“The upsurge of new ventures is sweeping Europe and the United States!” The German weekly “Focus” recently reported that a large number of companies have closed down in Europe and the United States due to the epidemic. But at the same time, the start-up ecosystems in Europe and the United States are becoming more and more robust, and the number of applications for new companies has increased the fastest in 10 years. “The epidemic is reshaping the European and American economies, accelerating technological change and innovation and entrepreneurship.” Kasper, an economist from Hamburg, Germany, told the reporter that entrepreneurs take advantage of people’s pent-up needs and seize new opportunities. For Chinese investors, this is also a new business opportunity.
Keep up with the bankruptcy wave
Recent data released by the management consulting firm McKinsey show that if the epidemic in Europe continues to worsen, there will be a serious wave of bankruptcy. In the next six months, 10% of small and medium-sized enterprises in Europe will line up for bankruptcy. By September next year, 55% of SMEs in Europe will face the risk of bankruptcy. Data from online review site Yelp also showed that from March 1 to July 25, more than 80,000 companies in the United States were permanently closed, most of which were small and medium-sized enterprises.
However, with the wave of business closures, new companies are also emerging. The Wall Street Journal recently reported that data from the U.S. Census Bureau showed that the number of employer ID applications required by entrepreneurs to start companies this year has exceeded 3.2 million, compared with 2.7 million in the same period in 2019. “This epidemic actually caused a surge in startups and brought us back to the days before the recession,” said Haltiwanger, an economist at the University of Maryland. The Wall Street Journal called this entrepreneurial wave a phenomenon of “creative destruction.”
Small businesses are mostly emerging in the entrepreneurial wave. One of them is OKZoomer, an app developer who lives in Dallas, USA, and his brother Jorge opened a practical dating site for college students, OKZoomer. It currently has 20,000 users and employs 6 employees to develop mobile apps. Daniel Payton, who lives in Miami, became the founder of the fitness platform. In mid-June, she and co-founder Rachel Siegel launched the online fitness course platform Kuu-dose, which costs $9.99 a month or $99 a year. Payton said the company has already signed contracts with 550 customers.
In Europe, entrepreneurial cases are also emerging in endlessly. During the epidemic, three young Germans including Eric established an electric bicycle company Dance in Berlin, aiming to provide consumers with a “subscription” service for electric bicycles. The company just received 15 million euros in financing this week. Dance electric bike costs 59 euros per month. After users place an order on the official website, the bike will be delivered to the door within 24 hours. The company hopes to extend its business to the European and even American markets in the future.
According to the German “Business Daily”, the investment attracted by startups in Europe in 2019 reached 30 billion US dollars, and this year this figure is expected to exceed 35 billion euros. Especially in countries such as Germany and France, not only are EU projects supported, governments at all levels also provide assistance to start-ups.
China has no shortage of investment masters
“Chinese investors have been investing in start-ups in Europe and the United States for about 10 years.” Economist Casper said that first he was looking for investment targets in the Silicon Valley of the United States, and now the tide has turned to Europe, Southeast Asia and other regions. Chinese companies such as Tencent and Alibaba are veterans of investment.
The most talked about by the venture capital community is Hong Kong tycoon Li Ka-shing. Li Ka-shing’s Victoria Harbor Investment has invested in many successful projects in the United States and other places in the past 10 years, including the US cloud video conferencing company Zoom. As early as 2013, Victoria Harbor Investment had invested in equity and led a US$6.5 million Series B financing. Two years later, it participated in Zoom’s Series C financing of US$30 million. It is reported that a total of US$8.5 million has been invested in Zoom during this period. According to Bloomberg statistics, based on the stock price on September 1, Li Ka-shing’s Zoom shares are worth as much as 11 billion US dollars.
Tencent is also a master in the investment world. Its most well-known investments involve video game companies, including the Finnish company Super-cellOy that produced “Clash of Clans” and RiotGames, the production company of “League of Legends”. In Silicon Valley, Tencent has also invested large sums of money in various projects, from electric vehicles to space tourism and asteroid mining.
There is also Alibaba. In March 2014, the company invested US$215 million in Tango, an instant messaging application, which attracted worldwide attention. After that, Alibaba also participated in a US$170 million investment in Fanatics, an online retailer of sports memorabilia, and Kabam, a video game startup, also received a US$120 million investment from Alibaba. Alibaba also invested 90 million euros last year to invest in data Artisans, a data processing startup in Berlin, Germany.
According to data released by Rhodium Group in September, China’s direct investment in the United States increased slightly in the first half of 2020 from the first half of 2019, from 3.4 billion US dollars to 4.7 billion US dollars. But this is mainly because Tencent bought a minority stake in Universal Music for US$3.4 billion.
Transfer from the U.S. to Europe
Casper told the reporter that for European and American start-ups, Chinese investors have three major advantages: First, sufficient funds; Second, they can help technology start-ups enter the Chinese market; Third, Chinese investors tend to It is a large group, which is conducive to the long-term planning and development of start-ups. “Now is a good time to invest in European and American start-ups. Because of the epidemic, European and American countries don’t provide enough support for start-ups and foreign investors are needed,” he said.
Casper also believes that the focus of Chinese investors entering Europe and the United States is to locate the “Silicon Valley” everywhere. In addition to the Silicon Valley in San Francisco, there are also many “Silicon Valleys” in Europe, such as London, Paris, Berlin, and Zurich. For example, Berlin has sprung up in recent years and has been selected as the “European Startup Capital” many times. Currently, there are about tens of thousands of startup companies in Berlin, mainly involved in software development, financial technology and online shopping platforms.
Rudiger, the head of the investment department of the Berlin city government, told the reporter that Berlin welcomes Chinese companies to enter the Berlin Innovation Park and also welcomes Chinese venture capital. For example, Beijing Liangdao Intelligent Vehicle Technology Co., Ltd. opened a branch in Germany, focusing on the testing and verification of autonomous driving environment perception systems. Soon after the establishment of Liangdao Germany, it received the support of the Berlin City Government’s “Improving the Economic Regional Structure” project, with a total amount of 2.43 million euros in three years. Rudiger believes that, for Chinese investors, the biggest advantage of investing in Germany and Europe is the stable social environment and policies, abundant professionals and numerous government preferential policies.
The biggest problem in investing in European and American companies now is policy. The Washington Post reported in September that the Committee on Foreign Investment in the United States is stepping up its reexamination of Chinese investment in US technology start-ups in the past few years. This worry in Europe is also growing. They believe that the current medium-term investment of European start-ups mainly comes from foreign investors such as China, which has caused many European start-ups to no longer be European, and therefore require the EU to restrict such investments. In this regard, Kasper believes that, compared with large companies, although start-ups have technology, they receive less government attention, so investment opportunities are still great. Chinese investors can avoid industries that European and American countries pay close attention to, such as artificial intelligence, data analysis, and network security, and turn to industries that have not yet “closed”, such as biotechnology and pharmaceuticals. He believes that in the past 10 years, the United States has been a hot spot for Chinese investment, and in the next few years, more will turn to Europe and other regions.