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w w w . a b a c u s n e w s . c o m / c h i n a - i n t e r n e t - r e p o r t CHINA INTERNET REPORT 2 0 1 8 Table of Contents China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 2 11 21 2 Source: US Census Bureau, Pew Research, Newzoo, Statista, eMarketer, CNNIC, IMF At a Glance: China vs. US Internet Although China's internet penetration is just over 50%, its sheer scale means there are 3x the number of smartphone users and 11x the number of mobile payment users in China than in the US. 3 Internet Smartphone Mobile Internet Mobile Payment China vs. US Top Players for Key Verticals 4 IN CHINA IN US Top Chinese Startup Cities Beijing is the country's top startup city based on valuation, followed by Hangzhou, Shanghai and Shenzhen. Source: China Money Network Total Valuation ($B) # of Unicorns Beijing 305 61 Hangzhou 240 17 Shanghai 115 34 Shenzhen 61 11 Ningde 20 1 Guangzhou 7 2 Zhuhai 6 2 Suzhou 4 2 Tianjin 3 2 Nanjing 2 2 Wuhu 2 1 Guiyang 2 1 Hong Kong 2 2 Chongqing 2 1 Wuhan 2 1 Dongguan 1 1 Wuxi 1 1 Grand Total 773 142 5 Top Chinese Internet Players (1 of 2) Company CEO Selected Investors Listed on Market Cap/ Valuation (US$) 1 Alibaba Daniel ZHANG G Squared, Vulcan Capital, Softbank, Goldman Sachs NYSE: BABA 492.4B 2 Tencent Pony MA Naspers, IDG Capital Partners, PCCW HKG: 0700 479.6B 3 Ant Financial Eric JING Alibaba Group, NSSF, CDIB, CCB International Private 150.0B 4 Baidu Robin LI ePlanet Capital, IDG Capital Partners, Google, China Equity Venture TDF NASDAQ: BIDU 87.8B 5 Lufax Gregory D GIBB CICC, COFCO, Arbor Ventures, BlackPine Private Equity Private 60.0B 6 JD LIU Qiangdong Hillhouse Capital Group, Capital Today, Tiger Global Management NASDAQ: JD 56.6B 7 Didi Chuxing CHENG Wei Alibaba Group, Softbank, Tencent Holdings, Ping An Private 55.0B 8 Xiaomi LEI Jun All-Start Investment, Morgan Stanley, Shunwei, YF Capital, Qiming Ventures Partners HKG: 1810 47.9B 9 NetEase DING Lei SoftBank Capital, Capital Today NASDAQ: NTES 34.3B 10 Qihoo 360 ZHOU Hongyi Sequoia Capital, Matrix Partners, IDG Capital Partners SHA: 601360 28.7B As of July 9, 2018 6 Source: Crunchbase, ITjuzi, Zero2IPO Top Chinese Internet Players (2 of 2) Company CEO Selected Investors Listed on Market Cap/ Valuation (US$) 11 Meituan Dianping WANG Xing Sequoia Capital, Google, Tencent, IDG Capital Partners Private 31.8B 12 Toutiao ZHANG Yiming Sequoia Capital, SIG China, Sina Weibo Private 28.6B 13 Tencent Music Group Cussion PANG Tencent Private 25.0B 14 TAL Group ZHANG Bangxin Tiger Global, KTB Ventures NASDAQ: TAL 21.6B 15 Sina Weibo WANG Gaofei Alibaba NASDAQ: WB 20.2B 16 Suning ZHANG Jindong Alibaba SHE: 002024 18.5B 17 DJI Frank WANG Sequoia Capital, Accel Partners, LH Capital Management Private 15.0B 18 Momo TANG Yan Stonebridge Capital, Matrix Partners, Alibaba NASDAQ: MOMO 9.5B 19 China Literature WU Wenhui Tencent HKG: 772 8.9B 20 Giant Interactive Group LIU Wei SIG China Private 7.7B Source: Crunchbase, ITjuzi, Zero2IPO As of July 9, 2018 7 Xiaomi Is The Largest Chinese Internet IPO Since 2017 Largest Company IPOs CEO/Founder Listed on Date of IPO Market Cap (US$) at IPO Xiaomi LEI Jun HKG: 1810 2018/7/9 47.9B iQiyi GONG Yu NASDAQ: IQ 2018/3/29 13.5B China Literature WU Wenhui HKG: 0772 2017/11/8 11.8B ZhongAn CHEN Jin HKG: 6060 2017/9/28 11.0B Qudian LUO Min NYSE: QD 2017/10/18 7.9B Ping An Good Doctor WANG Tao HKG: 1833 2018/5/4 7.4B Yixin Group ZHANG Xu-An HKG:2858 2017/11/16 6.5B Sogou WANG Xiaochuan NYSE:SOGO 2017/11/9 5.1B Best Express ZHOU Shaoning NYSE: BSTI 2017/9/20 4.2B Paipaidai ZHANG Jun NYSE: PPDF 2017/11/10 3.9B Jianpu.ai YE Daqing NYSE: JT 2017/11/17 3.3B Bilibili CHEN Rui NASDAQ: BILI 2018/3/28 3.2B Huya TV LI Xueling NYSE:HUYA 2018/5/11 2.4B LEXIN XIAO Wenjie NASDAQ: LX 2017/12/21 1.8B Rise Center SUN Yiding NASDAQ: REDU 2017/10/20 913M G-bits SU Huazhou SHA: 603444 2017/1/4 870M Longshine XU Changjun SSE:300682 2017/8/1 678M hexindai.com ZHOU Xinming NASDAQ: HX 2017/11/4 500M China Rapid Finance WANG Zane NYSE: XRF 2017//4/28 350M SECOO LI Rixue NASDAQ: SECO 2017/9/22 333M Source: Crunchbase, ITjuzi, Zero2IPO 8 Jan 2017 Jul 2018 Notable Acquisitions Of Chinese Start-ups Since 2017 9 Jan 2017 Jul 2018 (1) $9.5B is the enterprise valuation of Ele.me; Alibaba and Ant Financial owned 43% with Alibaba acquiring the remaining shares. Source: Crunchbase, ITjuzi, Zero2IPO Notable Acquisitions CEO/Founder Acquired by Amount of Acquisition (US$) Ele.me ZHANG Xuhao Alibaba 9.5B(1) Mobike HU Weiwei Meituan-Dianping 2.7B Cheyipai WANG Xuejian Souche 1-2B Dangdang LI Guoqing HNA Group 1.1B Waimai(Baidu) GONG Zhenbin Ele.me 800M Tantan HAN Zhibai Momo 600M Tian Tian Express XI Chunyang Suning Commerce Group 472M Lagou.com MA Delong 51job 119M Hellobike YANG Lei Youon Bike Undisclosed Maoyan WANG Xing Enlight Media Undisclosed Kanche.com WEI Zheng Yixin Group Undisclosed Bluegogo HU Yufei Didi Undisclosed FaceU GUO Lie Toutiao Undisclosed Most Active Chinese Venture Capital Firms Venture Capital Firm Selected Investments Zhen Fund Ofo, Mia.com, Zhaogang.com, Jumei.com, Meicai.cn, UR WORK, YITU, Vincross Polly.ai, UMA, BeSound, EHANG, Mobnote, SUGR Cube, Vidoo IDG Capital Partners Baidu, Xiaomi, SouFun, Ctrip, 360, Meitu, iQiyi, Sohu.com, Meituan, XPeng, Pony.ai, NIO, Razer, SenseTime, Pingduoduo, LingoChamp(liulishuo) Matrix Partners Zhaogang.com, Babytree, Ofo, FUTUS.com, DIDI, 36kr, Lieping.com, MOMO, Baofeng.com, Ele.me, Yuantiku, VIPKID, Qingting FM Sequoia Capital JD, 360, VIPKID, Toutiao, ThinkForce, Horizon Robotics, Versa NIO, BGI, Dajiang, YITU, 100Credit, Ping++, Dianping K2VC Fenqile, Zhaogang.com, Mia.com, Jumei.com, Tiger Brokers, Qichacha, Duodian Shunwei Capital 51talk, iQiyi, Kuaishou, Renrenche, Xiaomi, DXY.cn, Jimu, iKongjian.com, 17zuoye.com Plum Ventures Yiigoo, CHJ, mia.com, Huoqiu.cn, Qudian, 8btc, Changba, NIU Legend Capital Bilibili, Paipaidai, Ribo, Zuoyebang, Musical.ly, Damai.cn, BitAuto, Zhaopin.com Sinovation Ventures Zhihu, Jing Chi, Bitmain, BroadLink, ImbaTV, Meitu, Qingting.FM, URWork, Face++ Shenzhen Capital Group Maijing Gene, DidaTravel, Formlabs, Pagoda, Huada Empyrean Software, Wetalk TV, Topline, Suning Finance Fortune Venture Capital Shihou TV, CloudIn, aihuishou, YOHO, BlueFocus, Hua Shu, Huayou Cobalt, COSHIP, Focus Media, NewRank, Yidou360 Qiming Venture Partners Mi, Face++, UBTECH, BingoBox, Tongdun.cn, Xueba100.com igetget.com, Zhihu, Wacai, Mobike Jan 2017 Jun 2018 10 Source: Crunchbase, ITjuzi, Zero2IPO Table of Contents China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 2 11 21 11 Four Overarching Themes Chinese Internet Companies Embrace 'Social+' Chinese Internet Giants Are Doing Everything Chinese Internet Empowers Rural Population Government Is The Visible Hand 12 Chinese Internet Giants Are Doing Everything (1 of 2) 13 Whether it's building or investing/acquiring, Baidu, Alibaba and Tencent are present across the internet ecosystem. Industry Baidu Alibaba Tencent Build Invest/Acquire Build Invest/Acquire Build Invest/Acquire Ecommerce / O2O / Retail - Bitauto, Uxin Taobao, Tmall, Hema, Aliexpress Ele.me, Xiaohongshu, Yiguo, Sun Art, Suning Lazada, Paytm - JD, Meitan Dianping, Bitauto, Pinduoduo, Xiaohongshu, Vipshop, Meili Inc, MissFresh, Yonghui Content & Media Baidu News, Baidu Tieba, Baidu Knows, Baidu Wiki iQiyi, PPS Alibaba Music, Alibaba Pictures Youku Tudou, Wanda Film, Wasu Media Tencent Video, Tencent News, Tencent Reading, Tencent Music, Tencent Pictures Kuaishou, Bilibili, China Literature, Qutoutiao, Bona Film, Huayi Brothers Media, SoundHound Messaging & Social - - Dingtalk Weibo, Momo, Snap Wechat, QQ Zhihu, Snap Sharing Economy - Shouqi Limousine & Chauffeur, Uber - Didi, ofo, Lyft - Didi, Mobike, Uber, Lyft AI Baidu AI SoundAI Alibaba AI Lab SenseTime Tencent AI, Tencent Youtu ObEN Smart Devices - Raven Tech Tmall Genie - - LeTV, Tile Selected companies built or invested/acquired by BAT(1) (1) Investments by holding company only. Source: Crunchbase, media reports Investments outside of Mainland China *For the full list of 400+ companies that BAT have built/invested/acquired, visit: https://www.abacusnews.com/china-internet-report/full-list.html Chinese Internet Giants Are Doing Everything (2 of 2) 14 Whether it's building or investing/acquiring, Baidu, Alibaba and Tencent are present across the internet ecosystem. Industry Baidu Alibaba Tencent Build Invest/Acquire Build Invest/Acquire Build Invest/Acquire Autonomous Car Apollo Velodyne LiDAR Alibaba(2) - Tencent(3) Nio, Tesla, CYNGN Blockchain - Circle Alibaba and Ant Financial - - Webank, Blockstream Fintech Du Xiaoman Financial Yintai Capital, Zest Finance Ant Financial ZhongAn Tencent Financial Technology ZhongAn, Lufax, Webank, CICC Education Baidu Jiaoyu Hujiang Education Taobao Jiaoyu iTutor Group Tencent Class VIPKID Gaming Baidu Game - Ali Games Ejoy Technology Tencent Games WeGame Huya, Douyu, Supercell , Riot Games, Kakao Games Esports - - - AGTech Holdings Tencent Esports VSPN Others Baidu Search, Baidu Cloud, Baidu Map China Unicom, Ctrip, Qunar, Home Link, WM Motor AliCloud, Alimama, Alibaba Health, UCWeb, Fliggy (Alitrip) China Unicom, AutoNavi, Intime, Cainiao Logistics, Xiaopeng Motor, Magic Leap, Softbank Robotics Tencent Cloud, Tencent Map China Unicom, Home Link, Sogou, 58.com, Manbang, WM Motor Selected companies built or invested/acquired by BAT(1) (1) Investments by holding company only. (2) AI Resarch Lab. (3) Tencent Autonomous Vehicle Laboratory. Source: Crunchbase, media reports Investments outside of Mainland China *For the full list of 400+ companies that BAT have built/invested/acquired, visit: https://www.abacusnews.com/china-internet-report/full-list.html Chinese Internet Empowers Rural Population (1 of 2) The number of rural internet users in China reached 209m in 2017 with a penetration rate of 35%. 53 85 107 125 136 156 177 178 195 201 209 7% 12% 16% 19% 21% 24% 28% 29% 32% 33% 35% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Internet users in rural China (M) Internet penetration rate in rural China Source: CNNIC, China National Bureau of Statistics Annual per capita disposable income of rural residents in China is only US$1,870 in 2016, which is already up 47% compared to 2012 15 Chinese Internet Empowers Rural Population (2 of 2) The internet has contributed significantly to the development of ecommerce, education and media in rural China. 55M The number of students in rural schools that are reachable by live-streaming classes 50% The percentage of poor villages that will be equipped with ecommerce capabilities by 2020 8% The minimum of a local government's annual budget that must be spent on digitalization of education 2,100+ The number of Taobao villages1 in 2017, accounting for 490,000 active online shops, US$19 billion in annual sales and 1.3 m new jobs created 78M The number of rural users who read news from the three primary news apps at least once a month 175M The number of short video app users from rural China (1) Any rural village where at least 10% of households sell goods online with annual sales of at least US$1.6M Source: Alibaba, QuestMobile, State Council Leading Group Office of Poverty Alleviation and Development, Ministry of Education, Research Institute of Rural Education at Northeast Normal University Education Ecommerce News & Entertainment 16 Chinese Internet Companies Embrace 'Social+' (1 of 2) Chinese ecommerce companies have adopted a Social+ model where their business is anchored by a social pillar that drives user engagement and growth. Source: SCMP, 36kr Social commerce app with 156M monthly active users ("MAUs") at the end of 2017 Discounts are offered if a user successfully starts a "group buy" by sharing the deal with friends and encouraging them to also make a purchase Above robot vacuum normally retails for 399 but a "group buy" can bring the price down to 288 The app's main tab is a feed featuring influencers with product photos, videos, reviews and tips Social commerce platform which operates like a combination of Instagram, Pinterest and Amazon with 30M MAUs in 2018 Users are encouraged to post photos of themselves and tag clothes, accessories, or make-up products they use to the corresponding ecommerce listings within the platform Xiaohongshu Pinduoduo 17 Chinese Internet Companies Embrace 'Social+' (2 of 2) Ecommerce platforms aren't the only ones who have adopted the Social+ model though other verticals such as media and education have incorporated these social elements into their business model. Source: SCMP, Nasdaq Hulu-like online video platform with 126M+ DAUs Launched its own social media platform iQiyi Paopao, which has 46M+ DAUs iQiyi News app with 10M+ daily active users (DAUs) Uses financial incentives to build followers, relying heavily on users' existing social networks Offers cash when users and their followers read news on consecutive days. Qutoutiao English-learning app that encourages users to share their progress daily on their WeChat Moments feed in return for an incentive If readers stick to the plan and share their progress for 80 consecutive days, they are rewarded with free English books Mint Reading 18 Government Is The Visible Hand (1 of 2) Success or failure in China's internet landscape, especially fintech, is contingent upon government authority. Source: SCMP, Abacus, Sina 19 Sept 2017: Cryptocurrency exchanges and initial coin offering banned by the government. Dec 2017: China's central bank and regulatory commission tightened rules around internet financing and peer-to-peer online lending, wiping out smaller players. The last three years have seen the number of P2P companies shrink from 6,000 to 2,000. Government Is The Visible Hand (2 of 2) Chinese content-driven internet companies are also closely monitored and faced restrictions from government. Source: SCMP, Abacus, Sina 20 Feb 2018: 17 online quiz app makers were halted by the State Administration of Press, Publication, Radio, Film and Television and told to clean up their act April 2018: China's media regulator ordered news aggregator Toutiao and live-streaming app Kuaishou to clean up content on their platforms, singling out both platforms for disrupting order in the online media industry. March 2018: Beijing cyberspace authorities ordered Zhihu, 'China's Quora,' to delist from all app stores from March 2 to March 9 due to their inefficiency in purging "illicit information" on the platform. Table of Contents China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car 2 11 21 21 21 29 37 43 49 58 63 68 75 81 86 91 Alibaba And JD Still Dominate, But Social Commerce Is On The Rise Source: QuestMobile, 36kr In the past year, Pinduoduo has grown to become the 3rd most popular ecommerce platform in China. 0 100 200 300 400 500 600 Mar Apr May June Jul Aug Sep Oct Nov Dec Jan Feb Mar Taobao JD.com Pinduoduo VIPshop China's Top Ecommerce Platforms By Monthly Active Users m 2018 2017 Launched in 2015, Pinduoduo is a social commerce platform that allows users to participate in group buying deals. Last July, Pinduoduo surpassed VIPshop to become the 3rd most popular ecommerce platform. In 2017, 2.5 years since Pinduoduo launched, the company's Gross Merchandise Value exceeded RMB100B (US$15.6B) it took JD 10 years, VIPshop 8 years and Taobao 5 years to achieve this milestone. 22 Ecommerce Is Reshaping Grocery Shopping In China (1 of 3) China's online grocery market is expected to reach US$30B this year. Source: iResearch 2.0 4.3 7.8 13.6 21.7 30.4 2013 2014 2015 2016 2017 2018e China's Online Grocery Market US$ Billion +73% p.a. 23 Ecommerce Is Reshaping Grocery Shopping In China (2 of 3) New forms of online-to-offline (O2O) grocery stores have emerged across China. Alibaba's Hema supermarket spearheaded the new O2O grocery shopping in China. It features mobile app shopping and payment, has in-store dining and also serves as a warehouse with a ceiling conveyor system. Hema has 46 stores in 13 cities as of May 2018 and recently announced 24- hour delivery service for its stores in Beijing and Shanghai. Source: SCMP, Alizila 24 Ecommerce Is Reshaping Grocery Shopping In China (3 of 3) New forms of online-to-offline (O2O) grocery stores have emerged across China. Source: SCMP, Tencent, JD JD launched its first offline fresh-food supermarket, called 7Fresh, in Beijing in early Jan 2018. The new store has 4,000 m2 of floor space and smart carts which guide shoppers to their desired aisles. It has cooked-food stalls, offers fresh food and provides delivery within a 5 km radius so users receive groceries in 30 minutes. Tencent has invested heavily in Super Species, the fresh grocery store brand of Yonghui Superstores. Super Species employs a hybrid model of "high-end supermarket + fresh food restaurant + O2O". 25 Digital Retail Has Transformed Mom & Pop Shops Alibaba and JD aim to transform the six m convenience stores across China. Source: Alizila, AB Bernstein Before Integrated Retail For China's Mom & Pop Convenience Stores After Alibaba and JD have launched 'Ling Shou Tong' and 'Zhang Gui Bao' initiatives aimed at integrating local convenience stores into their ecosystem by providing modern analytics and operations. Ling Shou Tong offers a suite of digital services to improve efficiency, including: store makeover, mobile app to order inventory from a single source, consumer analytics to determine highest selling goods and even mobile/data top-up plans. Number Of Mom & Pop Stores Enrolled In Alibaba & JD Initiatives - 500 - 300 0 100 200 300 400 500 600 Jan 2017 Nov 2017 Alibaba JD Thousand 26 Meituan-Dianping Is The Most Funded Chinese Ecommerce Startup Company Total Funding(1) (US$ m) Selected Investors China Internet Plus (Meituan-Dianping) 8,300 Tencent Holdings, DST, Capital Today, GIC, Baillie Gifford, Cananda Pension Plan Investment Board, Trustbridge Partners Pinduoduo 3,100 Tencent Holdings, Banyan Capital, Cathay Innovation, New Horizon Capital Koubei 2,100 Alibaba, Silver Lake, CDH Investments , Yunfeng Capital, Primavera Capital Guazi 1,700 Sequoia Capital, Dragoneer Investment Group,Matrix Partners, YF Capital, IDG Capital, Capital Today Uxin 960 Baidu, Tencent, TPG, Jeneration Capital, Warburg Pincus, Tiger Fund, Hillhouse Capital, KKR,China Vision Capital, Huasheng Capital RenRenChe 760 Tencent, Didi, Shunwei Capital, Redpoint, Ceyuan Ventures Souche Holdings 635 Alibaba, Warburg Pincus, Primavera Capital, Cmb International, Morningside Ventures, VMS Investment Xiaohongshu 418 Zhen Fund, Tencent Holdings, Alibaba Group, GSR Ventures, Adrian Cheng, Genesis Capital, Tiantu Capital, GGV Capital Mogujie 412 MSA Capital, Ping An, Zhixin Capital, Hillhouse Capital, IDG Capital, Qiming Ventures, HOPU Investment Management Company, Banyan Mezzanine Funds Womai 330 Taikang Life Insurance, Baidu, IDG Capital, SAIF Partners China As of June 2018 27 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Ecommerce Investors in China Most Active Investors Top Ecommerce Deals IDG Capital Xiaomi, FarFetch, Moncler, Yuantiku, Three Squirrels, Beibei.com, Mogu Street, Womai.com Zhen Fund Zhaogang.com, VIP.com, mia.com, Xiaohongshu, Lechun, ClubFactory, FlowerPlus Matrix Capital The Beast, Reflower, MSParis, MissPao, Udream Tiantu Capital mwee.cn, Pagoda.com, Mogu Street, Xiaohongshu China Growth Capital 700Bike. MAGMODE, KLOOK, MissFresh, Xiachufang, smzdm.com, Tongbanjie.com Susquehanna International Group, LLP Yitiao, FlashEX, Meiyou, Easyflower, Piaoniu.com, 51zhaoyou.com FreeS Fund Three Squirrels, Xinliangji, Uber, Tingjiandan, Club Factory Bertelsmann Asia Investment Fund SECOO, Mogu Street, Yijiupi.com. 352, Zaozuo Vision Capital MissFresh, Xingbianli, lif8.com, Hamo, Chemao, Zaozuo, Zhaomei.com, Champzee Sequoia Capital DJI, JD, VIP.com, Haocaitou, Liuliumei, Meituan-Dianping, Ele.me Source: Crunchbase, ITjuzi, Zero2IPO As of June 2018 28 Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 29 2017 Was The Year Of Short Video Source: QuestMobile Although messaging remains the dominant mobile activity, users have more than tripled the amount of time they spend watching short videos in the last year. 37.9% 10.0% 1.3% 2.6% 2.2% 0.8% 0.6% 32.0% 10.1% 5.5% 3.1% 1.8% 0.8% 0.6% Messaging Online Video Short Video Weibo Online Music Live-Streaming Game-Streaming Dec-16 Dec-17 Percentage of Time on Spent on Mobile Internet by Activity -15.6% +323% The number of monthly active users for short video apps in China doubled in 2017, from 203M at the beginning of the year to 414M at year end. % 30 Short Video Users Have Grown At An Exceptional Pace (1 of 2) As of March 2018, there are nearly 600M users in China who are actively using short video apps. Source: QuestMobile, SensorTower, SCMP 204 52 78 82 230 124 114 113 0 50 100 150 200 250 Kuaishou Douyin (Tik Tok) Huoshan Xigua Dec-17 Mar-18 Number of Monthly Active Users Across China's Top-4 Short Video Apps m 31 Owned by Toutiao Short Video Users Have Grown At An Exceptional Pace (2 of 2) Kuaishou and Douyin (Tik Tok) are the two leading short video apps. Source: QuestMobile, SensorTower, SCMP Launched in 2011, Kuaishou is the current leader of short video apps, capturing more than 50% market share. The majority of its users are from 2nd to 4th-tier cities. Kuaishou has more than 10M daily active users outside of China. Only launched in Sep 2017, Douyin (Tik Tok) has nearly tripled its monthly active users in Q1 this year. It was the most downloaded iOS app (45M+ downloads) in Q1 of 2018 globally, beating out YouTube, WhatsApp and Facebook. 32 Online Video Is Also A Game Of Three Giants China's online video market is dominated by three players: Tencent Video, iQiyi (owned by Baidu) and Youku (owned by Alibaba). 604 584 450 96 66 55 53 52 40 10 Tencent iQiyi Youku MangoTV Bilbili Letv PPTV Fun.tv Sohu BesTV Monthly Active Users On China's Top Online Video Apps as of May 2018 m Source: iResearch, Tencent, Baidu, Nasdaq Tencent Video iQiyi Youku Mango TV Bilibili Letv PPTV Fun.tv Sohu BesTV Launched in 2010 by Baidu Listed in Mar 2018 raising $2.3B Has 60m paying subscribers as of Feb 2018 Launched in 2006 and acquired by Alibaba in 2015 for $3.7B Merged with Tudou but remained separate brands Youku streams hit shows and dramas while Tudou focuses on user-generated content Launched in 2011 Has 63m paying subscribers as of Feb 2018 Quick Facts 33 Tencent and Toutiao Lead The Way For News In China Tencent News has the largest user base while Toutiao has the longest user time spent. Top 5 News Apps By MAU (Apr 2018) 80 95 118 212 259 Tencent Reading NetEase News Sina News Toutiao Tencent News Source: iResearch, QuestMobile, SCMP calculation Top 5 News Apps By Average Time Spent (Dec 2017) 31 32 55 60 73 Tencent Reading Sina News Tencent News NetEase News Toutiao m Minutes 34 Toutiao Is The Most Funded Chinese Content & Media Startup Company Total Funding(1) (US$ m) Selected Investors TouTiao 3,100 SIG, DST, General Atlantic, Sina Weibo Ximalaya 450 SIG, KPCB, Sierra Ventures, WestSummit Capital, Mi, Puhua Capital, China Creation Ventures, China Broadband Capital Qingting.fm 230 Sinovation Capital, Baidu, CMIG, Shenzhen Guozhong Venture Capital Qutoutiao 200 China Innovision Capital, Advantech Capital, Tencent, XiaoMi, Chuangban Investment, Lighthouse Capital Zhihu 185 Tencent Holdings, Sinovation Ventures, Capital Today, SAIF Partners, Sogou, Qiming Ventures Partners Yidian Zixun 178 Phoenix New Media, Xiaomi, OPPO igetget.com 170 Sequoia Capital, Qiming Ventures Partners, Tencent Holdings, Youku, Shunwei Capital, Zhen Fund MobiExchanger 72 PreAngel, New Margin Capital, Envision Capital, Mytech China ZMT 70 Kinzon Capital, IDG, Fosun Kinzon Capital, YF Capital NewsDog 50 Tencent Holdings, Legend Capital, Dotc United Group, Danhua Capital 35 As of June 2018 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Content & Media Investors In China Most Active Investors Top Content & Media Deals Tencent Holdings Qutoutiao, Jike, NewRank, Weimob, NewsDog, SNM IDG Capital ZMT, huoxing24.com, Vzan.com, xmt.cn Zhen Fund Papi, Mianbao Xiaoke, New Rank, Jike, WeSee, News Break Matrix Partners Weiboyi, Adsame, Focus Media, data100 Sequoia Capital Mianbao Xiaoke, igetget.com, zongheng.com, Toutiao Plum Ventures youshu, tingwen.me, MKIT, palmax, Mena Shenzhen Capital Group Infinitas Interactive Media, ipinyou, dodoca.com, Naqu Fortune Venture Capital Focus Media, NewRank, yidou360 Qiming Venture Partners Zaojiu, Zhihu, igetget.com Hongtai Capital Nanyouquan, Happy Juzi, baozouribao.com Source: Crunchbase, ITjuzi, Zero2IPO As of June 2018 36 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 37 WeChat and Weibo Among the World's Largest Services WeChat MAUs have crossed 1 billion as of February 2018. Source: Company filings Weibo's MAUs grew 20.5% between Q1 2017 and 2018 WeChat's MAUs grew 10.9% between Q1 2017 and 2018 341 411 Q1 2017 Q1 2018 938 1040 Q1 2017 Q1 2018 Million Million 38 Mini-Programs Have Burst Onto The Scene This Past Year In the beginning of 2018, 50% of WeChat's MAUs (472M) were using mini-programs. 1 1 8 28 32 34 61 75 96 116 111 193 472 444 405 1% 1% 1% 3% 4% 4% 7% 9% 11% 13% 13% 22% 52% 49% 44% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar WeChat Mini-Program MAUs (M) Percentage of Overall WeChat MAUs 2017 2018 What is a Mini Program? Launched in Jan 2017, mini-programs are sub-applications smaller than 10 megabytes within the WeChat ecosystem. WeChat has more than 580,000 mini- programs after just one year of development. Number of WeChat Mini-Program Users Source: QuestMobile, SCMP 39 Mini-Programs Have Created An Ecosystem Within WeChat Mini-programs are enabling WeChat to be the dominant all-in-one application on mobile. 28 13 12 9 8 7 5 4 4 3 3 1 1 1 1 Top 100 Mini-Programs By Type As Of March 2018 Source: QuestMobile, SCMP More than half of China's leading ecommerce platforms have launched a mini-program. Pinduoduo now has more than 233 m users on its mini-programs. The Jump Jump mobile game attracted 400 m players in China in less than three days. A number of international brands, including McDonalds, KFC, Coach and Tesla released mini-programs for WeChat in the past year. 40 Most Funded Chinese Social & Messaging Startups Company Total Funding(1) (US$ m) Selected Investors Kuaishou 1,350 Tencent Holdings, DCM, Sequoia Capital, Baidu, Morningside Venture Capital Miaopai 775 Sequoia Capital, Shanghai Media Group, Kleiner Perkins Caufield & Byers, iDreamsky Technology, Morningside Group, StarVC, Weibo, New Industry Investment Fund, Axiom Asia Private Capital Huajiao 215 Tiange.com, Mango investment, CIC, CDI Fund, 360.cn Zhihu 185 Tencent Holdings, Sinovation Ventures, Capital Today, SAIF Partners, Sogou, Qiming Ventures Partners Blued 132 UG Capital, CDH Investment, Vision Knight Capital, Ventech China, Shunwei Capital, DCM Ventures, Zhonglu Capital, Crystal Stream Capital Maimai 100 IDG Capital, DCM Ventures, Morningside Ventures Capital Douban 59 Sequoia Capital, Ceyuan Ventures, BAI Fund, Trustbridge Partners Yalla 30 Orchid Asia, SIG, Hongfan Capital Same 23 Tencent Holdings, Trustbridge Partners Zuiyou 18 SIG, Qiming Ventures 41 As of June 2018 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Social & Messaging Deals IDG Capital Maimai, Microvcard, SegmentFault, Echo, Faceu, Huoliao APP, Zuoyou, Tencent Matrix Partners Highing, in APP, Shudong, Nice, Momo, ZANK, Lookle Tencent Holdings Kuaishou, Zhihu, 17Paipai, Snapchat, Hike Mesenger, Kik, Kakao Talk, Same Zhen Fund Microvcard, Weilian, Nice, Jiayuan Sequoia Capital Kuaishou, Miaopai, Momo, Douban Morningside Capital ShareChat, Maimai, Nice, Taoyou, time2plato Alibaba Group Snapchat, Weibo, Momo, Tango, Xiaoshengshuo Shunwei Capital Myhug.cn, ShareChat, Paime, Renmaitong Qiming Venture Partners Zuiyou, Jiayuan, Kaixin001.com GGV Capital Myhug.cn, Verlocal, HOLLA, Wiselike Source: Crunchbase, ITjuzi, Zero2IPO Most Active Social & Messaging Investors In China As of June 2018 42 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 43 Three New Players Enter China's Ride-Sharing Battlefield Market giant DiDi sees new competition coming from Meituan Dianping, Ctrip and Alibaba's AutoNavi unit. Source: SCMP, Nasdaq, China Money Network US$80B estimated valuation 450M+ users Meituan Dianping Ctrip AutoNavi Holdings Leading provider of on-demand online services with a private valuation of US$30B as of 2017 Rolled out its own ride sharing services in Dec 2017 and has since expanded its service to seven cities in China One week after Meituan was launched in Shanghai, it achieved 300K active users China's leading travel services platform with a market cap of $25B as of end of May 2018 Obtained a ride hailing license from Tianjin Municipal Transportation Commission to operate ride hailing business nationwide Alibaba's mapping unit, AutoNavi Holdings Ltd. (Gaode Map), launched its own carpooling business starting in Chengdu and Wuhan with plans to roll out nationally in 2018 AutoNavi has 700M+ users 44 China's Bike-Sharing Industry Has Consolidated To Three Players Ofo and Mobike command over 90% of the market; Hellobike surging quickly in third place. Before More than 40 bike-sharing services have sprouted in China since 2016. The bike-sharing market in China has undergone significant consolidation, with more than 20 start-ups going bust as of Feb 2018. Today In March 2018, ofo secured US$866M in a new round of financing led by Alibaba. Ofo has more than 200M users in China, 26M MAUs and 32M rides per day. In April 2018, Mobike was acquired by Meituan Dianping, China's largest provider of on-demand online services, at a valuation of US$3.7B. Mobike has more than 200M users, 22M MAUs and 30M rides per day. Founded in 2016 and became the fastest-growing bike-sharing company in 2017 Hellobike has approximately 100M users and 10M rides per day. Hellobike ofo Mobike Source: QuestMobile, SCMP, Mobike 45 China's Sharing Economy Expands Overseas China's leading co-working, home-sharing and bike-sharing companies are now looking for success abroad. Bike-Sharing As of Dec 2017, ofo has covered 50 cities across 20 countries. Mobike has expanded to 11 international cities. Co-Working China's URWork opened its first overseas location in Singapore in June 2017 and formed a JV partnership with New York's Serendipity Labs. URWork also made a strategic investment in Sept 2017 in Rework, a co-working provider in Indonesia, to strengthen its network in SE Asia. Home-Sharing Xiaozhu, China's Airbnb, now has listings in over 100 overseas cities and entered a strategic partnership with global online booking platform, Agoda, a member of Booking Holdings. Source: SCMP, Serendipity Labs, 36kr 46 Didi Is The Most Funded Chinese Sharing Economy Startup Company Total Funding(1) (US$ m) Selected Investors Didi 20,100 Mirae Asset Financial Group, GSR Ventures, Tencent Holdings, Alibaba, Ping An, China Investment Corporation, Sailing Capital, GGV Capital, DST Global ofo 2,200 GSR Ventures, Hongdao Capital, Zhen Fund, Vision Plus Capital, Matrix Partners China, CITIC PE, Xiaomi, Shunwei Capital, DST Global, Didi, Alibaba BAIC BJEV 1,660 Daimler, China Cinda Asset Management, Zhongji Investment Tujia 755 All-Stars Investment, G Street Capital, Ctrip, HomeAway, Lightspeed China Partners, MSA, Qiming Ventures, CBC Capital, CDH Investment WiFi Skeleton Key 652 Haitong Internation Securities Group, Northern Light Venture Capital, Eight Roads Ventures Zhubajie 431 Chongqing New North Zone Government Investment Fund, IDG Capital, Cybernaut Venture Capital Caocao Zhuanche 380 Zhejiang Geely Holding Group Xiaozhu 272 Joy Capital, YF Capital, Legend Capital, Morningside Venture Capital, MSA, BAI, Capital Today, CITIC Capital Holdings, Heyu Capital, YF Capital Shouqi Limousine & Chauffeur 229 NIO Capital, Baidu, Harvest Capital, China Jianyin Investment, Oceanwide Holdings, Silk Road Hua Chuang Dian 120 Sequoia Capital, Tencent Holdings, InCapital, GSR Ventures, Vision Plus Capital, DT Capital Partners, CDH Investments, Banyan Capital As of June 2018 47 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Sharing Economy Deals Matrix Partners China Didi, ofo, Yunniao, zuzuche.com, Huangbaoche Sequoia Capital ymm56.com, Dian, Mobike, Xingbianli Zhen Fund Ofo, TOGO, YCLOSET, First Class, Hami CDH Investment Didi, FlashEx, Tujia, Dian, Grab GSR Ventures Didi, ofo, YCLOSET, Dian Lightspeed China Partners xingren.com, ymm56.com, Tujia, fangdd.com Joy Capital UCAR Inc, Mobike, xiaozhu.com Vision Plus Capital Ofo, Dian, Xingbianli Qiming Ventures Tujia, Mobike Panda Capital Mobike, atzuche.com Source: Crunchbase, ITjuzi, Zero2IPO Most Active Sharing Economy Investors As of June 2018 48 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 49 China's AI Development Still Lags Behind The US As of June 2017, the US was home to the most AI startups in the world at 1,078 with China in second at 591. 1078 591 138 74 70 666 USA China UK Israel Canada Other Number of AI Startups By Country as of June 2017 000s 488 586 33 304 273 14 A B Other US China US vs. China: Number of AI Startups By Sector 000s Machine Learning, Robotics, & Autonomous Vehicles Computer Vision & Language Infrasructure Source: Tencent Research Institute 50 But The Chinese Government Has Ambitious Plans To Catch Up Baidu's focuses autonomous driving. Baidu, Alibaba, Tencent and iFlyTek have been a driving force behind China's AI advancement. AI Strategic Plan Leading Chinese Companies In AI In July 2017, China's State Council released its roadmap to create a domestic 1 trillion yuan (US$148B) AI industry and leapfrog the US to be the global leader in the field of AI by 2030. Keep pace with leading AI technology and applications in general by 2020 Make major breakthroughs by 2025 Be the world leader in the field by 2030 The cloud computing division of Alibaba is working on a project called "city brains", a set of AI solutions to improve urban life, including smart transport. Tencent focuses on computer vision for medical diagnosis. Shenzhen-listed iFlyTek, a dominant player in voice recognition, specializes in voice intelligence. Investment and Training In Jan 2018, the government announced that it would spend US$2.1B to build an AI industrial park in the suburbs of Beijing. In April 2018, the Ministry of Education launched a five-year AI talent training program, where 500 teachers and 5,000 students would train at top universities. Source: SCMP 51 Facial Recognition Technology Is A Leading AI Application in China Major Chinese cities are employing facial recognition to improve transportation and security. Facial recognition systems are being tested in major train stations like Wuhan. China's Spring Festival this year saw over 400 m people traveling by train. Source: SCMP In Shenzhen, AI-firm Intellifusion works with local police to display the faces of jaywalkers on large LED screens at intersections. It is now collaborating with local mobile phone carriers and social media platforms such as WeChat to develop a system where offenders will receive personal text messages as soon as they violate the rules. Police arrested a fugitive in southeast China after facial recognition technology helped identify him in a crowd of about 50,000 people attending a pop concert. 52 Use of Big Data Continues To Grow And Is Being Applied To Farming Farms are leveraging AI technologies to enhance efficiency, yields and income. JD launched its AI chicken project called "running chicken" in 2018. With the help of AI, the chicken farm is monitored 24/7 with functions including automatic feeding, cleaning and health diagnose. Source: SCMP, JD Alibaba uses AI to raise pigs by using a digital ID for each pig, which can help track vital signs, pregnancy, sickness, sleeping and eating schedule and their mood. This has helped Tequ Group, a Sichuan-based pig farming enterprise, to raise more newborn pigs, reduce death rates and increase income by 10 percent. 53 Robotics Is An Area Of Major Development In China Intelligent service robots continue to upgrade across industries, including ecommerce and healthcare. Cainiao x Tmall's warehouse is powered by delivery self- charging robots; each robot can carry up to 500 kilograms. The robots save time by three-fold for warehouse clerks. Source: SCMP, Alizila, Statista In September 2017, a robot dentist in China became the world's first to perform 3D-printed teeth implants in a patient's mouth without any human involvement. 54 China's intelligent service robots market will reach US$2.4 Billion by 2019 Voice and Language Applications Are Seeing Greater Adoption Chinese consumers are increasingly using AI for translation and voice command. The Sogou Travel Translator receives over 200M daily voice requests, approximately 240,000 hours of data with 97% translation accuracy. Source: Sogou, Technology Review Over 500M Chinese use iFlytek voice input via its 400,000 developers in various industries such as smart home and mobile internet. 55 SenseTime Is The Most Funded Chinese AI Startup Company Total Funding(1) (US$ m) Selected Investors SenseTime 1,600 Morningside Venture Capital, Sailing Capital, CICC, Co-Stone Capital Alibaba, IDG, TCL Capital, StarVC, WANDA Group, CDH Investment Megvii 607 Sunshine Insurance, Sinovation Ventures, Ant Financial Foxconn Technology Group, China State-Owned Assets Venture Investment Fund, CCB International, SK Group, Qiming Venture Partners United Imaging 530 China Life Insurance, SDIC Fund, China International Capital, CITIC Securities, CMB International CloudWalk 397 Shunwei Capital, Oriza Holdings, Puhua Capital Wecash 328 IDG, Lingfeng Capital, Sea Limited, China Merchants Innovation Investment ManagementSIG Ventures, Hongdao Capital, Forebright Capital, ORIX Asia Capital Ltd Mobvoi 253 Volkswagen China, Google, Sequoia Capital, Zhen Fund, SIG China Unisound 211 Hanfor Holdings, China Electronics Health Fund, Qihoo 360 Technology, Zhongdian Health Fund, Qiming Venture Partners, Qianhai Wutong Mergers and Acquisitions Funds CloudMinds 131 SoftBank, Foxconn, Keynote Ventures, Walden International, Bojiang Capital, Shenzhen Capital Group, Qiming Ventures Horizon Robotics 100 Intel Capital, Sinovation Ventures, Morningside Capital, Hillhouse Capital, Linear Venture, Harvest Investment, Wu Capital, Tsing Capital Cambricon 100 Yonghua Capital, SDIC Chuangye Investment Management, Alibaba, Lenovo, CAS Investment Management, Turing, Oriza Seed Capital, Lenovo Capital As of June 2018 56 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top AI Deals Sequoia Capital JD, 360, Mobvoi, Toutiao, ThinkForce Horizon Robotics, Versa, NIO, BGI, Dajiang, YITU, 100Credit Tencent Holdings Yonghong Tech, JD, Sougou, iCarbonX, UBTECH, NIO IDG Capital Baidu, Mi, SenseTime, 100Credit, Liulishuo, Rokid, APEAKIN Matrix Partners Yonghong Tec, Mobile, 360, 12Sigma, Sensing Tech, ccint.com GGV Capital Momenta, Liulishuo, Zhuiyi, EHANG, Deepinfar, binguohezi YF Capital Sougou, Mi, ThinkForce, YITU, Video++, Alibaba Qiming Ventures Xiaomi, Face++, UBTECH, binguohezi, tongdun Morningside Ventures Xiaomi, SenseTime, Horizon Robotics, Zhuiyi Oriental Fortune Capital Hydata, Geetest, Quant Group, Yonghong Tech, Learnta Sinovation Ventures Dorabot Inc., ImageDT, class100, STEM Cloud Pine Ventures SenseTime, BGI, UBTECH, Gaomuxuexi Source: Crunchbase, ITjuzi, Zero2IPO Most Active AI Investors In China As of June 2018 57 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 58 Smart Speakers Are Still Nascent In China But Quickly Growing JD, Xiaomi and Alibaba are the current leaders in China's small but growing smart speaker market. 10 60 350 1,200 4,400 2015 2016 2017 2018E Source: GfK, Canalys, SCMP Number of Smart Speakers Sold in China 000s Smart Speaker Sales Share By Manufacturer For 2017 % of total units sold 38% 32% 15% Other 15% By comparison, shipments of smart speakers in the US totaled 25m in 2017 59 LingLong DingDong Tmall Genie X1 Mi AI Speaker Raven H Little Fish VS1 & Sengled Smart Lamp Speaker US$126 US$76 US$47 US$256 N/A Nov 2016 July 2017 July 2017 Nov 2017(1) N/A The Battlefield For Smart Speakers Is Intensifying In China The market is overcrowded with more than 100 smart speaker developers and Baidu is the latest entrant. (1) Raven H production reported to have stopped in June as only 10K units were manufactured. Source: SCMP, Press Research Selected Speakers 60 Xiaomi Is The Most Funded Chinese Smart Device Startup Company Total Funding(1) (US$ m) Selected Investors Xiaomi(1) 3,400 All-Stars Investment, Shunwei Capital, Green Bay Ventures, Morningside Group, GIC, YF Capital, DST Global, Ratan Tata, Qiming Venture Partners, NGP Capital Royole 1,100 Shenzhen Capital Group, Shanghai Pudong Development Bank, IDG Capital Partners, Tanshi Capital, Green Pine Capital, Hanfor Capital Management, Warmsun Holding Group, Zhongtai Chuanghui Equity Investment Fund UBTECH 940 CITIC Securities, Tencent Holdings, CDH Investment, Qiming Venture Partners Meizu 890 Alibaba, Haitong Kaiyuan Investment Smartisan 234 PurpleSky Capital XGIMI 160 CDF Capital, Sailing Capital, Lucion Venture Capital, Matrix Partners China, Baidu, Bojiang Capital, Pan-Lin Asset Management Rokid 158 Credit Suisse, M Fund, IDG Capital Partners, Advantech Capital, Temasek Holdings, Linear Ventures, Walden International, CDIB Capital JMGo 125 Golden Brick Capital, SkyChee Ventures Codoon 111 Susquehanna International Group, Shenzhen Capital Group, FountainVest Partners, SBCVC Fund III Company, CITIC Capital Holding, SBCVC, Focus Media, Advanced Power Electronics Corp DJI 111 Sequoia Capital, Accel Partners, LH Capital Management As of June 2018 61 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. (2) Xiaomi listed in HKEX on Jul 9, 2018; funding amount is before IPO. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Smart Devices Deals Zhen Fund Vincross, Polly.ai, UMA, BeSound, EHANG, Mobnote, SUGR Cube, Vidoo, YOGO, FLEXIV, IMIO Sequoia Capital Pony.ai, LinkedSee AR, Horizon Robotics, Huami, Viomi, DJI, iRay, Microduino, Janez T, ChargeDot IDG RDA, Montage, ISSC, Sane Chips, MUCH, YOGO, TMiRob, DKVision PreAngel Mech-Mind, Dobot, EHANG, LYRobotix, Aeris Aura Northen Light Venture Leishen Lidar, Shenzhen Smart Drone, Casun Legend Star OneSpace, CarRobot, LisaWatch, TONY watch Matrix Partners China AutoBot, GLXSS, MaxStone, Vidoo, Convenient Power Sinovation Ventures Wonder Workshop, AINemo, Dorabot, Goluk, Fineck, Mobnote Qiming Ventures VINNO, Convenient Power, Xiaomi, UBTECH Tencent Pacewear, Meta, Moon Express, Whaley, PICOOC, Tile Source: Crunchbase, ITjuzi, Zero2IPO Most Active Smart Devices Investors In China As of June 2018 62 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 63 China vs. US In Autonomous Cars China is formulating technology standards and industry guidelines to close the gap with the US. Source: SCMP, McKinsey 2019 and beyond 2018 2017 The US Transportation Department plans to unveil revised self-driving car guidelines this year. In March, Shanghai issued licenses for self-driving cars from NIO and SAIC. In April, China's Ministry of Industry and Information Technology released national guidelines for smart internet connected cars, giving local authorities a freer hand to arrange road tests for autonomous vehicles. China is likely to emerge as the world's largest market for autonomous vehicles and mobility services, worth more than US$500 billion by 2030. In December, the National Development and Reform Commission, China's top economic planning agency, unveiled a three-year plan making the development of smart cars a national priority. Beijing also became China's first city to green light open road tests for autonomous cars. In September, the US approved a bill that laid out a framework for federal autonomous vehicle regulation, speeding up deployment of self-driving cars in the country. 64 The Last Year Has Seen Major Development In Autonomous Cars Leading Chinese internet companies and automakers are making headway, with Baidu leading the pack. Chinese Internet companies Chinese Auto Manu- facturers Identified by China's Ministry of Science & Technology as national champion in self-driving cars Announced plans to commence mass production of an L4 autonomous driving bus with King Long Motor Group in July 2018, L3 passenger vehicles with JAC Motor and BAIC Motor in 2019, L3 vehicles with Chery in 2020 and L4 vehicles in 20211 (1) The Society of Automotive Engineers have defined six levels (0-5): L3 = cars safely control all aspects of driving in mapped environment, L4 = no driver interaction needed, L5 = completely autonomous Source: Alibaba, SCMP Now running road tests of autonomous cars on a regular basis and has the capabilities for open road trials with the goal is to achieve L4 autonomous capability Partnered with SAIC Motor to launch internet-connected cars powered by Alibaba's AliOS Has partnered with six Chinese automakers GAC, Changan, Geely, BYD, Dongfeng, FAW since 2017 Received its first license to conduct open-road tests for its autonomous cars in Shenzhen in May 2018 Electric vehicle start-up NIO, backed by Tencent, Baidu and Xiaomi, received a license to road test autonomous driving in Shanghai for its 7-seater sport utility vehicle Partnered with Intel in the beginning of 2018 to develop Level 3, 4 and 5 autonomous vehicles Also awarded licenses to road test autonomous driving in Shanghai for two models of its smart car Company Development 65 Nio Is The Most Funded Chinese Autonomous Car Startup Company Total Funding(1) (US$ m) Selected Investors NIO 2,100 Tencent Holdings, Baillie Gifford, Lone Pine, Sequoia Capital, IDG, China Asset Management Co, GIC, CITIC Capital, TPG, MSA, Baidu, Hillhouse Capital WM Motor 1,200 Susquehanan International Group, Sequoia Capital, Amiba Capital, Tencent Holdings, Baidu Capital, Minmentals Development, Zhejiang Geely Holding Group Xiaopeng Motors 706 CICC, Kinzon Capital, Alibaba, Shunwei Capital, GWC Innovator Fund, IDG Capital Partners, UCAR, Matrix Partners China, Morningside Venture Capital, Lightspeed Venture, YF capital, GGV Capital, Foxconn Group CHJ Automotive 594 Yintai Group, SourceCode Capital, Future Capital AG, Matrix Partners China, LEO Group, Funcity Capital, Plum Ventures, BlueRun Ventures Zhiche Auto 580 Intel Capital, GX Capital, One Capital, NetPosa Roadstar.ai 128 Shenzhen Capital Group, Wu Capital, China Vision Capital, Yunqi Partners, CMBI International Capital, Glory Ventures, Green Pine Capital JingChi 120 China Growth Capital, Nvidia GPU Ventures, Qiming Venture Partners Pony.ai 112 Sequoia Capital, Legend Capital, Puhua Capital, IDG Capital Partners, DCM Ventures, Silicon Valley Future Capital, Morningside Venture Capital, Legend Star, Polaris Capital Group TuSimple 83 Fuhe Capital, Sina, Zhiping Capital, Nvidia, Composite Capital Management Momenta.ai 51 Shunwei Capital, Zhen Fund, Sinovation Ventures, Unity Ventures, Daimler, NIO Capital, Blue Lake Capital AG As of June 2018 66 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Autonomous Car Deals Sequoia Capital NIO, Lingyun, NIU, Ninebot, WM Motor, LingYun Technology IDG Capital Carsmart, CloudCar, Navya, Commsigna, SINGULATO Zhen Fund Hyperloop Technologies, Lingyun, Momenta.ai Tencent Holdings WM Motor, NIO, Tesla, Yixin Group Matrix Partners Xiaopeng Motors, CHJ Automotive Morningside Ventures Xiaopeng Motors, Pony.ai SourceCode Capital CHJ Automotive, DeepMotion Qiming Ventures JingChi GGV Capital Xiaopeng Motors YF Capital Xiaopeng Motors Source: Crunchbase, ITjuzi, Zero2IPO Most Active Autonomous Cars Investor In China As of June 2018 67 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 68 Chinese Consumers Are Crazy About Cryptocurrency A few Chinese cryptocurrencies have reached over $1 billion in market cap Binance, OKex, Huobi are the top 3 crypto exchanges in the world with over $1 billion in daily trading volume There are multiple cryptocurrencies and exchanges in China with huge scale. Source: Coin Market Cap 69 China Says 'No' To Cryptocurrency But 'Yes' To Blockchain China wants to be a frontrunner in blockchain technology even if the ban on crypto remains. Source: SCMP, ITjuzi No To Cryptocurrency But Yes To Blockchain Domestic closure: In September 2017, China ordered the closure of all cryptocurrency exchanges and pronounced all initial coin offerings (ICOs) illegal, marking the start of the official crackdown on the digital currency that saw a number of bitcoin traders relocate to other countries. Funding halted: In January 2018, the People's Bank of China ordered financial institutions to stop providing funding to any activity related to cryptocurrencies. Foreign platforms banned: In February 2018, China blocked all overseas websites related to cryptocurrency trading and ICOs as well. Local support: Shanghai, Shanxi, Henan, Guangzhou, Guiyang and Hangzhou have all issued policies to encourage blockchain development. New funding: Shenzhen established a 500 m yuan fund focused on blockchain investments. Hangzhou announced its plan to invest 10 billion yuan in a blockchain fund, which officials claimed as the world's biggest fund investing in blockchain projects. Central government support: The master plan for the Xiongan New Area economic zone, created under the direct order from President Xi Jinping, highlights the use of blockchain technologies to create a smart city. Startups on the rise: 41% of startups that received funding in China in the first quarter of 2017 were blockchain-related. 70 China's 'No' To Cryptocurrency Can Be Illustrated With Bitcoin CNY-denominated Bitcoin trading volume plummeted in early 2017 and ultimately ceased by Oct 2017. Source: Bitcoinity, SCMP CNY EUR GBP USD JPY Other Government warns investors about the risk controls of China's largest bitcoin exchanges, which temporarily suspend withdrawals Chinese exchanges lift suspension on withdrawals China deems initial coin offerings illegal, orders mainland exchanges to shut down 71 Blockchain Will Have Many Business Use Cases In China Although still in its infancy, blockchain technology can be applied across industries. Source: xxx Healthcare Patient Records Identity Management Supply Chain Digital Asset Tracking Logistics Luxury Goods Tracking IoT Message and Asset Tracking Money Remittance Alibaba partnered with the city of Changzhou in August 17 to launch China's first application of Blockchain technology in the medical sector. Tencent partnered with China Federation of Logistics & Purchasing in Mar-18 to develop an industry application based on Tencent blockchain-TrustSQL, including platforms for e-waybill service, transportation management system and warehouse management system. The Hong Kong Monetary Authority went live with its Trade Finance Platform, built on blockchain technology in September 2017. 72 Bitmain Is The Most Funded Chinese Blockchain Startups Company Total Funding(1) (US$ m) Selected Investors Bitmain 450 Sequoia Capital, IDG Capital Partners, GIC, DST Global Hyperchain 230 Xinghu Zhongbao, China Gaoxin Investment Group Canaan 47 Baopu Investment, Jin Jiang Group, Tunlan Capital OKCoin 47 Giant Network, Ceyuan Ventures, Mandra Capital, Sinovation Ventures Lab PreAngel Shuidihuzhu 33 IDG, Gaorong Capital, Tencent, Zhen Fund Jinghang Blockchain 31 Tunlan Capital TokenClub 30 INBlockchain, Shunwei Capital HOTchain 24 Qtum Capital, Qtum Foundation, Bitcoin Faith, IBT Ventures, Arrival Capital, IPTChain, FBTC,Genesis Capital BKBT 20 JRR Crypto 8btc 16 Puhua Capital, QF CapitalFuncity CapitalBitmain As of June 2018 73 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Blockchain Investors In China Investor Top Blockchain Deals Fenbushi Capital Stream, TenX, Zcash, GEM, ABRA, TIERION, Everledger, Symbiont, CIRCLE, Factom, OTONOMOS, biTSE, POE, soc Qianfang Capital Genaro, Bytom, Delphy, Primas, Cybex, Vechain, Loopring, ATMatrix, IOTA, Tezos INBlockchain Stream, InkChain, EOS, BOTTOS, BigONE, sia, QTUM, Maggie, ITC, WanChain, Oracle Chain, Insurance, uip, Decentraland, hot, iost, dta Node Capital Huobi, Coldar, Bochen Inc, Fengwo, Jinse Finance, Chainup, Dochain, soc LinkVC sosobtc, AICoin, QUOINE, Ripio, Genaro, Tenx, Measurable, Blockv, Raiden, BBEX, Cybermiles, Maggie, IOT Chain, Pro Chain Danhua Capital Meta, aelf, theat, data, bat, IOST Sequoia Capital Huobi, IOST, ugc, filecoin, orchid Zhen Fund Lino, IOST, data, yee, HOT, GXB, EDU IDG Capital Ripple, Coinbase, Cirlce, Bitmain, Bitkan Funcity Capital 8btc, IOST, Binance, huoxing24.com Source: Block Data 74 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 75 Chinese Internet Companies Play Across The Fintech Value Chain For these five major players, their fintech businesses serve to strengthen their core business. Source: Press research Online Payment Financing & Lending Investment QQ Wallet Baidu Wallet JD Pay Ping An E-wallet Tencent Welfare Licaitong UMoney Baidu Loan Xiaojinku Baidu Wealth Mgmt Baizhong 76 Mobile Payments Continue To Surge With Alipay and WeChat Pay China's mobile payment transaction volume hit US$15 trillion in 2017 with the duopoly taking 92% of the market. Source: iResearch, Analysys 0.8 1.3 1.9 3.1 4.1 5.0 1.9 9.2 15.4 25.9 1.0 2.2 3.8 12.3 19.5 30.9 2013 2014 2015 2016 2017 2018e PC Mobile China's Total Transaction Value Via 3rd Party Online Payments US$ Trillion 69% p.a. 54% 38% 8% Others China's Mobile Payment Market Split, 2017 % 77 Regulation Will Shape China's Fintech Landscape Tighter regulation and consolidation of regulatory bodies point to tougher fintech environment in the short-term. Source: SCMP, PwC In addition, China's financial regulatory bodies are being consolidated to reduce financial risk. Regulatory Body People's Bank of China (PBoC) Securities Regulatory Commission (CSRC) Banking Regulatory Commission (CBRC) Insurance Regulatory Commission (CIRC) In March, China merged its banking (CBRC) and insurance (CIRC) regulators to heed President Xi's calls to reduce financial risk. Legislative powers would be transferred and centralized with the People's Bank of China. Responsible areas of fintech Third-party fund payments and transfer Crowdfunding and online fund products P2P online lending, online trust products and online consumer finance Internet insurance There has been tightened regulation in China's internet financing and online lending segments. New rules In Nov 2017, China issued an administrative order ceasing the issuance of new online peer-to-peer (P2P) company licenses. In Dec 2017, China's central bank and banking regulatory commission jointly ordered that all organizations and individuals must obtain a license and operate with strict requirements. Regulators set high capital requirements, a rule mandating the appointment of a custodian bank, full disclosure of fund information and a ban on unsecured cash loans. 78 Ant Financial Is The Most Funded Chinese Fintech Startup Company Total Funding(1) (US$ m) Selected Investors Ant Financial 14,500 China Development Industrial Bank, Alibaba Group, National Social Security Fund, CCB International, Primavera Capital Group, China Investment Corporation JD Finance 3,000 CICC, Sequoia Capital, China Taiping Insurance, Oils and Foodstuffs Corporation, China Creation Ventures, Harvest Global Investments, China National Cereals Lufax 1,700 CICC, COFCO, CDH Investments, China MinSheng Bank, Guotai Junan Securities, Arbor Ventures, BLackPine Private Equity Partners U51.com 825 Yintai Group, Shunwei Capital, JD, Meridian Capital China, Xinhu Zhongbao, Tiantu Capital, GGV Capital, Harvest Capital Jiedaibao 694 JD Capital OneConnect 650 SBIIDG Ventures, Ping An CGTZ 521 Geo- Jade Petroleum, China Media Capital, Guangzhou YUEXIU Industrial Investment Fund, Shunwei Capital Dianrong 509 Standard Chartered Bank, EG Capital Advisors, CITIC Securities, Max Giant Capital, GIC, Bohai Leasing, Sun Hung Kai Properties, China Fintech Fund, Cross Pacific Capital Partners, Norther Light Venture Capital, GMIC Leasingm Simone Investment Mangers, ORIX Asia Capital Ltd, MindWorks Ventures, FinSight Ventures, Tiger Global Management WeBank 450 WI Harper Group, Temasek Dashu Finance 211 PAG, Primavera Capital Group, Sequoia Capital As of June 2018 79 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Fintech Deals Source Code Capital Qudian, Smart Finance Group, INK, feidee.com, Nongfenqi, Huifenqi, zichan360, licai.com, Lantouzi, Xiao Hu Group, juaicai.com, BMQB.com, ABC Fintech, Lean Work IDG China UMS, Qingsongchou, Shuidihuzhu, EasyTransfer, Tongdun, Qiandai, Tongbanjie, wacai.com, Wecash, 100credit.com, Yixin, Formax, TransferEasy Sequoia Capital ddjf.com, Shoujidai, Xiaoyusan Insurance, Zhongan, Pai Pai Dai Jinfuzi, feidee.com, 19pay, rong360.com BANYAN Capital Zhongrongjin, Qiandai, Shuidihuzhu, Yuanbaopu, Qianbao, QuantGroup, Jcaimao BAI Yixin Group, Fenqile, Nongfenqi, Meixin Global, Bigo Live, Baca, Linklogis Marathon Venture Partners Baozhunniu, Knowlegene, ejsino.com, Cihon, gevent.com, au23.cn, Totodi Bluerun Ventures Qudian, Shuidihuzhu, au23.cn, 51dang, Zhimahezi Qiming Ventures ABC Fintech, wacai.com, SequoiaDB China Creation Ventures id5.cn, Yixin, Sinowel, rong360.com Vertex Ventures InstaReM, Turnkey Lender, Maxent Source: Crunchbase, ITjuzi, Zero2IPO Most Active Fintech Investors In China As of June 2018 80 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 81 Top Online English-Learning Platform Overseas Teachers Network Over 40,000 teachers in the US and Canada 14,800 teachers in the Philippines and the US Teachers in the UK, the US, Australia and Canada Over 20,000 teachers from 80 countries Teachers from North America and Europe Online Education Connects Students In China With Int'l Resources Top online English-learning platforms are all leveraging videoconferencing technology to connect students in China with teachers overseas for real-time one-on-one lessons. Source: GETChina Insights, VIPKid, 51Talk, DaDaABC, vipabc, VIPKid, one of the top players in the industry, follows an Uber- like model that connects overseas teachers with parents & students. There are online tutorials on how to become a teacher on platforms such as VIPKid. VIPKid is also expanding the business model overseas i.e. connecting overseas students with teachers in China for Chinese-learning. 82 Online Education Is Empowering Students In Rural China Online education could be the answer to the challenges students face in rural China. Source: SCMP, VIPKid Challenges Shortage of teachers not enough qualified teachers willing to take up jobs in remote and impoverished areas. Outdated textbooks rural students often use textbooks more than a decade old. Solutions Live-streamed classes - enable educators in cities to reach out to students in rural areas with updated teaching resources. AI-enabled education frees up teachers' capacity and leads to more personalized education based on individual students' needs. Examples Government policy - China's Education Ministry has required governments at all levels to spend a minimum of 8% of their funding on digitalization of education. 87% of primary and middle schools in mainland China had access to the internet by 2016, according to the ministry. Ed tech companies - VIPKid x Jack Ma Charity Foundation launched the Rural Education Project in 2017, which aims to bring online education to 10,000 classrooms. CCtalk (online learning platform from Hujiang EdTech) offers free online lessons taught by experienced teachers based in cities on a voluntary basis. 83 VIPKID Is The Most Funded Chinese Education Startup Company Total Funding(1) (US$ m) Selected Investors VIPKID 825 Sequoia Capital, Zhen Fund, Tencent Holdings, Sinovation Ventures, Bryant Stibel Investments, Learn Capital, Matrix Partners China, Northern Light Ventures Capital, YF Capital Yuantiku 244 New Horizon Capital, IDG Capital Partners, Tencent Holdings, Matrix Partners China, Warburg Pincus, China Media Capital Zuoyebang 235 Sequoia Capital, H Capital, Legend Capital, GGV Capital, Xianghe Capital, Tiger Global Mauritius Fund Qingting.fm 230 Sinovation Capital, Baidu, CMIG, Shenzhen Guozhong Venture Capital Zhangmen 200 Warburg Pincus, Genesis Capital, StarVC, Shunwei Capital Qingqing Jiajiao 188 Sequoia Capital, IDG Capital, FREES Fund, TAL Education Group, ClearVue Partners, Trustbridge Partners Hujiang EdTech 187 Wanxin Media, China Minsheng Investment Group, Baidu Zhihu 185 Tencent Holdings, Sinovation Ventures, Capital Today, SAIF Partners, Sogou, Qiming Ventures Partners igetget.com 170 Sequoia Capital, Qiming Ventures Partners, Tencent Holdings, Youku, Shunwei Capital, Zhen Fund Xueba100.com 121 Anhui Xinhua Media, M Fund, Grand Fight Investment, China Wisdom, Yada Education, Vertex Ventures, Qiming Ventures Partners, China Merchants Capital, Trustbridge Partners As of June 2018 84 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Online Education Deals Zhen Fund VIPKID, igetget.com, VIPCODE, ToDoEN, LiveEdu.tv, Duia.com, Koala Reading Shunwei Capital Zhangmen, Hujiang EduTech, igetget.com, Qingting.fm, 17Zuoye, zhan.com Matrix Partners China VIPKID, BBTree, Yuantiku, Qingting.fm, Baicizhan Sequoia Capital VIPKID, Qingqing Jiajiao, igetget.com, Zuoyebang, Baicizhan IDG Capital Qingqing Jiajiao, Yuantiku, LingoChamp (liulishuo) , MSSVOCAL Sinovation Ventures VIPKID, Zhihu, Qingting.fm, VIPCODE, Waijiaoyi Trustbridge Partners xueba100.com, Qingqing Jiajiao, LingoChamp (liulishuo) GGV Capital Zuoyebang, LingoChamp (liulishuo) , Koala Reading Qiming Ventures Xueba100.com, igetget.com, Zhihu Warburg Pincus Yuantiku, Zhangmen Source: Crunchbase, ITjuzi, Zero2IPO Most Active Education Investors In China As of June 2018 85 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 86 26.1 30.8 37.9 25.1 28.1 30.4 55.3 62.9 69.6 106.5 121.7 137.9 2016 2017 2018e China US RoW China Further Solidifies Its Place As The Largest Gaming Market Most of China's growth comes from mobile gaming with Tencent and NetEase leading the way. % China (1) Consumer revenues generated by companies in the global games industry, excluding hardware sales, tax, business-to-business services and online betting. Source: Newzoo, iResearch, askci consulting 0% 20% 40% 60% 80% 100% 2016 2017 2018Q1 China captures more than a quarter of global gaming software revenue1 primarily driven by mobile gaming which is dominated by two players: Tencent and NetEase 24% 25% 28% $B 46% 53% 58% 54% 47% 42% 24.4 27.5 37.9 2016 2017 2018e Mobile Other Tencent market share NetEase market share 87 Others Battle Royale Is All The Rage Survival and shooter games have evolved into a new genre of battle royale which is sweeping mobile gaming. Chinese developers are capitalizing and have developed multiple versions globally. Source: Newzoo, SCMP, Abacus NetEase Tencent NetEase had first mover advantage, launching Knives Out and Rules of Survival in November 2017 in Chinese, English and Japanese. Normally, NetEase works to establish games in China before releasing them overseas but this time they changed their strategy. Knives Out 50 m monthly active users as of Jan 2018 Rules of Survival 25 m monthly active users as of Jan 2018 Shortly after in Feb 2018, Tencent launched two different versions of PUBG (PlayerUnknown's Battlegrounds, the overnight success originally launched in March 2017 for PC) in China. The international mobile version of PUBG was launched in March. PUBG: Exhilarating Battlefield 7.3 m downloads in China on iOS in debut month (#1 mobile game) 10 m daily active players (outside of China) as of May 2018 PUBG: Army Attack 2.9 m downloads in China on iOS in debut month (#2 mobile game) 88 Zeus Interactive Is The Most Funded Chinese Gaming Startup Company Total Funding(1) (US$ m) Selected Investors Zeus Interactive 410 Legend Capital, ENLIGHT MEDIA iDreamsky Technology 356 Hwa Xiu Investment Group, Legend Capital, Legend Star, Redpoint Linekong 228 IDG Capital Partners, New Enterprise Associates, SAIF Partners, Orchid Asia Group Management, Starwish Global Limited, Northern Light Venture Capital, Profitable Century International Limited Forgame 150 Qiming Venture Partners, Kongzhong, TA Associates Mokylin Group 92 Pine Capital Partners, Cowin Capital, DELI Group FunPlus 87 Signia Venture Partners, GSR Ventures, Orchid Asia Group Management, Steamboat Ventures Laoyuegou 70 Tiantu Capital Cheng Guang 55 Greenwoods Investment, Atlas Capital LLC, Guojin Capital Hoolai Games 38 Sequoia Capital, Zero2IPO Capital, CyberAgent Ventures, Greylock Partners, BAI, Tencent, Wanda EGLS Technology 23 Matrix Partners, Yinxinggu Capital, IFG, Galaxy Internet 89 As of June 2018 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Gaming Deals Tencent Win-Win fund Kamcord, Tianfeng, Pocket Gems, Heijing, Fireforge Games, Grinding Gear Games, VSPN IDG PlaySimple, Banana Culture, flamingo-inc.com, FUZE GAME, Sevenga Sinovation Ventures limboworks, iLongyuan, ENJOYGAME, 5EPlay, ImbaTV, Kamcord Sequoia Capital Zenjoy, Capstone Gaming, shiwan.com, BlingStorm, MYBO, CocoaChina Matrix Venture Partners mofang.com, Ismole, Kaiqigu, EGLS Technology, Forever Game Zhen Fund Jindouyun, Haichuan Game,Dreamobi, Taiyouxi, OtakuGames Fortune Venture Capital is-vr.com, iDreamSky, Miqtech, aiyounet.com, freeg.cn Green Pine Capital Partners Mokylin Group, Youzu Interactive, Niuqu Internet, HuoYoo Prometheus Capital Palmstar Game, Lanyou Culture, Forgame, iDreamsky Technology Source: Crunchbase, ITjuzi, Zero2IPO Most Active Gaming Investors In China 90 As of June 2018 Table of Contents Ecommerce Content & Media Social & Messaging Sharing Economy Artificial Intelligence Smart Devices Blockchain Fintech Education Gaming Esports Autonomous Car China at a Glance 1 Four Overarching Themes 2 Deep-dive by Sector 3 21 29 37 43 49 58 63 68 75 81 86 91 91 Live Streaming Of Esports Remains Dominated By Two Players In China, more than 200M viewers tune in to Esports via live streaming each year, mostly on Huya and Douyu. Rank Video Platform May 2017 MAU (app only) 1 18.0M 2 16.2M 3 8.6M 4 7.8M 5 4.5M Source: Abacus, CNNIC, iResearch More than 126 m people in China tuned in to watch the finals of the League of Legends tournament, Mid-Season Invitational (MSI). The viewing audience in China alone is equivalent to the entire population of Japan. As of Q4 2017, Huya had 610K monthly active streamers (desktop and mobile), more than that of Twitch which had 551K in Dec 2017. 92 Mobile Is The Main Growth Engine For Esports in China Mobile Esports revenue surpassed PC Esports in 2017 and is expected to outpace it. 3.8 4.3 4.7 5.0 0.8 1.8 4.7 7.1 0.8 1.3 4.8 6.4 10.2 13.5 PC client Mobile PC browser China's Esports Market (1) Esports revenue defined by desktop, mobile and ecosystem revenue, which includes sale of sponsorship, media rights, advertising, publisher fees and tickets and merchandising. Source: iResearch, Esports Charts 100 130 260 320 2015 2016 2017 2018e Market Size (US$B) Audience Size (M) Many top mobile titles have professional leagues, live stadium events and ms of viewers Tencent's "Honor of Kings" has over 200 m users and drew 20m viewers for its King Pro League Fall tournament. 93 Douyu TV Is The Most Funded Chinese Esports Startup Company Total Funding(1) (US$ m) Selected Investors Douyu TV 1,130 Tencent holdings, Cmb International, Sequoia Capital, Phoenix Capital Hero Entertainment 560 Sequoia Capital, Zhen Fund, Huayi Brothers, Pusi Capital Panda.tv 260 Lighthouse Capital, Hanfor Holdings, Zhen Fund, 360.com, Autobot Capital Partners ImbaTV 230 Cowin Capital, Sinovation Ventures, Suzhou International Development Venture, Addor Capital, Pusi Capital Chushou 57 Alpha X Capital, Shunwei Capital, Google, Feidian Capital, Qiming Venture Partners, GGV Capital Wangyu Master 50 Zhejiang Jinkong Capital Management, Mishuo Fund, Shenzhen Capital Group Longzhu TV 43 SoftBank, Tencent Holdings Banana Culture 36 Wargaming, IDG Capital Partners, Seeinfront Capital, Matrix Partners China, Esport Capital HK Esports 30 Autobot Capital Partners XianyuGame 28 Yao, Huayi Brothers, Jinke Holdings As of June 2018 94 (1) Total funding amount highly depends on company disclosure and may vary by sources. Best estimates apply here. Source: Crunchbase, ITjuzi, Zero2IPO Most Active Investors Top Esports Deals Tencent Win-Win Fund Douyu TV, Xishanju, tthl.qq.com, Gameley, Jingle Game, Kamcord, eeyy.com, iDreamsky Technology, Longzhu TV Zhen Fund Hero Entertainment, Panda TV, Wangyu Master, Kaiheikeji Sequoia Capital Douyu TV, Hero Entertainment, Kaiheikeji, 5EPlay, Cyphytech Matrix Venture Partners Kuka Shuzi, Mofang, Ismole, EGLS Autobot Capital Partners Panda TV, Kaiheikeji, HK Esports, Zhangmeng Prometheus Capital ImbaTV, Hero Entertainment, PentaQ Fortune Venture Capital dj.sina.com, YOOZOO, sqage.com Source: Crunchbase, ITjuzi, Zero2IPO Most Active Esports Investors In China 95 As of June 2018 Table of Contents Acknowledgement Abacus News Ravi Hiranand, Xinmei Shen, Andrew Barclay 500 Startups Edith Yeung, Stella Zheng, Bonnie Cheung South China Morning Post Chua Kong Ho, Ang Jin, Yifei Shao, Joey Liu, Pablo Robles, Zen Soo, Sarah Dai, Celia Chen For any questions or comments regarding the report, please email: report@abacusnews.com 96 The content of the article/video in this report are for information purposes only. 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