Xiaomi Q4 sees strong growth in overseas shipment and internet services

Xiaomi, the Chinese company known for its cheap handsets and a vision to drive revenues by selling internet services, has come in ahead of analysts’ estimates in its fourth-quarter profit although revenues missed expectations.

The Hong Kong-listed company more than tripled its net profit to 1.85 billion yuan ($276 million), exceeding the 1.7 billion yuan average estimate, Reuters reported citing Refinitiv data. However, revenue from the quarter missed the 47.4 billion yuan expectation, rising 26.5 percent to 44.4 billion yuan ($6.62 billion).

Xiaomi singled out overseas markets in its latest earnings report as the segment grew 118.1 percent to make up 40 percent of its total revenue in the fourth quarter, compared with just 28 percent for the year-earlier period. Xiaomi has been particularly well-received in India, where it holds a leading position in smartphone shipments according to market researcher Canalys, and it’s seeing rapid growth in western Europe.

Unlike conventional smartphone makers that are fixated on selling hardware, Xiaomi runs what it calls a “triathlon” business model comprising of hardware, software and retail. To put it in layman’s terms, the company is selling hardware through its network of online and offline stores, upon which users will consume the app services and in-app ads that come with its smartphones, smartwatches, smart air purifiers and hundreds of other connected devices.

Xiaomi has repeatedly billed itself as an “internet” firm, though so far smartphones are still its main economic driver, accounting for 65.1 percent of overall revenue in Q4. Despite a sluggish year for smartphone brands around the world, Xiaomi handsets grew nearly 30 percent to 118.7 million units in sales last year. The company predicted back in October that it was on course to hit the 100 million sales mark that month.

25.1 percent of Xiaomi’s Q4 revenue went to smart devices (excluding phones) and lifestyle items, representing an 87 percent year-over-year growth. The latter category, which ranges from umbrellas and suitcases to clothes and shoes, is pivotal to Xiaomi’s goal to attract more female users, an effort that has seen the company team up with selfie app maker Meitu. 

Internet services remain as Xiaomi’s smallest segment, bringing in only 9.1 percent of total revenue and growing at 61 percent year-over-year. But the highly lucrative business is bound to carry more load in the future as Xiaomi has promised to keep profit margins for smartphones and hardware under 5 percent.

Gross profit margin from Xiaomi’s internet services increased to 64.4 percent in 2018, up from 60.2 percent in 2017 driven by a higher-margin advertising business. The number is well above the 6.2 percent profit margin for Xiaomi smartphones, and the firm can potentially generate more internet-based income if it’s able to step up monetization of the 242.1 million monthly users on its ecosystems apps.

The headline has been corrected.

Xiaomi outs Redmi Go, a $65 entry-level smartphone for India

Chinese smartphone maker Xiaomi has announced a new entry level smartphone at an event in Delhi.

The entry-level smartphone is targeted at the Indian market and looks intended to woo feature phone owners to upgrade from a more basic mobile.

It runs Google’s flavor of Android optimized for low-powered smartphones (Android Go) which supports lightweight versions of apps.

Under the hood the dual-SIM handset has a Qualcomm Snapdragon 425 chipset, 1GB RAM and 8GB of storage (though there’s a slot for expanding storage capacity up to 128GB).

Also on board: 4G cellular connectivity and a 3000mAh battery.

Up front there’s a 5 inch HD display with a 16:9 aspect ration, and 5MP selfie camera. An 8MP camera brings up the rear, with support for 1080p video recording.

At the time of writing the Redmi Go is being priced at 4,499 rupee (~$65). Albeit a mark-down graphic on the company’s website suggests the initial price may be a temporary discount on a full RRP of 5,999 rupees (~85). We’ve asked Xiaomi for confirmation.

Xiaomi’s website lists it as available to buy at 12PM March 22.

While Xiaomi is squeezing its entry level smartphone price-tag here, the Redmi Go’s cost to consumers in India still represents a sizeable bump on local feature phone prices.

For example the Nokia 150 Dual SIM candybar can cost as little as 1,500 rupees (~20). Though there’s clearly a big difference between a candybar keypad mobile and a full-screen smartphone. Yet 3x more expensive represents an immovable barrier for many consumers in the market.

The Redmi Go also looks intended to respond to local carrier Reliance Jio’s 4G feature phones, which are positioned — price and feature wise — as a transitionary device, sitting between a dumber feature phone and full-fat smartphone.

The JioPhone 2 launched last year with a price tag of 2,999 rupees (~40). So the Redmi Go looks intended to close the price gap — and thus try to make a transitionary handset with a smaller screen less attractive than a full screen Android-powered smartphone experience.

That said, the JioPhone handsets run a fork of Firefox OS, called KaiOS, which can also run lightweight versions of apps like Facebook, Twitter and Google.

So, again, many India consumers may not see the need (or be able) to shell out ~1,500 rupees more for a lightweight mobile computing experience when they can get something similar for cheaper elsewhere. And indeed plenty of the early responses to Xiaomi’s tweet announcing the Redmi Go brand it “overpriced”.

Singapore fintech startup Instarem closes $41M Series C for global growth

Singapore’s Instarem, a fintech startup that helps banks and consumers send money overseas at lower cost, has closed a $41 million Series C financing round to go after global expansion opportunities.

The four-year-old company announced a first close of $20 million last November, and it has now doubled that tally (and a little extra) thanks to an additional capital injection led by Vertex Ventures’ global growth fund and South Korea’ Atinum Investment. Crypto company Ripple, which has partnered with Instarem for its xRapid product, also took part in the round, Instarem CEO Prajit Nanu confirmed to TechCrunch, although he declined to reveal the precise amount invested. More broadly, the round means that Instarem has now raised $59.5 million from investors to date.

The company specializes in moving money between countries in Asia in a similar way to TransferWise although, unlike TransferWise, its focus is on banks as customers rather than purely consumers. Today, it covers 50 countries and it has offices in Singapore, Mumbai, Lithuania, London and Seattle.

Instarem said it plans to spend the money on expansion into Latin America, where it will open a regional office, and double down on Asia by going after money licenses in countries like Japan and Indonesia. The company is also on the cusp of adding prepaid debit card capabilities, which will allow it to issue cards to consumers in 25 countries and more widely offer the option to its banking customers. That’s thanks to a deal with Visa .

Further down the line, the company continues to focus on an exit via IPO in 2021. That’s been a consistent talking point for Nanu, who has been fairly outspoken on his desire to take the company public. That’s included shunning acquisition offers. As TechCrunch revealed last year, Instarem declined a buyout offer from one of Southeast Asia’s tech unicorns. Commenting on the offer, Nanu said it simply “wasn’t the right timing for us.”

Grab launches SME loans and micro-insurance in Southeast Asia

In its latest move beyond ride-hailing, Southeast Asia’s Grab has started to offer financing to SMEs and micro-insurance to its drivers.

The launch comes just weeks after Grab raised $1.5 billion from the Vision Fund as part of a larger $5 billion Series H funding round that’ll be used to battle rival Go-Jek, which is vying with Grab to become the top on-demand app for Southeast Asia’s 600 million-plus consumers.

Grab acquired Uber’s Southeast Asia business in 2018 and it has spent the past year or so pushing a ‘super app’ strategy. That’s essentially an effort to become a daily app for Southeast Asia and, beyond rides, it entails food delivery, payments and other services on demand. Financial services are also a significant chunk of that focus, and now Grab is switching on loans and micro-insurance for the first time.

Initially, the first market is Singapore, but the plan is to expand to Southeast Asia’s five other major markets, Reuben Lai,  who is senior managing director and co-head of Grab Financial, told TechCrunch on the sidelines of the Money20/20 conference in Singapore. Lai declined to provide a timeframe for the expansion.

The company announced its launch into financial services last year and that, Lai confirmed, was a purely offline effort. Now the new financial products announced today will be available from within the Grab app itself.

Grab is also planning to develop a ‘marketplace’ of financial products that will allow other financial organizations to promote services to its 130 million registered users. Grab doesn’t provide figures for its active user base.

Grab announced a platform play last summer that allows selected partners to develop services that sit within its app. Some services have included grocery delivers from Happy Fresh, video streaming service Hooq, and health services from China’s Ping An.

TikTok parent Bytedance is getting serious about games

A turbulent 2018 for China’s gaming market hasn’t held back newcomers. Bytedance, the world’s most valuable startup behind a collection of rising new media apps including TikTok and Jinri Toutiao, is making a further push into video games after it took control of a mobile game developer through a roundabout deal.

According to a business registration filing, Shanghai Mokun has become wholly owned by Beijing Zhaoxi Guangnian, a second-tier subsidiary of Bytedance. Mokun is a mobile game developer previously owned by 37 Interactive Entertainment, a publicly listed games publisher that earmarked $791 million in revenue last year, which makes the Shanghai-based company about one-sixth the size of Activision Blizzard.

Zhang Lidong, a veteran journalist-turned senior vice president at Bytedance, has taken the helm as Mokun’s legal representative.

The price of the deal is undisclosed. A spokesperson from Bytedance declines to comment on the transaction. TechCrunch has reached out to 37 IE and will update the story if we hear back.

This isn’t the first time Bytedance has shown interest in the lucrative gaming market. Last month, TikTok’s Chinese version Douyin released its first in-app “mini-game” and Toutiao had already rolled out such lite games on its personalized news distribution platform in September.

These stripped-down forms of apps within a super app have been a sought-after way for Chinese tech giants to lock users in rather than sending them to download a stand-alone app. Bytedance’s foray into mini-games comes as a likely move to take on Tencent’s WeChat messenger, which had amassed 400 million MAUs on its own army of mini-games by January. On the other hand, Tencent is getting nervous about ByteDance’s rise and made inroads into short videos after trying its hand at several TikTok-like apps.

Though best-known for WeChat, Tencent has been generating the bulk of its income from video games for years and is the world’s largest games publisher by revenues, according to market researcher Newzoo. Tencent’s asset of more than 1 billion MAUs on WeChat and about 800 million MAUs on QQ, its legacy messenger from the PC era, allows the giant to conveniently convert social media users into gamers. Users can, for instance, easily log in and invite friends to play games via their WeChat or QQ accounts.

By comparison, 500 million users stream short-form videos on Douyin each month. Many of them may have already seen in-stream ads for games on the video app, which has become a popular marketing channel for small game developers, according to several media-buying agencies TechCrunch previously spoke to. Worldwide, TikTok has collected an estimated 1 billion downloads. This considerable global reach, which Tencent lacks, may eventually give Bytedance an edge in games distribution if the company decides to launch the effort overseas.

This YC-backed startup preps Chinese students for US data jobs

In recent years, data analysts have gone from optional to a career that holds great promise, but demand for quantitative skills applied in business decisions has raced ahead of supply as college curriculum often lags behind the fast-changing workplace.

CareerTu, a New York-based startup launched by a former marketing manager at Amazon, aims to close that talent gap. Think of it as Codecademy for digital marketing, data analytics, product design and a whole lot of other jobs that ask one to spot patterns from a sea of data that can potentially boost business efficiency. The six-year-old profitable business runs a flourishing community of 160,000 users and 500 recruiting patners including Amazon, Google and Alibaba, an achievement that has secured the startup a spot at Y Combinator’s latest batch plus a $150,000 check from the Mountain View-based accelerator.

In a way, CareerTu is helping fledgling tech startups on a tight budget train ready-to-use data experts. “American companies have a huge demand for digital marketing and data talents these days … but not all of them want to or can spend money on training, and that’s where we can come in,” said Xu, who made her way into Amazon after burying herself in online tutorials about digital marketing.

The gig was well paid, and Xu felt the urge to share her experience with people like her — Chinese workers and students seeking data jobs in the U.S. She took up blogging, and eventually grew it into an online school. CareerTu offers many of its classes for free while sets aside a handful of premium content for a fee. 6,000 of its users are actively paying, which translates to some $500,000 in revenue last year. The virtual academy continues to blossom as many students return to become mentors, helping their Chinese peers to chase the American dream.

CareerTu

Y Combinator founder Paul Graham (second left) with CareerTu founder Zhang Ruiwan (second right) and her team members / Photo: CareerTu

Securing a job in the U.S. could be a daunting task for international students, who must convince employers to invest the time and money in getting them a work visa. But when it comes to courting scare data talents, the visa trap becomes less relevant.

“Companies could have hired locals to do data work, but it’s very difficult to find the right candidate,” suggested Xu. LinkedIn estimated that in 2018 the U.S. had a shortage of more than 150,000 people with “data science skills,” which find application not just in tech but also traditional sectors like finance and logistics.

“Nationalities don’t matter in this case,” Xu continued. “Employers will happily apply a work visa or even a green card for the right candidate who can help them save money on marketing campaigns. And many Chinese people happen to have a really strong background in data and mathematics.”

A Chinese business in the US

Though most of CareerTu’s users live in the U.S., the business is largely built upon WeChat, Tencent’s messaging app ubiquitous among Chinese users. That CareerTu sticks to WeChat for content marketing, user acquisition and tutoring is telling of the super app’s user stickiness and how overseas Chinese are helping to extend its global footprint.

And it makes increasing sense to keep CareerTu within the WeChat ecosystem after Xu noticed a surge in inquiries coming from her homeland. In 2018, only 5 percent of CareerTu’s users were living in China, many of whom were export sellers on Amazon. By early 2019, the ratio has shot up to 12 percent.

Xu believes there are two forces at work. For one, Chinese exporters are leaving Amazon to set up independent ecommerce sites, efforts that are in part enabled by Shopify’s entry into China in 2018. The alternative path provides merchants more control over branding, margins and access to customer insights. Breaking up with the ecommerce titan, on the other hand, requires Chinese sellers to get savvier at reaching foreign shoppers, expertise that CareerTu prides itself on.

careertu

CareerTu offers online courses via WeChat / Photo: CareerTu

Next door, large Chinese tech firms are increasingly turning abroad to fuel growth. Bytedance is possibly the most aggressive adventurer among its peers in recent years, buying up media startups around the world including Musical.ly, which would later merge with TikTok. Indeed, some of CareerTu’s recent grads have gone on to work at the popular video app. Rising interest from China eventually paved Zhang’s way home as she recently set up her first Chinese office in her hometown Chengdu, the laid-back city known for its panda parks and witnessing a tech boom.

Just as foreign companies need crash courses on WeChat before entering China, Chinese firms going global must familiarize themselves with the marketing mechanisms of Facebook and Google despite China’s ban on the social network and search engine.

When American companies growth hack, they make long-term plans that involve “model building, A/B testing, and making discoveries from big data,” observed Xu. By comparison, Chinese companies fighting in a more competitive landscape are more agile and opportunist as they don’t have the time to ponder or test out the different variants in a campaign.

“Going abroad is a great thing for Chinese companies because it sets them against their American counterparts,” said Xu. “We are teaching Chinese the western way, but we are also learning the Chinese way of marketing from players like Bytedance. I’m excited to see in a few years whether any of these Chinese companies abroad will become a local favorite.”

Apple kerfuffles, praise groups, and media layoffs

Lots of news and interesting tidbits to wrap up the week.

Apple kerfuffles

Apple has been vindicated (for a brief moment anyway) in its long-standing dispute with Qualcomm. From Stephen Nellis at Reuters:

A U.S. federal judge has issued a preliminary ruling that Qualcomm Inc owes Apple Inc nearly $1 billion in patent royalty rebate payments, though the decision is unlikely to result in Qualcomm writing a check to Apple because of other developments in the dispute.

Judge Gonzalo Curiel of the U.S. District Court for the Southern District of California on Thursday ruled that Qualcomm, the world’s biggest supplier of mobile phone chips, was obligated to pay nearly $1 billion in rebate payments to Apple, which for years used Qualcomm’s modem chips to connect iPhones to wireless data networks.

We have chronicled Qualcomm’s challenges for some time. This long simmering dispute is complicated since Qualcomm needs the revenues from its patents, while not pissing off its arguably most important customer. The sooner the situation is settled and the parties move on (regardless of financial outcome), the better.

Meanwhile, Spotify and Apple has been the big antitrust story this week. TechCrunch’s news editor Ingrid Lunden covered the latest turns in the saga:

In a lengthy statement on its site called “Addressing Spotify’s Claims”, Apple walks through and dismantles some of the key parts of Spotify’s accusations about how the App Store works, covering app store approval times, Spotify’s actual cut on subscription revenues, and Spotify’s rise as a result of its presence on iOS.

At the same time, Apple carefully sidesteps addressing any of Spotify’s demands: Spotify has filed a case with the European Commission to investigate the company over anticompetitive practices and specifically to consider the relationship between Apple and Spotify (and by association any app maker) in terms of whether it is really providing a level playing field, specifically in the context of building and expanding Apple Music, its own product that competes directly with Spotify on the platform that Apple owns.

2019 is the year that most of the app stores are going to break on their revenue models. And it isn’t just limited to Apple — Steam is also facing huge challenges in the gaming market. As Chris Morris wrote for Extra Crunch a few weeks ago:

So what’s the draw for game makers to sell via the Epic Games store? It is, of course, a combination of factors, but chief among those is financial. To convince publishers and developers to utilize their system, Epic only takes a 12 percent cut of game-sale revenues. That’s significantly lower than the 30 percent taken by Valve on Steam (or the amounts taken by Apple or Google in their app stores).

According to Morris, Epic learned that it can be profitable at 12% based on its own experience with Fortnite, and therefore it wanted to rejigger the standard economics of game stores. Apple has a monopoly with its App Store on its own devices though, and so this sort of competition isn’t available. Given that Apple wants to increase services revenues in its financial model going forward, this is an important battle to watch.

One interesting model for improving the internet: praise groups

Photo by Yiu Yu Hoi via Getty Images

When it comes to unique business models for the web, the Chinese internet market is absolutely the place to get inspiration from.

The What’s on Weibo folks have an article on a popular new form of online communication in China:

A new phenomenon has become a hot topic on Chinese social media these days. ‘Kua kua’ groups (夸夸群) are chat groups where people share some things about themselves – even if they are negative things – and where other people will always tell them how great they are, no matter what.

The team pays $7.50 for a five-minute session complete with 200 “participants.” Their experience:

How does it feel to be praised by some 200 people, receiving hundreds of compliments? It’s overwhelming, and even though you know it’s all just an online mechanism, and that it doesn’t matter who you are or what you say, it still makes you glow a little bit inside.

Although some experts quoted by Chinese state media warn people not to rely on these praise groups too much, there does not seem to be much harm in allowing yourself to be complimented for some minutes from time to time.

I just rely on Extra Crunch members.

Media job cuts & Tumblr traffic crash

Image by Bryce Durbin / TechCrunch

A lot of tech execs left their jobs yesterday (or were pushed out), but the same is also true in the media industry according to a new report:

Consolidation, declining revenue, combative language from the Trump Administration, and occasional violence marked 2018 for members of the media. It was also the year with the highest number of job cut announcements in the sector since 2009, according to the monthly Job Cut Report compiled by global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc.

A huge challenge for traditional media and even some startups like Vice is that their cost structures are incompatible with their revenue models. We have heard this for years, and years, and years, and yet, we haven’t seen media companies rebuilding themselves from the ground up to be profitable today in 2019.

Red ink is not a business model.

Meanwhile, Tumblr (which is owned by TechCrunch parent company Verizon Media) seems to be heading for the abyss according to Shannan Liao at The Verge:

Tumblr’s global traffic in December clocked in at 521 million, but it had dropped to 370 million by February, web analytics firm SimilarWeb tells The Verge. Statista reports a similar trend in the number of unique visitors. By January 2019, only over 437 million visited Tumblr, compared to a high of 642 million visitors in July 2018.

As I wrote in a scathing review of the Tumblr decision (and my employer) a few months ago:

I get the pressure from Apple. I get the safety of saying “just ban all the images” à la Renaissance pope. I get the business decision of trying to maintain Tumblr’s clean image. These points are all reasonable, but they all are just useless without Tumblr’s core and long-time users.

Now the data is increasingly showing the high cost of these product decisions. And people wonder why media has layoffs.

Why can’t we build things? The inevitable vs the avoidable

Photo by Caiaimage/Rafal Rodzoch via Getty Images

Written by Arman Tabatabai

As we wind down our obsession with infrastructure development, it’s clear that there is no one answer to the question of “why can’t we build things?” Inefficiencies exist across all aspects of a project’s life cycle, from planning to financing to construction. While we can pin some of the difficulties to misaligned incentives, gamesmanship, or outdated business models, some of the friction in infrastructure development exist purely as a result of the deep complexity that underpins any project of such immense scale.

We’ve previously dug into issues on the infrastructure planning and financing side. This week, we sat down with structural engineer and author Roma Agrawal to learn more about the difficulties in the engineering and construction processes and how they came to exist, as she lays out in her 2018 book, Built: The Hidden Stories Behind Our Structures.

Built acts as a layman’s primer into the history and science behind structural engineering. Using historical and modern examples, Agrawal breaks down all the under-appreciated factors — from complex physics and wind conditions, to water and fire resistance — that engineers have to consider when planning the built infrastructure on which we all layer our lives.

In our conversation with Agrawal, we tried to get a better grasp of the major issues large project engineers encounter and which ones are actually avoidable. These are some of the most interesting highlights of our conversation:

  • Confirming a key dynamic we discussed with infrastructure expert Phil Plotch, Agrawal noted that misinformation and a lack of understanding between project participants can be an issue for many projects.
  • In her past life as a structural engineer, Agrawal noticed a palpable lack of knowledge about what the field of structural engineering was and what it actually entailed. And the unfamiliarity came not only from the public but from architects and project developers working alongside her on major development projects. Developers often didn’t know or care how their decisions impacted architects, and architects didn’t know or care about how they impacted engineers and so on so forth.
  • Agarwal discussed how historically, there was a lot more congruence between these careers:“If you go back in history — say the Roman times — there wasn’t a separation between architects and engineers. They used to be called Master Builders… [they] would talk about architecture but with discussions about forces and materials and wind.” However, while some tie the decentralization of information across these fields to complacency, laziness or ignorance, Agrawal explained how such conclusions are harsh oversimplifications of something that is really a product of…
  • * …The incredible, and growing, complexity that goes into the minutia of each project. For example, financiers may have to deal with unintelligible structuring of debt while engineers are forced to make precise calculations based off of conditions that are incredibly hard to measure, such as the quality of deep-buried soil and the historical chemical exposure of that soil.
  • “I would say that it’s near impossible today for one single person to understand all the different specializations in enough detail to get a modern structure constructed. So we started to naturally split up into the people that paid more attention to the steel and concrete compared to those that looked at the ventilation systems are those that looked at the drainage and those that looked at fire escapes. And obviously the architects themselves, and then the people funding it, and so on.” And with each development or change in technology, project size, climate or otherwise, it becomes more difficult for each person in the development process to understand how their decisions flow through a project and impact their counterparts.
  • Thus, misinformation and lack of mutual knowledge to some degree is inevitable. The success of many construction projects then becomes tied to coordination according to Agrawal. Similar to Plotch, Agrawal noted that since it’s incredibly difficult for people at one level of a project to understand what is going at another, poor communication and gamesmanship can cause one issue to quickly cascade into many and subsequently into cost overruns and delays.
    • “Generally there is a number of things that have to go wrong and add up. So if you think about if you had 100 steps that go into making a project work safe, and one, two, or maybe even five things are not quite 100% – the product will still probably be okay at the end. But when you get to that threshold whatever that number is that oh maybe 15 or 20 things have gone slightly wrong that’s where we start to run into some real issues.”
  • And while it seems like error compounding happens in almost every major project in the US, Agrawal noted that after her deep research into historical engineering and construction processes she believes we’re actually getting better at executing on projects than ever before. Agrawal pointed out that while mega projects and big hiccups get all the attention, generally most large construction projects are executed successfully.
    • “I think we tend to forget that we’ve now, at least, have these amazing debug procedurals. We go in and we think: ‘Oh my god, these are so huge? How do they stand up? How did the engineers get this right?’ But what we forget is that a number of these structures have collapsed and killed people before they got to the right one that worked… And if anything, we’re getting better and better at preventing the loss of that life — the accidents that happen now are much more manageable and occur at a tiny percentage compared to what we used to have.”

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to [email protected].

This newsletter is written with the assistance of Arman Tabatabai from New York

Shiok Meats takes the cultured meat revolution to the seafood aisle with plans for cultured shrimp

Rising consumer interest in alternative proteins and meat replacements has brought hundreds of millions of dollars to companies trying to grow or replace beef or chicken, but few companies have turned their attention to developing seafood alternatives.

Now Shiok Meats is looking to change that. The company has raised pre-seed financing from investors like AIM Partners, Boom Capital, and Bryan Bettencourt and is now part of the recent Y Combinator cohort presenting next week.

Co-founders Sandiya Shriram and Ka Yi Ling are both stem cell scientists working at Singapore’s Agency for Science, Technology and Research who decided to leave their cushy government posts for life in the fast lane of entrepreneurship. 

The two have set themselves a goal of creating a shrimp substitute that would be similar to what’s typically found in the freezer section of most grocery stores — and a minced shrimp-replacement for use in dumplings.

There’s a huge market for seafood across the globe, but especially in Asia and Southeast Asia where crustaceans are a huge part of the diet. Chinese consumers alone account for the consumption of some 3.6 million tons of crustaceans, according to a 2015 study from the Food and Agriculture Department of the United Nations .

Shrimp cultivation as it stands is also a pretty dirty business. The industry is constantly being criticized for poor working conditions, unsanitary farms, and ancillary environmental damage. A blockbuster report from the Associated Press revealed instances of modern slavery in the Thai seafood industry.

“We chose to start with shrimp because it’s an easier animal to deal with compared to crabs and lobsters,” says Shriram. But the company will be expanding its offerings over time to those higher-end crustaceans.

Right now, the focus is squarely on shrimp. The company’s early tests have proved successful and the company estimates that it can make a kilogram of shrimp meat for somewhere around $5,000.

While that may sound expensive, it’s still much less than many of the lab-grown meat companies are pending to produce their replacement beef.

“We’re still relatively low compared to the other clean meat companies, which are still at hundreds of thousands of dollars,” says Ling.

The company is looking to bring its first product to market in the next three-to-five years and will initially target the Asia-Pacific consumer.

That means initially selling into their home market of Singapore and expanding into Hong Kong, India and eventually, Australia.

 

Pi Day wasn’t pleasant for a lot of tech execs

Pi Day is apparently New Job day for tech execs and VCs these days.

Leaving: Lee Fixel

It’s not every day that one of the top VC investors heads out from their shop. TechCrunch’s @cookie aka Connie Loizos has the story:

Lee Fixel, the low-flying head of Tiger Global’s private equity business, is leaving at the end of June, the firm announced today in a letter sent to clients and seen by Reuters . Scott Shleifer and Chase Coleman will continue as co-managers of the portfolios Fixel has overseen, with Shleifer taking over as its head, according to the letter.

Fixel, 39, is reportedly planning to invest his own money and “may start an investment firm in the future,” Tiger Global wrote in the letter.

Tiger Global has become a major force in late-stage investing. As I wrote last fall, it is also part of a small coterie of investment firms which have pushed their portfolio companies to IPO with reasonable speed (the other firm I noted at the time was Benchmark).

One challenge for Tiger has been the rise of the SoftBank Vision Fund, which has driven up valuations for startups and has almost certainly complicated the return profile of many of Tiger’s investments. The two also share a penchant for investing internationally, where Tiger had almost a monopoly position before the Vision Fund burst on the scene.

Another wrinkle worth tracking is the increasing opposition of Indian founders to both Tiger (and specifically Fixel) and SoftBank. As I wrote in the newsletter just a few weeks ago:

There is a clear lack of trust between India’s startup and venture communities, which ultimately threatens the sustainability and growth outlook of the country’s tech sector.

But a solution to the problem is not so cut and dry. Mega growth funds like SoftBank and Tiger Global have given limited control to their Indian portfolio companies and have forced their hands on numerous occasions. Yet Ola’s avoidance of SoftBank has led to lower valuations and more difficult and lengthier fundraising processes.

Leaving: Chris Cox & Chris Daniels

Facebook’s chief product officer is leaving along with Chris Daniels, the VP of WhatsApp. TechCrunch’s Josh Constine summarized the situation:

The changes solidify that Facebook is entering a new era as it chases the trend of feed sharing giving way to private communication. Cox and Daniels may feel they’ve done their part advancing Facebook’s product, and that the company needs renewed energy as it shifts from a relentless growth focus to keeping its users loyal while learning to monetize a new from of social networking.

There has been much ink spilled here about what this all means strategically, but I do think that there are no good times for prominent 13-year and 8-year veterans to leave their positions. Zuckerberg seems ready to begin a whole new era for Facebook, and perhaps neither wanted to make the multi-year commitment that his new vision entails.

That, or Cox unplugged the servers yesterday.

Leaving (America): Jay Jorgensen

A very rare move from the United States to Korea for a senior exec, from TechCrunch’s Catherine Shu:

Coupang, the unicorn that is defining e-commerce in Korea, announced today that it has hired Jay Jorgensen, Walmart’s former global chief ethics and compliance officer, to serve as its general counsel and chief compliance officer. Jorgensen will relocate to Seoul for the position.

Founded in 2010, with a total of $3.4 billion raised from investors, including SoftBank, and a valuation of $9 billion, Coupang currently operates only in Korea, where it is the largest e-commerce player, but has offices in Seoul, Beijing, Los Angeles, Mountain View, Seattle and Shanghai.

Coupang has been the outlier success of the Korean startup ecosystem for the past few years. The company’s founder, Bom Kim, who holds a bachelor’s and an MBA from Harvard, has worked to apply American management models to Coupang, attempting to eschew the insular culture typical of Korea’s technology companies. Clearly, that vision is drawing international talent.

Staying: Zachary Kirkhorn

Tesla is getting some financial help from itself, from TechCrunch’s Kirsten Korosec:

The automaker officially tapped as its next chief financial officer Zachary Kirkhorn, a longtime employee who has been part of the automaker’s finance team for nine years, according to securities filings posted Thursday. The automaker also appointed Vaibhav Taneja, who led the integration of Tesla and SolarCity’s accounting teams, as its chief accounting officer. Taneja, who will report to Kirkhorn, will oversee corporate financial reporting, global accounting functions and personnel.

No telling whether Kirkhorn knows how to blow a whistle though….

No Longer Admitted: Bill McGlashan

Sometimes when you venture to make an investment, it doesn’t always pan out, from Maggie Fitzgerald at CNBC:

TPG’s Bill McGlashan was fired from the private equity firm on Thursday amid the massive college cheating scandal.

McGlashan, 55, has been terminated for cause from his positions with TPG and Rise effective immediately.

“After reviewing the allegations of personal misconduct in the criminal complaint, we believe the behavior described to be inexcusable and antithetical to the values of our entire organization,” said a TPG spokesperson.

McGlashan founded TPG Growth, which has had a litany of successes investing in later-stage startups such as Airbnb.

Leaving (but not by choice): Bird employees

Once high-flying and now somewhat not as high-flying scooter startup Bird announced that it was laying off around 40 employees. From TechCrunch’s Megan Rose Dickey:

“As we establish local service centers and deeper roots in cities where we provide service, we have shifting geographic workforce needs,” a Bird spokesperson told TechCrunch. “We are expanding our employee bases in locations that match our growing operations around the world, while developing an efficient operating structure at our Santa Monica headquarters. The recent events are a reflection of shifting geographical needs and our annual talent review process.”

I hope they flip them the Bird on the way out.

India fintech and the growing proxy war between global tech giants

Photo by anand purohit via Getty Images

Written by Arman Tabatabai

South African media conglomerate and investment giant Naspers is reportedly planning to invest $1 billion in India this year.

According to reports earlier this week, Naspers is looking towards India’s budding fintech market in particular to unload the fresh pile of dough it’s sitting on after recently lowering its stake in Tencent and cashing out on Walmart’s $16 billion acquisition of portfolio company Flipkart last year.

The fintech heavy thesis directionally makes sense in the context of Naspers’ broader strategy. Naspers has openly discussed its attraction to India’s financial services market and the company already has an established footprint in the region as the owner of payments platform PayU.

That said, the amount Naspers is reportedly looking to gift in just one year is astounding. Indian fintech startups saw around $2.6 billion of investment in 2018 according to Pitchbook. Naspers’ investment alone would represent a 40% spike in India’s total fintech venture capital.

Though one billion dollars in one year may seem ambitious, Naspers has proven it’s not afraid to pour billions into India and emerging verticals, having just led a $1 billion round in Indian food delivery startup Swiggy only a few months ago.

More importantly, Naspers’ push shows that the company is seriously doubling down in the escalating competition to become the dominant force in India’s booming fintech ecosystem. As we discussed in our recent conversation with Billionaire Raj author James Crabtree, India’s financial system is ripe for disruption. With secular tailwinds like growing mobile penetration and financial literacy, innovative financial models in India have begun leap-frogging traditional institutions, with Google and Boston Consulting Group even forecasting that the market for digital payments in India would reach $500 billion in size by 2020.

And many have taken notice — the number of fintech investments in India has grown at a 200%-plus compound annual growth rate over the last five years, according to data from Pitchbook, as leading investors and global tech powerhouses all battle to become the layer of financial infrastructure on which the future Indian economy sits.

A recent deep dive in the WSJ highlighted how crowded the ongoing fight for Indian payments dominance has become in the context of Paytm, an Indian startup that received a $1.4 billion investment from venture behemoth SoftBank:

The Indian market is one worth fighting for, with hundreds of millions of Indians getting online and starting to transact for the first time, thanks to plummeting prices for mobile data and smartphones.

Digital payments in India are soaring” and “set to explode,” Credit Suisse said in a February research note. They should rise nearly five times to $1 trillion by 2023, the report said…

…Meanwhile, it isn’t just Google and WhatsApp challenging Paytm . Indian e-commerce titan Flipkart, in which Walmart Inc. bought a controlling stake for $16 billion earlier this year, has a popular payments service called PhonePe. Amazon.com Inc. has its own payments service and two of India’s biggest telecom players, Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd., offer digital wallets, as well.”

Next to peers like Alibaba, SoftBank, or Google, Naspers can often seem like the biggest tech company no one has ever heard of. But if its latest swan dive into India can help Naspers strike gold — as it did with its early investment in Tencent — it might just become the company powering the next economies of the world.

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to [email protected].

This newsletter is written with the assistance of Arman Tabatabai from New York

Korean e-commerce unicorn Coupang hires Walmart’s former global chief compliance officer

Coupang, the unicorn that is defining e-commerce in Korea, announced today that it has hired Jay Jorgensen, Walmart’s former global chief ethics and compliance officer, to serve as its general counsel and chief compliance officer. Jorgensen will relocate to Seoul for the position.

Founded in 2010, with a total of $3.4 billion raised from investors including SoftBank and a valuation of $9 billion, Coupang currently operates only in Korea, where it is the largest e-commerce player, but has offices in Seoul, Beijing, Los Angeles, Mountain View, Seattle and Shanghai.

Known for building a tech infrastructure that gives it almost complete control over delivery fulfillment, including last-mile logistics, Coupang more than doubled its revenue over the past two years to about $5 billion in 2018. The company says more than 120 million products are available on its platform and half of Koreans have downloaded its mobile app, with millions of customers ordering from Coupang more than 70 times each year.

Prior to Walmart, Jorgensen was a partner in law firm Sidley Austin LLP. Earlier, he served as a judicial law clerk for the late Supreme Court Chief Justice William Rehnquist and a law clerk for Samuel Alito Jr. while he sat on the United States Court of Appeals for the Third Circuit.

Jorgensen told TechCrunch in a phone call that he wanted to join Coupang because of “the extent to which it is changing life in Korea. It is not just an e-commerce player, it is the e-commerce player.” The company also reminded Jorgensen of learning about Amazon and later on Alibaba in their early days, then watching them develop into the world’s biggest e-commerce players.

When a quickly growing startup unicorn hires a chief compliance officer, the obvious question is if that means a public offering is in the works. Coupang’s vice president of marketplace and customer experience, Dan Rawson, who was also on the call with TechCrunch, said the timing of company’s future IPO is “contingent on a number of factors, including everything from market conditions to company performance” and that it still sees many growth opportunities both in Korea and eventually other countries.

Rawson adds that Korea, already one of the five biggest e-commerce markets in the world, is set to become the third biggest, after only China and the United States, and there is still room for growth in the country. One of Coupang’s most important advantages is its control of the last-mile delivery and customer service experience (most packages are brought to customers by “Coupang men,” or the company’s delivery workers, while a some are performed by Coupang Flex, a peer-to-peer delivery program similar to Uber Eats).

More than four million products are available through its premium Rocket Delivery service, which, like Amazon Prime, offers faster shipment. Rocket Delivery’s options, however, are even faster than Amazon Prime’s. For example, one guarantees delivery by dawn if customers order by midnight. Rawson says Rocket Delivery has fulfilled more than one billion items since September 2018.