China's GoPro seeks capital in tough market

As tech devices search for a new growth point, Insta360, China's answer to GoPro, has just raised $30 million to expand its hardware business.

It is still debatable whether manufacturing tech devices is a profitable business in the long term. But some hardware retailers are expanding their business and product lines to find new momentum in an old market.

Chinese camera manufacturer Insta360 has just raised $30 million in follow-on Series C funding. Some investors, at least, are confident of growth in a niche hardware market.

Everest Venture Capital, MG Holdings and Huajin Capital are the investors of this round. Before this, Insta360 raised at least $20 million from investors including IDG Capital, Qiming Venture Partners, home appliance retailer Suning and Nasdaq-listed Xunlei.

Insta360 - China's answer to GoPro - makes consumer-grade cameras which can be attached to mobile telephones or worn while exercising. It recently added 3D and panorama cameras to its product lines.

Proceeds from this round will be used to expand its offline experiencing centres and to expand in international markets. At the moment, and led by the US, 80% of the company's profits come from overseas markets.

Insta360 has said that it is aiming for an IPO next year in China. The company still needs time to decide on which board to list.

There is an ongoing debate among investors about whether specialist hardware like this remains a profitable business. The argument is sharpened by the fact that our telephones can do so much and are becoming cheaper every day. Take Xiaomi as an example. Although ranked fourth in the global handset market with a 8.7% share, Xiaomi’s net profit ratio from its tech hardware was still below 1% last year. Significantly, the gross profit rate from Xiaomi’s core handset business dropped 2.6 percentage points to 6.2% in Q4 last year.

Being a pure original equipment manufacturer is not a long-profit business. That is precisely why Xiaomi’s executives kept emphasising the value of its software ecosystem throughout its annual results conference on Wednesday. The handset manufaturer is trying to get away from the image of a pure hardware seller, and provide more value-added software service in its devices.

Only four years old, Insta360 focuses on a more specific hardware market. Max Richter, Insta360’s global marketing director, said that there is still demand and growth for innovative cameras that let anyone create cinematic content. Its revenue grew fivefold between 2016 to 2018 and Insta360 has been profitable since 2017.

Some investors argue that there is less space for a pure hardware manufacturer. US rival GoPro listed on Nasdaq in 2014 and is now struggling to find its way. Its stock price has collapsed and the US camera manufacturer can’t find a new revenue point in a saturated camera.

Insta360 doesn't see a saturated camera market as a concern. Its products create new categories. "When you bring consumers something new that serves demands no existing product does, there is always room for massive growth," Richter said.

 

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