Chinese entrepreneurs have earned a reputation for coming up with some of the most exciting technology companies in the world, from internet giants Alibaba and Tencent to taxi-hailing firm Didi Chuxing and all the way to new disruptors such as Mobike and Ofo, a pair of companies trying to shake up the otherwise staid bicycle industry in the country.
But innovation inspired by ‘the sharing economy’ idea appears to be spreading to ever-more niche sectors. Rival power bank companies are providing phone charging on-the-go. Umbrella sharing is hitting the streets. A company in Zhejiang in eastern China is betting its future on users paying to share basketballs.
These businesses still appear to be attracting capital. But are some of the ideas now making waves among Chinese venture capitalists a step too far? That is certainly the belief of Wang Sicong, son of China’s richest man Wang Jianlin and a venture capitalist in his own right.
Wang, a member of Wanda Group's board, took to social network Wechat on May 5 to air his thoughts on the shared power bank idea. Between April and early May, companies in the sector attracted more than Rmb1.2 billion ($174 million) worth of funding — although apparently none of it was from Wang.
“If shared power banks can succeed, I will eat shit. Mark my words,” he wrote.
Leo Ou Chen, chairman of Jiedian, one of the hottest companies in the sector, quickly responded. “Appreciate your supervision, Sicong,” he wrote. “Not every project will lead to success. If shared-power bank failed, we’d do it for the public good then. But hopefully, you won’t let your personal feelings get in the way and block [Jiedian] from Wanda’s [shopping malls].”
Wang and Chen did not respond to requests for comment in a message exchange on Weibo. But some market participants were willing to pick sides — as least when it came to the question of who was right about the power-sharing idea.
“I can very firmly say that Wang would lose,” Liu Jin, an angel investor and executive partner at GoFly Ventures, a Chinese TMT-focused venture capital fund, told FinanceAsia. Having worked at Eagles Fund and as head of investments at Qihoo 360 previously, Liu invested in a power sharing company in April.
“[The] power bank sector is the third in the sharing economy bracket that is to hit a one-day customer order of 10 million,” he said, adding that taxi hailing and bike sharing were the first two.
Another private equity investor, who invested in the bike-sharing sector, argued demand for power bank rentals was relatively weak, unlike bike rentals.
There has certainly been plenty of money flowing into the sector though.
Xiaodian, one of the league players in the sector, announced on May 8 it had secured Rmb350 million in Series B financing, co-led by Sequoia Capital and Banyan Capital. Its A-round investor Tencent also participated in the second round, together with CDH Investments, Zhongwei Capital, Vision Plus Capital and Fosun Kinzon Capital.
There’s no lack of star investors among its angel list either – including GSR Ventures and one of China’s most active individual angel investors Wang Gang. Both had invested in the angel round of Cheng Wei’s Didi Dache, which became today’s ride-hailing giant Didi Chuxing.
Jiedian (also known as Ankerbox), which emerged out of an incubation plan by power bank manufacturer Anker, received a $14.5 million Series-A financing from IDG Capital Partners and battery manufacturer Sunwoda in April. Then in early May, Jumei International Holding, one of China’s largest online cosmetics retailer, announced it would take a stake of around 60% in Ankerbox for Rmb300 million.
Another power bank rental start-up, Laidian, which was founded in 2014, secured $20 million in its Series-A financing round led by SIG and Redpoint Ventures China, it said in April.
The business model is simple. These mobile power vendors allow customers to scan a QR code, pay a deposit and a fee of about Rmb1 per hour and get a portable power bank.
Some start-ups provide a microwave-sized charging cube; others rely on ATM-style stations. Users can return the piece to any cube or station run by the same vendor, which is not hard to find given its coverage in any area – shopping malls, airports, and office centres, for example.
Laidian has partnered with Alibaba’s Ant Financial to waive deposit payments for customers who have a decent score from the payment company’s flagship credit rating system, Sesame Credit. It’s not hard to understand why investors get excited about this little charging device. In the words of Ren Mu, chief marketing officer at Laidian: “The rise of bike-sharing start-ups in China has educated users and investors of the value of sharing that is based on an object, as compared to services."
The race for early investments among league players here is much faster than for bike-sharing investments, indicating a sense of anxiety from some investors who fear being left behind in a sharing economy boom. Series-A financings of bike-sharing hopefuls, Mobike and Ofo, were completed between October 2015 and February 2016, respectively.
Another reason, according to Ren, is that investors have realised it is increasingly costly to gain volume via online channels and are hence turning to the offline entries.
Ren said Laidian was now in the process of raising Series B financing and was receiving a “high level of interest” from investors. He declined to comment on the fundraising target.