Venture Funding Picks Up at Internet’s Edge 风险投资回归对互联网边缘领域
The past year will go down in history books as one of the worst ever for overseas listed China stocks, which have suffered from the triple blow of an economic slowdown at home, compounded by an Internet bubble and a confidence crisis caused by a series of accounting scandals. At the same time, many of the entrepreneurial start-up companies that often go on to list overseas have also quietly suffered, as the venture capitalists who supply much of their new funding have also become more cautious for similar reasons. I pointed to some signs last week that indicated the crisis for overseas-listed stocks is finally starting to subside (previous post), and now we’re also seeing some positive signs for the start-ups with a recent series of new funding announcements.
Perhaps most interesting in this new flurry of announcements is that all of the new funding is coming in peripheral areas of the Web, as investors avoid the mainstream Internet where competition remains intense. This week alone, we’re seeing news of 3 relatively big new venture capital fundings, one for an online wine seller named Jiumei, another for a mobile browser maker named Mobotap, and a third for an advertising firm named Yoyi Media.
According to media reports, Jiumei has received a new round of funding worth more than 100 million yuan, or about $16 million. (English article) Mobotap, meanwhile, is receiving up to $10 million in new funds (English article), while Yoyi’s new funding is likely worth $20 million or more. (English article) These relatively modest new fundings come about 2 months after one of China’s hottest start-ups, low-cost smartphone maker Xiaomi, received a large $216 million in new funds, marking the largest fund raising for a start-up Chinese company in the high-tech and media space in more than a year. (previous post)
While the Xiaomi funding was certainly a positive sign, these smaller fund-raisings look even more promising as they could signal that investor confidence is finally starting to return to these less well known companies. What’s more, venture capitalists who probably provided lax accounting oversight for their investments in the past have probably learned from their mistakes and will monitor their companies’ books more closely going forward. That’s important because it means that stock buyers will have more confidence about the quality of these companies’ accounting if and when the companies make initial public offerings in the future.
A quick look at Xiaomi and the other 3 companies shows that all are engaged in a range of different product and service areas that could have strong growth potential going forward. Xioami has found a nice niche in high-performance, low-cost smartphones, with its newest model costing just 2,000 yuan, or about $320. I particularly like Jiumei’s niche in the online wine-selling market, since it has relatively few competitors and can take advantage of the fast-growing Chinese appetite for wine.
Mobotop is in a big-growth new area as the mobile Internet rapidly expands, although it will face some stiff competition from existing players as well as the arrival of big names like Baidu (Nasdaq: BIDU) to the space. And Yoyi has also found a nice niche in the relatively underdeveloped Internet-based advertising services realm. Look for a growing number of new fundings in the $10-$30 million range in the next few months, with perhaps 1 or 2 mega-fundings in the same range as Xiaomi’s as confidence starts to return to the sector.
Bottom line: A flurry of new venture funding for high-tech and media start-ups indicates investor confidence is returning to the space after a year-long winter.
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