SOSV 1000 Startups Series: Chinaccelerator, MOX, and the next 4 billion mobile users
In 2020, SOSV invested in its 1,000th startup. In this series, SOSV GPs share insights on some lessons learned on the way, and the future of their sector.
- Program names: Chinaccelerator, MOX
- Program focus: Cross-border internet from the world to Asia & within Asia
- First program year: 2010
- Number of Investments to date: 218
- SOSV GP (interviewed below): William Bao Bean
How would you describe the focus of Chinaccelerator and MOX?
WBB: We’re cross-border internet. Chinaccelerator was the first accelerator to start in SOSV. We started in 2010, and 2020 is our 10th anniversary. We’re toward the end of our batch 18. What we focus on with cross-border internet is helping companies from all around the world and especially Asia go cross border to Asia and within Asia. Chinaccelerator invests in companies focused on selling to enterprises across Asia and consumer and enterprise into and out of China. In the past our focus was on helping global entrepreneurs focused on the consumer Internet to enter China. Today we help global enterprise entrepreneurs — from SaaS to B2B selling into large enterprises — sell to China and across Asia and also Chinese consumer focused entrepreneurs that want to expand outside China.
MOX, the mobile accelerator, invests in consumer-facing mobile apps and services. We believe that the consumer internet is fundamentally broken. It’s wrong to raise money and then transfer all that money to Facebook, Google, Alibaba, and Tencent for ads just to get users. We are changing the rules by helping our companies add new users through partnerships.
So how does MOX work? We help our companies get free user acquisition through our partnerships with handset brands like Samsung, telcos, traditional media from newspapers to TV stations and even digital media companies who find it hard to make money on ads. And in return, our MOX companies give these partners revenue share on lifetime revenues all revenue streams. Our unfair advantage is that our partners have over a billion users and they’re willing to promote our mobile apps and services for free in return for a recurring revenue share. Based on these partnerships MOX apps and services have already grown to 60 million monthly active smartphone users and have started to cross promote each other.
What matters is that consumers love a service, not how much money a company has raised. We are changing the rules and driving a revolution from media based relationships to revenue share based partnerships where everyone wins. We’re building an ecosystem here at SOSV, MOX, and Chinaccelerator that’s based on trust — not based on making a buck on advertising. Our startups don’t have to give their entire company away in return for cash that they then just give to tech giants for advertising.
We’re five years into MOX and starting to get some real traction in some big markets with not just one company but multiple companies in a mutual support network across borders. This strategy is enabling us to build a consumer internet portfolio that is world-class with very little capital. We can take a startup from 1 million users to 10 million in a year or less without having to pay for ads.
What is your current perspective on your sector?
WBB: In the last two and a half years in cross border internet — Chinaccelerator and MOX — we’ve invested in about 80 companies. Over the last two and a half years, 80 companies that we’ve invested in saw 63% revenue growth in the beginning of 2020. For Chinaccelerator batch 17, the largest batch we’ve ever had (14 companies), our internal goal was to help them grow their net revenue and gross profit by 3X (300% growth in three months). What happened in fact was 450% growth — 4.5X net revenue over the course of the three months from March 15th to June 15th.
There are companies that are benefiting from this horrible situation. There are companies that are destroyed by this horrible situation. Our role as venture capitalists is not the capital, it’s the venture. And when I say venture, our job is to help our companies navigate through tough situations. We’ve helped our companies change and pivot. Very few of our companies decided to hibernate. They decided to go out there and change what they do, and how they’re doing it, to go from, in this current tough environment, a “nice to have” to a “have to have”.
“Our role as venture capitalists is not the capital, it’s the venture. And when I say venture, our job is to help our companies navigate through tough situations.”
—SOSV GP William Bao Bean
Has your investment focus evolved over time?
WBB: Our investment focus evolves constantly. I’ve been doing tech investment since 1996 and been through three cycles: the Asian crisis, SARS, now COVID-19 — and you learn a few things about cycles when you go through cycles. So, what are we doing? Well, the funny thing is that a lot of the changes that we’ve put in place a year ago or two years ago, are holding us in good during this tough time. Most people don’t understand that China, for about one quarter of one year, was the number one venture capital market in the world, and that more venture capital was in China over a six month period than in the US. And then it crashed. So from September 2018, all through last year, there weren’t as many deals. It was not a hot market. But that really didn’t affect us because our companies focus on traction first, fundraising second. We don’t really push or encourage our companies to raise money unless they have something to spend it on. Now they could be pre-revenue and they want to spend it on taking their technology, since we’re a deep tech fund, from where it is to something that can be delivered. For mobile internet and for enterprise, in MOX and Chinaccelerator, what we focus on is taking those products that are working, that maybe only a thousand people love, and then scaling it up in their home market and taking it cross border. So we’re always changing. We’re always adapting. We’re data driven, cross border, market entry. And when you go from one market to another market, everything changes. I would say that we’re uniquely prepared. The interesting thing is that we’re not putting the brakes on, but we’re not accelerating either. We’re continuing to stick to our model through this tough time, because the best returns are made on investments that are made during a downturn. I think people understand this from the numbers, but because SOSV and all of our partners have been around through two, three, four cycles, we actually have the experience and the understanding to make this work. So it’s not just a tagline. It’s actually a strategy.
What are some portfolio highlights?
WBB:
LotaData — Tracking populations to safeguard people
When people think about smart cities, no one knows what they mean. The only people who know what smart cities are are the marketing agencies who try and raise money off the back of it. So what exactly is a smart city? It’s using data to make people’s lives better. And the problem that happened with COVID-19 is that mostly in cities, people’s lives became very rapidly…not so good. Our company LotaData has already been working with cities like San Francisco and Oakland on how to track the population in order to improve traffic — because if anybody has ever been to San Francisco, they know the traffic sucks.
Now, the interesting thing is that when COVID happened, something else came up: How do you track populations in order to safeguard people? So we took the data that we had — the location of people and where they were traveling to — in order to help governments from the state of California, to Canada, to Mexico, to Italy, help respond to the COVID crisis by making sure that, when a lockdown was called, that people actually stayed put. For folks that did not stay, to be able to trace them, not individually, but as groups, allowed governments to make sure that the appropriate resources were deployed to the likely outbreak points before the breakouts actually happened. When you know that you have 20 people going from a hot zone, and they are all traveling to another place populated by everybody’s grandparents, you want to send your resources there to make sure that you don’t lose the grandparents. And that’s what we did, from Mexico to Canada, California, to Italy, for LotaData.
Snapask — A tutor in your pocket
The funny thing about parents is as soon as they graduate college, and then as soon as they get a job, and as soon as they get married, and as soon as they have children, they forget how to do math. Now, the problem is when you’re locked down with your children and you don’t remember how to do math, and you are forced into something called distance learning, you’re in trouble! So, Snapask is a tutor in your pocket. What you do is you take a snap of the calculus 2 problem set, and an expert comes in within 11 seconds and helps your son or daughter get through their problems step by step, usually in 10 or 15 minutes, on demand. This company did extremely well last year, they raised a $35 million Series B, which closed in December or January. And then when COVID hit in Asia, we now had lots of people who were stuck at home with their children and forgot how to do trigonometry. In two months, Snapask did the entire revenue of all of last year. And we’re solving a real problem: helping students get through complex academics in preparation for their college entrance exams, and to pass 10th, 11th, 12th grade. And we’re also helping out parents who are uniquely unprepared to provide that tutoring, because as soon as they left high school, they promptly forgot the math they learned. Snapask went into COVID extremely well-funded with $35 million in dry powder. And, you know, they didn’t even have to do any marketing because they’re helping solve a problem with a must-have solution, for parents across Asia and now the rest of the world, which is helping kids with homework. We’re getting rich on that one.
Have you seen any changes in geographic and gender diversity throughout your experience in Chinaccelerator and MOX?
WBB: No. The reason why we were the number one most active investor in female led startups in the world (and now we’re number five, and I’m super happy that there are now four others in front of us, because being number one is not something you want to be) is that 40% of SOSV companies are female-led, and actually for Chinaccelerator and MOX, 20% to 40% of the CEOs are female. We’re here to make money and to help amazing entrepreneurs make money, and make money for our LPs. The best way to do that is to back the best teams, and the best teams just happen to be extremely diverse.
What are the biggest opportunities you see today? In the next decade?
WBB: We believe that the most fundamental change the world will see over the next decade is that the next 4 billion people who are currently not on the Internet will connect for the first time through smartphones. We are focused on investing in startups serving consumers that make $250-$1000 per month, and soon those with even less income. We call them Mobile First and Mobile Only in that these users’ first or only experience with the internet is on a smartphone, and we believe this is a huge opportunity as low income populations use technology to leapfrog consumers in North America and the US in areas such as financial services, ecommerce, media, education, and games.
RSVP to Chinaccelerator Batch 18 Demo Day on Wednesday, Dec 9th!
Further reading:
SOSV 1,000 Startups Series: IndieBio & The Future of Human and Planetary Health
