The Next Big Thing

Billion-dollar valuations, B2B e-commerce and social media apps: top 3 trends among China’s internet start-ups

PUBLISHED : Monday, 31 August, 2015, 7:00am
UPDATED : Friday, 04 September, 2015, 12:51pm

Are billion-dollar companies like car-hailing service Didi Kuaidi overvalued? Will Chinese online-to-offline (O2O) start-ups continue to reach sky-high valuations?

These were some of the issues tackled during the Credit Suisse 3rd Asia Internet C-Level Conference in Hong Kong last week. 

Here are the top three takeaways about the current state of the internet industry in China. 

First, so-called O2O companies in will continue to rack up billion-dollar valuations.

Didi Kuaidi is valued at US$15 billion. Food delivery service Eleme is estimated to be valued at about US$2 billion. 

Pundits have speculated that these companies may be overvalued given the heating-up state of the tech market. 

So will Chinese tech start-ups continue to accumulate sky-high valuations, especially in light of last week’s stock market crash that sent investors reeling? 

The answer is yes, according to Harry Man, a partner at venture capitalist firm Matrix Partners China. 

Man believes there are still “tons of opportunities” for such companies in China, and that private companies are still raking in millions of US dollars in funding even as investor confidence in the Chinese bourse tanks.

“It’s hard to say whether [these companies] are heavily overvalued or not. There is still much room for private companies to grow,” said Man.

He added that there are many companies who have not started charging for their services yet, which could lead to huge profits.

Second, companies focused on social media for mobile can succeed despite targeting niche segments

Instead of catering to a general user base, more mobile social companies in China are now targeting specific demographics. 

For example, location-based instant messaging app Momo allows users to make new friends or go on dates by chatting with other users of the app nearby. 

YY, a real-time audio broadcasting app, allows users to broadcast audio live to a group of listeners. Some users use YY to broadcast live music from concerts to listeners who tune in at home.

Although social networking giant Facebook already has 844 million people who use its mobile app each day, smaller rivals can still succeed by playing up their niche functions, according to Man.

Momo is a case in point: it is estimated to be worth up to US$3 billion.

Third, more traditional industries will jump on the e-commerce bandwagon

Buyers and sellers of materials such as plastic or steel may find the purchasing process much easier as traditional industries such as manufacturing sell to other businesses online.

Man gave the example of, a B2B e-commerce website that connects buyers and sellers of steel in an online marketplace. The company is now valued at almost US1 billion, he said. 

Real estate, steel production, plastics and logistics are examples of markets waiting to be exploited.

“[Marketplaces for these industries] all have the potential to turn into billion-dollar companies,” said Man.