Chinese startups are shifting from a mere business model innovation to real technology innovation, in a way to acquire more business clients.
In an interview with FinanceAsia, Jason Tu, founder of Hong Kong-based fintech startup MioTech, talked about how companies are using technology to build higher barriers and eventually commercialize in the market.
MioTech was set up in July 2016 by Tu and Tao Liu, firstly under the goal to save investors' time on conducting market research. The company aims to provide portfolio management and consulting services for high-net-worth clients, financial advisors, fund managers and family offices by applying artificial intelligence technology.
The two-year-old startup now has offices in Hong Kong and Shanghai, with a team of 50 employees. Currently, MioTech provides two main products, namely market research analysis and portfolio analysis.
According to Tu, MioTech's focus on business clients helps them to get through at a time when it is difficult to gain new retail clients.
“Business-to-consumer (B2C) startups had the trouble of acquiring retail customers in the past six months as they are directly competing with internet giants,” Tu said.
It is difficult for those startups to gain enough traffic volume if they do not join hands with those internet conglomerates, as B2C firms rely heavily on traffic growth to raise their profile in the early-stage of their businesses.
Comparatively, business-to-business (B2B) startups can hold up better when the market is bad because the sector is still underpenetrated, suggesting that they will face less competition.
Tu believes it is also harder to replace B2B firms because their services to corporate clients are tailor-made and customised according to their needs. "Some big companies may even feel this is an opportunity for them to lay off some staff and replace them with advanced technology in order to save cost,” Tu said.
Headwind remains
Venture capitalists now pay more attention to the track record of a startup when making an investment decision, as they focus more on the profitability of a startup, Tu said, adding that both private equity and venture capital now prefer leading enterprises in every vertical market.
“Such focus shift happens because of the unexpected performance in the public market since 2018,” Tu said. “In the private market, companies are experiencing the valuation correction as a result.”
The capital shortage forces Chinese startups to compete on research and development in order to raise the entry barriers for potential newcomers. At the same time, R&D speed is crucial in order to stay ahead of rivals and raise capital from investors.
“We already applied for two patents, both internationally and domestically,” Tu said. “But in China, it is always better to run faster than others.”
MioTech received $7 million Series A fundraising from Li Ka-Shing's Horizons Ventures in November 2017 and is preparing for the next round of fundraising to announce soon. Zhen Fund also participated in both Series A and seed round.
It is one of the few Hong Kong-based startups that are breaking into the regional markets.
