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We Nurture Innovators!
Deep Dive into VC Funding in China
Carman Chan
Founder and Managing Partner, Click Ventures
Setting the stage
Table of Content
1) Where VC Funding is going in China
2) Sectors where VC funding is going
a) High leve...
Section 1
Where VC Funding is Going
By City- using startup valuation as a gauge
Where VC Funding is going in China
Source: China Money Network, 36 Kr
Some hig...
Our observation is that these 4 tech hubs have different focuses
Where VC Funding is going in China
Source: 深圳晚报
Beijing- ...
Section 2a
Sectors where VC funding is going
VC funding goes into Business and Financial Services (including fintechs), Consumer Services
(including New Retail) and In...
Other interesting sectors to highlight
High level sector view of VC Funding
Source, SCMP, 36 Kr
National policy- Made in C...
Section 2b
Sectors deep dive
Why are VCs pouring money into these
sectors?
Who are the major players?
Payment is a key area of growth in Fintech
Why Fintech
Source, KPMG Fintech Pulse Report, China Internet Network Informati...
Wealth of data create opportunity for credits
Why Fintech (cont’d)
Source, KPMG Fintech Pulse Report, China Daily, Caixin ...
China fintech landscape
Who is in Fintech
Source, China Internet Report, Forbes
● The space is dominated by the BATJ
and P...
Social+ is a major driving force behind VC’s interest in the space
Why Social Commerce
Source, Coreinsight Research, GGV
S...
China social commerce landscape
Who is in Social Commerce
Source, Emarketer, 鲸准
443M is the number of smartphone-based onl...
China wants to be the AI Superpower by 2030
China’s State Council released its roadmap to
create a US$148B AI industry
● A...
Rich resources that Chinese AI startups can tap into
Why AI (cont’d)
Source, SCMP, Crunchbase
● Government mandate for the...
Chinese AI startups are well funded; computer vision companies are most sought after
Who is in AI
Source, China Internet R...
VCs back media startups for their strong engagement metrics and monetization potential
Why media
Source: TrustData
Media s...
Who is in media
快手 has dominance in
non-Tier 1 cities
抖音 and 西瓜 are different
● 抖音 has 85% of its users
below 24 years old...
VCs see the strong demand for electric vehicles in China
Why Electric Vehicle
Source: Forbes
2M electric and gasoline-elec...
According to Nikkei Asian Review, there are close to 300+electric car ventures in China
Source: Nikkei Asian Review, PE Da...
Section 3a
What do YOU need to know about partnering or
investing in a Chinese fintech company-
The Risk
Our observation is that China has been on a clampdown on P2P lending
Note of Caution to those going into P2P
Potential Red...
Section 3b
What do YOU need to know about partnering or
investing in a Chinese fintech company-
The Opportunities
B2B Fintech Suite
Providing a technology architecture to
traditional financial institutions
Now serving 100 banks, 60+ ins...
Hop on the outbound Chinese tourist bandwagon
Partnership with outbound Chinese Fintech
1) Being China Fintech’s on-the-gr...
The End- Thanks for listening!
Reach out at:
carman@clickventures.vc
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Deep Dive into VC Funding in China- Click Ventures

  1. 1. We Nurture Innovators! Deep Dive into VC Funding in China Carman Chan Founder and Managing Partner, Click Ventures
  2. 2. Setting the stage Table of Content 1) Where VC Funding is going in China 2) Sectors where VC funding is going a) High level of where funding went by sector b) Sector deep dive i) Fintech ii) Social Commerce iii) AI iv) Media v) Electric Vehicle 3) What do you need to know about partnering or investing in a Chinese fintech company a) Risks b) Where opportunities still lie
  3. 3. Section 1 Where VC Funding is Going
  4. 4. By City- using startup valuation as a gauge Where VC Funding is going in China Source: China Money Network, 36 Kr Some high level facts: ● Hangzhou overtook Shanghai in terms of valuation of startups ● Beijing and Shanghai still remain cities with the most number of unicorn as well as PE/VCs present ○ Beijing- 6,000+ ○ Shanghai- 5,600+
  5. 5. Our observation is that these 4 tech hubs have different focuses Where VC Funding is going in China Source: 深圳晚报 Beijing- Close to policy makers, strong talent pools Shanghai- VCs go there for Fintech/Gaming/Entertainment Hangzhou- E-commerce (due to Alibaba) Shenzhen- Hardware capital of the world Notable tech companiesNotable VCs 1,393 VC deals year to date Notable VCs Notable tech companies 785 VC deals year to date Notable tech companies Many ex-employees from Alibaba or Ant Financial leaving the companies to start their own businesses Notable tech companies 554 VC deals year to date 22 Unicorns in the city as of July 2018
  6. 6. Section 2a Sectors where VC funding is going
  7. 7. VC funding goes into Business and Financial Services (including fintechs), Consumer Services (including New Retail) and Information Technology (including AI) High level sector view of VC Funding Source: Dow Jones Venture Capital Report, up to Q3 2018 Landmark Deals Business and Financial Services Consumer Services Information Technology Definitions: Business and Financial Services- Fintech/B2B payments Consumer Services- Shopping facilitators/bike sharing Information Technology- AI/Electronics/Computer Hardware Total VC funding up to Q3 2018: US$107B Raised US$45.2B across 652 deals Raised US$29.3B in year to date across 880 deals Raised US$14.5B across 653 deals Ant Financial- Online Payment; US$14B Series C SenseTime- Artificial Intelligence US$1B Series D Ele.me- Food Delivery US$3B Funding round Megvii- Artificial Intelligence US$600M Series D
  8. 8. Other interesting sectors to highlight High level sector view of VC Funding Source, SCMP, 36 Kr National policy- Made in China 2025 Electric Vehicle ● Xiaopeng Motors raised US$596M in its most recent round despite inability to deliver EVs at scale Pinduoduo recently got listed in NYSE Social Commerce ● XiaohongShu raised US$300M in Series D led by Alibaba Short Videos (vertical social media) are taking the China Media industry by storm Media ● Kuaishou, raised US$1B in the recent funding round ● Douyin has more download in app-store than Facebook/Whatsapp/Youtube in Q1 2018
  9. 9. Section 2b Sectors deep dive Why are VCs pouring money into these sectors? Who are the major players?
  10. 10. Payment is a key area of growth in Fintech Why Fintech Source, KPMG Fintech Pulse Report, China Internet Network Information Center 9.6% of Chinese adults on a credit card in 2014 only- China skipped the credit card generation 98% of the population is on mobile 96% of consumers from the mainland mentioned they used "mobile payment app" in the past six months US$17T was the volume of mobile payment in 2017, (larger than the China GDP). Fun Fact about Payment in China There was a Robber robbed three stores and got caught and found out that he only got RMB160... Why are VC funding entering this segment? 1) Opportunities around payment 2) Opportunities around Credit- Personal and SME credits Some related figures to explain the rise of payment
  11. 11. Wealth of data create opportunity for credits Why Fintech (cont’d) Source, KPMG Fintech Pulse Report, China Daily, Caixin Global 38.8% of SMEs or more have trouble raising funds from traditional channels 30% or higher interest rate on top of central bank benchmark rate when SME extends credit from traditional banks Why are VC funding entering this segment? 1) Opportunities around payment 2) Opportunities around Credit- Personal and SME credits Some facts around the opportunity of credits RMB 250B worth of loans issued to 100,000+ SMEsSMEs Traditional Financial Institutions Illustrative example of JD Finance Launched Big Dipper for banks and financial institutions to leverage JD’s retail credit system
  12. 12. China fintech landscape Who is in Fintech Source, China Internet Report, Forbes ● The space is dominated by the BATJ and Ping An, the largest insurance company in the world ● These players sit on a wealth of data that can be leveraged for financial services such as lending and wealth management products.
  13. 13. Social+ is a major driving force behind VC’s interest in the space Why Social Commerce Source, Coreinsight Research, GGV Social + is the concept of adding social element to e-commerce ● Influencer marketing (XiaoHongShu) ● Team purchase among friends’ circle facilitated by communication tools such as Wechat (Pinduoduo) Social+ works well in non-Tier 1 cities: ● Users tend to have more time to engage socially ● PInduoduo has 60% of its users in 3rd tier cities or belowThe Potential: 50% of rural villages in China will have e-commerce capabilities by 2020 ~6X y-o-y growth in MAU
  14. 14. China social commerce landscape Who is in Social Commerce Source, Emarketer, 鲸准 443M is the number of smartphone-based online shoppers that these social commerce player tap into in 2018 US$150Bis the social commerce market size in 2020 24Mmerchants will be selling on such platforms in 2 years time The market is still in its earlier stages but growing quickly: 48% of social commerce players that recently raised funding is still at or before Series A Just in Q1 2018 the capital raised in social commerce is already close to the level of the entirety of 2017
  15. 15. China wants to be the AI Superpower by 2030 China’s State Council released its roadmap to create a US$148B AI industry ● Also announcing the AI National Team Why AI 2030 2018 2017 Government has strong AI ambition >4X deficit in number of AI companies compared to US China is catching up quick- “A lot of these companies are created in the last 2-4 years” Kai-fu Lee, Sinovation Ventures China’s AI has lots of potential to grow Source, Techrepublic, Techcrunch Spending US$2.1B to build an AI industrial park in the suburbs of Beijing Be the world leader in the field by 2030
  16. 16. Rich resources that Chinese AI startups can tap into Why AI (cont’d) Source, SCMP, Crunchbase ● Government mandate for these 4 companies to build Open innovation platform ● The technologies and resources of the platforms will be open to everyone, which will benefit the entire industry Smart Cities Healthcare Autonomous Driving Voice Intelligence The AI National Team Proliferation of Data Data is the fuel for AI development and China has lots of them compare to other countries… 50X more mobile payments than US that AI algorithms can tap into in China 1.3B+face data records on Chinese citizens from the Ministry of Public Security’s database that Megavii is allowed to tap into Fun fact: A few criminals were caught recently after they went to see concerts! Chinese people has different interpretation about privacy!
  17. 17. Chinese AI startups are well funded; computer vision companies are most sought after Who is in AI Source, China Internet Report, Crunchbase = Computer vision startups Number of Deals Total Funding volume for computer vision startups
  18. 18. VCs back media startups for their strong engagement metrics and monetization potential Why media Source: TrustData Media startups have found a new way to engage its audience- Short Videos 84%y-o-y growth daily using frequency 8 times daily engagement 175M short video app users in rural China 1.6B Daily Active Users of short video platforms Advertisers have found short videos to be a useful channel to conduct influencer marketing: Example: Adidas used Douyin in starting Jan 2018- in 1 month accumulated 1M+ fans with video top views at 100M+
  19. 19. Who is in media 快手 has dominance in non-Tier 1 cities 抖音 and 西瓜 are different ● 抖音 has 85% of its users below 24 years old. ● 西瓜 has more PGC and OGC content Owned by Toutiao Source: 中国产业信息网 Toutiao moved quickly into the short video space
  20. 20. VCs see the strong demand for electric vehicles in China Why Electric Vehicle Source: Forbes 2M electric and gasoline-electric hybrid vehicles in sales by 2020 ● Manufacturers need to at least have one electric vehicle produced by 2019 Supportive national policy- Made in China 2020 Strong Market Demand for EVs- sales of EVs in China reached 770Kunits last year Accounts for >50% of EVs sold globally The current EV market is heavily subsidized and will change in near future: ● Total government subsidies on the purchase of an EV with a range of > 250km has been ~US$10K to make EVs affordable ○ Local governments spent US$7.7 billion on EV subsidies in 2017 ● In 2019 the government is introducing the ‘Credit system’ for Fuel Burning Cars ○ This effectively shifting the financial burden to automakers Potential Red Flag
  21. 21. According to Nikkei Asian Review, there are close to 300+electric car ventures in China Source: Nikkei Asian Review, PE Daily Notable EV Startups at a glance EV startups in China Who is in Electric Vehicle
  22. 22. Section 3a What do YOU need to know about partnering or investing in a Chinese fintech company- The Risk
  23. 23. Our observation is that China has been on a clampdown on P2P lending Note of Caution to those going into P2P Potential Red Flag As many as 118 P2P lending firm failed in China just in July 2018 This brings the cumulative count of failed P2P lending startups to a staggering 4334 companies since 2013 Source: Bloomberg
  24. 24. Section 3b What do YOU need to know about partnering or investing in a Chinese fintech company- The Opportunities
  25. 25. B2B Fintech Suite Providing a technology architecture to traditional financial institutions Now serving 100 banks, 60+ insurance companies, and 40+ asset management firms and security brokers PICC Health Insurance uses it to speed up policy processing time by a few thousand times, daily reporting time from 4 hours to 6 minutes and cut product launch time by 80% Opportunity- Examples of traditional financial institutions using fintech’s aid Partnership with banks/lending institutions E-Credit LIne Attracts outside capital providers such as EZbob that leverage the data on Alibaba’s ecommerce platform to provide credit to SMEs ~5 minutes is the time needed to UK-based businesses to apply and get funded £50-120Kcredit available for up to 6-15 months JD FInance Microcredit Partners with banks and financial institutions to leverage on JD.com’s vast amount of data Extend credit/loans with much more informed decision Partnership with banks/lending institutions Export tech stack to banks/lending institutions Source: Forbes, Coinjournal Domestic International
  26. 26. Hop on the outbound Chinese tourist bandwagon Partnership with outbound Chinese Fintech 1) Being China Fintech’s on-the-ground partner can be a key trend to help them offer localized services 2) China fintech is becoming a technology exporter to its overseas partner- tap into their technology The Opportunities Example of Partnerships in SEA Enters Indonesia through joint venture with two Indonesian partners Joint venture with Indonesia’s Elang Mahkota Teknologi to roll out a mobile payment service Helping Indonesian banks to improve their debt collection systems through their technologySource: Economic Times, SCMP
  27. 27. The End- Thanks for listening! Reach out at: carman@clickventures.vc
  • kyleellicott

    Jan. 18, 2019
  • DerekLee31

    Nov. 20, 2018
  • francescogrillo2

    Nov. 20, 2018

Where VC Funding is going in China? Sectors where VC funding is going? What do you need to know about partnering or investing in a Chinese Fintech company?

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