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    Chinese start-ups attract record funding despite technology crackdowns

    Unlike the previous year, most Chinese technology funding E-commerce internet startupMost of the funding for the past year has been directed to more closely related areas Communist Party Priority, Semiconductors, biotechnology, information technology, etc.

    Venture capital investors invested $ 129 billion in more than 5,300 startups in China in 2021, the last in the 2018 market, according to data from Preqin, an investment database that has been tracking Chinese venture capital trading since 2000. It’s above the record of about $ 115 billion.

    Investing PEData figures show that broader indicators of investment lending to Chinese start-ups, including private equity finance, reached $ 165 billion in the first three quarters of 2021 in 2017 records. It’s on track for over $ 190 billion. -Zero2Ipo Holdings Inc. Financing database owned by. Year-round data is not yet available.

    Financing boom shows how popular China is Remain as an investment destination Government Try to impose more restrictions In some technology companies Broader economic separation Between China and the United States

    Chinese leaders are trying to win more Data management for high-tech companies And it curbs what they consider to be excessive risk-taking and anti-competitive behavior in the sector.authorities Blocked initial public offering In late 2020, FinTech leader Ant Group Co. Fines for consumer internet companies In 2021, many were forced to restructure their businesses in ways that could reduce profitability.

    These and other moves have upset investors and destroyed the multi-billion dollar market value of Alibaba and other companies.

    Meanwhile, Washington has dozens of Chinese tech companies, including start-ups. Procurement of equipment and capital from the United States As it is Aiming to slow China’s progress With the latest technology.

    Still, Beijing seems to have succeeded in turning its capital into what is known as the “hard tech” sector, and leaders find it more in the national interest than food delivery, video games, or e-commerce. ..

    Consumer internet companies like Tencent are no longer considered to serve national interests by Chinese leaders.


    Photo:

    ALY SONG / REUTERS

    country’s New 5-year plan Labeling technology development as a national security issue, it was announced with the aim of increasing R & D spending by 7% each year. This is more than an increase in the military budget. The economic blueprint included plans to speed up technological development from chips to artificial intelligence to quantum computing. Authorities hope to reduce their reliance on foreign providers in China and lead advanced technologies.

    In contrast, between 2016 and 2020, the country promoted the “Internet Plus” movement. The movement aimed to use the Internet to modernize and promote growth in China’s industry.

    According to PE data, the Internet sector, which was typically included in the top two investment areas in the last few years, fell to fourth place in the first three quarters of last year, raising about $ 20 billion in funding. .. That’s about $ 10 billion less than the most popular category, semiconductors.Alibaba

    Tencent Holdings Ltd

    , Once considered a crown jewel Those familiar with the debate said that some of China’s entrepreneurship is no longer seen by Chinese leaders as the type of technology company that can serve the national interest.

    Alibaba and Tencent spokesmen declined to comment.

    img 61dfbc09887d0

    China still relies heavily on foreign chip foundries and fabless chip makers. Mobile phone chip factory in Zhejiang Province, China.


    Photo:

    Tpg / Zuma Press

    Venture capital investors interviewed by Wall Street Journal said that “hard technology” and information technology companies take much longer to mature and profit than consumer internet companies like short video. There is a heavyweight ByteDance Ltd that said it was happy to piggyback on Beijing’s priorities.

    “Everything, including semiconductors, advanced manufacturing, enterprise software, and data, they’re ripe areas,” said Qiming Venture Partners, a partner with approximately $ 6 billion in assets under management and offices in Beijing, Shanghai, and Hong Kong. Gary Rieschel says. And Suzhou.

    Five years ago, companies related to the consumer Internet sector accounted for nearly 50% of Qiming’s investment, but then shrank to 15%, instead the company said: He added that he had invested money in technology. Chips, enterprise software, healthcare.

    At the Entrepreneurs Summit in Beijing last September, Neil Shen, founding and managing partner of Sequoia China Capital, said: One of the most active investors in China In 2021, more than 80% of that number will be in the audience Investment by the company In recent years, he has been engaged in “hard tech” fields such as artificial intelligence and high-end manufacturing.

    Shen said these startups and technologies have a long development cycle, so if investors ask for payment, these investments will require more patience, which is “half of public services, commercial. “Half of the opportunity”.

    Despite considerable financial support, industry analysts say there is still a long way to go before China achieves self-sufficiency or becomes a global leader in some of its goals. increase. Especially semiconductors..

    img 61dfbc0c3d6b5

    “Hard tech” companies may take longer to generate revenue than consumer internet companies like ByteDance.


    Photo:

    Thomson Suan / Reuters

    China still relies heavily on foreign chip foundries and fabless chip makers, imposed by the United States Export control of high-end equipment, They said, the country is unlikely to catch up with the West in the short term.

    Still, Danny Mu, a Chinese technology analyst at Forrester Research, said Chinese companies have expanded into areas such as databases and enterprise software in recent years.

    “When I was growing up, I was thinking of starting a company like this:

    Oracle

    It was very difficult. ” Beijing-based analysts have shown a keen interest in “hard tech” startups over the past 12 months, focusing on large investors and many state-related funds.

    “But now there are more and more scenarios where domestic tech brands and software have their own in the market, and people are more and more confident in them. The more you use it, the better. . “

    SaaS, or software as a service, is another emerging area that attracts venture capital. At a forum hosted by the Asian Venture Capital Journal in Beijing last October, all speakers were featured in a panel titled “Technology: Where are the Chinese Unicorns?” We talked about opportunities for SaaS startups to offer a variety of services to businesses such as human resources, sales and customer relationship management.

    Yuxiang Zhou, a 32-year-old tech entrepreneur who sells cloud computing-based software that helps factories in China manage production, said in 2021 when the government shift was gaining momentum.

    China’s tech stocks, popular with US investors, have fallen amid national regulatory crackdowns on tech companies. The WSJ describes some of the new risks investors face when buying stock in companies such as Didi and Tencent. Photo composition: Michelle Ines Simon (video from 8/6/21)

    Zhou said he was surprised at how quickly his company, Black Lake Technologies, raised funds from investors such as Lightspeed Venture Partners and Singapore’s sovereign wealth fund Temasek Holdings. Choose.

    Shanghai-based Zhou said the key turning point for enterprise technology had arrived in 2019, and the US-China trade dispute acted as “a moment of awakening for factories that do not have their own domestic factory software with China.” rice field.

    Beijing has launched steps aimed at facilitating the exit of investment through the domestic stock market, an important consideration for venture capitalists, in order to facilitate investment in the desired sector.

    Beijing Stock Exchange, Started trading in NovemberIs intended as a place for small startups with advanced technology. STAR Market on the Shanghai Stock Exchange, a NASDAQ-style committee also known as the Science and Technology Innovation Commission, revised its rules last year to prioritize the listing of “hard tech” companies.

    “Companies in industries such as semiconductors are very popular when listing on domestic stock exchanges such as STAR Market,” said Linda Cai, a partner at Shanghai-based Loyal Valley Capital. Year.

    Several states in China, including Shanghai, Jiangsu and Guangdong, and the Ministry of Industry and Information Technology have also introduced goals and policies that support the deployment of advanced manufacturing, software, and integrated circuits.

    Write in Lizarin Liza.Lin@wsj.com, In Jinyang Jing.Yang@wsj.com And Keith Zai keith.zhai@wsj.com

    Copyright © 2022 DowJones & Company, Inc. all rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

    Chinese start-ups attract record funding despite technology crackdowns

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    The post Chinese start-ups attract record funding despite technology crackdowns appeared first on Eminetra.

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