Category: Business

Where are bike-sharing companies pedaling to?

Following Uber and Didi Chuxing, the sharing economy has moved on to micro-mobility in the shape of bicycle or startups. From Ofo to Mobikes, bicycles have been appearing in massive numbers across cities.

They are trying to serve as an important addition in transiting between infrastructure – a mode of transportation that could be used to cover the so-called first or last mile of any trip, such as the distance from home to the nearest subway station.

Two unicorns have also rapidly emerged from this micro-mobility space: Ofo and HelloBike both having achieved more than a billion-dollar valuation.

But it’s no surprise. After all, there can be no hype without a unicorn. The bike-sharing hype has caught the attention of investors who have poured millions of dollars in capital into the major startups.

Earlier this year, Alibaba put its weight behind Ofo – leading a US$866 million fundraising while its competitor HelloBike also managed to raise US$321 million in June from Alibaba’s affiliate Ant Financial.

Mobike, on the other hand, was acquired by China’s largest provider of on-demand online services Meituan Dianping for reportedly US$2.7 billion.

Using these funds, bike-sharing services have been ostensibly aiming to democratize access to rental bikes by using technology.

Bikes now become dockless, tagged with GPS chips which enable them to be rented via a mobile app and removing the need for them to be stored in a central location. This makes them hugely convenient and more economical.

At the same time, expansion projects were on the move.

In China alone, Ofo and Mobike were expanding rapidly in a relatively unregulated environment, racing to secure dominance by flooding the streets with their bicycles.

Beyond China, Ofo has also expanded aggressively in 2017, first moving into Singapore, then the United Kingdom, United States, Australia, France and other countries.

As of June 2018, Ofo claimed to have some 15 million bikes in operations in more than 300 cities across 22 countries, as well as 250 million global users.

Putting on the Brakes

However, now Ofo has hit the brakes and in certain cases backpedaling fast.

The Chinese bike-sharing startup has ceased operations in Malaysia last week, about a year since the bike-sharing service expanded into Melaka. Just today, it has ceased operations in Thailand.

They have also laid off employees across the board in North America and is dramatically pulling back its US operations. According to Quartz, Ofo told North American team members that they are going into sleep mode.

“As part of our focus, we have been working towards profitability and this has meant that some markets have had a change in staff priorities and positions,” said Ofo’s spokesperson.

This is a phase to reorganize Ofo’s international market strategy to center their focus on priority countries, which in Asia includes Singapore, Hong Kong, South Korea, and Japan.

At the same time, another bike sharing company oBike also ceased its operations in Singapore last June, leaving users in a lurch with millions of dollars in deposit yet to be returned while the service’s 14,000 bicycles remain strewn across the city.

Sharing Troubles

In cities around the world, bike sharing companies were struggling with theft and vandalism. The influx of undocked bikes from Ofo, as well as funded rivals like Mobike and HelloBike, led to huge graveyards of broken, abandoned bike.

Dockless bikes have also been found on streets, tossed into lakes or even thrown from buildings. Such vandalism has forced Hong Kong-based bike-sharing startup Gobee to retreat from Europe, before shutting down entirely in July.

But more than just vandalism, theft and poorly maintained bikes, the trouble for the bike-sharing company is more than just innovation. It’s about painting the utopian vision of reshaping society to be more caring, cooperative, and trusting.

Unicorns Dominates Exits in 2018 Creating Multi-Year High Record

Amid the startup landscape, unicorns are few and far between.

Just last year, CB Insights worked out the odds of becoming a unicorn – a company with a valuation exceeding $1 billion or more – to be less than 1 percent.

But according to new data from CrunchBase, the odds were beaten when in these last eight months of 2018, a total of 260 unicorns have taken flight with a total cumulative valuation close to US$840 billion.

The year 2018 is quickly diminishing the statistical rarity which spurred Cowboy Ventures Partner Aileen Lee to nickname these successful startups.

If the trend continues, 2018 will be a record-making year for billion-dollar companies.

Then again, with average round sizes closing higher and growth investors being optimistic and keeping the cash flowing into startups, this result is already in the making.

Crunchbase reporter Joanna Glaser said, ”In the first seven months of 2018, investors had put $73 billion into rounds for private venture-backed companies valued at US$1 billion or more.”

That by comparison, is already at three-quarters of the total for the whole of 2017, which was last counted at $98 billion.

This all adds up to enormous numbers, whereby startups like Uber or Didi Chuxing reaches an impressive valuation of over US$55 billion.

Freshworks becomes next unicorn with US$100 million funding led by Sequoia, Accel

If you haven’t been following the venture capital network in India, Freshworks is one of the larger SaaS providers you have probably never heard of… well, until now.

California and Chennai-based customer engagement software maker Freshworks has officially joined the country’s unicorn club, after raising US$100 million in a fresh round of funding co-led by Sequoia Capital and Accel Partners.

This new funding values the company at around $1.5 billion, doubling up from the valuation of $700 million it reached in late 2016.

Question, Who is Freshworks?

Founded in Chennai, India in 2010 as Freshdesk, the startup began as a helpdesk software providing a single cloud-based customer support solution for businesses.

In less than a decade, the firm grew exponentially, moving beyond customer service to offer a host of innovative product suites in ITSM and CRM domains.

From Freshdesk to Freshmarketer, the startup owns products ranging from sales CRM software to recruitment tools and IT streamlining software, and this ultimately drove the name change to Freshworks.

So, now if you ask what Freshworks does?

Freshworks

Image Source: Freshworks.com

It provides organizations of all sizes with a series of SaaS solutions that make it easier for customer support, sales and marketing professionals to communicate efficiently with customers for better service and to collaborate with team members and resolve customer issues.

The startup has a workforce of more than 1,000 employees globally across five offices in India, United Kingdom, Germany, Australia and the United States.

To date, their software is being used by over 150,000 organizations around the world, counting established names like Bridgestone, Toshiba. Cisco, NHS, Rightmove, Hugo Boss, Honda, and Citizens Advice

Looking at the success of the startup today, Ramesh Ravishankar, the marketing Director of Freshworks said that the metrics and insights from Google have played a big part in understanding and continuing their growth.

“Google tools are the most sophisticated for measuring a channel’s effectiveness. We are well-armored when having to talk about the return on investment of Google products.”

Freshworks Google Marketing

Image Source: Freshworks.com

From launch, Freshworks has been using Google Search advertising to build a customer base in mature markets across the United States and Europe.

The startup also adopted a unique global inside sales model that lowered the company’s cost of selling. This enabled Freshworks to put more into their digital marketing budget, and improve the customer on-boarding experience.

At the same time, as software products move from on-premise to a cloud-based model, the SaaS market in India has seen a rapid evolution. Instant decision making, cost-effectiveness, low risk, greater flexibility combined with an increasing mobile workforce and customers has been the driving force behind SaaS adoption.

“Freshworks has built the only customer engagement platform on the market that elegantly meets the needs of a business of any size with software that is modern, intuitive and affordable,” said Sameer Gandhi, a partner at Accel.

Today, Freshworks is a global powerhouse in cloud-based business software with a majority of revenue coming from North America, followed by Europe. They now have a customer base of over 130,000 with 60% of their business coming through Google products.

What’s next? Talks about IPO

With Freshworks riding on an incredible wave of growth and reaching the unicorn stage, many have started to ask when are the plans for IPO?

In fact, expectations for IPO in the near future has already sparked when the startup announced the appointment of Suresh Seshadri, former AppDynamics’ Vice President of Finance & Treasury as the Chief Financial Officer. Seshadri has previously helped prepare AppDyanmics for its IPO before it was acquired by Cisco in 2017,

“Coming on board to work with Girish and the rest of the executive team is an incredible opportunity and I am confident that we are well-positioned to reach the next phase of Freshworks’ expansion,” Seshadri said.

Freshworks CEO: Girish Marhrubootham

Image Source: VentureBeats.com

However, Freshworks CEO Girish Mathrubootham told TechCrunch we shouldn’t be holding our breath waiting for his company to IPO.

“Freshworks hasn’t started the IPO process but we do feel that we will eventually go public in the U.S.,” he said. “With that said, our primary focus right now is on growing the business and investing in our platform. When the timing is right, we’ll make that decision.”

At present, the startup will focus on expanding Freshworks’ worldwide expansion and continue investing in its integrated SaaS platform, especially at how it can use AI to bring innovations to its new tools.

“When we started Freshworks in 2010, we were a single-product company with a goal of offering better, easier-to-use customer service software than what was in the market,” said Girish.

“It’s been a long way but we’ve since scaled our company to US$100 million in annual recurring revenue and built a full SaaS platform where all of our products – such as Freshsales, Freshdesk, and Freshservice – work together seamlessly without requiring additional integration resources or consultants to make the software simply work,” he added.

China’s bargain shoppers behind Pinduoduo’s US$1.6 billion IPO

Chinese online group discounter Pinduoduo Inc is slated for a U.S. initial public offering (IPO) priced at $19 per American depositary share (ADS), which will allow it to raise $1.63 billion in the second-biggest United States float by a Chinese firm this year.

Set up by former Google engineer Colin Huang, Pinduoduo which roughly translates to “buy more and more“, is a startup whose business encourages consumers to purchase in group and enjoy a massive discount.

On Thursday, the startup will begin trading on Nasdaq under the symbol PDD and this all came just three years after its inception in 2015.

Unbelievable? Yes.

From Alibaba to JD.com, China’s ecommerce is a highly consolidated market not short of powerhouses. However, what most had deemed impossible to crack was proven achievable — as long as you solve the right problems for the right group of customers.

Pinduoduo’s customers are not your typical image of a tech-savvy online shopper. They serve a different set of the population that is willing to go all out for an extra dollar discount on a stylish blouse or a wireless smartphone charger.

China's Da Ma

Image Source: Eatsday.com

They are mostly Chinese da ma (literally translated to big mamas), a group of budget-savvy mothers who do most of the shopping for the family and are more than happy for a good deal even if it is just for a difference of a few cents.

The place to find these deals is on Pinduoduo. The ecommerce app serves as a platform for them to score bargain prices on everyday items, with discounts as steep as 90% off.

Though there is a clause: gather enough friends on WeChat to order the items together in bulk. Some referenced the platform as a combination of Facebook + Groupon. Turns out this is the successful mix that had what it takes to make it into one of the fastest growing apps in the history of Chinese Internet.

Pinduoduo

Image source: Medium.com

How successful? According to a report by Cheetah Mobile published on 9th December 2017, the ranking of ecommerce Apps in China was #1 Taobao, the long-standing ecommerce app affiliated with Alibaba. At second, Pinduoduo.

In fact, the Chinese social ecommerce platform has seen explosive growth since its inception in September 2015, having a 300 million-strong user base with 65% of their users coming from third-tier cities and beyond.

It is no surprise. The shop-with-friends app combination of a group-buying strategy that includes cheap products integrated into China’s WeChat social media was the perfect equation for virality.

“We believe WeChat accounts for the majority of buyer traffic, and Pinduoduo could not have built up its large user base cost-effectively and rapidly without WeChat,” wrote Arun George, a technology analyst who publishes on independent research platform Smartkarma.

The platform accumulated a 300 million strong user base and became one of the largest ecommerce apps in China competing against Tmall, Weipinhui, and JD.com.

The firm’s gross merchandise volume exceeded 100 billion yuan ($14.98 billion) last year, a milestone which took Alibaba’s Taobao marketplace five years and JD.com 10 years.

Business Model: Cutting the Middle Man and Selling Wholesale

Unlike ecommerce giants who compete for affluent customers in urban centers, Pinduoduo is built on a C2B model in bulk which helps eliminate layers of distributors by connecting consumers and manufacturer directly.

This allows products to reach its user base when it’s still fresh and gives Pinduoduo the flexibility to sell anything from toilet paper to fresh produce from local growers, including mangoes or blemished apples (at a dirt cheap price).

Pinduoduo claims that over the course of two years, about 1000 factories produce and sell on the platform. These factories focus on producing just a few SKUs in colossal quantities and are able to manage order volumes that have grown exponentially.

Moreover, with the sheer volume of each group order, it allows sellers more room to cut prices to as low as 90% off.

One example is Chinese tissue manufacturers CoRou and ZhiHu (also known as Botare), whose factories have collectively completed more than 9,320,000 Pinduoduo orders, i.e. 261 million packets of tissue.

But ultimately, what attractive about Pinduoduo is not just it’s incredibly low prices, there’s also the satisfaction of getting a good deal and scoring massive discounts.

The experience feels less like shopping and more like playing a shopping video game. The company even calls its app a combination of Costco and Disneyland according to its regulatory filing, a platform where fun meets value.

However, there is always a price for quality

Rotten Mangoes

Image Source: BusinessInsider.com

According to the 2017 National User Satisfaction Survey of Major Ecommerce Platforms released by the China E-Commerce Research Center, the percentage of complaints on Pinduoduo is as high with 17.87% of users rating the app only at 1 star.

Some users are mainly dissatisfied with the poor quality, speed of delivery, inconsistencies between product and photo, as well as the failure to receive refunds after waiting for a long time.

Just ahead of the IPO, Forbes has reported that Pinduoduo was being sued for trademark infringement in federal court in New York.

However, this does not deter the course of Pinduoduo and its upcoming IPO.

The three-year-old company, under the name of Walnut Street Group Holding Limited, saw its stock closed at US$26.70, valuing the company at US$29.6 billion and its founder Colin Huang’s 46.8 percent stake at US$13.8 billion. This makes the 38-year-old tech founder the 13th wealthiest billionaire in China, and one of the youngest tech tycoons in China.

The startup counts Chinese internet giant Tencent Holdings Ltd as the main backer at US$23.8 billion including all outstanding share options, as well as Chinese investment firm Bayan Capital.

Introducing China’s Cryptocurrency Unicorns: Bitmain, Ebang, and Canaan Creative

In recent cryptocurrency news from China, three cryptocurrency mining hardware manufacturers – Bitmain, Ebang, and Canaan Creative – have been valued at more than $1 billion to climb up among the ranks of unicorn startups.

If you think about it, there’s a certain irony about how the first government in the world to ban cryptocurrency has now admittedly own three cryptocurrency unicorns.

Just last September, the Chinese government shut down all local crypto exchanges and banned initial coin offerings (ICO) amid fears that they could create financial instability.

However, fast forward today, Hurun Research Institute for the Greater China region has released the Q2 Unicorn Index ranking three Bitcoin mining firms among the list of 130 different Chinese unicorns.

Truth is, this is not the first time China has taken such contradictory actions.

In May, China Center for Information Industry Development (CCID), a research unit under the country’s industrial ministry officials had published a monthly rating index on 28 crypto coins and the blockchains behind them.

This goes to show that while China’s government is not a fan of cryptocurrency, the country still recognizes the merits and importance of bitcoin startups.

So, what does it mean to be ranked as a unicorn?

Cryptocurrency Unicorn

If this is the first time you heard the word unicorn outside the context of a mythical creature or in reference to LGBT, the term unicorn in business is a label given to privately held startup companies that have reached a valuation at over $1 billion in dollar terms.

The term was coined by venture capitalist Aileen Lee in 2013 and was meant to highlight the rarity of such successful ventures by comparing it to the mythical creature. And for the first time in China, the label is used to describe cryptocurrency-focused companies.

This means recognition for the thousands of other cryptocurrency and blockchain startups that are currently operating in China.

According to South China Morning Post, the number of companies which have registered names that includes the word ‘blockchain’ between January and July 16th of this year has increased by 500 percent when compared with the year of 2017.

As of July 16th, 3,078 companies had registered names containing the term qukualian (the Chinese translation of ‘blockchain’) during 2018, bringing the total number of firms with distributed ledger technology-themed names in China to more than 4,000.

Among them, the Top 3 Cryptocurrency Unicorns are:

#13 Bitmain: World’s Largest Designer of ASIC chips

Bitmain

Image Source: Qz.com

Founded in 2013 by Jihan Wu and Micree Zhan, Bitmain sits at the #13 spot on the list with Hurun valuing the company to be worth 70 billion yuan (about $10.3 billion).

The assessment is reflective of the US$10 billion Series B round funding that Bitmain raked in before its impending initial public offering.

The founder Jihan Wu, was the first person who had translated Satoshi Nakamoto’s legendary Bitcoin whitepaper into Chinese, as well as being the one who approached Zhan with a proposal to create an ASIC chip for specifically mining Bitcoin, known as Antminers.

The startup has also recently opened offices and mining centers in Washington, Quebec, and Israel. These offices are in addition to an expansion plan that has led the company to establish operations in Amsterdam, Hong Kong, Tel Aviv, Qingdao, Chengdu, Shanghai, Shenzhen, and Irkust, Wusia.

Besides, Bitmain’s strategic partnership with Block.one had also helped facilitate the creation and development of EOS one as of the fastest growing and most supported blockchains in the community.

#32 Canaan Creative: Maker of Bitcoin Mining Rigs

Canaan Creative

Image Source: Bcfocus.com

Tied with 20 other companies, Canaan Creative sits at #32 spot with a valuation of 20.34 billion yuan (about $3 billion). The startup is said to be the world’s second-biggest manufacturer of bitcoin mining chips and devices.

This valuation comes as per its financial statement included in part of its IPO filing, whereby Canaan raised 1.3 billion yuan (about $204 million) in its revenue for 2017 alone, marking a 3000 percent year-on-year growth compared with 2016.

Besides, the firm also brought in a net profit of $56 million in 2017, accounting for a six-fold increase as compared to its previous year. Backers of the startup include Jin Jiang International Group, Baopu Asset Management, and Tunlan Investment.

#53 Ebang: Telecommunications Co turned Bitcoin Mining Hardware Manufacturer

Ebang - China's cryptocurrency unicorn

Image Source: Tradingpeek.com

Ranking at the 53rd spot, Ebang is tied with 38 other companies at an approximated valuation of 10.17 billion yuan (about 1.5 billion). Founded in 2010, Ebang Communication started its business with production of hardware products for the telecommunication industry.

It was only in 2016 that the firm entered the cryptocurrency mining business and launched its own Ebit miners. In 2017, Ebang received 94.6 percent of its revenue from the sales of bitcoin miners.

Plans for Initial Public Offering (IPO)

All three companies have recently expressed their desire to conduct IPO on the Hong Kong Stock Exchange in the near future.

Looking at these news, it seems that cryptocurrency is gradually growing into what many are hoping it to be. With these three new China cryptocurrency unicorns, other crypto startups in China are sure to follow the path to these bitcoin mining companies.

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