Investment firm CCV picks localization-oriented tech stars for financial support, helps create unicorns
The rise of Chinese startups overseas is spurring CCV, a Chinese investment firm with financial arsenal of $400 million, to target opportunities abroad.
“Chinese startups are gearing up to change the game of starting a business abroad. This is the right time for Chinese startups to venture overseas,” said Zhou Wei, founding partner of Beijing-based CCV.
Gone are the days when made-in-China businesses were labeled cheap and inferior. In the wireless internet era, the world is truly “flat”, he said.
“In this new age, every country, no matter developed or developing, can compete on the world stage with its new technologies, and in a relatively equal way.”
With 20 percent of its investments in Chinese businesses abroad, CCV is well placed to exploit globalization, Zhou said.
To date, the investment firm has invested in seven Chinese startups, or startups founded by Chinese, whose businesses span foreign markets such as the United States, Europe, Egypt and Southeast Asia.
While selecting startups for investments, CCV will focus on “technology-driven” companies as technology is the key to being competitive.
One of the firms that CCV backs is Perfect, which operates a mobile app that helps people to try makeup online. Perfect uses advanced technologies including artificial intelligence and augmented reality.
With 600 million downloads worldwide, Perfect is now used by the world’s leading makeup brands at their points of sale at shopping malls.
“It is also a way of managing risks. While exploring overseas, we tend to invest in such tech-driven companies rather than asset-heavy firms,” he said.
Zhou’s philosophy about investing in startups abroad informs CCV’s operations. Before joining CCV, he served as the managing partner of KPCB China, a well-known US venture capital firm founded by Kleiner Perkins.
Sensing great potential for Chinese startups in the sector of telecommunications, media, and technology or TMT overseas, Zhou and his whole TMT team from KPCB founded CCV in 2017.
Chinese tech giant JD, fintech firms CreditEase and Rong360, popular online audio-sharing platform Ximalaya are among the companies Zhou and his team invested in.
To date, CCV has helped 15 companies it invested in at an early stage to complete listings or mergers and acquisitions. More than one-third have become unicorns－companies with a valuation of more than $1 billion.
“Another key strategy while selecting Chinese startups with overseas operations is that they must have some knowhow to operate in a totally different environment,” he said.
“We pay attention to their ability to conquer difficulties including cultural barriers in the foreign markets. Also, they have to be conscious of, and be able to adapt to, local laws and regulations.”
A string of challenges remain to be tackled in the area of Chinese startups abroad, said Dai Bin, country director for China market at App Annie, a mobile analytics firm.
“Chinese providers are expected to differentiate themselves from apps in those emerging markets to succeed. Newcomers should also avoid countries and regions that are already dominated by others who reached there earlier,” Dai said in an earlier interview.
Agreed Zhou. “Another advantage we see from Chinese startups abroad is that compared with foreign competitors, they are willing to localize and effect location-specific changes.”
He cited the example of Asia Innovations Group Ltd, a leading mobile entertainment platform that Zhou backed in 2014.
Asia Innovations, which has since gone public, has sworn by localization as a key strategy. In Egypt, for instance, it formed an operations team of 80 dedicated to localizing its business.
“That approach is good for investors as well because companies that underline flexible and personalized services in the local market are likely to succeed,” Zhou said.
“China is now the strongest in the internet ecosystem, visible almost in every vertical, including hardware manufacturing, technology advancement, user numbers and business environment. And that gives Chinese startups a natural advantage as they go global.
“Coupled with strong fighting power, effective capital, and differences that are gradually dissolving, Chinese startups that go global will have great potential. They will also offer high returns (to investors) in the future.”
Some of the startups CCV invested in overseas have already yielded attractive returns, with one startup generating eightfold gains, Zhou said.