China's big tech clampdown continues
China's big tech clampdown continues
Asia Tech Review: 4 May 2021
Welcome back,
It’s good to take a break sometimes. I personally took a long holiday last week for the first time in a long while. That much needed rest was coupled with a pause day across the whole company at The Ken. You may know that we publish one story per day in India and Southeast Asia come rain or shine, but we took last Wednesday off given the escalating situation in India. (My latest story on Y Combinator in Southeast Asia did run last week, though.)
My colleagues in India are truly an inspiration. How they can keep working—and working to our high standard—while people all around them suffer with the shortage of beds, oxygen and general chaos is incredible. A break doesn’t fix that, but we did try to channel our audience and resources to help charities that are fighting the good fight.
See you next week,
Jon
China
Weeks after China hit Alibaba with a $2.8B for monopolistic behaviour, so it looks like Tencent—Alibaba’s arch rival—is next in line for the cane.
Reuters reported that the Chinese government is moving to fine the Shenzhen-headquartered company at least $1.5B (10B CNY), but it’ll apparently be lower than Alibaba’s punishment.
Tencent faces penalties for not properly reporting past acquisitions and investments for antitrust reviews, an offence with a fine capped at 500,000 yuan per case, and for anticompetitive practices in some of its businesses, with music streaming in particular focus, said the sources.
The probe is said to relate to Tencent Music, which was spun out and IPOed in the US in 2018, and some of its licensing deals and acquisitions, rather than WeChat or other Tencent units. The company might be relatively spared, it seems.
"The attitude from the regulator is that unlike Alibaba you are not the biggest target here, but it would be impossible not to penalise Tencent now that the campaign is in action," said one of the people.
But other stuff is happening in the pipe in the aftermath of Alibaba’s fine and Ant’s halted IPO, namely:
Tencent and ByteDance have been ordered to reign in their financial services business. Like Ant’s reorg, they are being told to set up holding companies, rejig their models and clean up data sharing between other services
On Ant itself, things are by no means done. Beijing is exploring Ant’s IPO process, including how approvals were secured quickly and which state firms were poised to gain from the listing
(Alibaba is also having its own panic about the impact of Apple’s new privacy changes—am adding this here as it seems relevant to the chaos)
Meituan is also being probed for allegedly stifling competition—but that’s something investors are viewing as a badge of honour now that Meituan is in the China Tech Big Boys Club (per ATR 23 March 2021)
Finally, 33 apps are said to have violated rules over collecting user data
What a time, then, for ByteDance to find a new CEO.
Ok, this is a little less dramatic than it sounds. Firstly, this is for TikTok—aka the non-China business—and it is an inside appointment. Shouzi Chew—a Singaporean—is taking the top job, but he’ll also remain in his current role as ByteDance CFO.
It’s an odd appointment for sure:
There’s absolutely zero stardust here. Sorry, Mr Chew. TikTok caused a stir when it appointed former Disney exec Kevin Mayer to the top seat—but he stepped down after the Trump administration went after TikTok. Appointing your CFO doesn’t come close.
In fact, it seems to be the opposite of what you’d expect. It’s hardly a mark of separation between ByteDance and TikTok to appoint the latter’s current CFO as the former’s head
And finally, Chew will be based in Singapore—that’s ByteDance international HQ but a long way from its biggest market, the US—will that be significant since everyone is after TikTok’s short video app crown?
What’s happening here? Time will tell. Maybe he’s an interim appointment? Send your best answers on a postcard, or maybe a TikTok video?
These headlines dominated China tech but there is some interesting IPO reports:
Bike sharing: Alibaba backed Hello Inc could be the first Chinese bike sharing player to test US public markets after it filed to go public. Details of the planned IPO aren’t clear yet
Insurance platform: Waterdrop, a mutual fund platform backed by Tencent is again being linked with a US IPO. The latest report suggest it plans to raise $360M
Meanwhile, Huawei suffered a sales slump due to sanctions which hit its phone business, just as Apple saw a rebound in China as part of its latest (and phenomenal) results
Finally, while the government is cracking down on digital financial services, JD.com began testing out China’s digital currency—it’s using it for some salary payments. PayPal tried to position itself as a winner in China, as a cross-border player—that’s a tough one with lots of competition.
India
India is all aboard the IPO train this week as Zomato filed for what’s likely to be a seminal IPO.
Sure, at $1.1B, Zomato isn’t raising Grab SPAC level funds but—like Grab in Southeast Asia—it could be a landmark listing that moves the needle and gets others to follow its path. It’s also quite something for Zomato, which many of us will remember as a restaurant finding service way back in the day—it’s now transformed into food delivery and, dare I suggest… a Super App™
My colleague Seetha recently looked at Zomato’s business in detail, but the new numbers we got include impressive 5.5X revenue growth in 3 years but a (still) very unprofitable business. That’s not likely to change given the competition out there.
Speaking of that halo effect:
Robotics firm Grey Orange, which develops machines for warehouses and b2b usage, is evaluating going public via an IPO or potentially SPAC. The goal is reportedly to raise $500-$600M at a valuation of close to $2B. Seems like early days
A more certain bet may be Freshworks, which has quietly built a credible rival to Salesforce. It is said to have hired bankers to take it public on the Nasdaq this year at a valuation of $10B, according to Reuters, which added it might submit pipeline “in the coming weeks”
Speaking of big companies, it’s been a while since Byju’s has done an acquisition. And here’s another: a double deal to buy specialised education platforms Great Learning and Gradeup for a sum of $400M. A deal could happen this month.
India got a new unicorn when on-demand home service provider Urban Company raised $190M from—you guessed it—Tiger Global, although it was led by Prosus (FNA Naspers)
There was also a big round for ElasticRun, which develops an e-commerce platform for neighbourhood stores and raised $75M
And finally, what a week of social media disasters in India. People are frantically rushing to platforms to seek help for friends and family who have been impacted by Covid, and yet it emerged Facebook and Twitter had censored criticism of the government’s (frankly abysmal) handling of the situation:
Officials said the legally binding order was designed to tackle what it called attempts in recent days to spread coronavirus-related misinformation and create panic by posting images of dead bodies taken out of context. Twitter, which received many of the takedown requests, blocked the posts in India, though they remained visible outside the country.
“Certain people are misusing social media to create panic in society,” India’s Ministry of Electronics and Information Technology said in a statement Monday, when asked about the blocks. It didn’t specify which laws were used to issue the orders.
The absurdity reached new levels when Facebook had briefly (and, apparently, accidentally) blocked a hashtag encouraging Prime Minister Modi to resign. Sure, guys!
This is at least neat: Google is adding UPI payments over NFC to Google Pay India
Finally, The Information does great reporting but this story on Netflix “fumbling” India seemed a little off to me and a number of other reporters who I know in/covering India tech. It’s perfectly possible to argue Netflix has done ok in India so far, and that competition—and pricing—is cutthroat and it hasn’t fallen down that sinkhole… yet
Southeast Asia
Southeast Asia is currently obsessed by Digitising All Things In Indonesia—it’s a continuation of a number of themes but they are gathering more steam.
In cloud kitchens: Hangry raised a $13M Series A—it graduated Sequoia Surge and looks to be one of the highest funded of the program in Southeast Asia. One of its rivals is called Yummy so I guess these founders get to have some fun, at least when drawing up their names
In social commerce: Super, an app that helps small merchants sell online, pulled in an impressive $28M Series B round led by SoftBank Ventures Asia
An equally hot market is stock trading and finance apps—I wrote about it with my colleague Dita last month—and yet another huge round just landed. Following $90M for Ajaib in 2021 and a $20M round for Pluang, so Bebit raised $65M. There’s also Bareksa, which is owned by top wallet app Ovo after an acquisition in 2019
Speaking of wallet acquisitions: Fresh from raising $100M Linkaja, the state-linked mobile wallet service, acquired p2p lending iGrow, which as the name suggests is focused on agriculture loans
And sticking with Indonesia, Gojek says it will make all vehicles in its fleet electric by 2030. We heard chatter of this back in February when EV scooter maker Niu said it would be a supplier (presumably one of many) for Gojek
500 Startups is launching a virtual accelerator in Singapore to help launch companies from scratch like Antler and Entrepreneur First does (oh, hey, I wrote about them last year)
Speaking of which, I looked in detail at Y Combinator’s growing successes in Southeast Asia but also the very real challenge it faces being relevant amidst newer, local programs and more funding options than ever before
StashAway, an investment app that isn’t from Indonesia—closed a whopping $25M led by Sequoia India. It’s a pretty fascinating company and journey, its CEO once led Rocket Internet’s Zalora business. My colleagues Ben and Kay profiled the business right before this round came in
Peer-to-peer lending startup Amartha banked US$28M from Women’s World Banking Capital Partners II fund and MDI Ventures
Shopee is reportedly getting aggressive with keeping sellers off of rival platforms
A rare funding round from Thailand: e-commerce service Mercular raised $3M
A pretty nasty security issue was found in the Philippines:
For at least two months, some 345,000 sensitive court documents from the Office of the Solicitor General of the Philippines related to ongoing legal cases were made publicly available online and could have been accessed by anyone who knew where to look, according to the U.K. security company TurgenSec
A look at how edtech startup Ruangguru used temporary workers—often on a pittance of a wage that’s below the legal minimum—to grow its business
Another neat fintech feature: a handful of banks in Thailand and Singapore connected their mobile payment wallets for easy and cheap cross-border transactions
Finally: Quorn, one of the oldest alt meat brands—I still remember my vegetarian housemate at university cooking with it—is going public with a $1.3B IPO in the Philippines. It is actually an IPO for its parent company Monde Nissin, which also owns a vegan brand called Cauldron Foods. Quorn was founded in the UK way back in 1985 by acquired by the Philippines business in 2015.
Japan
Toyota is building a smart city near Mount Fuji:
That’s why Toyota is building its sensor-laden “Woven City” from the ground up a two-hour drive outside of Tokyo. There, Toyota will test autonomous vehicles for transport, deliveries and mobile shops alongside the city’s hand-picked residents as a kind of living laboratory. When construction is completed in 2024, it will seek to offer a model of what urban centers around the world could look like in the age of autonomous transport. Doing so, of course, will require convincing a broader population.
Other reads
The 2021 World Press Freedom Index compiled by Reporters Without Borders (RSF) shows that journalism, the main vaccine against disinformation, is completely or partly blocked in 73% of the 180 countries ranked by the organisation. Its analysis of Asia Pacific is particularly troubling
Chinese workers allege forced labor, abuses in Xi’s ‘Belt and Road’ program
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