Steve Thomas - IT Consultant

Every year, tons of food ends up in landfills because of cosmetic issues (they won’t look nice in stores) or inefficiencies in the supply chain. Singapore-based TreeDots, which says it is the first food surplus marketplace in Asia, wants to help. The company is focused on creating a vertically integrated supply chain with a B2B marketplace and a social commerce feature for group buying by consumers. It is also developing its own cold-chain logistics infrastructure to help food reach end users more quickly. TreeDots announced today that it has raised an $11 million Series A led by Amasia and East Ventures, with participation from investors including Active Fund, Seeds Capital, author Nir Eyal and actress Fiona Xie.

The funding, which brings TreeDots’ total raised to $15 million, will be used to grow its operations in Malaysia, where it expanded last year, enter other markets and continue optimizing its logistics and supply chain business, called TreeLogs. The startup says its gross merchandise volume (GMV) has grown more than 4x year-over-year.

TreeDots was founded in 2017 as a surplus food marketplace for F&B businesses, before it expanded its business to include social commerce, too. About one-third of food produced in the world is never eaten. In Asia specifically, TreeDots’ team says this is usually because of inefficient supply chains or aesthetically “imperfect” foods. For example, a grocery chain might reject a chicken that is too big or has a broken bone. But F&B businesses like restaurants usually don’t care how their ingredients look, because they cook and plate food before it reaches the customer. TreeDots’ surplus food marketplace was originally created to sell food to F&B businesses at up to 90% cheaper than other suppliers.

In an email, TreeDots co-chief executive officer Tylor Jong explained that the company does not redistribute food from retailers. “Instead, we solve the food loss problem further upstream where you have food that is imperfect due to various cosmetic standards set by different groups of buyers (businesses, but ultimately driven by consumers) and food that is in surplus, as most countries want to ensure that all varieties are accessible and therefore keep more inventory than needed at every step of the supply chain.”

For suppliers, the benefits of selling food to TreeDots include earning incremental revenue and saving the money they would have spent to send surplus products to landfills. TreeDots also helps them digitize their operations through its app and onboard to TreeLogs. The logistics infrastructure was built using a combination of in-house and external services to fulfill demand from social commerce and business buyers, Jong said. It improves on traditional cold-chain logistics by “being tech-driven and striving for higher utilization, heavier delivery density and best practices,” he added.

In a statement about its investment in TreeDots, East Ventures managing partner Roderick Purwana said, “Food loss is already a trillion dollar problem, but what got us excited was the fact that suppliers started to use the system for all of their revenue, not just food loss products. If one of their trucks could make a delivery to a zone, TreeDots could make five deliveries on that same trip working across suppliers. The increased network density allows for decreased logistics costs and lower emissions.”

Alpha JWC co-founders Jefrey Joe and Chandra Tjan

Alpha JWC co-founders Jefrey Joe and Chandra Tjan

Alpha JWC, the Jakarta-based venture capital firm, announced today it has closed its third fund at $433 million. The company says this makes it Southeast Asia’s largest VC fund for early-stage startups and that it was oversubscribed, with an initial target of $250 million to $300 million. The third fund’s investors include the World Bank’s International Finance Corporation (IFC). The majority of LPs from Alpha JWC’s first two funds also contributed.

Co-founder and general partner Jefrey Joe said he has started to see more interest in Southeast Asia from global investors, thanks to high-profile exits like Bukalapak and Sea Group’s IPOs.

“It shows there is enough value to be created compared to such a developed market as the U.S.,” he told TechCrunch. He added that the new wave of investor interest started over the last year, as more startups, including Alpha JWC portfolio companies Ajaib, Kredivo and Carro hit unicorn status in a relatively short amount of time (Ajaib, an investment app, became a unicorn two and a half years after it launched). Alpha JWC was the first institutional investor in all three startups.

Alpha JWC now manages about $630 million in assets across its three funds. During this year, the company says its portfolio companies collectively raised more than a billion dollars so far, with the majority raising follow-on funding within a year of Alpha JWC’s initial investment.

The firm invests in early-stage—or pre-seed, seed and pre-Series A—and are often the first institutional investors on a startup’s cap table. Alpha JWC’s partners continue to work closely with their portfolio even as they reach later stages; for example, by connecting them to investors in the United States, said Joe, or helping build their management teams.

Alpha JWC launched in 2016 with a first fund of $50 million, which it invested in 23 companies. Its second fund closed in 2019 at $143 million and was used to back 30 companies. The company said its first fund’s total-value-to-paid-in (TVPI) has reached 3.72x and its internal rate of return (IRR) is about 37%. Performance metrics for its second fund are even higher: TVPI of 3.45x and 87% of IRR.

Most of the third fund is earmarked for Indonesian startups, but it will also invest in other Southeast Asian markets, like Singapore, Malaysia, Vietnam, Thailand and the Philippines, focusing on companies that want to enter Indonesia. Checks will range in size from hundreds of thousands of dollars to up to $60 million at multiple stages. Like Alpha JWC’s first funds, fund three is targeting about 25 to 30 early-stage startups, and is taking a sector-agnostic approach.

“We believe at this point in time, there’s no need to be sector-focused yet,” said co-founder and general partner Chandra Tjan. “The market is still early, very high potential and there are many industries where we can capture the local champion. But some of the sectors we really like are software services, fintech, O2O models and social commerce.”

Alpha JWC says that at least eleven of its portfolio companies are nearing unicorn status, including coffee chain Kopi Kenangan, B2B marketplace GudangAda, consumer goods producer Lemonilo and SME digital financing platform Funding Societies.

While digital adoption is still mainly driven by Tier 1 cities like Jakarta, Joe said Indonesia’s smaller cities and towns are quickly catching up. “The second and third tier cities are following strongly and when that happens, our potential will be unlocked and you will see a massive, massive growth in the digital ecosystem.”

Alpha JWC’s co-founders say that startups are beginning to demonstrate better monetization plans, strategies and stronger fundamentals early on, like Ajaib. This means clearer paths to exits, which in turn attracts more investors into the region.

“We were the first institutional investors in Ajaib and from the beginning the founders had built a very strong fundamental mindset, not just burning money to get users, but building strong fundamentals,” said Tjan.

In a statement on the IFC’s investment in Alpha JWC’s third fund, Kim-See Lim, its regional director for East Asia and the Pacific, said, “IFC’s partnership with Alpha JWC Ventures underscores our long-term commitment to Indonesia’s economic development and digital transformation.”

 

FunNow is a booking app for spontaneous people. For example, you can reserve a manicure or restaurant seat and head right over. As people start to spend more time outside their homes, FunNow is prepping itself for expansion into more countries. The Taipei-based company announced today it has closed a Series B of $15 million.

The round was co-lead by Perfect Hexagon Commodity & Investment Bank and Ascendo Ventures, with participation from the corporate venture arms of PChome, KKday and Wistron. It also included returning investors CDIB Capital, Darwin Ventures, Accuvest, Sanput Travel Group and CSV Venture Fund, which is jointly managed buy NEC Capital Solutions and Venture Labo Investment.

Co-founder and chief executive officer TK Chen told TechCrunch that FunNow originally planned to start raising its Series B in 2020 before COVID hit. Despite dealing with the pandemic’s impact in all of its markets, including Hong Kong and Malaysia, the company began to see business improve during the second quarter of this year. Its Series B brings FunNow’s total funding, including its 2018 Series A, to about $22.5 million, and will be used to expand the number of categories in its app, adding night clubs, karaoke bars and catering, for example, and enter new countries, including Thailand, Singapore and Japan.

During the pandemic, FunNow faced different challenges in each of its markets. For example, cases in Kuala Lumpur were low for most of this year before an outbreak that started in May. In Taiwan, FunNow’s biggest market, life was relatively normal until an uptick in cases triggered a lockdown from May to August, causing its revenue to decline sharply, but now its returned to about 80% of its pre-pandemic performance.

During the outbreaks, FunNow’s team adapted the app’s services. For example, in Malaysia, it talked to food and beverage merchants and discovered that customers prefer to pick up food instead of waiting for deliveries, so it added takeaway bookings. “Within two months, our return for takeaway was almost the same as dine-in revenue,” said co-founder and chief global strategist CC Chang.

The app already had multi-channel reservation tools, so it began adapting the types of hotel reservations offered, adding daytime options, with stays of 4, 6 or 12 hour increments. For example, people who wanted to dine somewhere, but not in a restaurant, could book a room for a few hours and order room service. Some users, tired of WFH, booked hotel rooms to work.

FunNow founders TK Chen, CC Chang, Pei-Yi Sun and Szu-Chi Lee

FunNow founders TK Chen, CC Chang, Pei-Yi Sun and Szu-Chi Lee

“We kept innovating, developing the app, developing more functions and also acquired a great team in Southeast Asia, Singapore and Kuala Lumpur, and also in Hong Kong,” said Chen. “We wanted to raise money now so we can expand market share as soon as possible, once the pandemic is under control.”

He added that COVID has changed consumer habits. For example, people now use online bookings more since walk-ins are discouraged in many places, and they prefer the convenience of FunNow over a phone call. People also started taking advantage of times when the COVID situation is relatively under control to do things like get salon services.

FunNow is facing more competition, however, as startups that used to focus on international travel switched to “staycations.” For example, both SoftBank-backed Klook and PickTime now also offering local bookings for many categories that overlap with FunNow. Chen said he anticipates that “the competition between us will ultimately get bigger and bigger.”

One of the ways FunNow differentiates is its emphasis on “daily life” activities—for example, food, hair cuts, manicures or massages, instead of packages centered around destinations, like theme parks, tourist spots or other cities.

“We are really focused on instant booking,” said Chang. “It’s important to our users because it’s more convenient. You don’t have to make a phone call and we have 10 different categories that are based on daily life, so if you are used to FunNow to do your hair, your nails, make salon appointments, order bouquets or cakes for parties, you won’t easily switch to other platforms.”

FunNow’s Series B included the corporate venture arms of e-commerce platform PChome, tour and activity booking app KKday and electronics manufacturer Wistron. Chen said their investment means that FunNow will be able to work with all three companies to “accelerate the growth of a lifestyle ecosystem.”

For example, PChome, one of the most popular shopping apps in Taiwan, might feature FunNow activities during promotions. People browsing on PChome for Mother’s Day gifts could see FunNow bookings for restaurants in the app.

Before the pandemic, KKday offered international travel bookings, but is now focused on staycations, or local activities. By working together, Chen said the two companies plan to become more formidable rivals to Klook. “We can’t give a lot of details right now, but the basic idea is to combine resources. For example, they have a lot of activities and we have dinners and massages. If we come together, we can combine our suppliers and get more traffic and orders to merchants.”

FunNow will seek other similar partnerships to drive low-cost traffic. Known for being one of Apple’s manufacturing contractors, Wistron’s role in FunNow’s booking ecosystem seems less obvious, but Chen explains its “not a pure strategy partner. Wistron has spent a lot of time focused on digitizing Taiwan’s market, and created a corporate fund to invest in startups, and we will get a lot of support from them.”

In a statement, Ascendo Ventures managing director Aaron Shih said, “FunNow’s performance during the COVID-19 pandemic shows that the company’s operating conditions are optimistic and have huge potential for overseas expansion.”

 

Tinder has already undergone a big revamp with its recent launch of “Explore,” a new section inside the app that will enable more interactive experiences, including the second “Swipe Night” series, real-time chat, interest-based matching, and more. Now, parent company Match Group is detailing its longer-term vision for Tinder and Explore, which will expand to include exclusive, shared, and live experiences and a virtual goods-based economy, supported by Tinder’s new in-app currency, Tinder Coins. In addition, Match spoke today about its broader plans for a dating “metaverse,” and avatar-based virtual experiences that may later roll out to apps across its portfolio, including Tinder.

In terms of the virtual economy, the first phase of its development includes Tinder Coins, which are already being tested in several markets, including a few countries in Europe, Match said.

Next year, Tinder Coins will become available to global users to make in-app purchases of Tinder’s a la carte products, like Boost and Super Like — tools aimed at helping online daters get more matches. They’ll also be used for new pay-as-you-go products that were previously only available with a subscription, like the See Who Likes You feature. And they’ll be used to incentivize certain behaviors on the app, like encouraging members to verify their profiles or add videos to their bio, for example.

Image Credits: Match Group

Longer-term, however, Tinder will evolve its app to include virtual goods and a trading ecosystem, which is being planned for 2022 and beyond. This strategic initiative was detailed during Tinder parent company Match Group’s Q3 earnings, including in its Shareholder Letter and on its earnings call with investors on Wednesday morning.

Across its dating app portfolio, Match Group had reported Q3 revenue of $802 million, up 25% year-over-year, and 16.3 million paid subscribers, up 16%. But the company was transparent about the fact that the Covid pandemic has had an impact on its business — lockdowns early in the pandemic had forced a pivot towards virtual experiences. And now, some users are still less inclined to meet in-person, compared with before the pandemic. In addition, citing lingering Covid effects in Asia, Match Group forecasted weaker Q4 growth than expected with $810-$820 million in revenue instead of the analyst forecast of $838 million.

To address this changing market for online dating, Tinder has leaned into virtual experiences that take place inside the app, instead of only pushing people to get offline for connections. That’s led to the launch of Tinder Explore, and now, it’s driving plans for the forthcoming virtual goods-based economy Tinder has in the works.

Image Credits: Tinder

According to Match Group CEO Shar Dubey, speaking to investors on today’s call, Tinder’s virtual goods will “help users with both self-expression as well as the ability to stand out — particularly in a one-to-many surface area that ‘Explore’ experiences will enable,” she said. “And so the way we envision virtual goods is that it’s something users will be able to collect, as well as give and gift to others.”

Dubey said Tinder in 2022 would be working to design the virtual goods, categorize them, create their value structure, and determine where to best showcase the items on users’ Tinder profiles. This will involve testing virtual goods then iterating and refining the product further, based on those tests. Despite the work that still needs to be done, the exec was optimistic about this plan.

“If we get this right, I do think this could be a multi-year revenue vector for Tinder which doesn’t exist today,” she said.

In addition to developing a virtual goods economy inside Tinder, Match Group also spoke to its larger plans for leveraging Hyperconnect, the Seoul-based social app maker it acquired for $1.73 billion earlier in 2021. So far, Hyperconnect has not performed as well as expected, in part due to Covid and in part due to other issues — including marketing performance and product delays, the company admitted.

But Match still believes in Hyperconnect’s long-term value to its business, Dubey said.

She talked specifically about Hyperconnect’s test of an avatar-based dating app and “metaverse” experience called Single Town, where users interact using real-time audio and meet each other in virtual spaces, like a bar, where they have live audio conversations. Users can express interest in one another in the virtual world, then choose to connect privately to continue their conversations.

“It is metaverse experiences coming to life in a way that is transformative to how people meet and get to know each other on a dating or social discovery platform, and is much more akin to how people interact in the real world,” Dubey said of the test.

This type of interactivity is something Match Group eventually wants to leverage across its portfolio, the company said.

“This next phase of dating apps, in particular, is going to be all about richer, more organic, and more akin to real-life ways of discovering, meeting, and getting to know people. Technology is finally getting there. And this underlying technology platform Hyperconnect has built that powers Single Town has been built in a way that it can be leveraged by other platforms easily,” Dubey noted, but without naming which Match-owned apps she had in mind.

However, it seems a metaverse-like platform for dating could later tie into something like Tinder’s virtual goods economy, though the company didn’t state this was the plan. But based on current social trends, it’s obvious how a dating app’s users could one day buy items to accessorize their avatar or buy gifts for other users, which are purchased with virtual currency — much like in other “metaverse” platforms, like Roblox, Fortnite, or withing Meta’s (Facebook’s) Horizon.

In its Shareholder Letter, Match Group only hinted towards the possibilities for this dating metaverse and the experiences it creates.

“This new experience provides a glimpse into how metaverse experiences could be applicable to dating and it is the sort of innovation that will help us evolve our portfolio as we enter the next phase of dating,” the letter stated.

“We’re still very optimistic about the long-term prospects for Hyperconnect,” explained Match Group CFO and COO Gary Swidler, on the call. “It can contribute extremely significantly to the long-term growth of the overall Match Group. There’s many ways that we can do that. We think that we can leverage video, audio, A.I. capabilities that they’ve got, things in moderation, and safety. There’s a number of things that we’re working very hard at leveraging,” he continued.

“The new metaverse elements and the experience that we’re seeing in that beta test — that is something that potentially we can build into either standalone app and/or potentially leverage that user experience into some of our apps in the portfolio,” Swidler said.

Una Brands, the e-commerce aggregator focused on Asia-Pacific brands, announced today it has raised $15 million for its Series A. The full-equity round was co-led by White Star Capital and Alpha JWC, along with participation from returning investors and Ninjavan co-founder Alvin Teo.

This news comes only five months after Una launched with a $40 million equity and debt seed round. The startup has not disclosed the ratio of debt and equity (like many other e-commerce aggregators, Una uses debt funding to buy brands because it is non-dilutive). Co-founder and chief executive officer Kiren Tanna told TechCrunch the Series A is a priced round with a valuation more than five times Una’s last funding. Besides raising equity, Una also extended its debt facility size from Claret Capital.

“We have a very strong pipeline of brands across APAC that we are working on, and as we have done some deals already, we are seeing larger and larger brands that are approaching us,” said Tanna. The Series A was raised to accelerate the growth of its brand portfolio and Una’s operations, and it plans to raise further debt and equity, he added. The company now has 90 team members in seven offices across the Asia-Pacific: Singapore, Australia, India, China, Indonesia and Malaysia.

Unlike many other e-commerce aggregators that focus on Amazon sellers, Una describes itself as “sector agnostic” because of the number of marketplaces used across APAC, including Tokopedia, Lazada, Shopee, Rakuten and eBay. Una looks for profitable brands that make between $1 million and $50 million in revenue per year. After acquisitions, Una grows brands by adding new distribution channels or expanding them into new countries.

Since launching, Una has bought more than 15 brands, and says the first ones it acquired have seen a 50% increase in sales and profits. The average EBITDA of its acquired brands are about 26%, putting the company on a path toward profitability, said Tanna.

He added that Una is building technology to help its brands scale. Since most aren’t on Amazon and many are seller-fulfilled, sometimes from their homes, Una transitions them to its professional warehouse fulfillment infrastructure. Tanna said the company is building its own technology to get transaction-level data from multiple channels to integrate it into its ERP system and track operational performance.

In a statement, Alpha JWC managing partner Jefrey Joe said, “Digitally native brands in APAC is a secular trend growing at 4x the rate of those in the West. We believe Una’s value proposition will resonate with brands across the region and further propel the growth of D2C in countries such as Indonesia.”

Australia could be next to mandate a choice screen in a bid to break Google’s dominance of the search market.

The Australian Competition and Consumer Commission (ACCC) is recommending it is given the power to “mandate, develop and implement a mandatory choice screen to improve competition and consumer choice in the supply of search engine services in Australia”.

A new report by the country’s competition watchdog concludes that interventions are needed to boost competition in the local search engine market and address harms flowing from Google’s circa 94% marketshare of search in Australia, such as barriers to entry for other competitors and the risk of lower quality services with what it dubs “undesirable features” — like more sponsored content vs organic search results…

Google’s grip on the local search market is also hampering new business models emerging — such as subscription options that don’t rely on ads (and data-mining users) to monetize Internet search.

The report gives the example of Neeva, a new, subscription-based search engine — which advertises itself as “the only ad-free private search engine” — and (unlike Google most other search engines) has no ads or affiliate links in search results —  thereby offering “a different value proposition that consumers may desire”, in the regulator’s assessment.

“Google’s foreclosure of key search access points through the arrangements discussed in this Report limits the ability of these businesses to grow, and consumers’ exposure to new and potentially attractive business models,” the ACCC concludes.

To tackle such problems, the regulator wants to be able to implement a search choice screen on Android devices which will provide users with a selection of options vs Google’s “predetermined default” — with the regulator saying that such a mechanism “can improve the ability of rival search engines to reach consumers”.

However the ACCC also wants to be responsible for developing the criteria around the application of a choice screen to specified service providers — which its report notes should be “linked to the provider’s market power and/or strategic position”.

That looks like a key qualification given Google has been offering a search choice screen in the European Union to users of Android smartphones for around three years — and there has been no notable shift in its regional dominance of search.

That can be blamed on the EU leaving it up to Google to determine how to ‘remedy’ the $5BN ‘cease & desist’ antitrust enforcement it issued against Google over Android back in 2018.

Google responded by adding a ‘choice’ screen of its own devising in the EU — which search rivals quickly decried.

They were especially incensed about a sealed bid auction model Google opted for — selling slots on the choice screen to rivals, without needing to pay to continue displaying its own search engine on the very same screen of course.

This resulted in Android choice screens that were filled with an uninspiring parade of Google-style ad-targeting wannabies or else Google itself as the offered ‘choice’ — almost entirely excluding pro-privacy or not-for-profit alternatives who were unable to outbid data-mining rivals.

The entirely predictable result was that Google has maintained its iron grip on Europe’s search market. And laughed all the way to the bank.

Eventually the European Commission did step in — and, this summer year, Google announced it would drop the auction model and instead let search rivals appear for free.

However alternative search engines, such as the non-tracking DuckDuckGo, remain highly critical of remedy, arguing that for a choice screen to truly work regulators must tackle the whole suite of damaging defaults Google applies to lock users to its products.

The EU implementation, for example, only applies to new Android devices (and not also to Chrome), and only on set-up or factory reboot of a device. DuckDuckGo’s counter suggestion is that regulators must make search competition a single click away at all times.

Australia’s watchdog appears aware of such pitfalls — writing: “The development of a choice screen and its implementation should be subject to detailed consultation with industry participants and user testing, and there should be careful consideration of its interaction with other measures proposed in this Report.”

Notably, it’s leaning towards the choice screen applying to both new and existing Android mobile devices — which is immediately a considerably broader application than Google chose to apply in the EU (giving itself a free pass to keep applying its damaging defaults on the hundreds of millions of already in-play Androids).

The ACCC also stipulates that an Australian Android choice screen should be free for search engines to participate in. So the lesson of Google’s self-serving EU auction model has clearly trickled down under.

Australia’s watchdog also wants wider powers to be able to effectively tackle the lack of competition in search — suggesting it will need measures to restrict a provider (“which meets pre-defined criteria”) from tying or bundling search services with other goods or services; and perhaps also limit the ability of a provider to pay for certain default positions.

The report also floats the idea of “potentially mandating access to specified datasets for rival non-dominant search engines”.

The regulator suggests rivals may need access to Google’s click-and-query data — “and potentially other datasets” — though it adds that this would need to be subject to “extensive consideration of privacy impacts, and careful design and ongoing monitoring to ensure there are no adverse impacts on consumers”.

“While there are a number of factors that contribute to the quality of a search engine, click-and-query data is a critical input,” the report goes on. “In limiting rivals’ ability to reach consumers at scale, Google has ensured it maintains access to an unrivalled dataset, allowing it to continuously improve the quality of its search results in a way that its competitors cannot, and reducing the extent to which rivals are able to scale and compete against Google.

“This has flow on effects for the ability of rival search engines to monetise their services, effectively self-reinforcing Google’s dominance in search. Google’s position means it can offer greater sums to suppliers of browsers and OEMs to be the default search engine. Rivals are thereby foreclosed from accessing users and the necessary click-and-query data to improve their search engine service, further raising barriers to entry and expansion, and extending and entrenching Google’s dominance in search.”

While the ACCC is considering some meaty interventions against Google’s dominance of search, actual action appears some way off — with a fifth interim report, that’s not due until September 2022, set to consider a framework for the proposed rules and powers, along with a broader assessment of the need for ex-ante regulation for digital platforms — “to address common competition and consumer concerns we have identified across digital platform markets”.

The reports are part of work ordered by the Australian government last year — when it instructed the regulator to conduct an inquiry into digital markets and report back every six months. However the final report is not due until March 2025.

The EU of course has already proposed ex ante rules to tackle platform giants, under the Digital Markets Act, which was presented at the end of last year. Though is likely years off being adopted.

The UK is also working on a competition reform that will give regulators pre-emptive powers over tech giants who are deemed to have strategic market power. But, again, a dedicated Digital Markets Unit is pending a suite of legislative powers.

While Germany — which is ahead of the pack — updated its digital regulations at the start of this year, bringing in ex ante powers to tackle platforms. Its competition watchdog, the FCO, is in the process of assessing the market power of a number of tech giants to determine how it might intervene to support competition.

Germany suite of probes includes a close look at Google’s News Showcase product, through which the tech giant licensed news publishers’ content by inking closed door commercial deals which risk playing large publishers off against smaller ones, among other competition concerns.

Australia has already passed legislation in this area — putting a news bargaining code into legislation back in February that applies to both Google and Facebook.

Reached for comment on the ACCC report, Google sent us this statement attributed to a spokesperson:

“People use Google Search because it’s helpful, not because they have to and its popularity is based on quality that’s built on two decades of innovation. Android gives people choice by allowing them to customise their device — from the apps they download, to the default services for those apps. Preinstallation benefits users by making it easier for them to use services quickly and easily. We are continuing to review the report and look forward to discussing it with the ACCC and Government.”

 

Based in Hong Kong, Finverse’s ambitious goal is to enable open banking throughout the Asia-Pacific region. The startup recently came out of stealth mode with $1.8 million in seed funding, and is now live in four markets (Hong Kong, the Philippines, Singapore and Vietnam) with connections to 30 banks. Founder and chief executive officer Stephane Lesaffre told TechCrunch that Finverse plans to launch in one new market per quarter, with the goal of covering about 75% of consumer and SMEs banks in each place.

Participants in Finverse’s seed round included Febe Ventures, Golden Gate Ventures, SixThirty, Venturra and angel investors.

Finverse is among a crop of fintechs developing APIs that allow easier sharing of financial data. The most prominent examples include Plaid in the United States and Tink and Truelayer in Europe (Finverse’s seed funding included angel investment from Truelayer employees).

Before starting Finverse in 2020, Lesaffre was senior product manager of financial data integrations at NerdWallet, working with account aggregation APIs like Plaid and legacy player Yodlee.

Plaid won the U.S. market because it was reliable and developer-friendly, Lesaffre said. It did not offer as much data coverage as Yodlee, but “what it did do is a very narrowly-focused set of data very well, and very easy to build. My ultimate learning from NerdWallet is that bad data is really worse than no data.”

Finverse wants to do the same thing for the Asia-Pacific region by building dependable APIs and data integrations. “At the core, we are a basically a consent-based data pipe where a consumer allows Finverse to connect to their account and share it with another fintech or financial institution,” said Lesaffre.

This can include information about accounts, balances, transaction histories and bank statements. Accessing this data gives financial institutions a sense of the consumer’s assets and liabilities, and can be used to perform things like income estimates, credit checks and gauge ability to repay.

Lesaffre said that Finverse’s early adopters are mostly fintech startups, including a mix of SME lending providers and buy now, pay later services.

Finverse’s APIs can be used for a wide range of use cases, but most of its current potential clients are focused on consumer or SME lending. Many of them want to transition from a heavily manual process that requires applicants to upload documents, to a digitized credit decision that can take as little as one minute.

Finverse is currently focused on banked consumers, or people who have traditional bank accounts and credit histories, but over time it also plans to add digital wallets, neobanks and other less traditional institutions. Future use cases include financial tracking as more people in Asia start using e-wallets, investment apps and online bank accounts.

“If you are a smaller digital bank, you know that a lot of your customers will have another primary account at a larger bank, so a lot of smaller banks are quite keen to be able to get a full perspective on their consumers,” said Lesaffre. “One way to do that is to let consumers track all their accounts in one place.”

Another use case for Finverse’s APIs is cross-border payments verification, compliance and KYC.

Other open banking startups focused on Southeast Asia include Brankas and Finantier. Lesaffre said Finverse’s approach is different because it is targeting the entire Asia-Pacific region, instead of focusing on specific markets. Its new funding will be used to grow its engineering and business development teams.

Rhinoceros beetles are one of the greatest threats to oil palm crops, attacking plants while they are young and potentially lowering a farm’s yield for years. They also affect workers’ health, since pesticides need to be sprayed frequently. Based in Kuala Lumpur, Poladrone wants to change the way farms use pesticides with a combination of drones and automation and analytics software.

The company announced today it has raised a $4.29 million seed round led by Wavemaker Partners, which it says is the largest seed round ever raised in Malaysia, based on data from Crunchbase. Other participants include the Malaysian Technology Development Corporation (MTDC), which is wholly-owned by Khazanah Nasional Berhad, the Malaysian government’s sovereign wealth fund; ZB Capital Limited; and angel investors.

Founded in 2016 by Cheong Jin Xi, Poladrone now operates in Malaysia and Thailand and plans to expand into Indonesia, the world’s largest oil palm producer. Cheong told TechCrunch that Poladrone is profitable, but decided to seek funding after the COVID-19 pandemic hit and “highlighted the positive impact our technology has on agriculture communities by creating jobs and upskilling opportunities.”

Adoption of Poladrone’s drones also increased during labor shortages caused by the pandemic, and the startup grew its team from 20 people to over 80 in less than a year to meet demand. Its seed round will be used for more hiring and to scale operations and build more Service Centers in agricultural areas, where clients can buy equipment and spare parts.

Cheong first became interested in drones when he was a high school student in Melbourne, Australia, and it led to him pursuing an aerospace engineering degree at university.

After Cheong returned to Malaysia, he began looking at potential applications for drone technology and realized “the agriculture industry made perfect sense,” because drones can fly over large terrains to perform repetitive tasks autonomously, and their cameras also capture a large amount of data.

Cheong’s interest in agritech was also inspired by growing up in Kuala Lipis, an agricultural town in the state of Pahang. Many of his family members and relatives are involved in farming, and his early insights went into the development of Poladrone’s products.

Rhinoceros beetles are a serious problem during the first three years of an oil palm’s 25 year lifecycle, he said, because attacks hurt trees’ growth, delaying them from reaching maturity and sometimes killing plants.

“The issue is that once the surrounding oil palms matures, replanting is no longer possible which means that any space wasted on a dead palm would be wasted for the next 22 years,” Cheong said. As a result, oil palm farms usually need to perform preventative pesticide spraying every two weeks for the first two years after oil palms are planted, then every month until they mature. This is often done by workers with knapsack sprayers or on tractors.

One of Poladrone's Service Centers

One of Poladrone’s Service Centers

In 2020, the company launched Oryctes, developed with support from Malaysia Digital Economy Corporation, for precision spot spraying of rhinoceros beetles and other pests. It also recently launched Mist Drone, which blanket sprays open field crops, like paddies, corn and bananas.

Most of the oil palm farms Poladrone works with are mid-to-large size, or about 5,000 hectares and above. “Data analytics and automation becomes extremely important for farms once they reach this scale,” Cheong said. He added that oil palm farms cover 18.7 million hectares around the world, and Poladrone sees a serviceable addressable market of 4.2 million hectares in Malaysia alone, worth over $1.3 billion per year. The company is also planning to expand its reach to other types of crops, like rice, corn and sugarcane.

In addition to selling its products, Poladrone’s Service Centers also provide repairs, training and workshops, with the goal of increasing drone adoption. Cheong said it typically takes one week of training before workers start using Poladrone’s equipment, which can be operated from smartphones.

In statement about investment, Wavemaker Partners general partner Gavin Lee said, “Poladrone now works with eight out of 10 of the biggest palm oil farms in Malaysia—an impressive feat that gives us confidence to back the team and their vision of propelling Southeast Asia’s agriculture industry.”

One of the big leaders in buying up and scaling third-party merchants selling on Amazon and other marketplace platforms is announcing a major round of funding today as it continues to expand its ambitions. Thrasio, the Boston-based startup, has closed an all-equity Series D of over $1 billion — a huge infusion in cash that it will be using to continue buying up more companies as well as to expand internationally. It said that it’s currently on a rate of buying 1.5 businesses per week and now has some 200 brands in its portfolio.

Silver Lake and Advent International led the round, with Advent remaining the company’s largest shareholder. Upper90, funds managed by Oaktree Capital Management, L.P., PEAK6 Investments and Corner Capital — all previous backers — were also in the round.

Thrasio has confirmed to me that the valuation is between $5 billion and $10 billion but declined to get more specific. As a marker of where it was prior to this round, in April of this year, when it raised $100 million, Thrasio was valued at $3.7 billion. Just on a straight added-capital basis that would put its valuation at close to $5 billion but the company also notes that it has been seeing accelerated growth — the number of brands under its wing has doubled since then to 200 — so very likely some ways higher than that. Current brands include Angry Orange pet deodorizers and stain removersSafeRest mattress protectors and ThisWorx car cleaning and detailing products.

The company, founded in 2018, has now raised $3.4 billion, including a $650 million debt round earlier this year.

Thrasio is one of the pioneers of the modern “roll up” player, and its traction, along with the wider opportunity in the market, have spawned dozens of other startups around the world building businesses replicating its model that have collectively raised hundreds of millions of dollars in equity and debt to build out their businesses. Other recent fundings in the space have included Heroes, which raised $200 million in August; Olsam ($165 million); Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); as well as HeydayThe Razor GroupBrandedSellerXBerlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.

One of the reasons it has raised so much in this round is to better target that global opportunity. Thrasio already has operations in the UK, Germany China and Japan and the plan is to expand that further, both as a means of finding more companies to gobble up, but also to expand its wider supply chain.

That wider opportunity, meanwhile, remains a large one despite how crowded the market is getting. By various estimates there are between 5 million and 10 million third-party merchants selling on Amazon alone, leveraging the e-commerce giant’s giant audience of shoppers and its Fulfillment by Amazon platform for delivery and other distribution logistics to cut down the operational costs and inefficiencies of building a direct-to-consumer business from the ground up. Thrasio’s co-CEO and co-founder Josh Silberstein told me earlier this year that Thrasio estimates that there are around 50,000 businesses out of those that make more than $1 million in revenues annually, so the tail of what is out there in terms of size is very long.

Thrasio is building out a bigger economy of scale play around that basic model, and in some cases replacing some of the Amazon components with scale of its own, which — the theory goes — only improves as it grows. That includes sourcing for products (as well as wider supply chain challenges), analytics both to source the more interesting companies to buy up as well as to market those products once under the Thrasio wing, even its own fulfillment technology. It is also increasingly also looking at opportunities to build sales and customer relationships outside of the Amazon ecosystem, using other marketplaces, other sales channels and in some cases direct-to-consumer plays.

(And that analytics engine for sourcing potential acquisitions is working hard: Thrasio says that it has “evaluated” some 6,000 businesses overall.)

“Our business is getting better as it gets bigger, and these investments will be invaluable as we continue on that path,” said Carlos Cashman, the other co-founder and CEO of Thrasio, in a statement. “Advent and Silver Lake both have phenomenal track records of building successful global businesses, and the additional funds from existing investors including Upper90 and PEAK6 are extremely rewarding votes of confidence in a crowded space.”

“Thrasio created the Amazon aggregator category, and their innovative approach and impressive growth have brought a lot of attention to this space,” said Greg Mondre, co-CEO, and Stephen Evans, managing director, of Silver Lake, in a joint statement. “We believe Carlos Cashman and his team are well positioned to accelerate their growth and build the preeminent next-generation, technology-driven consumer goods company. We’re excited to partner with Carlos, his team and the existing shareholders as the company enters the next phase of growth.”

“Thrasio has quickly established itself as the largest ecommerce aggregator globally, and we are thrilled to strengthen our partnership with Carlos and his team, in addition to welcoming Silver Lake as a new investor,” added David Mussafer, chairman and managing partner and Jeff Case, managing director, of Advent International. “Thrasio is well positioned for further success, and we look forward to working with the company as it continues to scale.”

In my previous essay on TechCrunch, I examined the profound challenges which confronted the computer engineers trying to fit tens of thousands of Chinese characters in a memory system designed to handle a much smaller alphanumeric symbolic system.

Now, I turn to the question of Chinese character output—monitors, printers, and related peripherals—where still more challenges confronted engineers seeking to render Western-manufactured personal computers and computer peripherals compatible with Chinese character text.

While we call them “peripherals,” suggesting a sort of supporting role, they are in fact at the very center of computing in Chinese, from the extreme limitations that Chinese computing faced in the 1970s and 80s to the immense strides and successes it has experienced from the 1990s onward.

During the early rise of consumer PCs in the 1980s, no Western-manufactured personal computer, printer, monitor, operating system, or other peripheral was capable of handling Chinese character input or output—not “out of the box,” at least. To the contrary, all of these devices exhibited the same kind of English-language and Latin alphabetic bias found in, for example, the early history of telegraphic codes and mechanical typewriters, as I’ve explored in my other research.

During the 1980s, what ensued in China and the Chinese-speaking world was a period of intense hacking and modding. Element by element, engineers in China and elsewhere rendered Western-manufactured computing hardware and software compatible with Chinese. It was a messy, decentralized, and often brilliant period of experimentation and innovation.

When we turn our attention to this broader ecology of computing—on printers, monitors, and all of the other “stuff” needed to make computing work—part two of this series on Chinese computing spotlights two conclusions.

First, the dominance of alphabet-based computing—“alphabetic order,” as I call it—went far beyond the question of keyboards and computer memory. Like the typewriter before them, computing devices, languages, and protocols were by and large invented first in English-language contexts, and only later “extended” to other languages and to writing systems other than the Latin alphabet. To achieve even basic functionality, Chinese engineers needed to constantly push against the boundaries of off-the-shelf computing peripherals, hardware, and software.

Second, I’ll dismantle the oversimplified idea of Chinese “copycatting” and “piracy” that has dominated, then as now, Western accounts of Chinese computing during this pivotal period in the late 1970s and 1980s. When encountering programs such as “Chinese DOS,” the knee-jerk reaction in the Western world has been to treat them as just more “Chinese knock-offs.” What this simplistic narrative fails to understand is that without the kinds of “forgeries” we will examine in this article, none of these Western-designed software suites would have worked at all in the context of Chinese character computing.

Dot-matrix printing and the metallurgical depths of alphabetic order

The first peripheral we need to examine is the printer—specifically, dot-matrix printers. From the standpoint of Chinese computing, the politics of dot-matrix printing began with the then-dominant configurations of industry standard printer heads—the 9-pin printer heads found in practically all mass-manufactured dot-matrix printers during the 1970s.

These commercial dot-matrix printers were able to produce low-resolution Latin alphabet bitmaps with just one pass of the printer head. This was not by accident, of course. Rather, the choice of nine pins was “tuned” to the needs of low-resolution Latin alphabetic printing.

The same printer heads, however, were incapable of printing low-resolution Chinese character bitmaps in anything less than two full passes of the printer head. Two-pass printing dramatically increased the time needed to print Chinese as compared to English and also introduced graphical inaccuracies, whether due to inconsistencies in the advancement of the platen, uneven ink registration, paper jams, or otherwise.

Aesthetically, two-pass printing could also result in characters with differing ink densities on their upper versus their lower halves. Worse, in the absence of any mod, all Chinese characters would be at least twice the height of English words, no matter the font size being used. This created comically distorted printouts in which English words appeared austere and economical, while Chinese characters appeared grotesquely oversized. Such print-outs also wasted large amounts of paper, with every document looking something like a large-print children’s book.

An example illustration of how these printer heads work is provided in this video, courtesy of the author:

Latin alphabet-centrism ran deeper than one might initially expect, moreover, as illustrated in the work of early Chinese computing pioneer Chan Yeh. Setting out to digitize Chinese characters and basing his system on a bitmap grid of 18-by-22, Yeh’s initial idea was an obvious one: to reduce the diameter of the pins so as to fit more of them on the printer head. As he discovered, however, the solution would not be so simple.

Interface of the IPX machine, invented by Chan Yeh and the Ideographix Corporation. Image Credits: Thomas S. Mullaney East Asian Information Technology History Collection, Stanford University

The Latin alphabetic bias of impact printing, he found, was encoded within the very metallurgical properties of printer components. Simply put, the metal alloys used to fabricate printer pins were themselves calibrated to 9-pin Latin alphabetic printing, such that reducing their diameters to the sizes needed for Chinese would result in pin deformation or breakage.

To compensate, engineers tricked Western-built printers into fitting as many as 18 dots in roughly the same amount of vertical space as nine normally spaced dots.

Their technique was ingenious and simple. Following standard, two-pass printing, an initial array of dots was laid down during the first pass of the printing head. Rather than laying down this second array of dots beneath the first, however, they tricked the printer into registering them in between the first set of nine dots, almost like the teeth of a zipper fastening together.

To achieve this effect, engineers rewrote printer drivers to hack the printer’s paper advance mechanism, refining it so that it rotated at an extremely small interval (as small as 1/216th of an inch).

Pin configurations weren’t the only challenge. Commercially produced dot-matrix printers were also tuned to the ASCII character encoding system, and thus unable to handle Chinese text as text. In English-language word processing, printing was not an act of transmitting a raster image to the printer. Rather, English-language text could be directly delivered via the printer driver as ASCII-encoded text, which resulted in much faster printer speeds.

In order for Western-built dot-matrix printers to print Chinese characters, however, there was no way to use these printers’ “text” mode. Instead, the printers once again had to be tricked, this time in order to print Chinese characters using the graphics mode typically reserved for printing raster images.

For students of the Chinese language, the irony here will be apparent: in order for Chinese characters to function on early Western-built dot-matrix printers, Chinese characters had to treated as pictures or pictographs. Pictographs were something that Westerners had long assumed Chinese characters to be, even though they are not (with few exceptions). But in the context of dot-matrix printing, “pictographs” were indeed what they had no choice but to become.

Eventually, a new family of impact printers began to be released on the commercial market: 24-pin dot-matrix printers, featuring pin diameters of 0.2 mm (as compared to 0.34mm on 9-pin printers). Unsurprisingly, the leading manufacturers of these new printers were largely Japanese companies such as Panasonic, NEC, Toshiba, Okidata, and more. Given the need to print characters required by the Japanese language, Japanese engineers needed to solve similar challenges as their Chinese counterparts.

Pop-up modernity: Chinese character monitors

Patent document image demonstrating the conversion of Chinese characters into bitmap rasters. Image Credits: Thomas S. Mullaney East Asian Information Technology History Collection, Stanford University

Yet another domain within the ecology of Chinese computing was that of mass-manufactured computer monitors. In certain respects, the politics of monitors were similar to those of printers, particularly with regards to the issue of character distortion. Unavoidably, even the lowest-resolution Chinese character bitmaps occupied upwards of twice the vertical and horizontal space of Latin alphabetic letters, making the Chinese in bilingual texts appear comically oversized (such as can be seen in this story’s featured image).

Standard, Western-manufactured computer monitors could also fit a far smaller number of Chinese characters on screen than Latin letters, both in terms of line length (the number of characters per line) and depth (the number of lines per screen). Chinese language users could thus see only small portions of their texts at any one time.

Then there were challenges unique to Chinese character display: the pop-up menu. Because of the inherently iterative process of Chinese input, in which users are constantly being presented with Chinese characters that fulfill the criteria provided by their keystrokes, an essential feature of Chinese computing is a “window”—whether software-based or hardware-based—that enables the user to review these Chinese character candidates.

Although the pop-up menu is a ubiquitous feature of Chinese computing from the 1980s onward, this feedback technique dates back to the 1940s. In a 1947 experimental Chinese typewriter designed by Lin Yutang, there was a key component of the machine the inventor called his “Magic Eye”: in effect, the first “pop-up menu” in history, albeit a mechanical one.

With the advent of personal computers, mechanical windows such as those found on the MingKwai, Sinotype, Sinowriter, or otherwise, were integrated into the computer’s main display. It became a software-governed “window” (or bar) on the screen, rather than a separate, physical device.

This pop-up menu placed further constraints on the already precious real estate of the computer monitor, however. What we might term “pop-up menu design” became a critically important area of research and innovation within Chinese personal computing from its inception. Companies experimented with different menu styles, formats, and behaviors, attempting to strike a balance between the requirements of input, screen size, and the preferences of users.

There were trade-offs to each option. Menus that displayed a larger number of character candidates at once increased the likelihood of more rapidly finding one’s desired graph, but came at the cost of screen space. Smaller windows, while less intrusive, required the user to scroll through “pages” of character candidates, if the user’s desired graph was not found amongst the top recommendations.

As a consequence of these strict limitations, Chinese engineers and firms were constantly seeking next-generation monitors. While this was perhaps true for the global market at large—since higher resolution monitors represent something of an “inherent good” for consumers—nevertheless, the motivating reasons for this hunger for high-resolution was dramatically different for the Chinese-language market.

Conclusion: No ESC

Inaugural issue of the magazine “Chinese Computing”. Image Credits: Thomas S. Mullaney East Asian Information Technology History Collection, Stanford University

As brilliant as each of these mods might have been, at the end of the day they remained just that: modifications. The autonomy and authority to create original systems—that is, the systems that subsequently needed to be modified—was ultimately where power was concentrated.

While the practice of modding tended to lead to a wide array of systems, it often came at the expense of interoperability. Modding required constant vigilance, moreover—no one-time “set it and forget it” solution was possible.

With every new computer program released on the market—and every new version of every computer program—programmers in China had to “debug” them line by line, insofar as programs themselves contained code which could set, or reset, parameters for the computer monitor, for example.

For most English-language word processing programs, for example, the baseline assumption baked into such programs was a 25-by-80 character display format (zifu fangshi xianshi). Since this format was incompatible with Chinese character display, engineers had to manually change every place in the program code where this 25-by-80 format was set. They did so, tellingly enough, using standard-issue “DEBUG” software. Through accumulated experience, engineers steadily learned their way around the assembly code bowels of leading programs.

Once modded, moreover, underlying operating systems and programs could always change. Shortly after the development of CCDOS and other systems, for example, IBM announced its move to a new operating system: the PS/2. “China and Chinese-language have been thrown into turmoil,” one article from 1987 wrote, noting that no existing Chinese-language systems—whether in Taiwan or on the mainland—had yet to be adapted to it. “The race is on for developers to come up with the best match for IBM’s MS/DOS platform.”

From an historical perspective, modders are vulnerable to misrecognition and erasure. In their time and place, their work was often misrecognized as mere theft or piracy, rather than as necessary acts of re-engineering to render incompatible machines compatible with the Chinese language. In a January 1987 issue of PC Magazine, for example, one cartoonist lampooned Sinicized operating systems. “It Runs on MSG-DOS,” the cartoon’s caption read.

As Western manufacturers slowly incorporated many of these Chinese mods into the core architectures of their systems (as well as Japanese and other non-Western ones), it is all too easy to forget that such changes were inspired by the work of engineers in China and the non-Western world. In sum, it is all too easy to retroactively imagine that the Western-built computer has always been language-agnostic, neutral, and welcoming.

This critical period of computing history has gone completely unwritten, and for a very simple reason. In the United States, and the Western world more broadly, none of these mods have been understood in terms of “experimentation,” let alone “innovation.” Instead, another set of words was—and continues to be—reserved for them: “copycatting,” “mimickry,” “piracy.” As Chinese engineers reverse-engineered Western-built dot-matrix printers, enabling them to print Chinese characters; or retrofitted Western-designed operating systems to make possible the use of Chinese input method editors, all that most Western observers could see was “theft.”

As wave after wave of regulatory crackdowns have dominated China tech news in 2021, one can be excused for losing track of what is being regulated, who is doing the regulating, and what exactly the regulations are. From fintech to data management to education, the rules of the game are being re-written by a range of agencies, often at a rate faster than all but the keenest observers can follow.

For antitrust, a newly-empowered bureaucratic entity appears to be sending the signal that we are only at the beginning of a large-scale reorganization of how Chinese internet firms interact with consumers, vendors, and the state. Formed only three years ago as a merger of already-existing agencies, the State Administration of Market Regulation (SAMR) has quickly become a force to be reckoned with, reshaping how companies view risk and opportunity in the market with the world’s most internet users.

Having already levied hefty fines on the likes of Alibaba and Meituan, recent developments suggest that SAMR is only getting started. On October 13, Reuters reported that China is considering upgrading the antitrust bureau within SAMR to deputy-ministerial status, under the name of the National Antimonopoly Bureau.

The elevated ranking would reportedly help antitrust investigators gain resources when examining mergers and acquisitions and would also help to strengthen SAMR’s in-house capability to conduct research that it has previously had to outsource. This would be aligned with previous reporting that the agency had been planning to considerably expand its workforce.

That portends further choppy waters for China’s tech giants and others competing for market share. It’s also rapidly changing the investor calculus of how to value some of the fastest-growing companies in the world.

Trusts and the antitrust blowback

This sort of regulatory blowback is hardly unprecedented. Known for its opulence and extreme inequality, the “Gilded Age” of the decades that followed the American Civil War saw the rise of the U.S. as an industrial and economic superpower. The period was marked by a weak central government and the rise of the country’s hyper-wealthy corporate interests and industrialists with names like Rockefeller, Carnegie, and Morgan, whose monopolies dominated economics, politics, and society.

While a time of great innovation and dynamism, its excesses also brought about the corrective measures of Theodore Roosevelt’s Progressive Era at the turn of the century, in which regulatory measures were taken to conserve natural resources, protect consumers and break up corporate monopolies.

As several observers have noted, present-day China has more than a few parallels with America as it transitioned from the Gilded to the Progressive Era: with a country stricken by social inequality, environmental degradation and behemoth corporate interests, Xi Jinping has consolidated control over the reins of the state and is attempting to curb the excesses that have resulted from decades of transformative growth.

Like Roosevelt, Xi appears to view his country’s most valuable corporations as oversized giants whose dominance threatens the long-term health of its economy and society. Yet while Roosevelt busted oil and railroad monopolies, Xi seems to have his sights set squarely on China’s world-leading internet companies.

Redefining “monopoly” for the platform economy

As China’s leaders seek to turn the page on the country’s Gilded Age through digital-era trust-busting, it is also looking to re-examine how monopolies are defined. For China and the rest of the world alike, this means crafting regulations that address the unique characteristics of market power in the digital economy. “As many of the large internet platforms are two-sided marketplaces, regulation needs to consider both consumer and merchant protections,” explains Michael Norris, a Shanghai-based analyst for market research firm AgencyChina. “Effective regulation needs to walk a tightrope between consumer protections, merchant interests, and platform economics.”

This stands in contrast to the longstanding established norm in the U.S. of the Consumer Welfare Standard, which directs courts and regulators to focus on the effects that challenged business practices have on consumers, rather than on alleged harms to specific competitors. For a digital economy in which the largest players such as Alibaba or Amazon function largely as intermediaries between vendors and consumers, and which use their massive scale to outmatch their competition, increasing numbers of policymakers have argued that the Consumer Welfare Standard is insufficiently comprehensive.

SAMR appears to be taking that position as well, given the targets of its investigations and the penalties it has levied thus far. Alibaba and Meituan have each been slapped with fines of 3-4 percent of annual revenue for their longstanding “choose one from two (er xuan yi 二选一)” practices, in which merchants were pressured to use the platform exclusively. While this practice was at times explicit, it often was exercised through more subtle or deceptive means, exploiting the data and recommendation algorithms that play such a prominent role in determining a merchant’s success. Some such tactics were listed in the recent SAMR announcement as it concluded its Meituan investigation.

Along such lines of forced exclusivity, China’s Ministry of Industry and Information Technology (MIIT) has also directed internet firms to tear down their “walled gardens,” and cease their formerly common practice of blocking competitors’ links on their platforms. Though adding complications for some firms, the banning of such behavior seems to be welcomed among Chinese consumers, as the inability to share Alibaba’s links on Tencent’s WeChat platform was a common annoyance.

SAMR has also ordered Tencent Music Entertainment to cease its exclusive deals with record labels, levying a minor fine of 500,000RMB (roughly $77,000), but also calling into question the business models of other content platforms whose business models rely heavily on exclusive deals with sought-after content producers.

A challenging time for investors

For investment firms, a greater concern may be in the heightened scrutiny over mergers and acquisitions. In July, a $5.3 billion merger between China’s leading game-streaming platforms Huya and Douyu was terminated two days after a SAMR decision to prohibit it, the first “adverse” merger control decision adopted by SAMR and its predecessor against a transaction without foreign participation.

Indeed, China’s antitrust push, coupled with its broader wave of regulations, have investors rethinking their strategy in the country. One anonymous employee of a prominent VC firm complained of greatly increased complications in gaining approval for a recent merger proposal, citing a far more invasive screening from SAMR than was previously expected, with questions ranging from business models and practices to issues of national security. In the end, the firm decided not to move forward with the deal.

Questions also loom large for the superstar firms that once headlined equity investors’ China portfolios. For many large, platform-based firms, consistent profitability has remained elusive. The prospect of continued growth and the profits that can be extracted from future market dominance was central to their once-soaring share prices and valuations. The e-commerce and food delivery fields in which Alibaba and Meituan operate, for example, are famously high volume/low margin areas. The fines, which amounted to 3-4% of top-line sales volume, do serious damage to already thin bottom lines.

Perhaps most worrisome to investors are the limited windows when they can achieve exits for their China-based investments. In addition to increased deal scrutiny that make mergers and acquisitions more difficult, regulatory roadblocks to IPOs are popping up where they have not been seen before. Though the dramatic eleventh-hour halting of Ant Group’s late-2020 listing sent shockwaves through the financial community, it was also seen as an anomaly: had it gone through, it would have been the biggest public offering in history. The intervention to block it was also conducted by China’s powerful central bank, and reportedly ordered by Xi Jinping himself.

What we are now seeing is a growing number of regulatory agencies further down the bureaucratic hierarchy who have both the power and the mandate to interfere with IPOs if they deem it necessary.

There is, of course, China Securities Regulatory Commission (CSRC), China’s counterpart to the Securities and Exchange Commission, which has announced a new cross-agency task force to crack down on illegal activities in the country’s capital markets as a number of the regulator’s former leaders are charged with corruption.

After ride-hailing platform Didi Chuxing ignored warnings not to go through with their U.S. offering until after conducting a thorough examination of its network security, the Cyberspace Administration of China (the country’s chief cybersecurity watchdog) appears to be dedicated to making an example out of the company, removing it from app stores and placing the future of both the firm and its leaders in question.

Finally, as SAMR is given elevated status, it is highly likely that it will also have the power to determine if and how a company is allowed to go public.

For investors hoping for IPOs, the road to their exit is lined with a growing number of checkpoints whose standards seem to be getting progressively tighter.

How far will China’s antitrust mandate go?

With an elevated regulator coupled to a sweeping mandate, China’s antitrust campaign can now potentially reach areas where very little precedent has been set. Compounded with the authoritarian nature of China’s political system, there is very little that firms can do to fight back. In many cases, the best they can try for is to comply, and maintain a positive working relationship with authorities, as the alternative is far worse.

“Chinese authorities are very adept at using reputational sanctions,” explained University of Hong Kong law professor Angela Huyue Zhang while appearing on my podcast to discuss her book Chinese Antitrust Exceptionalism. “They are very adept at leaking information to (state media) and there are different ways that they can announce an investigation, leading to different levels of media publicity.” Zhang went on to cite Alibaba’s $90 billion drop in market capitalization after the mere announcement of an antitrust investigation on Christmas Eve of 2020. As Didi is also now experiencing, the reputational taint of being outside of Beijing’s good graces can be as damaging as any formal punishment.

With investigations into Alibaba and Meituan now concluded, it may be the case that the scrutiny into “choose one from two” practices are wrapping up. However, fear and speculation outweighs the certainty at the moment, as a newly-empowered and staffed-up SAMR likely has plenty on its to-do list.

One popular theory is that the beefed-up SAMR will spend more of its muscle targeting subsidized group-buying practices that helped propel the rise of social e-commerce firms like Pinduoduo, but which also can place strong downward pressure on prices, hurting small vendors. In March, SAMR slapped minor fines on five firms for illegal behavior around group-buying practices. As such practices have been known to be quite common among China’s internet platforms, there could be considerably more to be found if regulators continue to dig, as well as harsher penalties, perhaps, to follow.

“Previous SAMR-issued fines and commentary show they take a harsh view of subsidies used to sell goods and services below cost,” says Norris. “A stronger penalty regime is what SAMR needs if it’s to create an effective deterrent to subsidy-driven growth.”

What is also worth noting is the extraterritorial nature with which antitrust can be used, particularly as a countermeasure to U.S. sanctions. “In 2018, there was an onslaught of sanctions on Huawei and ZTE and other Chinese tech companies, and this was really a wakeup call for the Chinese government, which realized that the U.S. has such strong extraterritorial sanctioning power,” said Zhang. “One of the tools that [the Chinese government] came up with was antitrust, as it allows them to exert extraterritorial jurisdiction over foreign business.”

This came into play significantly in mid-2018, when Qualcomm abandoned a proposed $44 billion acquisition of Dutch chipmaker NXP Semiconductors after struggling to get SAMR approval for the deal. Though U.S.-China relations appear to be somewhat brought back from the brink of the Trump years, it is clear that China considers extraterritorial antitrust measures to be an arrow in its quiver.

What we do know is that for both foreign and domestic firms alike, the free-wheeling days of China’s Gilded Age are quickly becoming a thing of the past, and that antitrust is a powerful tool in forcing that transition to happen.

For a technology sector that would much prefer to focus on growth over geopolitics, the push for U.S.-China “decoupling” poses an inescapable threat. The fuzziness of the concept only increases the danger.

U.S. distrust of China, particularly in technology, is nothing new. Indeed, Congress took action to keep Huawei and ZTE out of U.S. telecommunications almost a decade ago, during the Obama administration.

But during the administrations of both George W. Bush and Barack Obama, there was a broad push to engage in dialogue and find common ground between the world’s two biggest economies. As China emerged as a leading global economy and became an increasingly important trading partner to the U.S., (accounting for 2.5% of U.S. imports in 1989 and rising to a peak of 21.6% in 2017), there were moves to incorporate it into the U.S.-led global trading system. In 2005, Deputy Secretary of State Robert Zoellick put forward the idea of China as a “Responsible Stakeholder,” under the assumption that embracing China’s entry into the global trading system would ensure that it helped that system continue to function.

Not long before that, the U.S. had agreed to China’s 2001 accession to the World Trade Organization. But while it was seen by many as a turning point, it was really just a waypoint. That year, China’s share of U.S. imports was already 9.0%. Growth in Chinese imports, moreover, reflected a rebalancing of Asian trade more than anything else; from 1989 to 2017, Asia’s share (including China) of U.S. imports grew from 42.3% to just 45.2%. China’s relative growth instead ate into the share of countries like Japan and Malaysia, reflecting a reordering within Asia. The standard system of trade accounting overplayed this shift, as a good that was finished in China and had 10% Chinese value added would count as 100% Chinese for trade statistics.

Regardless of what was labeled as produced where, the bottom line was that a well-developed Asian supply chain incorporated China as a major player. With increased engagement, however, and very different economic systems, the points of economic disagreement between China and the United States accumulated. During the Trump administration, dialogue took a back seat to new trade barriers. The United States applied tariffs on hundreds of billions of dollars of Chinese imports and China responded with barriers of its own. Although the Trump tariffs were initially cast as temporary measures meant to achieve finite policy objectives, some key policymakers within the Trump administration saw value in diminished interaction between the two countries.

Matthew Pottinger, who served as Deputy National Security Adviser under President Trump, subsequently wrote that “important U.S. institutions, especially in finance and technology, cling to self-destructive habits acquired through decades of ‘engagement,’ an approach to China that led Washington to prioritize economic cooperation and trade above all else.” His solution calls for bold steps “to frustrate Beijing’s aspiration for leadership in … high-tech industries.” The Biden administration recently announced, after a prolonged review, that it was maintaining the Trump tariffs and Congress has pushed to fund initiatives that would subsidize technological independence. These moves for lessening dependence, particularly in technology, have fallen under the broader rubric of “decoupling.”

Amidst all the newfound enthusiasm for U.S. decoupling from China, one might imagine that the term is well-defined. Yet it takes relatively little probing to discover a lack of clarity. Of course, the above-mentioned tariffs have served to discourage trade between the two countries, but how far is this policy meant to go?

Does decoupling mean the U.S. will turn away from inbound and outbound foreign direct investment? What about portfolio investment, such as the purchase of U.S. Treasuries? Does it mean that the U.S. should avoid importing final goods produced by Chinese firms? What about European firms producing in China? What about U.S. firms producing in China? Or European or U.S. firms producing outside China but incorporating Chinese parts? Or companies selling into the Chinese market and thus, presumably, subject to Chinese influence?

The sheer breadth of economic interactions between the two giant economies illustrates the implausibility of a clean divide between them. Instead, the most likely result of an attempt at exclusion would be another reordering, not China’s disappearance as a supply chain power. This is particularly true when other global economic powers, such as the European Union, do not share even the vague objective of decoupling.

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The nebulous nature of the decoupling push poses a particular threat to the tech sector. Over decades, the push to take advantage of scale economies and to drive down production costs has resulted in highly-integrated global tech production. Further, in subsectors that have recently emerged as particularly contentious, such as the production of semiconductors, investments have to be made at large scale and well in advance. That leaves the sector especially vulnerable to rapidly-shifting rule changes, as policymakers struggle to give substance to a problematic concept at a time of difficult supply chain disruptions. Policy responses that shower the sector with subsidies, as some bills in Congress have proposed, seem appealing, but lose their effectiveness when countries such as Japan move to match them.

A world in which the United States provides an extreme answer to the above questions and is absolutist in its separation from China is likely to be one in which the United States cripples itself technologically, denying itself access to globally-competitive sourcing and empowering competitors elsewhere. The only politically viable alternative at the moment, a world in which the United States takes a more moderate stance and struggles to find a middle ground, is likely to be an unpredictable one in which rules are constantly evolving.

In either case, proponents of U.S.-China decoupling will find such a move counterproductive. Far from resolving strategic policy concerns, its primary impact may be to challenge U.S. technology leadership instead.