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Xie Yu

Venture capital (VC) investment in China’s thriving new economy – based on the expanding use of smartphones – is becoming riskier, warns veteran investor Helen Wong, whose company joined the most recent financing round for one of China’s highest-profile unicorns, the bike-sharing service Mobike.
“It is not like before when growth was relatively easy for start-ups, when user numbers and activities were exploding in the mobile internet world.
“Nowadays with every one having more than 20 apps on their smartphone, it becomes harder to tempt new installations,” said Wong, a partner at Qiming Venture Partners.
She was speaking at an alumni event held in Hong Kong by INSEAD, one of the world’s leading and largest graduate business schools.

Wong’s argument is backed up by a latest study from data provider QuestMobile, which
showed the number of active smartphone used in China grew from 1.03 billion to 1.06 billion in the first nine months.
But the month-on-month growth rate decreasing from 13.1 per cent in January to 7 per cent in September, which shows “demographic dividend depletion, while user growth in the mobile internet industry faces huge challenges”.
Global venture capitalists splashed out US$39 billion worth of investment in the third quarter, according to KPMG’s Venture Pulse report for the period, with more than a quarter of that (US$10.2 billion) heading into China.
China’s bike-sharing giants could merge to stop the cash burning
With online traffic still largely monopolised by a few industry giants such as Tencent, however, looking for new avenues of investment is becoming more challenging.
Investors say they have been seeing much faster shifts in investor target areas, leading to several “mini cycles” taking place, Wong said, citing two typical examples: shared power banks, and mini KTV systems.
On October 11, Hangzhou-based power bank rental start-up LeDian announced it had shut down its business altogether and retrieved all its devices, while at the same time telling some existing users they might face difficulties withdrawing deposits due to an overload on its server.
It’s only six months ago that the shared power bank business triggered a rush in investment into similar ideas. In 10 days since late March, five start-ups in the sector pocketed a combined 300 million yuan (US$45.2 million) financing from 20 institutions.
“Investors have got to stay nimble and sober,” Wong said, adding she believes there will be good opportunities in sectors in future such as the further integration of online and offline shopping, and the online entertainment market dominated by those born after 2000.
China’s small power bank rental firms to be ousted in battle for market share
Since last year, Wong has led three rounds of investment by her firm Qiming into Mobike, which now values China’s high-profile bike sharing firm at US$3 billion.
Since late September there has been talk of a merger between the country’s two leading bike sharers, Mobike and Ofo – itself another unicorn – but Wong believes both can successfully continue independently, but only by expanding their service offerings.
“In China, the tradition seems to be when you have two top players in an area, they merge. But it is not necessarily the case for Mobike and Ofo,” Wong said.
The ambitions of a company are always an interesting question – we definitely do not want to exit early if an entrepreneur is capable of growing their business bigger, even though he or she might not make any profit for years
Helen Wong, a partner at Qiming Venture Partners
China’s bike-sharing platforms, which enable users to pick up and dump bikes anywhere, any time, by scanning a code with their smartphone, has attracted a staggering US$2 billion in funding over the last 18 months.
At the top of the tree are Mobike and Ofo. However, fierce prices wars have already forced out smaller competitors, leaving the realistic profitability of the two top players in question.
Last week saw the sector’s biggest casualty yet, with the third biggest player Bluegogo – the Tianjin-based start-up that boasted 20 million registered users at its peak – going bust due to a shortage of cash and the strain of growing cutthroat competition.
Wong’s optimism for the two market leaders is based on their strong business expansion plans.
Mobike is now moving into car sharing, partnering with electric car-maker Xinte Electric, it said earlier this month, to launch a fleet of shared cars, dubbing “Mocars”.
“The ambitions of a company are always an interesting question – we definitely do not want to exit early if an entrepreneur is capable of growing their business bigger, even though he or she might not make any profit for years.
The first merger gets under way among China’s bike-sharers as cash runs out among also-rans
“On the other hand, I have watched too many entrepreneurs insist on expanding their companies too quickly, which can often lead them to miss what many see as their ultimate goal: an IPO (initial public offering),” she said.
Wong said the US, Chinese mainland and Hong Kong markets are all looking for different types of companies to list.
US investors like room for growth and are willing to invest for the future. The mainland market stresses earnings and profitability, she said.
While Hong Kong is somewhere in between, with smaller internet companies with strong consumer bases and brand awareness having the best chance of success.


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Investing

Slower smartphone growth gives VCs the jitters

Leading industry veteran says investors have to remain nimble and make sure they know their targets have strong and varied expansion plans in place

=== NO ARCHIVE IMAGE === ATN. BIKE26. Outrage online and among neighbours as entrance to a famous hospital in Beijing blocked by shared bicycles. UNDATED HANDOUT

Helen Wong, a partner at Qiming Ventures, says venture capital investment in China’s thriving new economy is becoming riskier . Photo: Jonathan Wong

Are China’s bike-sharing services oversharing?

Chinese firms Mobike and Ofo are in a race with oBike of Singapore to capture the Asian market – but there are roadblocks ahead, including a backlash against illegal parking

Photo of the new sharing bikes "obike" parked around Hung Shui Kiu Light Rail station in Yuen Long. 16SEP17 SCMP / David Wong

A man on his electric motorbike scooter tries to pass a busy traffic car lane as a stack of shared bicycles block the cycle lane on a street in Beijing, Monday, Aug. 14, 2017. Chinese authorities has issued nationwide guidelines to regulate the bike-sharing services which have boomed but created management issues as millions of bikes clogged the sidewalks in major cities across China. (AP Photo/Andy Wong)

Boseh bike-sharing dock

Bike-sharing services in Zhejiang, China. Photo: Reuters

***THIS PHOTO IS FOR FEATURES. PLEASE DO NOT USE IT BEFORE SEPTEMBER 17, 2017*** People use mobile payment to rent ofo bikes, a bike sharing service in Shenzhen, China. 10AUG17 SCMP / May Tse [FEATURES MOBILE PAYMENT]

People ride shared bicycles on Chang’an Avenue in Beijing. Photo: Xinhua

Bike-sharing major Mobike lands US$600 million of new funding to push global expansion

Mobike shared bicycles on a street in Beijing. Bike-sharing start-up Mobike has raised more than US$600 million to help finance its overseas expansion, as competition in the booming market intensifies. Photo: AFP

Davis Wang, founder and chief executive officer of Beijing Mobike Technology Co., reacts during a Bloomberg Television interview on the sidelines of the Morgan Stanley China Summit in Beijing, China, on Wednesday, May 31, 2017. The valuation of the Chinese bike-sharing startup, which aims to be in 150 to 200 cities globally this year, is now "several billion" dollars, Wang said. Photographer: Giulia Marchi/Bloomberg

Bike-sharing operator Gobee.bike offering free rides in Hong Kong amid parking woes

The scheme follows complaints from residents that bicycles had been left randomly in car parks and occupied public spaces for extensive periods. Photo: Felix Wong

Picture showing how empty the bicycle parking space is without Gobee in Tai Wai.

China’s largest bike-sharing app Ofo considering ‘smog-free’ bicycles

This illustration shows how bikes can be fitted with a screen on their handlebars, that absorb the surrounding dirty air and purifies it as you cycle. The pedalling powers the screen. Photo: Studio Roosegaarde

Daan Roosegaard poses for a photograph in front of his invention, the Smog Free Tower. [POST MAGAZINE] Photo : Studio Roosegaarde

***ONE TIME USE ONLY, PLEASE CLEAR THE COPYRIGHTS BEFORE RE-USE - OTUO*** undated photo of Dutch designer Daan Roosegaarde.

China sets out rules to govern booming bike-sharing industry

A woman rides past a bicycle lane blocked with discarded shared bikes in Beijing. Photo: AFP

This picture taken on July 3, 2017 in Shanghai shows two men (centre) riding bicycles from a sharing company. Authorities in Shanghai and Tianjin will impose regulations on the rapidly growing bike-sharing sector following mounting complaints over an accumulation of millions of the rentable two-wheelers on city streets, state media reported. / AFP PHOTO / Johannes EISELE / TO GO WITH STORY: China-economy-business-lifestyle-sharing , by Peter Stebbings

FILE PHOTO - A staff member from the bike-sharing company Ofo gathers its shared bikes for use during the evening rush hour, in Beijing, China April 12, 2017. REUTERS/Jason Lee/File Photo

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Leading industry veteran says investors have to remain nimble and make sure they know their targets have strong and varied expansion plans in place


Slower smartphone growth gives VCs the jitters

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Leading industry veteran says investors have to remain nimble and make sure they know their targets have strong and varied expansion plans in place

Leading industry veteran says investors have to remain nimble and make sure they know their targets have strong and varied expansion plans in place