, Southeast Asian startups raised $6 billion, according to DealStreetAsia, positioning 2021 as another record year for VC investment in the region.
The region is also rising in prominence as a destination for investment capital relative to the rest of Asia. Regional VC investment grew 5.2 times to $8.2 billion in 2020 from $1.6 billion in 2015, as we can see in the table below.
Image Credits: Jungle VC
Southeast Asia also has many opportunities for VC investment relative to its market size. From 2015 to 2020, China saw VC investment of nearly $300 per person; for Southeast Asia — despite a recent investment boom — this metric sits at just $47.50 per person, or just a sixth of that in China. This implies a substantial opportunity for investments to develop the region’s digital economy.
The region’s rising population and growth prospects are higher due to China’s population growth challenges, alongside the latter’s higher digital economy market saturation and maturity.
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Driven by livestreams, consumer spending in social apps to hit $17.2B in 2025
The livestreaming boom is driving a significant uptick in the creator economy, as a new forecast estimates consumers will spend $6.78 billion in social apps in 2021. That figure will grow to $17.2 billion annually by 2025, according to data from mobile data firm App Annie, which notes the upward trend represents a five-year compound annual growth rate (CAGR) of 29%. By that point, the lifetime total spend in social apps will reach $78 billion, the firm reports.
Image Credits: App Annie
Initially, much of the livestream economy was based on one-off purchases like sticker packs, but today, consumers are gifting content creators directly during their livestreams. Some of these donations can be incredibly high, at times. Twitch streamer ExoticChaotic was gifted $75,000 during a live session on Fortnite, which was one of the largest-ever donations on the game-streaming social network. Meanwhile, App Annie notes another platform, Bigo Live, is enabling broadcasters to earn up to $24,000 per month through their livestreams.
Apps that offer livestreaming as a prominent feature are also those that are driving the majority of today’s social app spending, the report says. In the first half of this year, $3 out every $4 spent in the top 25 social apps came from apps that offered livestreams, for example.
Image Credits: App Annie
During the first half of 2021, the U.S. become the top market for consumer spending inside social apps, with 1.7x the spend of the next largest market, Japan, and representing 30% of the market by spend. China, Saudi Arabia and South Korea followed to round out the top 5.
Image Credits: App Annie
While both creators and the platforms are financially benefitting from the livestreaming economy, the platforms are benefitting in other ways beyond their commissions on in-app purchases. Livestreams are helping to drive demand for these social apps and they help to boost other key engagement metrics, like time spent in app.
One top app that’s significantly gaining here is TikTok.
Last year, TikTok surpassed YouTube in the U.S. and the U.K. in terms of the average monthly time spent per user. It often continues to lead in the former market, and more decisively leads in the latter.
Image Credits: App Annie
Image Credits: App Annie
In other markets, like South Korea and Japan, TikTok is making strides, but YouTube still leads by a wide margin. (In South Korea, YouTube leads by 2.5x, in fact.)
Image Credits: App Annie
Beyond just TikTok, consumers spent 740 billion hours in social apps in the first half of the year, which is equal to 44% of the time spent on mobile globally. Time spent in these apps has continued to trend upwards over the years, with growth that’s up 30% in the first half of 2021 compared to the same period in 2018.
Today, the apps that enable livestreaming are outpacing those that focus on chat, photo or video. This is why companies like Instagram are now announcing dramatic shifts in focus, like how they’re “no longer a photo sharing app.” They know they need to more fully shift to video or they will be left behind.
The total time spent in the top five social apps that have an emphasis on livestreaming are now set to surpass half a trillion hours on Android phones alone this year, not including China. That’s a three-year CAGR of 25% versus just 15% for apps in the Chat and Photo & Video categories, App Annie noted.
Image Credits: App Annie
Thanks to growth in India, the Asia-Pacific region now accounts for 60% of the time spent in social apps. As India’s growth in this area increased over the past 3.5 years, it shrunk the gap between itself and China from 115% in 2018 to just 7% in the first half of this year.
Social app downloads are also continuing to grow, due to the growth in livestreaming.
To date, consumers have downloaded social apps 74 billion times, and that demand remains strong, with 4.7 billion downloads in the first half of 2021 alone — up 50% year-over-year. In the first half of the year, Asia was the largest region region for social app downloads, accounting for 60% of the market.
This is largely due to India, the top market by a factor of 5x, which surpassed the U.S. back in 2018. India is followed by the U.S., Indonesia, Brazil and China, in terms of downloads.
Image Credits: App Annie
The shift toward livestreaming and video has also impacted what sort of apps consumers are interested in downloading, not just the number of downloads.
A chart that shows the top global apps from 2012 to the present highlights Facebook’s slipping grip. While its apps (Facebook, Messenger, Instagram and WhatsApp) have dominated the top spots over the years in various positions, TikTok popped into the number one position last year, and continues to maintain that ranking in 2021.
Further down the chart, other apps that aid in video editing have also overtaken others that had been more focused on photos or chat.
Image Credits: App Annie
Video apps like YouTube (#1), TikTok (#2) Tencent Video (#4), Bigo Live (#5), Twitch (#6), and others also now rank at the top of the global charts by consumer spending in the first half of 2021.
But YouTube (#1) still dominates in time spent compared with TikTok (#5), and others from Facebook — the company holds the next three spots for Facebook, WhatsApp and Instagram, respectively.
This could explain why TikTok is now exploring the idea of allowing users to upload even longer videos, by increasing the limit from 3 minutes to 5, for instance.
TikTok is testing a longer 5 minute video upload limit
pic.twitter.com/qiRbJmHkma
— Matt Navarra (@MattNavarra) August 25, 2021
In addition, because of livestreaming’s ability to drive growth in terms of time spent, it’s also likely the reason why TikTok has been heavily investing in new features for its TikTok LIVE platform, including things like events, support for co-hosts, Q&As and more, and why it made the “LIVE” button a more prominent feature in its app and user experience.
App Annie’s report also digs into the impact livestreaming has had on specific platforms, like Twitch and Bigo Live, the former which doubled its monthly active user base from the pre-pandemic era, and the latter which saw $314.2 million in consumer spend during H1 2021.
“The ability of social media users to communicate with each other using live video – or watch others’ live broadcasts – has not only maintained the growth of a social media app market, but contributed to its exponential growth in engagement metrics like time spent, that might otherwise have saturated some time ago,” wrote App Annie’s Head of Insights, Lexi Sydow, when announcing the new report.
The full report is available here.
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China roundup: Beijing wants tech giants to shoulder more social responsibilities
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.
This week, the gaming industry again became a target of Beijing, which imposed arguably the world’s strictest limits on underage players. On the other hand, China’s tech titans are hastily answering Beijing’s call for them to take on more social responsibilities and take a break from unfettered expansion.
Gaming curfew
China dropped a bombshell on the country’s young gamers. As of September 1, users under the age of 18 are limited to only one hour of online gaming time: on Fridays, Saturdays and Sundays between 8-9 p.m.
The stringent rule adds to already tightening gaming policies for minors, as the government blames video games for causing myopia, as well as deteriorating mental and physical health. Remember China recently announced a suite of restrictions on after-school tutoring? The joke going around is that working parents will have an even harder time keeping their kids occupied.
A few aspects of the new regulation are worth unpacking. For one, the new rule was instituted by the National Press and Publication Administration (NPPA), the regulatory body that approves gaming titles in China and that in 2019 froze the approval process for nine months, which led to plunges in gaming stocks like Tencent.
It’s curious that the directive on playtime came from the NPPA, which reviews gaming content and issues publishing licenses. Like other industries in China, video games are subject to regulations by multiple authorities: NPPA; the Cyberspace Administration of China (CAC), the country’s top internet watchdog; and the Ministry of Industry and Information Technology, which oversees the country’s industrial standards and telecommunications infrastructure.
As analysts long observe, the mighty CAC, which sits under the Central Cyberspace Affairs Commission chaired by President Xi Jinping, has run into “bureaucratic struggles” with other ministries unwilling to relinquish power. This may well be the case for regulating the lucrative gaming industry.
For Tencent and other major gaming companies, the impact of the new rule on their balance sheet may be trifling. Following the news, several listed Chinese gaming firms, including NetEase and 37 Games, hurried to announce that underage players made up less than 1% of their gaming revenues.
Tencent saw the change coming and disclosed in its Q2 earnings that “under-16-year-olds accounted for only 2.6% of its China-based grossing receipts for games and under-12-year-olds accounted for just 0.3%.”
These numbers may not reflect the reality, as minors have long found ways around gaming restrictions, such as using an adult’s ID for user registration (just as the previous generation borrowed IDs from adult friends to sneak into internet cafes). Tencent and other gaming firms have vowed to clamp down on these workarounds, forcing kids to seek even more sophisticated tricks, including using VPNs to access foreign versions of gaming titles. The cat and mouse game continues.
Prosper together
While China curtails the power of its tech behemoths, it has also pressured them to take on more social responsibilities, which include respecting the worker’s rights in the gig economy.
Last week, the Supreme People’s Court of China declared the “996” schedule, working 9 a.m. to 9 p.m. six days a week, illegal. The declaration followed years of worker resistance against the tech industry’s burnout culture, which has manifested in actions like a GitHub project listing companies practicing “996.”
Meanwhile, hardworking and compliant employees have often been cited as a competitive advantage of China’s tech industry. It’s in part why some Silicon Valley companies, especially those run by people familiar with China, often set up branches in the country to tap its pool of tech talent.
The days when overworking is glorified and tolerated seem to be drawing to an end. Both ByteDance and its short video rival Kuaishou recently scrapped their weekend overtime policies.
Similarly, Meituan announced that it will introduce compulsory break time for its food delivery riders. The on-demand services giant has been slammed for “inhumane” algorithms that force riders into brutal hours or dangerous driving.
In groundbreaking moves, ride-hailing giant Didi and Alibaba’s e-commerce rival JD.com have set up unions for their staff, though it’s still unclear what tangible impact the organizations will have on safeguarding employee rights.
Tencent and Alibaba have also acted. On August 17, President Xi Jinping delivered a speech calling for “common prosperity,” which caught widespread attention from the country’s ultra-rich.
“As China marches towards its second centenary goal, the focus of promoting people’s well-being should be put on boosting common prosperity to strengthen the foundation for the Party’s long-term governance.”
This week, both Tencent and Alibaba pledged to invest 100 billion yuan ($15.5 billion) in support of “common prosperity.” The purposes of their funds are similar and align neatly with Beijing’s national development goals, from growing the rural economy to improving the healthcare system.
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China restricts kids’ online gaming to three hours a week
China’s National Press and Publication Administration has released a notice imposing limits on online gaming for minors. On September 1st, video game companies will have to restrict gaming time to three hours a week — from 8 PM to 9 PM on Friday, Saturday and Sunday.
With this new set of restrictions, Chinese authorities want to tackle addition to online games. According to the National Press and Publication Administration, online gaming has an impact on both the physical and mental health of minors.
In order to implement those time limits, game companies will have to leverage a real-name-based registration system. In 2018, Tencent started using this system to limit play time on Honor of Kings, a widely popular mobile game.
Back then, limits weren’t as strict, though, as children up to aged 12 could play one hour per day, and up to two hours per day for children between 13 and 18. At the time, authorities were concerned about worsening myopia among minors.
During the signup flow, users must go through an ID verification system, which means that you can only have one account associated with your real name. Regulators will regularly check whether gaming companies comply with local regulation.
It’s going to be interesting to see how the new rules affect video games as a whole. Online gaming is mentioned specifically, which could mean that solo games won’t be restricted going forward. Similarly, it’s unclear whether console games and foreign games will have to implement the new real-name-based registration system.
Some young gamers will also be tempted to circumvent the restrictions by signing up on a foreign server. It’s also worth noting that adult players will still be able to play 24/7.
Following the news, Tencent issued a statement. “Tencent expressed its strong support and will make every effort to implement the relevant requirements of the Notice as soon as possible,” the company says.
As Bloomberg noticed, NetEase shares are currently down 8% compared to yesterday’s closing price. NetEase is another popular Chinese game development company and its activities aren’t as diversified as Tencent’s activities.
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Jolla hits profitability ahead of turning 10, eyes growth beyond mobile
Jolla, the Finnish startup behind the Sailfish OS, which formed almost a decade ago when a band of Nokia staffers left to keep the torch burning for a mobile Linux-based alternative to Google’s Android, announced today it’s hitting profitability.
The mobile OS licensing startup describes 2020 as a “turning point” for the business — reporting revenues that grew 53% YoY, and EBITDA (which provides a snapshot of operational efficiency) standing at 34%.
It has a new iron in the fire too now — having recently started offering a new licensing product (called AppSupport for Linux Platforms) which, as the name suggests, can provide Linux platforms with standalone compatibility with general Android applications — without a customer needing to licence the full Sailfish OS (the latter has of course baked-in Android app compatibility since 2013).
Jolla says AppSupport has had some “strong” early interest from automotive companies looking for solutions to develop their in-house infotainment systems — as it offers a way for embedded Linux-compatible platforms the capability to run Android apps without needing to opt for Google’s automotive offerings. And while plenty of car makers have opted for Android, there are still players Jolla could net for its “Google-free” alternative.
Embedded Linux systems also run in plenty of other places, too, so it’s hopeful of wider demand. The software could be used to enable an IoT device to run a particularly popular app, for example, as a value-add for customers.
“Jolla is doing fine,” says CEO and co-founder Sami Pienimäki. “I’m happy to see the company turning profitable last year officially.
“In general it’s the overall maturity of the asset and the company that we start to have customers here and there — and it’s been honestly a while that we’ve been pushing this,” he goes, fleshing out the reasons behind the positive numbers with trademark understatement. “The company is turning 10 years [old] in October so it’s been a long journey. And because of that we’ve been steadily improving our efficiency and our revenue.
“Our revenue grew over 50% since 2019 to 2020 and we made €5.4 million revenue. At the same time the cost base of the operation has stabilized quite well so the sum of those resulted to nice profitability.”
While the consumer mobile OS market has — for years — been almost entirely sewn up by Google’s Android and Apple’s iOS, Jolla licenses its open source Sailfish OS to governments and business as an alternative platform they can shape to their needs — without requiring any involvement of Google.
Perhaps unsurprisingly, Russia was one of the early markets that tapped in.
The case for digital sovereignty in general — and an independent (non-U.S.-based) mobile OS platform provider, specifically — has been strengthened in recent years as geopolitical tensions have played out via the medium of tech platforms; leading to, in some cases, infamous bans on foreign companies being able to access U.S.-based technologies.
In a related development this summer, China’s Huawei launched its own Android alternative for smartphones, which it’s called HarmonyOS.
Pienimäki is welcoming of that specific development — couching it as a validation of the market in which Sailfish plays.
“I wouldn’t necessarily see Huawei coming out with the HarmonyOS value proposition and the technology as a competitor to us — I think it’s more proving the point that there is appetite in the market for something else than Android itself,” he says when we ask whether HarmonyOS risks eating Sailfish’s lunch.
“They are tapping into that market and we are tapping into that market. And I think both of our strategies and messages support each other very firmly.”
Jolla has been working on selling Sailfish into the Chinese market for several years — and that sought-for business remains a work in progress at this stage. But, again, Pienimäki says Jolla doesn’t see Huawei’s move as any kind of blocker to its ambitions of licensing its Android alternative in the Far East.
“The way we see the Chinese market in general is that it’s been always open to healthy competition and there is always competing solutions — actually heavily competing solutions — in the Chinese market. And Huawei’s offering one and we are happy to offer Sailfish OS for this very big, challenging market as well.”
“We do have good relationships there and we are building a case together with our local partners also to access the China market,” he adds. “I think in general it’s also very good that big corporations like Huawei really recognize this opportunity in general — and this shapes the overall industry so that you don’t need to, by default, opt into Android always. There are other alternatives around.”
On AppSupport, Jolla says the automative sector is “actively looking for such solutions,” noting that the “digital cockpit is a key differentiator for car markers — and arguing that makes it a strategically important piece for them to own and control.
“There’s been a lot of, let’s say, positive vibes in that sector in the past few years — newcomers on the block like Tesla have really shaken the industry so that the traditional vendors need to think differently about how and what kind of user experience they provide in the cockpit,” he suggests.
“That’s been heavily invested and rapidly developing in the past years but I’m going to emphasize that at the same time, with our limited resources, we’re just learning where the opportunities for this technology are. Automotive seems to have a lot of appetite but then [we also see potential in] other sectors — IoT … heavy industry as well … we are openly exploring opportunities … but as we know automotive is very hot at the moment.”
“There is plenty of general Linux OS base in the world for which we are offering a good additional piece of technology so that those operating solutions can actually also tap into — for example — selected applications. You can think of like running the likes of Spotify or Netflix or some communications solutions specific for a certain sector,” he goes on.
“Most of those applications are naturally available both for iOS and Android platforms. And those applications as they simply exist … the capability to run those applications independently on top of a Linux platform — that creates a lot of interest.”
In another development, Jolla is in the process of raising a new growth financing round — it’s targeting €20 million — to support its push to market AppSupport and also to put toward further growing its Sailfish licensing business.
It sees growth potential for Sailfish in Europe, which remains the biggest market for licensing the mobile OS. Pienimäki also says it’s seeing “good development” in certain parts of Africa. Nor has it given up on its ambitions to crack into China.
The growth round was opened to investors in the summer and hasn’t yet closed — but Jolla is confident of nailing the raise.
“We are really turning a next chapter in the Jolla story so exploring new emerging opportunities — that requires capital and that’s what are looking for. There’s plenty of money available these days, in the investor front, and we are seeing good traction there together with the investment bank with whom we are working,” says Pienimäki.
“There’s definitely an appetite for this and that will definitely put us in a better position to invest further — both to Sailfish OS and the AppSupport technology. And in particular the go-to market operation — to make this technology available for more people out there in the market.”
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Equity Monday: Stocks up, cryptos up, regulation up
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here. I also tweet.
Today’s show was good fun to put together. Here’s what we got to:
- Global stocks are up to kick off the week. It’s a great way to start Monday, frankly.
- Thinking broadly, the latest regulatory news from China regarding ByteDance is not super bullish for the nation’s tech industry. And what the Indian government is doing to its own technology industry is not encouraging. But all of that and tension between the two countries is not stopping deals. You can’t stop deals!
- Facebook bowed to pressure, and released a content report that it had previously shelved.
- Zetwerk raised a $150 million Series E. The Indian startup scene is trucking right along, perhaps acting a bit as if its government wasn’t increasingly authoritarian.
- Shelf.io raised a $52.5 million Series B in what we’re somewhat considering a classic Tiger-led deal.
- And the SPAC boom is not over yet, with yet another Virgin space company headed for the public markets.
Woo! And that’s the start to the week. Hugs from here, and we’ll chat you on Wednesday!
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 a.m. PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!
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