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Some Chinese VCs looking for a quick exit, Technology News, ETtech

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Illustration: Rahul Awasthi
Illustration: Rahul Awasthi

Chinese investors who have written small cheques in early- to mid-stage Indian tech companies are exploring a quick exit and have started talks with portfolio founders, co-investors and bankers amid the growing anti-China sentiment, people in the know said.

The venture capital and individual investors exploring exits currently own about 4-5% in Indian companies, with some holding less than 2%.

Their presence in the capitalisation table of Indian companies will only hurt business optics including future rounds, and not result in any significant long-term benefit during exit even years later, these investors told ET.

“New rounds are out of the question, I’m trying to find ways to exit money deployed as well,” said a Chinese high net-worth individual who has backed four technology startups in the last four months.

The government on Monday banned 59 Chinese mobile applications, including TikTok, WeChat, Helo and Shareit, citing threats to the country’s “sovereignty and security”. Along with changed FDI rules for Chinese capital introduced recently, this has made investors skittish about their future investments here. Chinese follow-on investments, too, are expected to become more complex, ET reported earlier.

Founders are looking to limit or cut their exposure to China, a venture capitalist said, even if that comes at the cost of giving these investors an immediate secondary exit.

“Since the revised FDI norms came about, in any investor conversation, I first ask them if they are okay buying out a 1% China investor stake, and then begin discussions around a primary round,” said the founder of a growth-stage company.

Some Chinese VCs looking for a quick exit
Chinese investments in India’s tech ecosystem almost doubled to $3.9 billion in 2019 across stages, including in Paytm, Ola, Zomato, ShareChat, Delhivery and Doubtnut. “Chinese investors who typically have smaller exposure to India are not able to make investments. In the last two months, there has been no investment from China in local startups,” said the founder of a homegrown social media app.

Some funds and corporates that have seen fin-tech, social commerce and content businesses play out in China had believed that they could leverage their learning and replicate that success in India while making a premium on those deals.

“A lot of Chinese funds like ours invest with the bet that we would either make it a strategic play or get in early and sell to a large Chinese strategic (like Tencent or Alibaba). At this point, all those bets are off,” said an investor who did not want to be quoted by name.

Investors said India was pegged as a source of growth for China funds, given its positive macro indicators like smartphone reach, GST implementation and the Aadhaar database. Along with China’s slowing economic growth rate, these factors had made India an attractive investment destination.

More than a dozen new China-domiciled large corporates, venture funds and family offices were looking to expand their presence in India over the last six months.

These included Boyu Capital, Kunlun Capital, Horizons, Legend Capital, ZhenFund, SOSV, XVC Capital, CDH Investments, BAce Capital, Qiming Venture Partners, Morningside Ventures, Fosun and Kuaishou.

Corporates including Jingdong, Kuaishou, Ping An, and YY.com, as well as big tech companies such as Tencent, Alipay, Didi Chuxing, Meituan Dianping, and Xiaomi were also actively looking to expand.

Those plans are now on hold indefinitely, investors said.

“Till there is a meaningful de-escalation between the two countries at the highest levels, neither Indian companies would prefer to take Chinese capital nor would Chinese investors want to commit a lot more capital,” said Ashish Sharma, managing director at Temasek-backed venture debt firm InnoVen Capital.

Indian startups are also seeking advice on whether they should pursue Chinese investors going forward.

“Even Indian companies are very reluctant to raise capital from Chinese investors in this environment, as they are sensitive to customer backlash and adverse impact on their brands,” Sharma added.



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Wells Fargo tells workers to delete TikTok as security, privacy concerns grow

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Wells Fargo is directing employees to delete TikTok from their work phones amid growing concerns over security and privacy from the short-form Chinese-owned video app.

“We have identified a small number of Wells Fargo employees with corporate-owned devices who had installed the TikTok application on their device,” Wells Fargo said in a statement to NBC News on Saturday. “Due to concerns about TikTok’s privacy and security controls and practices, and because corporate-owned devices should be used for company business only, we have directed those employees to remove the app from their devices.”

The move from the nation’s fourth-largest bank came as Amazon clarified Friday it was not telling its employees to do the same, despite an email reportedly sent to some employees that instructed them to do so.

“This morning’s email to some of our employees was sent in error. There is no change to our policies right now with regard to TikTok,” a spokesperson for the e-commerce giant said in a statement late Friday.

The company had requested that its workers remove the app from their mobile devices due to “security risks,” according to a memo to employees seen by Reuters.

NBC News has not seen the memo.

The controversy capped a week in which Secretary of State Mike Pompeo said the United States was considering banning TikTok and other Chinese apps.

TikTok is owned by the Beijing tech giant ByteDance and has been eager to show lawmakers in the U.S. and elsewhere that people can trust it with their personal data.

A spokesperson for TikTok told NBC News on Friday that “user security is of the utmost importance” to the company.

“We are fully committed to respecting the privacy of our users,” the spokesperson said.

“While Amazon did not communicate to us before sending their email, and we still do not understand their concerns, we welcome a dialogue so we can address any issues they may have and enable their team to continue participating in our community. We’re proud that tens of millions of Americans turn to TikTok for entertainment, inspiration, and connection, including many of the Amazon employees and contractors who have been on the frontlines of this pandemic.”

TikTok has become one of the most popular apps in the world, a platform where people, mostly under 30, share creative 15-second videos set to music.

But lawmakers in the U.S. and Europe have raised concerns that the app might be sending people’s data back to Beijing.

There have also been concerns that TikTok is censoring content that might be critical of China’s well-documented human rights abuses, using the social media platform as an outlet to shape its image in the eyes of young people around the world.

TikTok has repeatedly denied this, saying it is not influenced by China or any foreign government and that it has not shared data nor has been asked to do so.

It said Tuesday that it was withdrawing from Hong Kong, making TikTok the latest tech company to review its involvement in the territory following a sweeping national security law passed by Beijing.

TikTok has always been intended for the international market, with parent company ByteDance offering a separate version of the platform, called Douyin, to users in mainland China.

Cristian Santana, Reuters and Alexander Smith contributed.



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Plant-Based Seafood, Third-Party Lawsuit, and Scotland!

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It’s the weekend, yay! Celebrate it at home and wear a mask if you go out.

That is all.

Now enjoy some food tech news.

Good Catch Goes Frozen

Good Catch launched its first line of frozen plant-based seafood this week: New England Style Plant-Based Crab Cakes, Thai Style Plant-Based Fish Cakes and Classic Plant-Based Fish Burgers. Food Dive writes that the new products are made from “a blend of peas, chickpeas, lentils, soy, fava beans and navy beans, with umami flavor from seaweed and algae extracts.”

An Uber Eats courier is seen in Bucharest, Romania on May 1, 2019. (Photo by Jaap Arriens/NurPhoto)

Anti-trust Suit Filed Against Third-Part Delivery Services

A lawsuit was filed against Uber, GrubHub and Postmates this week, with a complaint around menu pricing. As Nation’s Restaurant News reports, the suit accuses those three services “of monopolizing delivery prices by not allowing restaurants who contract with them to sell menu items to consumers at lower prices on other platforms, including direct orders from the restaurants.” DoorDash, the nation’s largest restaurant delivery platform, was not named in the suit. Not all restaurants mind the higher pricing however.

Image via Visit Aberdeenshire

Vertegrow to Create Scotland’s First Vertical Farm

IGS, an indoor agtech company, completed a deal with Vertegrow to build a four-tower vertical farm in Aberdeenshire, Scotland later this year. Hortidaily wrote, “A 245 m2 insulated superstructure will accommodate four nine-metre-high towers alongside a 1,600 m2 service area on Vertegrow’s site at Waterside Farm in Aberdeenshire. This will provide approximately 1,343 m2 of growing space, producing up to 70 tonnes of produce per annum when fully operational.” The towers should be up and running by early 2021.

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Google to restrict ads for tracking technology, spyware

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By: Bloomberg |

Published: July 11, 2020 12:57:56 pm


The new policy will be implemented globally on August 11

Alphabet Inc.’s Google is changing its policies next month to restrict advertising for spyware and other unauthorized tracking technology.

The change “will prohibit the promotion of products or services that are marketed or targeted with the express purpose of tracking or monitoring another person or their activities without their authorization,” according to the company.

While ads for these products already violate Google’s Enabling Dishonest Behavior policy, the change will make the ban on tracking technology explicit and lead to increased enforcement, a company spokeswoman said.

The policy will prohibit advertisements of spyware and malware “that can be used to monitor texts, phone calls, or browsing history,” according to Google. It will also ban ads for “GPS trackers specifically marketed to spy or track someone without their consent” and of cameras or recorders “marketed with the express purpose of spying.”

The new policy will be implemented globally on August 11, and the accounts of advertisers that violate it will be suspended, according to Google.

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