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ADG China Insights - October 2017

Chris role.png Over the last few years the growth of China tech start-ups has been mind boggling. The net result is that it has improved the quality of life for many people across China. For me, I most enjoy the ease of mobile payments, finding high quality Chinese food in a hip modern environment, and meeting young, smart entrepreneurs building great technology companies with the same vibe you  might find in Silicon Valley. It has been a great trend made possible by an entrepreneurial spirit and massive amounts of local and global VC capital.

But with the good comes the bad. For every one of China's 55 private unicorns you will find 20 copycats behind each of them. And the reason they exist is not because of the entrepreneurs but driven by VCs worried about losing access to their capital if their investors don't see them allocating capital into the hot sectors - so they create the psuedo entrepreneur to build the copycat company - problem solved. This, along with the dumb money, has created what people in China mockingly calling the "VC business model" - driving prices down without any consideration for profits or even an inkling of a sustainable long term strategy.

Over the last few months it appears that a rationalization cycle is finally coming to the rescue and accelerating.  We have seen a noticeable uptick in companies that are running out of funding and struggling to raise follow-on rounds. This is a positive trend and we expect to see a renewed focus on sustainable business models and a slow down in the endless rising cost of salaries, office space and hopefully even the housing prices here in Beijing. If you have a technology company and haven't been to China in the last few years it is time for a visit and see for yourself. On our next newsletter I will talk more about why Sino - Foreign JVs are back. - Chris DeAngelis, ADG

I will be speaking at the HYSTA's Annual US-China Tech Investment Summit in Silicon Valley on Oct 5/6. Click here here if you would like to meet up or get a discount code to join the event.

The World’s Biggest Tech Companies Are No Longer Just American

The technology world’s $400 billion-and-up club — long a group of exclusively American names like Apple, Google, Facebook, Microsoft and Amazon — needs to make room for two Chinese members. Alibaba Group and Tencent Holdings, Chinese companies that dominate their home market and have rocketed this year to become global investor darlings. - The New York Times

Alibaba Beats Amazon

Chinese online and mobile commerce company Alibaba Group beats U.S. online retailer Amazon in the last twelve months on Wall Street. Alibaba shares have gained 75.18% in the past twelve months compared to 26.20% of Amazon. - Forbes   All eyes are now looking to Southeast Asia where the two will face-off against each other on an equivalent playing field.  

If you are interested in reading more about what is happening with e-commerce in China, I also suggest you read this article which talks about some of the more personalized and quirky things China companies do to capture the buyer's attention - Power Retail

Huawei passes Apple to be No. 2 smartphone vendor—for now: Counterpoint

Huawei surpassed Apple to become the world’s second-largest smartphone vendor in June and July, according to fresh data from Counterpoint Technology Market Research. And it may have beaten the iPhone in August as well. But holding onto that claim for the rest of the year will be tough. - Fierce Wireless  ...and btw Xiaomi is back again now that many of the copycats have disappeared never to be heard from again.  Good riddance to brands like Zuk that never found a reason to exist in the first place.

China’s Mobile-Payment Solutions Taking Root In US And Europe

In China, the traditional wallet is all but dead replaced by the smartphone now used to make all of your payments for daily needs.  The astonishing transformation which seemed to happen almost overnight was driven by vision and the intense competition between WeChat and Alipay. These two tech behemoths have their eyes set firmly on global markets including the USA  - Forbes  I have seen some of their plans and was blown away by the detailed methodical planning, KPIs and long term view.  Going overseas is not an easy path in financial services but let's hope they can instill enough fear in our own companies to wake them up from their long naps.

Upcoming Events

2017 HYSTA Annual Conference U.S.-China Tech Investment Summit

ADG is pleased to announce we have been invited to speak at the  2017 HYSTA Annual Conference in Santa Clara on October 5/6. Fill out the form here if you would like to meet with and talk about China and get a discount code for the conference.  The event is HYSTA's biggest event of the year bringing together 1000-1500 established and emerging industry leaders, executives, entrepreneurs and venture capitalists from Silicon Valley and China. 

2017 Money20/20 US Conference

Meet with David ADG's founder at Money 20/20's annual conference in Las Vegas from October 22nd-25th. Email him here to chat about China opportunities in fintech.

Interesting Stories you may have missed

Options Market Likes China’s Mobile-First Revolution - Bloomberg

What are the Implications of the Rapid Growth of Fintech in China?- Brink News

How Indian Smartphone Makers Lost the War Against Chinese Companies - Gagets

China’s advanced 5G network set for adoption in 2020 - Asia Times

China's bike-share company comes to Seattle - TechCrunch

China expected to be a key AI player in five years: UBS - EJInsight

Xiaomi Now Ships More Wearables Than Apple, Fitbit - Investopedia