The Chinese tech startup wave roused by Xiaomi is taking Asia by storm. If western companies are not already paying attention, they soon will be as the region’s most ambitious startups eye even bigger conquests to prove they can become contenders on an international scale.
Smartphone maker Xiaomi’s transformation from Chinese startup to mobile giant is testament to this shift. Besting goliaths in the global smartphone market, the company’s potent mix of online flash sales, passionate fans and a quirky mascot propelled it to become the world’s most valuable technology startup. Now that it is valued at more than $64bn, the real test will be living up to investors’ high expectations.
Xiaomi has benefited from the liberalisation of the Chinese market that has marked the arrival of a plethora of innovative business models that over-index on e-commerce, mobile, apps and online marketplaces. Where there is innovation there is money to be made and entrepreneurs from the US are already looking at how they can adopt Chinese business models in what is a reverse of the copy-to- China trend of nearly a decade ago.
So who are the tech startups emerging from Asia to strike fear into the heart of the west?
Up and coming Chinese smartphone maker Xiaomi is setting the startup scene ablaze. Its record valuation aside, the business has fashioned a disruptive model selling high-quality phones at low prices – at least 60 per cent lower than devices at the top end of the market.
To sustain the prices, Xiaomi keeps models on the market far longer than the likes of Apple and Samsung do. Instead of charging steep fees to offset the cost of state-of-the-art components, the business prices its phones just a little higher than the cost of manufacturing.
It’s a reversal on Apple’s push for higher profits through product innovation, which are needed regularly to keep margins up.
Overseas expansion is imminent with Xiaomi eyeing those markets that fit its low-cost approach rather than avoid those where it could be sued for intellectual property breaches.
Hong Kong startup GoGoVan is going places.
Founded in 2013, the delivery van hire service capped off last year with a $10m cash injection from Chinese social networking giant Ren Ren to fuel its expansion into China, Japan and south-east Asia. Ren Ren’s investment, which bought it around 10 per cent in the business, puts GoGoVan’s current valuation somewhere in the region of £100m.
It marks a rapid rise for a company that has been dubbed the “Uber of logistics” through an online platform that puts users in touch with more than 14,000 drivers at any time. The startup went online in 2013 but has yet to turn a profit.
David Brabbins, associate partner at global brand and marketing consultancy Prophet's Hong Kong office, says: “The big question is whether deep pocketed Uber will overwhelm these local niche players, but GoGoVan was born from a local insight and relentless customer focus, so I think it can remain relevant by staying close to customers and tailoring the service to local needs across Asia's diverse markets.”
WeChat may appear on the surface as China’s WhatsApp but it’s actually a lot more than a messaging app.
Part e-commerce platform, part social network, the app has evolved over the last four years to become a bonafide media channel that is fast becoming pivotal to advertisers.
Unlike anything here in the west, the app integrates with users’ bank accounts, allowing companies to scan objects while they are in-store so that they can later purchase via the app.
Its ownership by Tencent means it is not a startup in the strictest sense, however, the app is blurring the lines between professional and social in a way that has seen its group chat feature emerge as one of the driving forces behind China’s tech and startup scene. Putting a value on WeChat is tricky.
A scarcity of details on costs and engagement statistics make it difficult to pin down the app’s earnings potential. For now, valuations are still largely based on hope.
The hits keep rolling in for this DIY e-commerce platform. The one-year-old Hong Kong-based startup capped off a strong 12 months of media exposure and an international roadshow by raising $1.2m in funding from venture capitalists.
Growing from a team of three to nine in that period, the business is targeting south-east Asia for expansion.
Shopline provides an out-of-the-box package that supplies retailers large and small with their own online shop, analytics package and CRM features for $40 per month.
Beyond the basic features, the service also offers marketing advice for those non-tech savvy sellers. In a market where consumers start many of their journeys in-store rather than online, China’s e-commerce explosion is hard to ignore but multichannel will be key, says Qusai Sarraf, chief executive of Ivis Group, which is working with British retailers looking to break into Asia.
India-based Scandid is attracting a lot of buzz among venture capitalists. The country’s only app for geolocalised savings and discounts came close to securing $500,000 for funding earlier this month at the Seedstars startup competition only to be beaten by another Asian business.
Not to be perturbed, Scandid’s founders Sushil Choudhari and Madhur Khandelwal are on the hunt for new income streams after they used the competition to gauge interest in the service overseas.
Unlike some of its counterparts on the Asian market, it is easier to envisage a use for Scandid in the west.
The barcode scanner, local shopping and price comparison app lets people search for deals in three simple ways: search by keywords, scan a barcode or by simply saying the product name aloud.
It is powered by Shoppingwash technology, one of the more robust platforms and coupons databases currently available in the region.
Founded in 2012, it is still early days for Scandid. Time will tell whether the innovative mix of services can attain the critical mass needed to expand beyond its heartland.
Singapore-based online grocery retailer Redmart sees itself as a technology and logistics company that just happens to be delivering groceries.
Eventually it wants to move beyond food and drink to sell products in other verticals, an ambition very much reflective of the e-commerce boom sweeping across Asia.
The business enjoyed a strong 2014, having closed two rounds of funding that have consequently heaped expectation and pressure on its team’s ambitious plans to be implemented.
Armed with a sizeable war chest of nearly $30m, the company is sharpening its core offering.
Chiefly, the logistical nightmare that is fresh food, which will see it shift to a temperature controlled warehouse and invest in new packaging technology.
While Singapore remains the current focus, Redmart chief executive Roger Egan has backed an aggressive expansion drive once it has ironed out all the logistical challenges from its business model.
Dubbed the ‘Groupon of China’ by some, group deals site Meituan has raised $700m since 2010 and is valued at $7bn.
Transaction volume on the Alibaba-backed platform surpassed $7.4bn last year, nearly double the increase from 2013. Meituan predicts the number of transactions to top $16bn this year and to smash $160bn by 2020.
It’s impressive stuff for a company that has become the largest service in China for activities such as restaurant bookings and movie ticket purchases, with 60 per cent share of the country’s group discount market.
Founded in 2010, the company has since gained more than 200 million active users, including 20 million daily mobile users, and is used in more than 1,000 Chinese cities – up from around 300 a year ago.
Ivis Group’s Sarraf says: “Over the last two years there has been massive growth from e-commerce in China. There are lots of innovations happening in the market at the moment to try and take advantage of the ubiquity of mobile and multichannel.”
Online healthcare service provider Guahao received over $100m investment by Chinese internet giant Tencent last October.
It is the largest single investment in China’s internet healthcare sector, a telling sign of the transformation of the country’s healthcare industry into a business vertical.
Derived from the Chinese word meaning ‘scheduling a patient appointment’, the online service helps users make bookings online with doctors based on location, symptoms and other criteria.
It offers a reprieve to patients across China who often have to wait in long queues for treatment and occasionally deal with third parties that push up medical fees. Justin Peyton, chief strategy officer for Asia Pacific at DigitasLBi, says: “[Companies like Guahao] are creating apps that aren’t sexy.
They are going to market with apps that are utilities in the growth economies of the world.” Following the cash injection from Tencent, the service will plug into the internet company’s mobile apps, WeChat and Mobile QQ.
It has also recently launched a mobile app that will allow users to reserve medical appointments from their phones while also boosting Tencent’s mobile payments business.
This feature was first published in the 18 February issue of The Drum.