Category: Sequoia

China Roundup: Enterprise tech gets a lasting boost from coronavirus outbreak

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, a post from Sequoia Capital sounding the alarm of the coronavirus’s impact on businesses is reaching far corners of tech communities around the world, including China.

Many echo Sequoia’s observation that the companies that are the “most adaptable” are the likeliest to survive. Others cling to the hope of “[turning] a challenging situation into an opportunity to set yourself up for enduring success.”

Two weeks ago I wrote about how the private sector and the government in China are working together to contain the epidemic, bringing a temporary boost to the technology industry. This week I asked a number of investors and founders which of these changes will stand to last, and why.

B2B on the rise

The business-to-business (B2B) space was rarely a hot topic in China until online consumer businesses became relatively saturated in recent times. And now, the COVID-19 epidemic has unexpectedly breathed life into the once-boring field, which stretches from virtual meetings, online education, digital healthcare, cybersecurity, telecommunications, logistics to smart cities, analysis from investment firm Yunqi Partners shows.

For one, there is an obvious opportunity for remote collaboration tools as people work from home. Downloads of indigenous work apps like Dingtalk, WeChat Work, TikTok’s sister Lark as well as America’s Zoom jumped exponentially amid the health crisis. While some argue that the boom is overblown and will dissipate as soon as businesses are back to normal, others suggest that the shift in behavior will endure.

Like other work collaboration services, Zoom soared in China amid the coronavirus outbreak, jumping from No. 180 in late January to No. 28 as of late February in overall app installs. Data: App Annie 

“People are reluctant to change once they form a new habit,” suggests Joe Chan, partner at Hong Kong-based Mindworks Ventures. The virus outbreak, he believes, has educated the Chinese masses to work remotely.

“Meeting in person and through Zoom both have their own merits, depending on the social norm. Some people are used to thinking that relationships need to be established through face-to-face encounters, but those who don’t hold that view will have fewer meetings. [The epidemic] presents a chance for a paradigm shift.”

But changes are slow

Growth in enterprise businesses might be less visible than what China witnessed over the SARS epidemic that fueled internet consumer verticals such as ecommerce. That’s because software-as-a-services (SaaS), cloud computing, health tech, logistics and other enterprise-facing services are intangible for most consumers.

“Compared to changes in consumer behavior, the adoption of new technologies by enterprises happen at a slower pace, so the impact of coronavirus on new-generation innovations [B2B] won’t come as rapidly and thoroughly as what happened during SARS,” contended Jake Xie, vice president of investment at China Growth Capital.

Xie further suggested that the opportunities presented by the outbreak are reserved for companies that have been steadily investing in the field, in part because enterprise services have a longer life cycle and require more capital-intensive infrastructure. “Opportunists don’t stand a chance,” he concluded.

As for changing consumer behavior, such as the uptick in grocery delivery usage by seniors trapped indoors, the impact might be short-lived. “The only benefit that the epidemic brings to these apps is getting more people to try their services. But how many of them will stay? The argument that people will keep using these apps over concerns of getting sick in offline markets is unsubstantiated. The strength of a business lies in its ability to solve user problems in the long term, for example, providing affordability and convenience,” suggested Derek Shen, chairman of Danke Apartment, the Chinese co-living startup slated to list on NYSE.

Summoned by Beijing

The adjacent sector of enterprise services — at-scale technologies tailored to energizing government functions — has also seen traction over the course of the epidemic. Private firms in China have teamed up with regional authorities to better track people’s movements, ramp up facial recognition capacities aimed at a mask-wearing public, develop contact-free consumer experience, among other measures.

Tech firms touting services to the government are no stranger to criticisms concerning the lack of transparency in how user data is used. But the appeal to private firms is huge, not only because state contracts tend to provide a steady stream of long-term revenue, but also that certain public-facing projects can be billed as a fulfillment of corporate social responsibilities. Following the virus outbreak, Chinese tech companies of all sizes hastened to offer contributions, with efforts ranging from making monetary donations to building tools that keep the public informed.

On the flip side, the government also needs private help in emergency management. As prominent Chinese historian Luo Xin poignantly pointed out in podcast SurplusValue’s recent episode [1:00:00], some of the most efficient and effective responses to the public health crisis came not from the government but the private sector, whether it is online retailer JD.com or logistics firm SF Express delivering relief supplies to the epicenter of the outbreak.

That said, Luo argued there are signs that some local authorities’ tendency to centralize control is getting in the way of private efforts. For example, some government offices have stumbled in their attempts to develop crisis management systems from scratch, overlooking a pool of readily available and proven infrastructure powered by the country’s tech giants.

VCs to antitrust officials: We’d rather take our chances than see tech regulated

Last week at Stanford, antitrust officials from the U.S. Department of Justice organized a day-long conference that engaged numerous venture capitalists in conversations about big tech. The DOJ wanted to hear from VCs about whether they believe there’s still an opportunity for startups to flourish alongside the likes of Facebook and Google and whether they can anticipate what — if anything — might disrupt the inexorable growth of these giants.

Most of the invited panelists acknowledged there is a problem, but they also said fairly uniformly that they doubted if more regulation was the solution.

Some of the speakers dismissed outright the idea that today’s tech incumbents can’t be outmaneuvered. Sequoia’s Michael Moritz talked about various companies that ruled the world across different decades and later receded into the background, suggesting that we merely need to wait and see which startups will eventually displace today’s giants.

He added that if there’s a real threat lurking anywhere, it isn’t in an overly powerful Google, but rather American high schools that are, according to Moritz, a poor match for their Chinese counterparts. “We’re killing ourselves; we’re killing the future technologists… we’re slowly killing the potential for home-brewed invention.”

Renowned angel investor Ram Shriram similarly downplayed the DOJ’s concerns, saying specifically he didn’t think that “search” as a category could never be again disrupted or that it doesn’t benefit from network effects. He observed that Google itself disrupted numerous search companies when it emerged on the scene in 1998.

Somewhat cynically, we would note that those companies — Lycos, Yahoo, Excite — had a roughly four-year lead over Google at the time, and Google has been massively dominant for nearly all of those 22 years (because of, yes, its network effects).

Sleek raises $5M to help companies incorporate and operate in Singapore and Hong Kong

Sleek, a startup that is making it easier for other startups and companies to incorporate and operate in Singapore and Hong Kong, said today it has extended its seed financing round to raise $5 million.

The extended seed round for the two-year-old startup was led by private investors Pierre Lorinet and Fabio Blom, and MI8, an Asia-focused European backed private investment company.

Sleek also counts a number of high profile individuals including Martin Crawford, former Group CEO of corporate services giant Vistra, Olivier Gerhardt, founder of Wavecell, Eric Barbier, founder of TransferTo, and Olivier Legrand, MD Asia at Linkedin among its investors.

Sleek, founded by French entrepreneurs Julien Labruyere and Adrien Barthel, today helps more than 2,000 startups and companies in Singapore and Hong Kong, an additional market it extended to in mid-2019. Some of its clients include Yours Cosmetics (funded by Sequoia), Aspire Financials (which raised $30 million recently), Ematic Solutions, Devialet, and oil and gas giant Total.

As we wrote about them in June this year, Sleek not only helps startups and companies incorporate themselves in Singapore (and now, Hong Kong), but also takes care of their accounting, taxes, regulatory compliance and other administrative work.

Sleek founders Julien Labruyere (right) and Adrien Barthel (left)

Singapore and Hong Kong have emerged as epicenters for startups and tech worldwide. “Hong Kong is a historical Asian financial hub, with six times more operating companies than in Singapore and an amazing business ecosystem,” said Barthel, adding that despite the current situation in Hong Kong, the business is growing in the market.

Both Singapore and Hong Kong today offer a range of benefits including government-backed startup programs to attract businesses, but setting up shops there still require a lot of paperwork.

The traditional way of dealing with accounting and incorporation is a cumbersome task, and the last thing founders want to deal with, Barthel explained to TechCrunch in an interview. Plus, there’s no transparency in what the actual cost of doing these tasks would be, he said.

Sleek offers a subscription business, where it charges a fixed amount — about $600 — to its customers each year. Starting second year, it waives some of its fee, said Barthel. “We also offer a simple dashboard for our clients to quickly check the progress we have made on any front,” he added.

To make the deal even better, Sleek offers vouchers with subscription to AWS, Stripe, Google Cloud — that they are likely going to use in their businesses anyway — worth thousands of dollars. The startup also connects its partner entrepreneurs with financial institutions to help them access working capital.

Barthel said before signing up a client, Sleek does its own due diligence. “Singapore, for instance, has stringent on KYC (know your customer) processes. Among other things, we use a number of APIs that are tied with all the major global databases to ensure that our potential clients are not doing notorious business,” he said.

Sleek, which today employs 85 people, will use the fresh capital to expand its tech team, build new features for clients, and increase its operational capacity.