In today’s fast-paced world — it’s often difficult to pause for reflection. And while we all have our ideas or “resolutions” about how we can improve and be better — it’s equally important to reflect on the positive outcomes from the last year. At Cathay Innovation, 2019 was an exciting year of growth not only for our portfolio but for our firm and global partners who have joined us on our mission in supporting innovative entrepreneurs and driving change through technology.
A few highlights from the last year include launching several new funds such as Cathay Africinvest Innovation — our partnership with Africinvest to create the largest Pan-African venture capital fund — and Cathay Innovation Fund II — a EUR 500M fund to continue investments across North America, Europe and China. 2019 brought renewed support from investors such as Bpifrance, Groupe ADP, Groupe SEB, Michelin, Valeo and GL Events in addition to the arrival of new partners including Accor, BioMerieux, Dassault, JCDecaux Holding, Kering, Pernod Ricard and L’Oreal.
In addition, the Cathay team has expanded our presence in regions such as Germany and Southeast Asia, with fintech startup FinAccel’s recent $90M Series C funding round marking our first investment in this up-and-coming technology hub. 2019 has been a notable year for many of our portfolio companies including: the impressive rise of Pinduoduo as the number two e-commerce player in China two years ahead of plan; top U.S. challenger Bank Chime on its way to becoming a “Deca-corn” while raising more than US$ 700M in 2019 ; leading European car rental marketplace Drivy’s $300M acquisition by Getaround; and European on-demand delivery startup Glovo surpassing the 1Billion thresold both in revenues run rate revenues and market cap while and raising a $350M Series D&E.
As we close the book on 2019, we’re looking forward to seeing what 2020 has in store and how the technology landscape will continue to evolve and impact the world in meaningful ways. Specifically, here’s three areas we see taking flight in 2020 and beyond:
Tech Investment Evolved — The Shift Towards A Global Platform Approach
With the globalization of tech, emerging companies are bringing new technologies and business models to world markets that enable rapid growth like never before. While the Venture Capital industry, which was historically dominated by U.S. tech hubs, has also expanded across the world — we’ll see a shift in traditional models (often siloed by region) towards a global platform approach that will unify tech investment and create new opportunities and value by linking global startup centers, investors and corporations from the start. This won’t be limited to established tech hubs as more and more regions from around the world, including developing economies that used to be considered “low tech” (i.e., Africa, Mexico, Southeast Asia), experience rapid transformation thanks to a growing middle class with increased internet accessibility.
We’ve seen this massive trend continue to gain momentum not only from the partnership side with global corporates across industries, from mobility and automotive to telecom to healthcare and so on, increasing their involvement in the ecosystem but also in the global trends that our portfolio represents in itself. For example Chime and the rise of the digital neobank across the world, Glovo and OnTruck emerging during the rapid transition to on-demand even in industries such as logistics or Layie as a potential leader of the RPA (Robotic Process Automation) revolution in China.
In the last few years, China has emerged as a powerful tech-center particularly around e-commerce and AI. China is now on par with Silicon Valley in leading the evolution of technologies and services that will greatly impact the future across industries. For example, Bytedance’s Tik Tok surpassed the 1B downloads milestone in early 2019 and is used in more than 100 markets worldwide including 75 languages — showing just how powerful AI-enabled services are in not only China, but throughout the world. China is also unique in that the AI revolution has transformed key industries, such as the automobile industry, faster than other regions. For example, we’ve seen new business models emerge that redefine the value of a car from its initial sale to a lifetime product. This includes predictive maintenance provided through collaborations and an exchange of data between all the actors of the value chain.In 2020, we believe more and more industries will join the AI revolution in China and the Bytedance case will become one of many examples of AI-powered Chinese services across many domains (i.e., education) emerging in the race for global leadership.
The Rise of Impact Tech: Tech for Good Moves Beyond Hype to Tackle Real World Issues
While the pros and cons of some recent technology innovations have been widely debated, in 2020 we will see a renewed focus on “technology for good” that moves beyond the hype. Driven by the convergence of various fields of sciences and applied technologies combined with eco-conscious consumers, innovative startup platforms and new business models that achieve global scale quickly — technology will now be able to address critical human needs that benefit the majority of people worldwide. In addition, Venture Capitalists will dedicate more resources to backing this next generation of sustainable products and services that provide significant impact and just as the mobile revolution transformed China, we’ll see a “sustainable leapfrog” from emerging markets (e.g., Southeast Asia, Africa and Latin America).
We’ve seen that many of the most successful companies are also the most socially impactful. Looking within our portfolio for a few examples there’s KaiOS, the affordable smart-feature phone startup looking to solve global issues such as the digital divide and has connected more than 100 million people to the internet for the first time. This kind of impact has landed them on Time’s Best Invention list in 2019 and its partnership with India’s Reliance Jio in the number one spot on Fortune’s Change the World List in 2018.
Another example is in Pinduoduo, our early backed Chinese social commerce company which in four years since founding has become the second largest ecommerce platform in the country second to Alibaba. Pinduoduo supports multiple initiatives around anti-poverty and brand-revitalization to create economic and employment opportunities. They recently earned farmers sales revenue of more than $9.7 billion through a program dedicated to selling produce from poverty-stricken areas.
Fintech Unleashed: Collaboration and Connectivity as the Catalyst to Mainstream Fintech
In the last few years, technology has brought forward a significant change in services across industries, with fintech perhaps taking center stage. There’s been an explosion of fintech’s on both the consumer side, such as our portfolio companies Chime or Mexico’s Kueski, and the B2B side, such as Fundbox’s SMB payments and credit network. From digital banks to lending to insurance (and much more), we’ve seen many fintech’s emerge to fill the gaps in financial services throughout the world.
While the fintech industry has seen phenomenal progress to date — we believe that 2020 will be the year that it starts going mainstream on a global level due to an increase in collaboration and internet connectivity. In developed countries like the U.S., more and more financial institutions and traditional banks are getting into the fintech game which not only helps the fintech scale but grants incumbent’s access to innovative technology and business models. Another part of this is the increasing horizontalization of fintech — where innovation in the space cuts across industries and allows non-financial firms to offer financial products (i.e., Amazon, Shopify).
Whereas in emerging economies with more and more of the population connecting to the internet for the first time, fintech’s are able to provide access to credit or new banking options that stand to achieve terrific adoption rates. KaiOS believes that with the introduction of these new services, we will see 2 billion new smartphone connected people in the next five years. We have clearly seen this trend come to life with Indonesian fintech leader Finaccel, granting more than 30 million of loans through its lending platform, or Migo, similarly granting millions of loans in Nigeria in a short period of time.
Parting Thoughts: Cheers to 2020
While predictions in their nature are always hit or miss — we are optimistic about the year to come as there’s never been a more exciting time for the ever-evolving world of technology. From the globalization of tech and investment platforms, to mainstream fintech and a greater focus on impact — these are just a few of our ideas about where the industry is headed as a whole. We have never seen such a fast path of Innovation, and it continues to accelerate today led by the US and China through the rise of AI. But with great innovation also comes a great responsibility shared among all the members of the community. As Venture Capitalists, we look forward to playing our part by starting to use an ROI+Risk+Impact framework rather than just ROI+Risk framework to evaluate future investments.