To keep revenues growing, tap new markets.
To that end, a number of tech startups in China, eyeing a slowing economy at home, are raising money – and targeting operations – cross-border.
Financial Times reports that the activity is centered among a “new breed” of startups – namely, firms that ply their respective trades abroad.
Perhaps it’s a case of finding uncrowded opportunities, as China’s markets are dominated by tech juggernauts such as Alibaba and Tencent. The markets that are most immediately attracting attention for these nascent firms include India and Southeast Asia.
As one executive, Andy Tian, co-founder of Asia Innovations Group (AIG), told the financial publication, “Tencent and Alibaba exemplify the reason why companies like us go international,” as the firm has a majority, or 80 percent, of its millions of users located abroad. “The old guard are generally more successful in domestic China, but what works in China doesn’t necessarily work overseas, so that gives opportunities for startups like us.”
The push to find money and new audiences beyond China’s borders can be seen in corporate events such as those that have marked CashCash, which grabbed an undisclosed amount of funding in a Series A round late last year.
According to FT, the movement has been exemplified by Musical.ly, an app that traces its genesis to China but took hold in the US and was ultimately purchased by ByteDance, another firm based in China.
Separately, Wei Zhou, founder of venture capital firm CCV, has said the latest trend toward overseas markets is “purely online,” tied in part to the widespread availability of platforms such as Android. “Now with the mobile age, the world is really flat. That gives the opportunity for Chinese companies to operate globally, but not necessarily facing the … certain bias that people globally think about Chinese products, that it’s cheaper but lower quality,” Zhou told FT.
The competitive landscape for payments firms and food delivery companies is a bit less fraught in markets where firms do not have to subsidize users, the report noted, citing Zhou’s observation that profits and cash flow were relatively quicker to obtain.
In another example of Chinese firms setting sights abroad, PYMNTS recently spotlighted PingPong Global, which has carved out a niche serving small and mid-sized businesses based in China pursuing “outbound” commerce. The company was granted a payment institution license from Luxembourg later in 2017. More recently, as 2019 began, PingPong CEO Robert Chen told PYMNTS that the Luxembourg news is only one example of the company’s global expansion strategy. The firm has offices established beyond China in the United States, Hong Kong and Japan.
And, of course, cross-border strategies are not limited to smaller firms, as both Tencent and Alibaba have poured money into international expansion efforts as well. Tencent late last year took a 12 percent stake in Snap, and has a mid-single digit stake in Tesla. Alibaba has invested in India’s Paytm and food delivery firm bigbasket.com.