Five Chinese startups that survived a tough year of Covid lockdowns

BEIJING — In a year of Covid lockdowns and travel bans, some surviving Chinese startups are finding growth online and overseas.

China’s economy will grow by just 3% in 2022, economists estimate. Lockdowns hamper businesses and prevent investors from reviewing deals. The path to the IPO in the United States – an important route for reaping investment returns – essentially froze.

The next year or two will remain soft in terms of venture capital support for startups in China and elsewhere, according to assessments from Preqin, a VC data service. US dollars raised by China-focused VCs fell more than 80% from 2021 to less than $9 billion in 2022, according to Preqin data on December 28.

But many deals are still underway in China’s information technology industry, manufacturing-related sectors and business connectivity applications, among others, said Angela Lai, senior research analyst at Preqin.

He says venture capitalists have near-record levels of capital — what he calls “dry powder.” China-focused VCs have $104.7 billion in March 2022, Preqin data shows.

“Asset managers are ready to react when the market rises,” Lai said. “Everybody is waiting for when the entry point is going to be really good, when the macro is going to start.”

As China prepares to reopen from zero-Covid, here is a selection of five startups that are doing so in 2022, in alphabetical order:

Year established: 2019

Notable backers: Hillhouse Capital, BlueRun Ventures

Headquarters: Beijing

Cybersecurity company Anxinsec sees revenue quadruple by 2022 to tens of millions of yuan, founder Alex Jiang said. It is thanks to customers of large companies which he said now include Siemens, JD.com and Baidu.

The three companies did not immediately respond to requests for comment.

The startup has avoided the significant impact of China’s Covid lockdown because it can ship products virtually, Jiang said. He added that greater use of digital tools — from ride-hailing apps to video conferencing — means more of a company’s core assets are digital, creating more demand for cybersecurity protection.

Anxinsec focuses on data, or memory, protection services — free for personal use, Jiang said. He points out that Microsoft says 70% of vulnerabilities are memory-related.

The startup already has subsidiaries in Hong Kong and the United Arab Emirates, but the company still has a long way to go before going public, Jiang said.

Year established: 2016

Notable backers: Skyline Ventures

Headquarters: Foshan

In a year of inflation and war, European-focused kitchenware brand Ciarra saw sales grow by about 25%, founder Kang Zuotian said.

He claims that if the war in Ukraine had not broken out, sales could have grown by about 60%, but the willingness of European consumers to spend has fallen because energy prices have risen more than incomes.

The company sells cooker hoods and induction hobs for home use, with list prices of several hundred euros each – or several hundred US dollars, for the US market.

Although Ciarra’s products may be 30% to 40% more expensive than similar ones on the market, they use half the electricity, Kang said in Mandarin as translated by CNBC. “We don’t want Chinese companies to go abroad just to be cheap.”

Most products reach Europe by ship and are usually sold through physical stores, he said. Kang said he will use the 2022 financial performance to prepare for future Chinese mainland IPOs.

Year established: 2010

Notable Backers: SoftBank, Prosperity7 Ventures, Yunqi Partners

Headquarters: Shanghai

With no growth to speak of in China by 2022, Keenon Robotics sees revenue increase by more than 40% due to overseas business, COO Wan Bin said.

The company is aggressively pushing overseas in 2022 – launching subsidiaries in Tokyo, Seoul, Germany, Dubai, Los Angeles and Hong Kong, Wan said. By 2023, he said the plan would be to expand regional business from there, while capitalizing on China’s rebound.

Previously, Wan said that Keenon has seen revenue double or more every year from the lower base, while the Chinese market has grown.

Keenon has reached unicorn status, with a net worth of over $1 billion. In September 2021, SoftBank’s Vision Fund 2 led a $200 million Series D investment round, and SoftBank Robotics announced a partnership with Keenon.

It took five years for Keenon to find a focus on service sector robots, especially catering, Wan said. These 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 for each robot, Wan said, as prices are higher overseas.

Wan had no specifics to share about his IPO plans.

Year established: 2020

Notable backers: eWTP Capital, Skyline Ventures

Headquarters: Guangzhou

Home furnishings brand Povison is seeing sales more than double last year, to more than $50 million by 2022, founder Ayden Lin said. They expect an IPO within three years.

The company primarily sells to US consumers through its website – which features a $2,000 marble dining table, a $1,500 wooden dressing table set and $500 for a pair of adjustable bar stools. The company has a staff of 100 people in China’s southern Guangdong and Los Angeles provinces, Lin said.

Lin said he started working in China’s domestic furniture e-commerce market in 2017. He found there was overproduction in the industry, but suppliers did not know how to adjust their business.

Lin claims that part of his success is the development of the company’s digital system that allows Povison to find areas of consumer demand and respond quickly through 40 to 50 suppliers.

One system manages the warehouse and divides the manufacturing process into parts, so that steps such as painting and gluing can be done simultaneously, Lin said. Others connect shipments with trucks that can deliver products in the U.S., he said.

Year established: 2021

Noted backers: Future Capital, Shunwei Capital, Ventech China

Headquarters: Shanghai

2022 is the year China’s first passenger plane, the Comac C919, finally gets local certification. Just over a year earlier, an engineer who worked on airplanes had launched his own startup, Volant Aerotech, to build what was essentially an electric-powered helicopter.

That technical experience gives Volant the edge to efficiently develop aircraft that can meet regulatory requirements — such as considering flight over water — from the start, founder and CEO Dong Ming said.

Volant has built a prototype that China’s aviation regulator has given the green light for flight testing, which will take place in early 2023.

The vehicle, expected to begin delivery 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, they expect Volant to deliver around 100 vehicles.

Delta Air Lines and other passenger airline operators have backed the startup to develop a similar vehicle, formally known as an electric vertical take-off and landing (eVTOL) aircraft.