BEIJING — In a year of Covid lockdowns and travel restrictions, some Chinese startups that survived found growth online and overseas.
China’s economy likely grew by just 3% in 2022, economists estimate. Lockdowns stifled business and kept investors from vetting deals. The path to an IPO in the United States — an important route to reaping investment returns — essentially froze.
The next year or two will remain soft in terms of venture capital backing for startups in China and elsewhere, according to an assessment from Preqin, a VC data service. U.S. dollars raised by China-focused VCs plunged by more than 80% from 2021 to just under $9 billion in 2022, according to Preqin data as of Dec. 28.
But many deals still went on in China’s information technology industry, factory-related sectors and business connectivity apps, among others, said Angela Lai, a senior research analyst at Preqin.
She said that venture capitalists have near-record levels of capital on hand — what’s known as “dry powder.” China-focused VCs had $104.7 billion as of March 2022, Preqin data showed.
“Asset managers stand ready to react when the market picks up,” Lai said. “Everyone’s waiting to see when is a really good entry point, when is the macro going to be picking up.”
As China gears up for a reopening from zero-Covid, here’s a selection of how five startups said they did in 2022, in alphabetical order:
Anxinsec Technology
Year founded: 2019
Notable backers: Hillhouse Capital, BlueRun Ventures
Headquarters: Beijing
Cybersecurity company Anxinsec saw revenue quadruple in 2022 to tens of millions of yuan, said founder Alex Jiang. That’s thanks to big corporate customers which he said now include Siemens, JD.com and Baidu.
The three companies did not immediately respond to a request for comment.
The startup avoided significant impact from China’s Covid lockdowns since it could deliver its products virtually, Jiang said. He added that the greater use of digital tools — from ride-hailing apps to videoconferencing — means more companies’ core assets are digital, creating more demand for cybersecurity protection.
Anxinsec focuses on data or memory protection services for businesses, Jiang said. He pointed out that Microsoft has said that 70% of vulnerabilities are related to memory.
The startup already has subsidiaries in Hong Kong and United Arab Emirates, but the company still has a long way to go before going public, Jiang said.
Ciarra
Year founded: 2016
Notable backers: Skyline Ventures
Headquarters: Foshan
In a year of inflation and war, Europe-focused kitchen appliances brand Ciarra saw sales grow by about 25%, founder Kang Zuotian said.
He claimed if the war in Ukraine hadn’t broken out, sales could have grown by about 60%, but European consumers’ willingness to spend declined as energy prices soared more than incomes rose.
The company sells cooker hoods and induction hobs for use at home, with list prices of a few hundred euros each — or a few hundred U.S. dollars, for the U.S. market.
Although Ciarra products might be 30% to 40% more expensive than similar ones on the market, they use half the electricity, Kang said in Mandarin translated by CNBC. “We don’t want Chinese companies going overseas to only be cheap.”
Most products reach Europe by ship and are sold mostly through physical stores, he said. Kang said he plans to use 2022’s financial performance to prepare for a mainland China IPO in the near future.
Keenon Robotics
Year founded: 2010
Notable backers: SoftBank, Prosperity7 Ventures, Yunqi Partners
Headquarters: Shanghai
With no growth to speak of in China for 2022, Keenon Robotics saw revenue climb by more than 40% thanks to its overseas business, COO Wan Bin said.
The company aggressively pushed overseas in 2022 – launching subsidiaries in Tokyo, Seoul, Germany, Dubai, Los Angeles and Hong Kong, Wan said. In 2023, he said the plan is to expand regional business from those places, while capitalizing on China’s rebound.
Previously, Wan said that Keenon had seen revenue at least double or more every year from a lower base, when the China market was growing.
Keenon has reached unicorn status, with a valuation of more than $1 billion. In Sept. 2021, SoftBank’s Vision Fund 2 led a $200 million Series D investment round, and SoftBank Robotics announced a partnership with Keenon.
It took about five years for Keenon to find its focus in service sector robots, especially catering, Wan said. Their robots now serve food at restaurants such as Haidilao hot pot, or bring deliveries to hotel rooms.
In China, customers pay about 2,000 yuan a month per robot, Wan said, noting prices are higher overseas.
Wan didn’t have specifics to share about IPO plans.
Povison
Year founded: 2020
Notable backers: eWTP Capital, Skyline Ventures
Headquarters: Guangzhou
Home furniture brand Povison saw sales more than double in the last year, to over $50 million in 2022, founder Ayden Lin said. He hopes for an IPO in three years.
The company primarily sells to U.S. consumers via its website — which lists $2,000 marble dining tables, $1,500 wooden makeup vanity table sets and $500 for a pair of velvet adjustable bar stools. The company has a staff of 100 people in the southern Chinese province of Guangdong and Los Angeles, Lin said.
Lin said he began working in China’s domestic furniture e-commerce market in 2017. He found there was overproduction in the industry, but suppliers didn’t know how they could adjust their business.
Lin claims part of his success is the company’s development of digital systems that allow Povison to discover areas of consumer demand and respond quickly via its 40 to 50 suppliers.
One system manages warehouses and divides the manufacturing process into parts, so that steps such as painting and gluing can be done at the same time, Lin said. The other connects shipments with trucks that can deliver products in the U.S., he said.
Volant Aerotech
Year founded: 2021
Notable backers: Future Capital, Shunwei Capital, Ventech China
Headquarters: Shanghai
2022 was the year China’s first passenger plane, Comac C919, finally got local certification. Just over a year earlier, engineers who worked on the airplane launched their own startup, Volant Aerotech, to build what’s essentially an electric-powered helicopter.
That technical experience gives Volant an edge in efficiently developing aircraft that can meet regulators’ requirements — such as considering flight over water — from the very start, founder and CEO Dong Ming said.
Volant has already built a prototype that China’s aviation regulators have greenlit for a test flight, set to take place in early 2023.
The vehicle, expected to begin deliveries in the second half of 2026, can be used in shuttle services, for charter flights, tourism and package delivery, Dong said. By the end of 2027, he expects Volant will have delivered about 100 of the vehicles.
Delta Air Lines and other passenger flight operators have backed startups developing similar vehicles, known formally as electric vertical take-off and landing (eVTOL) aircraft.
Correction: This story has been updated to reflect that Anxinsec only works with businesses.