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Airwallex raises $200M at a $4B valuation to double down on business banking
Business, now more than ever before, is going digital, and today a startup that’s building a vertically integrated solution to meet business banking needs is announcing a big round of funding to tap into the opportunity. Airwallex — which provides business banking services directly to businesses themselves as well as via a set of APIs that power other companies’ fintech products — has raised $200 million, a Series E round of funding that values the Australian startup at $4 billion.
Lone Pine Capital is leading the round, with new backers G Squared and Vetamer Capital Management, and previous backers 1835i Ventures (formerly ANZi), DST Global, Salesforce Ventures and Sequoia Capital China also participating.
The funding brings the total raised by Airwallex — which has head offices in Hong Kong and Melbourne, Australia — to $700 million, including a $100 million injection that closed out its Series D just six months ago.
Airwallex will be using the funding both to continue investing in its product and technology as well as to continue its geographical expansion and to focus on some larger business targets. The company has started to make some headway into Europe and the U.K. and that will be one big focus, along with the U.S.
The quick succession of funding and rising valuation underscore Airwallex’s traction to date around what CEO and co-founder Jack Zhang describes as a vertically integrated strategy.
That involves two parts. First, Airwallex has built all the infrastructure for the business banking services that it provides directly to businesses with a focus on small and medium enterprise customers. Second, it has packaged up that infrastructure into a set of APIs that a variety of other companies use to provide financial services directly to their customers without needing to build those services themselves — the so-called “embedded finance” approach.
“We want to own the whole ecosystem,” Zhang said to me. “We want to be like the Apple of business finance.”
That seems to be working out so far for Airwallex. Revenues were up almost 150% for the first half of 2021 compared to a year before, with the company processing more than US$20 billion for a global client portfolio that has quadrupled in size. In addition to tens of thousands of SMEs, it also, via APIs, powers financial services for other companies like GOAT, Papaya Global and Stake.
Airwallex got its start like many of the strongest startups do: It was built to solve a problem that the founders encountered themselves. In the case of Airwallex, Zhang tells me he had actually been working on a previous startup idea. He wanted to build the “Blue Bottle Coffee” of Asia Pacific out of Australia, and it involved buying and importing a lot of different materials, packaging and, of course, coffee from all around the world.
“We found that making payments as a small business was slow and expensive,” he said, since it involved banks in different countries and different banking systems, manual efforts to transfer money between them and many days to clear the payments. “But that was also my background — payments and trading — and so I decided that it was a much more fascinating problem for me to work on and resolve.”
Eventually one of his co-founders in the coffee effort came along, with the four co-founders of Airwallex ultimately including Zhang, along with Xijing Dai, Lucy Liu and Max Li.
It was 2014, and Airwallex got attention from VCs early on in part for being in the right place at the right time. A wave of startups building financial services for SMBs were definitely gaining ground in North America and Europe, filling a long-neglected hole in the technology universe, but there was almost nothing of the sort in the Asia Pacific region, and in those earlier days solutions were highly regionalized.
From there it was a no-brainer that starting with cross-border payments, the first thing Airwallex tackled, would soon grow into a wider suite of banking services involving payments and other cross-border banking services.
“In the last six years, we’ve built more than 50 bank integrations and now offer payments across 95 countries, payments through a partner network,” he added, with 43 of those offering real-time transactions. From that, it moved on to bank accounts and “other primitive stuff” with card issuance and more, he said, eventually building an end-to-end payment stack.
Airwallex has tens of thousands of customers using its financial services directly, and they make up about 40% of its revenues today. The rest is the interesting turn the company decided to take to expand its business.
Airwallex had built all of its technology from the ground up itself, and it found that — given the wave of new companies looking for more ways to engage customers and become their one-stop shop — there was an opportunity to package that tech up in a set of APIs and sell that on to a different set of customers, those who also provided services for small businesses. That part of the business now accounts for 60% of Airwallex’s business, Zhang said, and is growing faster in terms of revenues. (The SMB business is growing faster in terms of customers, he said.)
A lot of embedded finance startups that base their business around building tech to power other businesses tend to stay at arm’s length from offering financial services directly to consumers. The explanation I have heard is that they do not wish to compete against their customers. Zhang said that Airwallex takes a different approach, by being selective about the customers they partner with, so that the financial services they offer would not be in direct competition with those of its customers. The GOAT marketplace for sneakers, or Papaya Global’s HR platform are classic examples of this.
However, as Airwallex continues to grow, you can’t help but wonder whether one of those partners might like to gobble up all of Airwallex and take on some of that service provision role itself. In that context, it’s very interesting to see Salesforce Ventures returning to invest even more in the company in this round, given how widely the company has expanded from its early roots in software for salespeople into a massive platform providing a huge range of cloud services to help people run their businesses.
For now, it’s been the combination of its unique roots in Asia Pacific, plus its vertical approach of building its tech from the ground up, plus its retail acumen that has impressed investors and may well see Airwallex stay independent and grow for some time to come.
“Airwallex has a clear competitive advantage in the digital payments market,” said David Craver, MD at Lone Pine Capital, in a statement. “Its unique Asia-Pacific roots, coupled with its innovative infrastructure, products and services, speak volumes about the business’ global growth opportunities and its impressive expansion in the competitive payment providers space. We are excited to invest in Airwallex at this dynamic time, and look forward to helping drive the company’s expansion and success worldwide.”
Updated to note that the coffee business was in Australia, not Hong Kong.
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Roku debuts new Streaming Stick 4K bundles, software update with voice and mobile features
Weeks after Amazon introduced an updated Fire TV lineup that included, for the first time, its own TVs, Roku today is announcing its own competitive products in a race to capture consumers’ attention before the holiday shopping season. Its updates include a new Roku Streaming Stick 4K and Roku Streaming Stick 4K+ — the latter which ships with Roku’s newer hands-free voice remote. The company is also refreshing the Roku Ultra LT, a Walmart-exclusive version of its high-end player. And it announced the latest software update, Roku OS 10.5, which adds updated voice features, a new Live TV channel for home screens and other minor changes.
The new Streaming Stick 4K builds on Roku’s four-year-old product, the Streaming Stick+, as it offers the same type of stick form factor designed to be hidden behind the TV set. This version, however, has a faster processor, which allows the device to boot up to 30% faster and load channels more quickly, Roku claims. The Wi-Fi is also improved, offering faster speeds and smart algorithms that help make sure users get on the right band for the best performance in their homes where network congestion is an increasingly common problem — especially with the pandemic-induced remote-work lifestyle. The new Stick adds support for Dolby Vision and HDR 10+, giving it the “4K” moniker.
Image Credits: Roku
This version ships with Roku’s standard voice remote for the same price of $49.99. For comparison, Amazon’s new Fire TV Stick Max with a faster processor and speedier Wi-Fi is $54.99. However, Amazon is touting the addition of Wi-Fi 6 and support for its game streaming service, Luna, as reasons to upgrade.
Roku’s new Streaming Stick 4K+ adds the Roku Voice Remote Pro to the bundle instead. This is Roku’s new remote, launched in the spring, that offers rechargeability, a lost remote finder and hands-free voice support via its mid-field microphone, so you can just say things like “hey Roku, turn on the TV,” or “launch Netflix,” instead of pressing buttons. Bought separately, this remote is $29.99. The bundle sells for $69.99, which translates to a $10 discount over buying the stick and remote by themselves.
Image Credits: Roku
Both versions of the Streaming Stick will be sold online and in stores starting in October.
The Roku Ultra LT ($79.99), built for Walmart exclusively, has also been refreshed with a faster processor, more storage, a new Wi-Fi radio with up to 50% longer range, support for Dolby Vision, Bluetooth audio streaming and a built-in ethernet port.
Plus, Roku notes that TCL will become the first device partner to use the reference designs it introduced at CES for wireless soundbars, with its upcoming Roku TV wireless soundbar. This device connects over Wi-Fi to the TV and works with the Roku remote, and will arrive at major retailers in October where it will sell for $179.99.
The other big news is Roku’s OS 10.5 software release. The update isn’t making any dramatic changes this time around, but is instead focused largely on voice and mobile improvements.
The most noticeable consumer-facing change is the ability to add a new Live TV channel to your home screen, which lets you more easily launch The Roku Channel’s 200+ free live TV channels, instead of having to first visit Roku’s free streaming hub directly, then navigate to the Live TV section. This could make the Roku feel more like traditional TV for cord-cutters abandoning their TV guide for the first time.
Image Credits: Roku
Other tweaks include expanded support for launching channels using voice commands, with most now supported; new voice search and podcast playback with a more visual “music and podcast” row and Spotify as a launch partner; the ability to control sound settings in the mobile app; an added Voice Help guide in settings; and additional sound configuration options for Roku speakers and soundbars (e.g. using the speaker pairs and soundbar in a left/center/right) or in full 5.1 surround sound system).
A handy feature for entering in email and passwords in set-up screens using voice commands is new, too. Roku says it sends the voice data off-device to its speech-to-text partner, and the audio is anonymized. Roku doesn’t get the password or store it, as it goes directly to the channel partner. While there are always privacy concerns with voice data, the addition is a big perk from an accessibility standpoint.
Image Credits: Roku
One of the more under-the-radar, but potentially useful changes coming in OS 10.5 is an advanced A/V sync feature that lets you use the smartphone camera to help Roku make further refinements to the audio delay when using wireless headphones to listen to the TV. This feature is offered through the mobile app.
The Roku mobile app in the U.S. is also gaining another feature with the OS 10.5 update with the addition of a new Home tab for browsing collections of movies and shows across genres, and a “Save List, which functions as a way to bookmark shows or movies you might hear about — like when chatting with friends — and want to remember to watch later when you’re back home in front of the TV.
The software update will roll out to Roku devices over the weeks ahead. It typically comes to Roku players first, then rolls out to TVs.
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What we can learn from edtech startups’ expansion efforts in Europe
It’s a story common to all sectors today: investors only want to see ‘uppy-righty’ charts in a pitch. However, edtech growth in the past 18 months has ramped up to such an extent that companies need to be presenting 3x+ growth in annual recurring revenue to even get noticed by their favored funds.
Some companies are able to blast this out of the park — like GoStudent, Ornikar and YouSchool — but others, arguably less suited to the conditions presented by the pandemic, have found it more difficult to present this kind of growth.
One of the most common themes Brighteye sees in young companies is an emphasis on international expansion for growth. To get some additional insight into this trend, we surveyed edtech firms on their expansion plans, priorities and pitfalls. We received 57 responses and supplemented it with interviews of leading companies and investors. Europe is home 49 of the surveyed companies, six are based in the U.S., and three in Asia.
Going international later in the journey or when more funding is available, possibly due to a VC round, seems to make facets of expansion more feasible. Higher budgets also enable entry to several markets nearly simultaneously.
The survey revealed a roughly even split of target customers across companies, institutions and consumers, as well as a good spread of home markets. The largest contingents were from the U.K. and France, with 13 and nine respondents respectively, followed by the U.S. with seven, Norway with five, and Spain, Finland, and Switzerland with four each. About 40% of these firms were yet to foray beyond their home country and the rest had gone international.
International expansion is an interesting and nuanced part of the growth path of an edtech firm. Unlike their neighbors in fintech, it’s assumed that edtech companies need to expand to a number of big markets in order to reach a scale that makes them attractive to VCs. This is less true than it was in early 2020, as digital education and work is now so commonplace that it’s possible to build a billion-dollar edtech in a single, larger European market.
But naturally, nearly every ambitious edtech founder realizes they need to expand overseas to grow at a pace that is attractive to investors. They have good reason to believe that, too: The complexities of selling to schools and universities, for example, are widely documented, so it might seem logical to take your chances and build market share internationally. It follows that some view expansion as a way of diversifying risk — e.g. we are growing nicely in market X, but what if the opportunity in Y is larger and our business begins to decline for some reason in market X?
International expansion sounds good, but what does it mean? We asked a number of organizations this question as part of the survey analysis. The responses were quite broad, and their breadth to an extent reflected their target customer groups and how those customers are reached. If the product is web-based and accessible anywhere, then it’s relatively easy for a company with a good product to reach customers in a large number of markets (50+). The firm can then build teams and wider infrastructure around that traction.
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Tile secures $40 million to take on Apple AirTag with new products
Tile, the maker of Bluetooth-powered lost item finder beacons and, more recently, a staunch Apple critic, announced today it has raised $40 million in non-dilutive debt financing from Capital IP. The funding will be put toward investment in Tile’s finding technologies, ahead of the company’s plan to unveil a new slate of products and features that the company believes will help it to better compete with Apple’s AirTags and further expand its market.
The company has been a longtime leader in the lost item finder space, offering consumers small devices they can attach to items — like handbags, luggage, bikes, wallets, keys and more — which can then be tracked using the Tile smartphone app for iOS or Android. When items go missing, the Tile app leverages Bluetooth to find the items and can make them play a sound. If the items are further afield, Tile taps into its broader finding network consisting of everyone who has the app installed on their phone and other access points. Through this network, Tile is able to automatically and anonymously communicate the lost item’s location back to its owner through their own Tile app.
Image Credits: Tile
Tile has also formed partnerships focused on integrating its finding network into over 40 different third-party devices, including those across audio, travel, wearables and PC categories. Notable brand partners include HP, Dell, Fitbit, Skullcandy, Away, Xfinity, Plantronics, Sennheiser, Bose, Intel and others. Tile says it’s seen 200% year-over-year growth on activations of these devices with its service embedded.
To date, Tile has sold more than 40 million devices and has over 425,000 paying customers — a metric it’s revealing for the first time. It doesn’t disclose its total number of users, both free and paid combined, however. During the first half of 2021, Tile says revenues increased by over 50%, but didn’t provide hard numbers.
While Tile admits that the COVID-19 pandemic had some impacts on international expansions, as some markets have been slower to rebound, it has still seen strong performance outside the U.S., and considers that a continued focus.
The pandemic, however, hasn’t been Tile’s only speed bump.
When Apple announced its plans to compete with the launch of AirTags, Tile went on record to call it unfair competition. Unlike Tile devices, Apple’s products could tap into the iPhone’s U1 chip to allow for more accurate finding through the use of ultra-wideband technologies available on newer iPhone models. Tile, meanwhile, has plans for its own ultra-wideband-powered device, but hadn’t been provided the same access. In other words, Apple gave its own lost item finder early, exclusive access to a feature that would allow it to differentiate itself from the competition. (Apple has since announced it’s making ultra-wideband APIs available to third-party developers, but this access wasn’t available from day one of AirTag’s arrival.)
Image Credits: Tile internal concept art
Tile has been vocal on the matter of Apple’s anti-competitive behavior, having testified in multiple congressional hearings alongside other Apple critics, like Spotify and Match. As a result of increased regulatory pressure, Apple later opened up its Find My network to third-party devices, in an effort to placate Tile and the other rivals its AirTags would disadvantage.
But Tile doesn’t want to route its customers to Apple’s first-party app — it intends to use its own app in order to compete based on its proprietary features and services. Among other things, this includes Tile’s subscriptions. A base plan is $29.99 per year, offering features like free battery replacement, smart alerts and location history. A $99.99 per year plan also adds insurance of sorts — it pays up to $1,000 per year for items it can’t find. (AirTag doesn’t do that.)
Despite its many differentiators, Tile faces steep competition from the ultra-wideband-capable AirTags, which have the advantage of tapping into Apple’s own finding network of potentially hundreds of millions of iPhone owners.
However, Tile CEO CJ Prober — who joined the company in 2018 — claims AirTag hasn’t impacted the company’s revenue or device sales.
“But that doesn’t take away from the fact that they’re making things harder for us,” he says of Apple. “We’re a growing business. We’re winning the hearts and minds of consumers… and they’re competing unfairly.”
“When you own the platform, you shouldn’t be able to identify a category that you want to enter, disadvantage the incumbents in that category, and then advantage yourself — like they did in our case,” he adds.
Tile is preparing to announce an upcoming product refresh that may allow it to better take on the AirTag. Presumably, this will include the pre-announced ultra-wideband version of Tile, but the company says full details will be shared next week. Tile may also expand its lineup in other ways that will allow it to better compete based on look and feel, size and shape, and functionality.
Tile’s last round of funding was $45 million in growth equity in 2019. Now it’s shifted to debt. In addition to new debt financing, Tile is also refinancing some of its existing debt with this fundraise, it says.
“My philosophy is it’s always good to have a mix of debt and equity. So some amount of debt on the balance sheet is good. And it doesn’t incur dilution to our shareholders,” Prober says. “We felt this was the right mix of capital choice for us.”
The company chose to work with Capital IP, a group it’s had a relationship with over the last three years, and who Tile had considered bringing on as an investor. The group has remained interested in Tile and excited about its trajectory, Prober notes.
“We are excited to partner with the Tile team as they continue to define and lead the finding category through hardware and software-based innovations,” said Capital IP’s Managing Partner Riyad Shahjahan, in a statement. “The impressive revenue growth and fast-climbing subscriber trends underline the value proposition that Tile delivers in a platform-agnostic manner, and were a critical driver in our decision to invest. The Tile team has an ambitious roadmap ahead and we look forward to supporting their entry into new markets and applications to further cement their market leadership,” he added.
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News aggregator SmartNews raises $230 million, valuing its business at $2 billion
SmartNews, a Tokyo-headquartered news aggregation website and app that’s grown in popularity despite hefty competition from built-in aggregators like Apple News, today announced it has closed on $230 million in Series F funding. The round brings SmartNews’ total raise to date to over $400 million and values the business at $2 billion — or as the company touts in its press release, a “double unicorn.” (Ha!)
The funding included new U.S. investors Princeville Capital and Woodline Partners, as well as JIC Venture Growth Investments, Green Co-Invest Investment, and Yamauchi-No.10 Family Office in Japan. Existing investors participating in this round included ACA Investments and SMBC Venture Capital.
Founded in 2012 in Japan, the company launched to the U.S. in 2014 and expanded its local news footprint early last year. While the app’s content team includes former journalists, machine learning is used to pick which articles are shown to readers to personalize their experience. However, one of the app’s key differentiators is how it works to pop users’ “filter bubbles” through its “News From All Sides” feature, which allows its users to access news from across a range of political perspectives.
It has also developed new products, like its COVID-19 vaccine dashboard and U.S. election dashboard, that provide critical information at a glance. With the additional funds, the company says it plans to develop more features for its U.S. audience — one of its largest, in addition to Japan — that will focus on consumer health and safety. These will roll out in the next few months and will include features for tracking wildfires and crime and safety reports. It also recently launched a hurricane tracker.
The aggregator’s business model is largely focused on advertising, as the company has said before that 85-90% of Americans aren’t paying to subscribe to news. But SmartNews’ belief is that these news consumers still have a right to access quality information.
In total, SmartNews has relationships with more than 3,000 global publishing partners whose content is available through its service on the web and mobile devices.
To generate revenue, the company sells inline ads and video ads, where revenue is shared with publishers. Over 75% of its publishing partners also take advantage of its “SmartView” feature. This is the app’s quick-reading mode, an alternative to something like Google AMP. Here, users can quickly load an article to read, even if they’re offline. The company promises publishers that these mobile-friendly stories, which are marked with a lightning bolt icon in the app, deliver higher engagement — and its algorithm rewards that type of content, bringing them more readers. Among SmartView partners are well-known brands like USA Today, ABC, HuffPost and others. Currently, over 70% of all SmartNews’ pageviews are coming from SmartView first.
SmartNews’ app has proven to be very sticky, in terms of attracting and keeping users’ attention. The company tells us, citing App Annie July 2021 data, that it sees an average time spent per user per month on U.S. mobile devices that’s higher than Google News or Apple News combined.
Image Credits: App Annie data provided by SmartNews
The company declined to share its monthly active users (MAUs), but had said in 2019 it had grown to 20 million in the U.S. and Japan. Today, it says its U.S. MAUs doubled over the last year.
According to data provided to us by Apptopia, the SmartNews app has seen around 85 million downloads since its October 2014 launch, and 14 million of those took place in the past 365 days. Japan is the largest market for installs, accounting for 59% of lifetime downloads, the firm noted.
“This latest round of funding further affirms the strength of our mission, and fuels our drive to expand our presence and launch features that specifically appeal to users and publishers in the United States,” said SmartNews co-founder and CEO Ken Suzuki. “Our investors both in the U.S. and globally acknowledge the tremendous growth potential and value of SmartNews’s efforts to democratize access to information and create an ecosystem that benefits consumers, publishers and advertisers,” he added.
The company says the new funds will be used to invest in further U.S. growth and expanding the company’s team. Since its last fundraise in 2019, where it became a unicorn, the company more than doubled its headcount to approximately 500 people globally. it now plans to double its headcount of 100 in the U.S., with additions across engineering, product, and leadership roles.
The Wall Street Journal reports SmartNews is exploring an IPO, but the company declined to comment on this.
The SmartNews app is available on iOS and Android across more than 150 countries worldwide.
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LinkedIn launches a $25M fund for creators, will test Clubhouse-style audio feature in coming weeks
When LinkedIn first launched Stories format, and later expanded its tools for creators earlier this year, one noticeable detail was that the Microsoft-owned network for professionals hadn’t built any kind of obvious monetization into the program — noticeable, given that creators earn a living on other platforms like Instagram, YouTube and TikTok, and those apps had lured creators, their content and their audiences in part by paying out.
“As we continue to listen to feedback from our members as we consider future opportunities, we’ll also continue to evolve how we create more value for our creators,” is how LinkedIn explained its holding pattern on payouts to me at the time. But that strategy may have backfired for the company — or at least may have played a role in what came next: last month, LinkedIn announced it would be scrapping its Stories format and going back to the proverbial drawing board to work on other short-form video content for the platform.
Now comes the latest iteration in that effort. To bring more creators to the platform, the company today announced that it would be launching a new $25 million creator fund, which initially will be focused around a new Creator Accelerator Program.
It’s coming on the heels of LinkedIn also continuing to work on one of its other new-content experiments: a Clubhouse-style live conversation platform. As we previously reported, LinkedIn began working on this back in March of this year. Now, we are hearing that the feature will make an appearance as part of a broader events strategy for the company very soon.
“We’ll be starting to test audio with a small pilot group in the coming weeks,” said Chris Szeto, senior director of product at LinkedIn, who heads up its audio efforts. “Given the trends in virtual, hybrid events we are also working on making audio part of our overall event strategy rather than a standalone offering, so that we can give people more choice about how they want to run and engage with their audiences.”
Notably, in a blog post announcing the creator fund, LinkedIn also listed a number of creator events coming up. Will the Clubhouse-style feature pop up there? Watch this space. Or maybe… listen up.
In any case, the creator accelerator that LinkedIn is announcing today is part of a bigger effort it’s been making to build out a platform for creating content. That has included building new tools and acquiring companies like Jumprope (a platform devised to make “how-to” videos) earlier this year. Together with the accelerator, the idea that LinkedIn wants to encourage more dynamic and lively set of voices to get more people talking and spending time on LinkedIn.
Andrei Santalo, global head of community at LinkedIn, noted in the blog post that the accelerator/incubator will be focused on the many ways that one can engage on LinkedIn.
“Creating content on LinkedIn is about creating opportunity, for yourselves and others,” he writes. “How can your words, videos and conversations make 774+ million professionals better at what they do or help them see the world in new ways?”
The incubator will last for 10 weeks and will take on 100 creators in the U.S. to coach them on building content for LinkedIn. It will also give them chances to network with like-minded individuals (naturally… it is LinkedIn), as well as a $15,000 grant to do their work. The deadline for applying (which you do here) is October 12.
The idea of starting a fund to incentivize creators to build video for a particular platform is definitely not new — and that is one reason why it was overdue for LinkedIn to think about its own approach.
Leading social media platforms like TikTok, Snapchat, Instagram and Facebook and YouTube all have announced hundreds of millions of dollars in payouts in the form of creator funds to bring more original content to their platforms.
You could argue that for mass-market social media sites, it’s important to pay creators because competition is so fierce among them for consumer attention.
But on the other hand, those platforms have appeal for creators because of the potential audience size. At 774 million users, LinkedIn isn’t exactly small, but the kind of content that tends to live on there is so different, and maybe drier — it’s focused on professional development, work and “serious” topics — that perhaps it might need the most financial incentive of all to get creators to bite.
LinkedIn’s bread and butter up to now has been around professional development: people use it to look for work, to get better jobs, to hire people, and to connect with people who might help them get ahead in their professional lives.
But it’s done so in a very prescribed set of formats that do not leave much room for exploring “authenticity” — not in the modern sense of “authentic self”, and not in the more old-school sense of just letting down your guard and being yourself. (Even relatively newer initiatives like its education focus directly play into this bigger framework.)
With authenticity becoming an increasing priority for people — and maybe more so as we have started to blur the lines between work and home because of COVID-19 and the changes that it has forced on us — I can’t help but wonder whether LinkedIn will use this opportunity to rethink, or at least expand the concept of, what it means to spend time on its platform.
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Epic Games appeals last week’s ruling in antitrust battle with Apple
Fortnite maker Epic Games is appealing last week’s ruling in its court battle with Apple, where a federal judge said Apple would no longer be allowed to block developers from adding links to alternative payment mechanisms, but stopped short of dubbing Apple a monopolist. The latter would have allowed Epic Games to argue for alternative means of serving its iOS user base, including perhaps, through third-party app stores or even sideloading capabilities built into Apple’s mobile operating system, similar to those on Google’s Android OS.
Apple immediately declared the court battle a victory, as the judge had agreed with its position that the company was “not in violation of antitrust law” and had also deemed Apple’s success in the app and gaming ecosystem as “not illegal.” Epic Games founder and CEO Tim Sweeney, meanwhile, said the ruling was not a win for either developers or consumers. On Twitter, he hinted that the company may appeal the decision when he said, “We will fight on.”
In a court filing published on Sunday (see below), Epic Games officially stated its attention to appeal U.S. District Judge Yvonne Gonzalez Rogers’ final judgment and “all orders leading to or producing that judgment.”
As part of the judge’s decision, Epic Games had been ordered to pay Apple the 30% of the $12 million it earned when it introduced its alternative payment system in Fortnite on iOS, which was then in breach of its legal contract with Apple.
The appellate court will revisit how Judge Gonzalez Rogers defined the market where Epic Games had argued Apple was acting as a monopolist. Contrary to both parties’ wishes, Gonzalez Rogers defined it as the market for “digital mobile gaming transactions” specifically. Though an appeal may or may not see the court shifting its opinion in Epic Games’ favor, a new ruling could potentially help to clarify the vague language used in the injunction to describe how Apple must now accommodate developers who want to point their customers to other payment mechanisms.
So far, the expectation floating around the developer community is that Apple will simply extend the “reader app” category exception to all non-reader apps (apps that provide access to purchased content). Apple recently settled with a Japanese regulator by agreeing to allow reader apps to point users to their own website where users could sign up and manage their accounts, which could include customers paying for subscriptions — like Netflix or Spotify subscriptions, for instance. Apple said this change would be global.
In briefings with reporters, Apple said the details of the injunction issued with the Epic Games ruling, however, would still need to be worked out. Given the recency of the decision, the company has not yet communicated with developers on how this change will impact them directly nor has it updated its App Store guidelines with new language.
Reached for comment, Epic Games said it does not have any further statements on its decision to appeal at this time.
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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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Nuula raises $120M to build out a financial services ‘super app’ aimed at SMBs
A Canadian startup called Nuula that is aiming to build a super app to provide a range of financial services to small and medium businesses has closed $120 million of funding, money that it will use to fuel the launch of its app and first product, a line of credit for its users.
The money is coming in the form of $20 million in equity from Edison Partners, and a $100 million credit facility from funds managed by the Credit Group of Ares Management Corporation.
The Nuula app has been in a limited beta since June of this year. The plan is to open it up to general availability soon, while also gradually bringing in more services, some built directly by Nuula itself but many others following an embedded finance strategy: business banking, for example, will be a service provided by a third party and integrated closely into the Nuula app to be launched early in 2022. Alongside that, the startup will also be making liberal use of APIs to bring in other white-label services, such as B2B and customer-focused payment services, starting first in the U.S. and then expanding to Canada and the U.K. before expanding further into countries across Europe.
Current products include cash flow forecasting, personal and business credit score monitoring, and customer sentiment tracking; and monitoring of other critical metrics including financial, payments and e-commerce data are all on the roadmap.
“We’re building tools to work in a complementary fashion in the app,” CEO Mark Ruddock said in an interview. “Today, businesses can project if they are likely to run out of money, and monitor their credit scores. We keep an eye on customers and what they are saying in real time. We think it’s necessary to surface for SMBs the metrics that they might have needed to get from multiple apps, all in one place.”
Nuula was originally a side-project at BFS, a company that focused on small business lending, where the company started to look at the idea of how to better leverage data to build out a wider set of services addressing the same segment of the market. BFS grew to be a substantial business in its own right (and it had raised its own money to that end, to the tune of $184 million from Edison and Honeywell). Over time, it became apparent to management that the data aspect, and this concept of a super app, would be key to how to grow the business, and so it pivoted and rebranded earlier this year, launching the beta of the app after that.
Nuula’s ambitions fall within a bigger trend in the market. Small and medium enterprises have shaped up to be a huge business opportunity in the world of fintech in the last several years. Long ignored in favor of building solutions either for the giant consumer market, or the lucrative large enterprise sector, SMBs have proven that they want and are willing to invest in better and newer technology to run their businesses, and that’s leading to a rush of startups and bigger tech companies bringing services to the market to cater to that.
Super apps are also a big area of interest in the world of fintech, although up to now a lot of what we’ve heard about in that area has been aimed at consumers — just the kind of innovation rut that Nuula is trying to get moving.
“Despite the growth in services addressing the SMB sector, overall it still lacks innovation compared to consumer or enterprise services,” Ruddock said. “We thought there was some opportunity to bring new thinking to the space. We see this as the app that SMBs will want to use everyday, because we’ll provide useful tools, insights and capital to power their businesses.”
Nuula’s priority to build the data services that connect all of this together is very much in keeping with how a lot of neobanks are also developing services and investing in what they see as their unique selling point. The theory goes like this: banking services are, at the end of the day, the same everywhere you go, and therefore commoditized, and so the more unique value-added for companies will come from innovating with more interesting algorithms and other data-based insights and analytics to give more power to their users to make the best use of what they have at their disposal.
It will not be alone in addressing that market. Others building fintech for SMBs include Selina, ANNA, Amex’s Kabbage (an early mover in using big data to help loan money to SMBs and build other financial services for them), Novo, Atom Bank, Xepelin and Liberis, biggies like Stripe, Square and PayPal, and many others.
The credit product that Nuula has built so far is a taster of how it hopes to be a useful tool for SMBs, not just another place to get money or manage it. It’s not a direct loaning service, but rather something that is closely linked to monitoring a customers’ incomings and outgoings and only prompts a credit line (which directly links into the users’ account, wherever it is) when it appears that it might be needed.
“Innovations in financial technology have largely democratized who can become the next big player in small business finance,” added Gary Golding, General Partner, Edison Partners. “By combining critical financial performance tools and insights into a single interface, Nuula represents a new class of financial services technology for small business, and we are excited by the potential of the firm.”
“We are excited to be working with Nuula as they build a unique financial services resource for small businesses and entrepreneurs,” said Jeffrey Kramer, Partner and Head of ABS in the Alternative Credit strategy of the Ares Credit Group, in a statement. “The evolution of financial technology continues to open opportunities for innovation and the emergence of new industry participants. We look forward to seeing Nuula’s experienced team of technologists, data scientists and financial service veterans bring a new generation of small business financial services solutions to market.”
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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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