Bike sharing pioneer Mobike is retreating to China

In a telling sign of the state of bike sharing, Mobike, a once red-hot startup that attracted billions in investment capital, is closing down all international operations and putting its sole focus on China.

On Friday, Mobike laid off its operations teams in APAC, which entailed more than 15 full-time employees and many more contractors and third-party agency staff across Singapore, Malaysia, Thailand, India and Australia. Those affected were told the company will “ramp down” the regional business without being provided specific reasons for the rollback, five people familiar with the matter told TechCrunch.

These layoffs are a key step towards the eventual goal of closing Mobike’s international footprint since the Asia Pacific region accounts for the majority of its non-China business. More staff cuts are impending outside Asia that can include Europe and the Americans, according to two sources. Eventually, Mobike will only be operational in its native China, which accounts for the majority of its overall global business.

The change of strategy encapsulates the struggle that Chinese bike sharing companies have experienced over the past year. Mobike was arguably the most successful from the camp. Before it was ultimately bought by Chinese delivery giant Meituan for $2.7 billion 11 months ago, it had raised over $900 million from investors such as Tencent, Foxconn, Hillhouse Capital and Warburg Pincus as bike-sharing became the hot topic in 2017. Ultimately, though, Mobike wasn’t able to find a sustainable business model amid tough competition and tight financials.

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Photo source: Mobike

Employees were taken aback by Friday’s announcement as they had been under the impression that Mobike’s prospects were bright and there had not been issues with salaries or other financial concerns. In Singapore, specifically, the bike app claims to be the top player and is working closely with the government to make the city-state greener.

“I was shocked. The business is doing well from my perspective,” one source told TechCrunch. “But just because one country does well doesn’t mean the whole region will survive. Mobike ran a lot of analysis on profits and losses in the [overseas] region and came to the conclusion that there is no way it would turn profitable.”

Things were rosier just a year ago. When Meituan, the one-stop app for neighborhood services in China, acquired Mobike, the buyout was widely seen as a triumph for the young startup as its Chinese peer Ofo suffered mounting financial pressures standing as an independent company. Ofo started to phase out its international operations last year and was reportedly preparing for bankruptcy recently.

Before long, Meituan also started to show its restraint over the mobility segment. In an effort to cut costs, the Hong Kong-listed firm focusing on food delivery and hotel booking announced it would pause expansions on dockless bikes and car-hailing. Its bike unit is also facing growing competition from Hellobike, which is Alibaba’s latest attempt to crack China’s two-wheel transport industry.

Despite the hurdles, Mobike’s APAC employees told TechCrunch that they had believed the overseas business would stick it out as they had generated “a lot of cost-saving and progresses” in recent months after being assigned to boost the company’s operational efficiency.

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Photo source: Mobike

Those affected won’t have much time to ponder but feel “unbalanced” and “upset” about the company’s “one-sided” decision. TechCrunch understands that staff weren’t given a chance to negotiate and most will leave by mid-April with a limited number of “key” employees asked to stay until the “ramping down” is completed. Severance packages vary on people’s termination dates, while some employees received no compensation altogether as the notice had arrived before the 30-day period required by the contract.

Meituan’s decision to close down the regional business has also come as a risky move for the company. In Singapore, Mobike’s largest market outside China, bike-sharing companies are required to file an exit plan with the government before they pull the trigger. Mobike has not informed the Singapore Land Transport Authority of its layoff as of Friday, according to two sources, although it has been in talks with the transportation regulator regarding a potential shutdown. Mobike told employees to keep news of the job cuts private before it announces them officially to the LTA.

Meituan declined to comment for this story. The company is scheduled to report earnings on Monday which may shed more light on the situation.

Huawei is suing the the US government over “unconstitutional” equipment ban

Huawei has decided to go on the legal offence against the United States government after defending itself against alleged espionage and bank frauds linked to American sanctions on Iran. During a press conference late Wednesday, Huawei announced that it has filed a lawsuit against the U.S. government, arguing that a ban on the use of its products by federal agencies and contractors violated due process and is unconstitutional.

The company is the world’s largest maker of telecommunications equipment and a growing threat to Apple in the global smartphone race. At the center of the suit is Huawei’s claim that Section 889 in the National Defense Authorization Act, passed in August 2018, is unconstitutional. Section 889 contains restrictions that prevent federal agencies from procuring covered Huawei equipment or services, working with contractors that use covered Huawei equipment or services or awarding grants and loans that would be used to procure Huawei products.

During today’s press conference, Huawei rotating chairman Guo Ping said Congress has failed to provide evidence to support them or allowed Huawei due process of law. The company is seeking a permanent injunction against the restrictions.

 

“For three decades, we have maintained a solid track record in security,” said Guo. “Huawei has not and never installed backdoors and we will never allow others to install backdoors in our equipment. The U.S. government branded our services a threat. The U.S. government has never provided any evidence supporting their accusations that Huawei poses a serious security threat. The U.S. government is sparing no effort to smear the company. Even worse, it is trying to block us in other countries.”

U.S. officials have long warned domestic companies and other governments against using Huawei equipment over threats that China could be using its tech for spying. Concerns around Huawei have escalated as the Chinese company grows to play a key role in 5G, the network solution important to power driverless cars, remote surgeries and other futuristic tech.

Earlier this year, the U.S. Justice Department filed criminal charges against Huawei and its financial executive Meng Wanzhou over business practices that allegedly circumvent U.S. sanctions over Iran. Meng announced this week she is suing the Canadian governemnt and police of violating her rights when they detained her on behalf of the U.S. government in December.

Huawei executives, including founder Ren Zhengfei who rarely speaks out publicly, have firmly denied the presence of any backdoors in its equipment. Ren recently declared that the U.S. won’t hamper his company’s trajectory and that the arrest of Meng — his daughter — is a “politically motivated act [that] is not acceptable.”

Food delivered to the doorstep is not so cheap in China anymore

A big selling point of ordering food to the doorstep in China is price, which, in the early years, could be much cheaper than eating in-house. That’s arguably indulged a demographic of lazy, indoorsy eaters, but that may not last for much longer.

Over the past few months, users in China have noticed incremental price increases on their meals ordered via Ele.me and Meituan, the country’s largest food delivery apps. The trigger? China’s food heavyweights have gone about taking a bigger cut of each order — over 20 percent in some cases — as their priorities shifted following a major upheaval.

Three-way war

Ele.me and Meituan work just like their American counterparts Uber Eats, GrubHub, DoorDash and the likes. The apps list menu items from an assortment of local restaurants. When a user places an order, they pass it along to the restaurant and dispatch a driver — in China’s case, a scooter driver — to pick up the food. The customer can then see when their meal will arrive through a live map tracking the driver’s movement.

This new habit of ordering food via a marketplace app rather than calling a restaurant caught on rapidly in China, in part thanks to vast sums of subsidies from companies like Ele.me and Meituan to bring costs down for restaurants and users. The market was on course to reach 240 billion yuan ($35.8 billion) in transactions in 2018 with an 18 percent year-over-year growth rate, estimates research firm iiMedia. Total users would reach 355 million, which means a quarter of Chinese are now ordering food from their phones.

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Meituan’s delivery driver pictured in an ad / Image: Meituan via Weibo

Food delivery startups willingly undertook the cash-intensive fight because they had deep-pocketed backers. For a few years, the sector was a three-way proxy war between China’s tech mammoths Baidu, Alibaba and Tencent, which are collectively known as the “BAT”. Baidu effectively quit the scene after selling its food delivery business to rival Ele.me in 2017. Last year saw more shakeup as Alibaba took over Ele.me, which subsequently merged with the parent’s local services unit Koubei, while Meituan went public with Tencent being a major shareholder.

Meituan led the game in 2018 with a 61.3 percent market share according to research firm TrustData, giving it a meaningful edge over Ele.me, which alongside its newly acquired Baidu Waimai commanded a total of 36.5 percent share.

Subsidies were helpful in enlisting restaurants and consumers early on, but as the market consolidates, investors will likely become more attuned to monetization. It’s thus unsurprising to see both major players scaling back from subsidy-powered growth. It’s too soon to know how the faceoff between Ele.me and Meituan will play out in the next few years, as the duo is now dealing with a fresh set of challenges and goals.

New adventures

It’s hard to nail down how much Ele.me and Meituan are charging restaurants from each transaction since fees vary on the location, type and size of a restaurant. What’s widely acknowledged is that both have been raising commission rates once every few months, forcing restaurants to rethink their strategy for ferrying food around.

“We’ve raised all our items by at least two yuan [$0.30]. We aren’t worried because we’ve built a loyal customer base over the years. For those who just started and focus on delivery, they may have a harder time,” a restaurant owner who operates a take-out kitchen in Hefei, the capital of China’s Anhui Province, told TechCrunch.

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Ele.me’s delivery driver pictured in an ad / Image: Ele.me via Weibo

The subsidy-fuelled period cultivated a clan of “virtual restaurants” that operate only out of a kitchen. As subsidies shrink, those reliant on delivery as a lifeline are left with three options: close down, absorb the new costs to keep customers happy, or in some cases where the kitchen is well-functioning, shift the costs to customers.

TechCrunch spoke to more than a dozen restaurants and take-out kitchens in China’s major cities and found most are paying at least 20 percent of each order — a considerable bite to the low-margin business — to Meituan and slightly less to Ele.me. The discrepancy may speak to Meituan’s mounting operating losses — which tripled year-over-year to 3.45 billion yuan ($510 million) in the third quarter of 2018 — a soft spot that its rival poignantly pointed out.

“Ele.me promises it won’t further raise fees [on restaurants] and its rate will always be lower than that of Meituan,” Ele.me vice president Wang Jingfeng told news portal Sina in an interview in January. “Meituan is under financial pressure. But Ele.me understands the food delivery market is still in the phase of being educated. Reaping rewards from merchants too early can do great harm to the market.”

Meituan said it had no comment on its increased fees for restaurants. But the Hong Kong-listed company, driven with the vision to become the “Amazon for services,” already showed signs of stress when it ceased expansions on its costly new ventures — car-hailing and bike-rental. Food delivery accounts for the majority of Meituan’s revenues, while hotel booking is its second-most significant revenue source. The company, however, assured investors that it’s in no rush to turn a profit.

“We are not focused on the short-term profitability, even though we have been proven that we are able to do so, to make it — continue improvement in our unit economics. We would rather focus on growth and improve the overall user and merchant experience and to continue to strengthen our leadership in this market,” said Chen Shaohui Chen, Meituan’s vice president of corporate development, during the company’s Q3 earnings call. 

Despite enjoying support from consistently profitable Alibaba, Ele.me will also face pressure soon as parent company Alibaba copes with slowing revenue growth. For Ele.me, opportunities lie outside China’s megacities where eating via an app is not yet a norm. All told, Alibaba plans to hire 5,000 new employees in 2019 for Ele.me and Koubei to infiltrate the largely untapped Tier 3 and 4 cities, a source close to the matter told TechCrunch, and the team will focus not just on delivery but also work to digitally power up conventional restaurants.

Food delivery is just one way to generate income. Both Ele.me and Meituan are aiming to upgrade restaurants the way Alibaba and JD.com have transformed brick-and-mortar stores: from how data analytics can beef up sourcing efficiency to implementing scan-to-order for in-house diners. The hope is a data-centric practice will convert to cost-saving for restaurants, which will eventually boost their loyalty and willingness to pay for the tech giants’ tools.

China’s YY eyes overseas live streaming with $1.45B Bigo buyout

One of China’s top live streaming companies YY bought a stake and obtained the right to purchase a majority share in Bigo last June, and now the other shoe has dropped after YY fully acquired the Singapore-based startup behind live streaming app Bigo Live and short-video service Like.

That’s according to an announcement YY made on Monday, which disclosed it has bought out the remaining 68.3 percent of all the issued and outstanding shares of Bigo for a price tag of about $1.45 billion.

Bigo’s connection to YY is deep-rooted. Li Xueling, a veteran Chinese journalist who’s also known as David Li, founded YY in 2005 well before the heyday of mobile-based live streaming apps. With the intent to bring the China-tested business to overseas markets, Li started Bigo in 2016 to replicate YY’s lucrative revenue model where the platform operator takes a cut whenever viewers reward streamers with virtual gifts, which can be cashed out.

YY racked up $675 million in net revenues and a net income of around $100 million from the fourth quarter of 2018, its latest earnings report shows.

The Bigo buyout is set to be a huge boost to YY’s international ambitions as its home market has been divided up between YY itself, its spin-off Huya that focuses on esports streaming and Huya’s archrival Douyu. Curiously, both Douyu and Huya are backed by Tencent, the company best known for the WeChat messenger but is also China’s largest games publisher.

To bring the domestic rivalry into perspective, Nasdaq-listed YY recorded a monthly mobile user base of 90.4 million in the fourth quarter. Huya, which priced its U.S. initial public offering at $180 million last August, posted a monthly of 50.7 million users from the same period. Douyu hasn’t recently unveiled its size as the company is reportedly mulling to go public in the U.S., but third-party data analytics company QuestMobile put its MAU in December at 43 million.

“We are very excited to announce the completion of the acquisition of Bigo. It is an important milestone for YY group which demonstrated our confidence and commitment to the globalization strategy,” said Li of YY in a statement.

While anchoring in Southeast Asia, Bigo has debuted in over 100 countries worldwide and been in the top ten of Apple’s app store not just in neighboring countries like Vietnam and Cambodia but also in Paraguay, Yeman and Angola, according to data collected by app tracking service App Annie.

Li estimated in 2017 that Bigo was generating an annual revenue of $300 million at the time. Bigo claims 200 million registered users to date with MAUs reaching almost 37 million worldwide. Its popularity has, however, gone hand in hand with its reputation for hosting offensive content, but the startup has assured it deploys resources to closely screen content. Back in China, YY, Huya, Douyu and the likes are constantly grappling with the government’s tightening grip over online information, which puts the burden on media companies to keep a robust content monitoring team to not only rid illegal videos but also parse the country’s opaque definition of what’s considered “inappropriate”.

Moka raises $27M led by Hillhouse to make hiring more data-driven in China

Moka, a startup that wants to make talent acquisition a little more data-driven for China-based companies that range from smartphone giant Xiaomi to Burger King’s local business, announced Monday that it has raised a 180 million yuan ($27 million) Series B round of funding.

The deal was led by Hillhouse Capital, an investor in top Chinese technology companies such as Tencent, Baidu, JD.com, Pinduoduo — just to name a few. Other investors who took part include Xianghe Capital, an investment firm founded by two former Baidu executives, Chinese private equity firm GSR Ventures and GGV Capital.

Moka claims more than 500 enterprise customers were paying for its services by the end of 2018. Other notable clients are McDonalds and one of China’s top livestreaming services YY. It plans to use its new capital to hire staff, build new products and expand the scope of its business.

Founded in 2015, Moka compares itself to Workday and Salesforce in the U.S. It has created a suite of software aiming to make recruiting easier and cheaper for companies with upwards of 500 employees. Its solutions take care of the full cycle of hiring. To start with, Moka allows recruiters to post job listings across multiple platforms with one click, saving them the hassle of hopping between portals. Its AI-enabled screening program then automatically filters candidates and make recommendations for companies. What comes next is the interview, which Moka helps streamline with automatic email and message reminders for job applicants and optimized plans for interviewers on when and where to meet their candidates.

That’s not the end, as Moka also wants to capture what happens after the talent is onboard. The startup helps companies maintain a talent database consist of existing employees and potential hires. The services allow companies to keep a close tap on their staff, whose resume update will trigger a warning to the employer, and alerts the recruiter once the system detects suitable candidates.

Moka is among a wave of startups founded by Chinese entrepreneurs with foreign education and work experiences. Zhao Oulun, whose English nickname is Orion, graduated from the University of California, Berkley and worked at San Francisco-based peer-to-peer car sharing company Turo before founding Moka with Li Guoxing. Li himself is also a “sea turtle,” a colloquial term in Chinese that describes overseas-educated graduates who return home to work. Li graduated from the University of Michigan and Stanford University, and had worked at Facebook as an engineer.

When the founders re-entered China, they saw something was missing in the booming domestic business environment: effective talent management.

“Businesses are flourishing, but at the same time many of them fall short in internal organization and operation. To a large extent, the issue pertains to the lack of digital and meticulous operation for human resources, which slows down decision-making and leads to mistakes around talents and company organization,” says chief executive Zhao in a statement.

Moka’s mission has caught the attention of investors. Jixun Foo, a partner at Moka backer GGV Capital, also believes China’s businesses can benefit from a data-driven approach to people management: “We are positive about Moka becoming a comprehensive HR service provider in the future through its unique data-powered and intelligent solutions.”

Tiger Global and Ant Financial lead $500M investment in China’s shared housing startup Danke

A Chinese startup that’s taking a dorm-like approach to urban housing just raised $500 million as its valuation jumped over $2 billion. Danke Apartment, whose name means “eggshell” in Chinese, closed the Series C round led by returning investor Tiger Global Management and newcomer Ant Financial, Alibaba’s e-payment and financial affiliate controlled by Jack Ma.

Four years ago, Beijing-based Danke set out with a mission to provide more affordable housing for young Chinese working in large urban centers. It applies the coworking concept to housing by renting apartments that come renovated and fully furnished, a model not unlike that of WeWork’s WeLive. The idea is by slicing up a flat designed for a family of three to four — the more common type of urban housing in China — into smaller units, young professionals can afford to live in nicer neighborhoods as Danke takes care of hassles like housekeeping and maintenance. To date, the startup has set foot in ten major Chinese cities.

With the new funds, Danke plans to upgrade its data processing system that deals with rental transactions. Housing prices are set by AI-driven algorithms that take into account market forces such as locations rather than rely on the hunches of a real estate agent. The more data it gleans, the smarter the system becomes. That layout is the engine of the startup, which believes an internet platform play is a win-win for both homeowners and tenants because it provides greater transparency and efficiency while allowing the company to scale faster.

“We are focused on business intelligence from day one,” Danke’s angel investor and chairman Derek Shen told TechCrunch in an interview. Shen was the former president of LinkedIn China and was instrumental in helping the professional networking site enter the country. “By doing so we are eliminating the need to set up offline retail outlets and are able to speed up the decision-making process. What landlords normally care is who will be the first to rent out their property. The model is also copiable because it requires less manpower.”

“We’ve proven that the rental housing business can be decentralized and done online,” added Shen.

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Photo: Danke Apartment via Weibo

Danke doesn’t just want to digitize the market it’s after. Half of the company’s core members have hailed from Nuomi, the local services startup that Shen founded and was sold to Baidu for $3.2 billion back in 2015. Having worked for a business of which mission was to let users explore and hire offline services from their connected devices, these executives developed a propensity to digitize all business aspects including Danke’s day-to-day operations, a scheme that will also take up some of the new funds. This will allow Danke to “boost operational efficiency and cut costs” as it “actively works with the government to stabilize rental prices in the housing market,” the company says.

The rest of the proceeds will go towards improving the quality of Danke’s apartment amenities and tenant experiences, a segment that Shen believes will see great revenue potential down the road, akin to how WeWork touts software services to enterprises. The money will also enable Danke, which currently zeroes in on office workers and recent college graduates, to explore the emerging housing market for blue-collar workers.

Other investors from the round include new backer Primavera Capital and existing investors CMC Capital, Gaorong Capital and Joy Capital.

China’s rental housing market has boomed in recent years as Beijing pledges to promote affordable apartments in a country where few have the money to buy property. As President Xi Jinping often stresses, “houses are for living in, not for speculation.” As such, investors and entrepreneurs have been piling into the rental flat market, but that fervor has also created unexpected risks.

One much-criticized byproduct is the development of so-called “rental loans.” It goes like this: Housing operators would obtain loans in tenants’ names from banks or other lending institutions allegedly by obscuring relevant details from contracts. So when a tenant signs an agreement that they think binds them to rents, they have in fact agreed to take on loans and their “rent” payments become monthly loan repayments.

Housing operators are keen to embrace such practices for the loans provide working capital for renovation and their pipeline of properties. On the other hand, the capital allows companies like Danke to lower deposits for cash-strapped young tenants. “There’s nothing wrong with the financial instrument itself,” suggested Shen. “The real issue is when the housing operator struggles to repay, so the key is to make sure the business is well-functioning.”

Danke alongside competitors Ziroom and 5I5J has drawn fire for not fully informing tenants when signing contracts. Shen said his company is actively working to increase transparency. “We will make it clear to customers that what they are signing are loans. As long as we give them enough notice, there should be little risk involved.”

NetEase is the latest Chinese tech giant to lay off a big chunk of its staff

NetEase, China’s second-biggest online games publisher with a growing ecommerce segment, is laying off a significant number of its employees, adding to a list of Chinese tech giants that have shed staff following the Lunar New Year.

A NetEase employee who was recently let go confirmed with TechCrunch that the company had fired a large number of people spanning multiple departments, including ecommerce, education, agriculture (yes, founder and executive officer Ding Lei has a thing for organic farming) and public relations, although downsizing at Yanxuan, its ecommerce brand that sells private-label goods online and offline, had started before the Lunar New Year holiday.

Multiple Chinese media outlets covered the layoff on Wednesday. According to a report from Caijing Magazine, Yanxuan fired 30-40 percent of its staff; the agricultural brand Weiyang got a 50 percent cut; the education unit downsized from 300 to 200 employees; and 40 percent of NetEase’s public relations staff was gone.

A spokesperson from NetEase evaded TechCrunch’s questions about the layoff but said the company is “indeed undergoing a structural optimization to narrow its focus.” The goal, according to the person, is to “boost innovation and organizational efficiency so NetEase can fully play to its own strengths and adapt to market competition in the longer term.”

NetEase CEO Ding Lei pictured picking Longjing tea leaves in Hangzhou. Photo: NetEase Yanxuan via Weibo

Oddly, ecommerce and education appear to be some of NetEase’s brighter spots. The company singled them out alongside music streaming during its latest earnings call as the three sectors that saw “strong profit growth potential” and “will be the focus of [the company’s] next phase of strategic growth.” The staff cuts, then, may represent an urgency to tighten the purse strings for even NetEase’s rosiest businesses.

The shakeup fits into market speculation about company staff cuts to save costs as China copes with a weakening domestic economy. JD.com, a rival to Alibaba, is firing 10 percent of its senior management to cut costs, Caixin reported last week. Ride-hailing giant Didi Chuxing plans to let go 15 percent of its staff this year as part of a reorganization to boost internal efficiency, though it’s adding new members to focus on more promising segments.

Alibaba took an unexpected turn, announcing last week that it will continue to hire new talent in 2019. “We are poised to provide more resources to our platforms to help businesses navigate current environment and create more job opportunities overall,” the firm said in a statement.

2018 was a tough year for China’s games companies of all sorts. The industry took a hit after regulators froze all licensing approvals to go through a reshuffle, dragging down stock prices of big players like Tencent and NetEase. These companies continue to feel the chill even after approvals resumed, as the newly minted regulatory body imposes stricter checks on games, slowing down the application process altogether and delaying companies’ plans to monetize lucrative new titles.

That bleak domestic outlook compelled NetEase to take what Ding dubs a “two-legged” approach to game publishing, with one foot set in China and the other extending abroad. Tencent, too, has been finding new channels for its games through regional partners like Sea’s Garena in Southeast Asia.

NetEase started in 1997 and earned its name by making PC games and providing email services in the early years of the Chinese internet. More recently the company has intended to diversify its business by incubating projects across the board. It has so far enjoyed growth in segments like music streaming and ecommerce (which is reportedly swallowing up Amazon China’s import-led service) while stepping back from others such as comics publishing, an asset it is selling to youth-focused video streaming site Bilibili.

Korean conglomerate SK leads $600M round for Chinese chipmaker Horizon Robotics

Horizon Robotics, a three-year-old Chinese startup backed by Intel Capital, just raised a mega-round of fundings from domestic and overseas backers as it competes for global supremacy in developing AI solutions and chips aimed at autonomous vehicles, smart retail stores, surveillance equipment and other devices for everyday scenarios.

The Beijing-based company announced Wednesday in a statement that it’s hauled in $600 million in a Series B funding round led by SK China, the China subsidiary of South Korean conglomerate SK Group; SK Hynix, SK’s semiconductor unit; and a number of undisclosed Chinese automakers along with their funds.

The fresh capital drove Horizon’s valuation to at least $3 billion, the company claims. The Financial Times previously reported that the chipmaker was raising up to $1 billion in a funding round that could value it at as much as $4 billion. Such a price tag could perhaps be justified by the vast amount of resources China has poured into the red-hot sector as part of a national push to shed dependency on imported chips and work towards what analysts call “semiconductor sovereignty.”

Horizon did not specify how the proceeds will be used. The company could not be immediately reached for comments.

In 2015, Yu Kai left Baidu as the Chinese search engine giant’s deep learning executive and founded Horizon to make the “brains” for a broad spectrum of connected devices. In doing so Yu essentially set himself up for a race against industry veterans like Intel and Nvidia. To date, the startup has managed to make a dent by securing government contracts, which provide a stable source of income for China’s AI upstarts including SenseTime, and several big-name clients like SK’s telecommunication unit, which is already leveraging Horizon’s algorithms to develop smart retail solutions. Like many of its peers who are at the forefront of the AI race, Horizon has set up an office in Silicon Valley and hiring local talents for its lab.

Other investors who joined the round included several of Horizon’s returning investors such as Hillhouse Capital and Morningside Venture Capital . There were also some heavyweight new backers, such as a fund run by conglomerate China Oceanwide Holdings as well as the CSOBOR Fund, a private equity entity set up by China’s state-owned CITIC to back projects pertaining to China’s ambitious “One Belt, One Road” modern Silk Road initiative.

Alibaba challenger Pinduoduo is bringing imported goods to rural homes

Pinduoduo, the latest challenger to China’s ecommerce dominators Alibaba and JD.com, wants to bring affordable, imported items to shoppers in China’s smaller cities and rural areas.

The three-year-old Tencent-backed ecommerce upstart is recruiting importers to set up shop on its marketplace, shows a message on its website. The business is known for offering cheap, sometimes counterfeit goods that initially appealed to users from the less prosperous parts of China but have gradually garnered more price-sensitive urbanites. Its rise is closely linked to Tencent’s popular WeChat messenger, which lets it toy with viral marketing schemes like group deals, a level of access that’s unavailable to, say, Tencent rival Alibaba. Furthermore, the app’s focus on direct sales between manufacturers and consumers helps to keep costs down.

Pinduoduo’s social group-buying model works so well that it’s rapidly closing in on its larger rivals. It claimed 232 million monthly active users by the end of September. That represents only a fraction of Alibaba’s 700 million user base but the newcomer is growing at over 200 percent year-over-year. Pinduoduo already eclipsed JD.com in terms of market penetration according to data analytics company Jiguang. Over the past year, Pinduoduo was installed on 27.4 percent of all mobile devices in China, placing it ahead of JD.com which stood at 23.9 percent and behind Alibaba’s Taobao at 52.5 percent.

And now Pinduoduo becomes attuned to China’s booming cross-border business. People’s cravings for imported, higher-quality goods are surging along with their increasing disposable income. That new demand gives rise to a bountiful supply of “daigou”, or purchasing agents who send overseas goods to Chinese shoppers, and inspires ecommerce operators like Alibaba and JD.com to start their own cross-border businesses. The lucrative sector, estimated by market researcher iiMedia to have generated 9 trillion yuan ($1.34 trillion) in transactions last year, has even drawn unexpected players like NetEase. The Hangzhou-based firm is best known as one of China’s top game publisher but it’s made a dent in cross-border shopping in recent years with its Kaola service, which is reportedly buying Amazon China’s import unit.

TechCrunch has reached out to Pinduoduo for more information on its overseas shopping scheme and will update the story if we hear back. What we know for sure is that the ecommerce site plans to take on 500,000 small and medium-sized merchants for its overseas channel within the next three years, the company’s vice president Li Yuan announced at a November event. Pinduoduo was already deliverying imported goods to customers, a business that it said had seen surging transactions last year.

Pinduoduo has yet to make a profit, and the cost of battling Alibaba and JD.com became more evident after it recently announced to raise more than $1 billion just six months after a $1.63 billion initial public offering in the U.S. Time will tell whether cross-border ecommerce — where it plans to replicate its direct sales model — will help it gain an upper hand over the industry giants.

China wants its rural villages to go cashless by 2020

Residents of even the tiniest far-flung villages in China may soon be able to pay on their phones to run daily errands as Beijing announced this month that it aims to make mobile payments ubiquitous in rural areas by the end of 2020.

The plan arrived in a set of guidelines (document link in Chinese) jointly published by five of China’s top regulating bodies, including the central bank, the Banking and Insurance Regulatory Commission, the Securities Regulatory Commission, the Ministry of Finance and the Ministry of Agriculture and Rural Affairs, in a move to make online financial services more accessible to rural residents.

The hope is that by digitizing the lives of the farming communities, from getting loans to buy fertilizers to leasing lands to city developers, China could bolster the economy in smaller cities and countryside hamlets. Hundreds of millions of rural Chinese have migrated to large urban centers pursuing dreams and higher-paying jobs, but 42 percent of the national population remained rural as of 2017. While scan-to-pay is already a norm in bigger cities, digital payments still have considerable room to grow in rural towns. All told, 76.9 percent of China’s adults used digital payments in 2017. That ratio was 66.5 percent in rural parts, according to a report released by the central bank.

Following the digital payments pledge was the release of the annual Number One Document (in Chinese) that outlines China’s national priorities for the year. Over the past 16 years, China has devoted the paper to its rural economy and this year, digital integration continues to be one of the key goals. More precisely, Beijing wants rural officials to ramp up internet penetration, the digitization of public services, sales of rural produce to city consumers, and more.

Those directives usher in huge opportunities for companies in the private sector. Tech heavyweights such as Alibaba and JD.com were already looking outside megacities a few years ago. Both have set up online channels enabling farmers to sell and buy as well as working with local governments to build up logistics networks.

Alibaba notably invested in Huitongda, a company that provides merchandising, marketing and supply chain tools to rural retail outlets. Despite posting the slowest revenue growth in three years, Alibaba saw exceptional user growth in rural regions. Similarly, JD’s daily orders from smaller Tier 3 and 4 cities were growing 20 percent faster than those in Tier 1 and 2 cities like Beijing and Hangzhou, the company said in 2017.

Other players went with a rural and small-town play early on. Pinduoduo, an emerging ecommerce startup that’s close on the heels of Alibaba and JD, gained a first-mover advantage in these less developed regions by touting cheap goods. Kuaishou, a Tencent-backed video app that rivals TikTok’s Chinese version Douyin, has proven popular in the hinterlands as farmers embrace the app to showcase the country life and sell produce through live streaming.