Author: azeeadmin

Korean automaker Hyundai is jumping into India’s on-demand mobility space after it led a $14.3 million investment in car-rental startup Revv.

Hyundai, which is the second largest seller of cars in India, initially announced an undisclosed investment in Revv this week, but now the startup has confirmed that the capital is part of a larger 100 Crore INR (~$14.3 million) Series B round.

Other investors in the round include Japan’s Dream Incubator, Telama Investment and Sunjay Kapoor of auto component firm Sona BLW. Existing investors Edelweiss and Beenext also took part in the deal, which takes Revv to $23 million raised from investors, according to data from Crunchbase.

Revv was founded in 2015 and it offers on-demand car rentals using a model similar to Zipcar in the U.S. The startup is currently active in 11 cities in India with a fleet of around 1,000 vehicles. It claims to have served 300,000 users to date. One of its hallmarks is doorstep delivery and collection from customers, which eschews the usual process of designated collection and return locations.

In an interview with TechCrunch, Revv co-founders Anupam Agarwal (CEO) and Karan Jain (COO) said the plan is to expand to 30 cities over the next 12-18 months while growing the fleet size to 10,000-12,000. The duo said that the investment from Hyundai didn’t include any specific clause to provide vehicles, but that it is possible that an agreement may be reached in the future.

Beyond potential support on growing the fleet, Agarwal and Jain said that Revv plans to tap Hyundai for its knowledge in vehicles, including performance upkeep, maintenance of cars and more, and other tech areas as it builds out its platform and new products.

A photo of the Revv team

That’s because the startup’s expansion plan goes beyond new geographies to include different types of services, too.

Right now, Revv offers on-demand car rentals and a subscription-based product — Switch — that is designed for power-users, but Agarwal and Jain want to introduce more modular and flexible products. Already Shift users account for around one-third of rentals, but Revv wants to go further.

Agarwal and Jain hinted that could range from shorter time “on-demand” rentals, such as within 15 minutes, to longer-term alternatives to car ownership that remain financial commitments of loans and repayments.

“We are looking at innovative business models that we can take to the consumer,” the Revv co-founders said. “We understand that the traditional model of car ownership will be diluted and alternative options of accessible mobility will be the norm.

“Cabs solve point A to B in 40 minutes, but every other need is still a largely unsolved problem in this country. India is unique [and the need for] mobility solutions is far higher because 98 percent of people don’t own cars,” they added.

While taxi on-demand apps like Ola and Uber are making the cab experience better in India, Revv believes it can’t address other needs like out of town trips, long-distance commuting and other requirements that it believes are common among Indian consumers. Longer term, the startup’s aim is to grow the ‘automobile access’ rate to 50 percent across India to help cover these gaps.

Revv co-founders Anupam Agarwal (left) and Karan Jain (right)

With this new funding in the bag, Revv aims to amp up its business with a “slew” of new products. Agarwal and Jain said the target is to increase revenue 10X, going from $10 million ARR right now to $100 million within 18 months.

They believe that these new services are essential and that they could account for half of that revenue target. They also plan to increase marketing spend to grow the brand, having previously focused on user retention, according to Agarwal and Jain.

When asked about the potential to add two-wheeled transportation — given the growth of startups in that space, such as Sequoia-backed Bounce — the duo, who both spent time with McKinsey, said they would remain focused on cars for at least the next year.

“We feel there’s a huge opportunity that hasn’t been tapped into,” they said.

Revv’s chief domestic rival is Zoomcar, which raised $40 million earlier this year and is backed by the likes of Ford and Mahindra & Mahindra. Zoomcar has already moved into two-wheelers, and its big differentiator is a program that allows existing car owners to lease out their vehicles by adding them to the Zoomcar fleet. The five-year-old startup is also considering overseas expansion.

Elsewhere, other competitors include Voler, Drivezy and Carzonrent.

Australia has blocked Huawei and ZTE from providing equipment for its 5G network, which is set to launch commercially next year. In a tweet, Huawei stated that the Australian government told the company that both it and ZTE are banned from supplying 5G technology to the country, despite Huawei’s assurances that it does not pose a threat to national security.

We have been informed by the Govt that Huawei & ZTE have been banned from providing 5G technology to Australia. This is a extremely disappointing result for consumers. Huawei is a world leader in 5G. Has safely & securely delivered wireless technology in Aust for close to 15 yrs

— Huawei Australia (@HuaweiOZ) August 22, 2018

Earlier today, the Australian government issued new security guidelines for 5G carriers. Although it did not mention Huawei, ZTE or China specifically, it did strongly hint at them by stating “the Government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorized access or interference.”

Concerns that Huawei, ZTE and other Chinese tech companies will be forced to comply with a new law, passed last year, that obligates all Chinese organizations and citizens to provide information to national intelligence agencies when asked have made several countries wary of using their technology. Earlier this month, the United States banned the use of most Huawei and ZTE technology by government agencies and contractors, six years after a Congressional report first cited the two companies as security threats.

In its new security guidelines, the Australian government stated that differences in the way 5G operates compared to previous network generations introduces new risks to national security. In particular, it noted the diminishing distinctions between the core network, where more sensitive functions like access control and data routing occur, and the edge, or radios that connect customer equipment, like laptops and mobile phones, to the core.

“This new architecture provides a way to circumvent traditional security controls by exploiting equipment in the edge of the network – exploitation which may affect overall network integrity and availability, as well as the confidentiality of customer data. A long history of cyber incidents shows cyber actors target Australia and Australians,” the guidelines stated. “Government has found no combination of technical security controls that sufficiently mitigate the risks.”

Last year, Australia introduced the Telecommunications Sector Security Reforms (TSSR), which takes effect next month and directs carriers and telecommunication service providers to protect their networks and infrastructure from national security threats and also notify the government of any proposed changes that may compromise the security of their network. It also gives the government the power to “intervene and issue directions in cases where there are significant national security concerns that cannot be addressed through other means.”

Huawei’s Australian chairman John Lord said in June that the company had received legal advice that its Australian operations are not bound to Chinese laws and he would refuse to hand over any data to the Chinese government in breach of Australian law. Lord also argued that banning Huawei could hurt local businesses and customers by raising prices and limiting access to technology.

TechCrunch has contacted ZTE and Huawei for comment.

Tim Kentley-Klay, the co-founder and CEO of secretive self-driving vehicle company Zoox, was fired suddenly Wednesday by the company’s board.

Kentley-Klay’s departure was first reported by The Information, which cited an unnamed source. Kentley-Klay later tweeted a statement confirming that he had been fired by the board.

Kentley-Klay and Zoox could not be reached for comment. TechCrunch will update the story as it develops.

In the tweet, Kentley-Klay wrote:

I came to this town as a founder only to build the future of mobility, and by the metrics shared here was crushing it against the biggest. But the shocking reality is that this—without a warning, cause or right of reply—the board fired me. Today was Silicon Valley up to its worst tricks. This town sells the story that it backs founders to create real change. Rather than working through the issues in an epic startup for the win, the board chose a path of fear, optimizing for a little money in hand at the expense of profound progress for the Universe. Cheers to the true believers that have built Zoox from scratch these last four years. Don’t let anyone stand between you and what you know is right. TKK.

He also posted a graphic comparing the capital efficiency of top autonomous vehicle programs like Waymo, Uber, and Cruise with Zoox.

Kentley-Klay has since posted more than a dozen tweets, quoting others who have contacted him to express support and disappointment. He doesn’t name anyone, but the presumption is that these are Zoox employees.

The firing comes just a month after Zoox closed a massive $500 million funding round at a $3.2 billion post-money valuation. The round, led by Mike Cannon-Brookes of Grok Ventures, brings its total amount of funding to $800 million.

Kentley-Klay founded Zoox with Jesse Levinson about four years ago. The company is infamous for its secrecy. The first real inside look into the company, and Kentley-Klay, came just a month ago in a feature by Bloomberg’s Ashlee Vance.

The company, which employs about 500 people, wants to deploy autonomous vehicles on public streets and launch a ride-hailing service with its fleet by 2020.

Facebook announced today that it had banned the app myPersonality for improper data controls and suspended hundreds more. So far this is only the second app to be banned as a result of the company’s large-scale audit begun in March; but as myPersonality hasn’t been active since 2012, and was to all appearances a legitimate academic operation, it’s a bit of a mystery why they bothered.

The total number of app suspensions has reached 400, twice the number we last heard Facebook announce publicly. Suspensions aren’t listed publicly, however, and apps may be suspended and reinstated without any user notification. The only other app to be banned via this process is Cambridge Analytica.

myPersonality was created by researchers at the Cambridge Psychometrics Centre (no relation to Cambridge Analytica — this is an actual academic institution) to source data from Facebook users via personality quizzes. It operated from 2007 to 2012, and was quite successful, gathering data on some four million users (directly, not via friends) when it was operational.

The dataset was used for the Centre’s own studies and other academics could request access to it via an online form; applications were vetted by CPC staff and had to be approved by the petitioner’s university’s ethics committee.

It transpired in May that a more or less complete set of the project’s data was available for anyone to download from GitHub, put there by some misguided scholar who had received access and decided to post it where their students could access it more easily.

Facebook suspended the app around then, saying “we believe that it may have violated Facebook’s policies.” That suspension has graduated into a ban, because the creators “fail[ed] to agree to our request to audit and because it’s clear that they shared information with researchers as well as companies with only limited protections in place.”

This is, of course, a pot-meet-kettle situation, as well as something of a self-indictment. I contacted David Stillwell, one of the app’s creators and currently deputy director of the CPC, having previously heard from him and collaborator Michel Kosinski about the dataset and Facebook’s sudden animosity.

“Facebook has long been aware of the application’s use of data for research,” Stillwell said in a statement. “In 2009 Facebook certified the app as compliant with their terms by making it one of their first ‘verified applications.’ In 2011 Facebook invited me to a meeting in Silicon Valley (and paid my travel expenses) for a workshop organised by Facebook precisely because it wanted more academics to use its data, and in 2015 Facebook invited Dr Kosinski to present our research at their headquarters.”

During that time, Kosinski and Stillwell both told me, dozens of universities had published in total more than a hundred social science research papers using the data. No one at Facebook or elsewhere seems to have raised any issues with how the data was stored or distributed during all that time.

“It is therefore odd that Facebook should suddenly now profess itself to have been unaware of the myPersonality research and to believe that the data may have been misused,” Stillwell said.

Examples of datasets available via the myPersonality project.

A Facebook representative told me they were concerned that the vetting process for getting access to the dataset was too loose, and furthermore that the data was not adequately anonymized.

But Facebook would, ostensibly, have approved these processes during the repeated verifications of myPersonality’s data. Why would it suddenly decide in 2018, when the app had been inactive for years, that it had been in violation all that time? The most obvious answer would be that its auditors never looked very closely in the first place, despite a cozy relationship with the researchers.

“When the app was suspended three months ago I asked Facebook to explain which of their terms was broken but so far they have been unable to cite any instances,” said Stillwell.

Ironically, Facebook’s accusation that myPersonality failed to secure user data correctly is exactly what the company itself appears to be guilty of, and at a far greater scale. Just as CPC could not control what a researcher did with the data (for example, mistakenly post it publicly) once they had been approved by multiple other academics, Facebook could not control what companies like Cambridge Analytica did with data once it had been siphoned out under the respectable guise of research purposes. (Notably, it is projects like myPersonality that seem to have made that guise respectable to begin with.)

Perhaps Facebook’s standards have changed and what was okay by them in 2012 — and, apparently, in 2015 — is not acceptable now. Good — users want stronger protections. But this banning of an app inactive for years and used successfully by real academics for actual research purposes has an air of theatricality. It helps no one and will change nothing about myPersonality itself, which Stillwell and others stopped maintaining years ago, or the dataset it created, which may very well still be analyzed for new insights by some enterprising social science grad student.

Facebook has mobilized a full-time barn door closing operation years after the horses bolted, as evident by today’s ban. So when you and the other four million people get a notification that Facebook is protecting your privacy by banning an app you used a decade ago, take it with a grain of salt.

The vast majority of environmental experts say that avoiding meat and dairy is the single most important, and most impactful action, you can take to reduce your personal impact on Earth. Why? Because of the sheer amount of carbon pumped into the atmosphere from the process of meat production. Many would agree it’s also pretty good for your health. But when most of us have been brought up with animal protein in the middle of our plates, it often feels pretty hard to achieve. At the same time, fast food delivery has been taking off, but we’re still eating the same thing: meat.

So a Danish startup has come along to try to solve this. Simple Feast delivers sustainable food to people’s homes in biodegradable boxes, and it’s now raised a $12 million Series A funding round led by Balderton Capital in London, with participation from 14W in New York. Existing investors Sweet Capital and ByFounders are also re-investing the round.

Simple Feast offers what it describes as ready-to-eat plant-based food that is “sustainably produced, organic, and delivered straight to the doorstep” in biodegradable boxes every week. The meal solution delivers weekly boxes with three prepared plant-based and 100 percent organic meals ready to serve in 10 minutes.

In this respect it’s not unlike other startups, such as HelloFresh, with the main difference being that all the food is plant-based.

Jakob Jønck, CEO and co-founder of Simple Feast, says: “Climate change is real. There is no Planet B and we are facing what is arguably the biggest challenge in human history. This is a big investment for a small company, but it’s a drop in the ocean considering the challenge at hand, the politicians and industries we are up against.”

He and Thomas Ambus, co-founder/CTO, started thinking more deeply about Simple Feast when Under Armour acquired Endomondo and MyFitnessPal, their previous startups, in the spring of 2015 and got serious about it in 2016. “Ever since founding Endomondo and heading up International Operations for MyFitnessPal, I always felt a missing link when trying to move towards a healthy, sustainable diet — an actual product that didn’t compromise on taste, nor convenience, but solved the huge challenges involved with embarking on this journey towards eating plants first and foremost,” says Jønck.

Daniel Waterhouse, a partner at Balderton Capital, says: “With a global transition towards plant-based food, we believe Simple Feast is uniquely positioned to change the way we eat and create awareness about the impact of our food choices.”

The main target is families, with the parents in their 30s and 40s. “We find that women are still predominantly the decision maker when it comes to food for the family. Our most typical customers are women in a relationship in their 30s with one or two kids. Our customers are also politically interested, above the average,” says Jønck.

They are competing with restaurants, meal kits and take-away. “We are disrupting both the restaurant and the meal kit industry. Nobody has ever taken the challenge of creating climate-friendly, plant-based food seriously while serving it directly to consumers. We don´t make compromises on taste, nor convenience, and we don´t believe that we have seen that before,” he told me.

What good is 3D? Does depth and definition give you anything worthwhile in an interface that’s most likely flat anyway? Is “immersion” as a metric really worth that much?

Even as a ton of startups and big companies have invested in 3D-centric hardware and software, there has undoubtedly been some pushback on whether it’s all that necessary. I grappled with some of these questions when I played with the latest project from Looking Glass, a desktop volumetric display that they see as so central to the company’s goals that they’ve just named it the Looking Glass.

My experience with it left me a bit perplexed with where the tech would end up, but god dammit was it cool anyway.

via Looking Glass

The startup is in the midst of a crowdfunding campaign to gauge interest in such a product, they’ve raised about $775k with north of 1,200 backers. I had a chance to try out both of the versions of what they’re shipping, a $450 8.9 inch version and a $2,500 15.6 inch type.

The display is beaming 45 views of an object, each at 60 frames per second delivering images that you can peer around and see multiple angles of. How it works is that the display is basically sending out a fan of perspectives which can be observed by multiple people from multiple perspectives. No matter what you initially hear about the technical details of how it all works, there is a certain degree of disbelief baked into seeing a volumetric display like this for the first time. It’s like… looking into a fishbowl of pixels.

Looking Glass has been around since 2015 and has already shipped quite a few products that broadly fit into the world of holograms, this one comes at a time where it has the chance to be a little bit more than a toy for designers and creative types. Rather than putting on a headset, Looking Glass argues, this product offers these people the chance to easily see what they’re working on and show it to other without tossing a headset around.

The display is a fascinating pairing for the recent buildup in platforms and stores for 3D digital assets. It’s easier than its ever been to build a 3D scan of something now that there are sophisticated camera arrays on devices like the iPhone X, similarly large tech cos are looking to buy into the AR/VR development process with 3D digital asset libraries that can be easily accessed.

I’m a bit torn on how far out I see the use cases for a volumetric display type like this actually extending, but this does specifically seem like a very intriguing tool for a 3D creator who’s building their own models and wants to see them visualized in a more immersive way. Is it solving an essential problem for them? I wouldn’t say so, but it’s such a weirdly interesting technology that I don’t doubt they’ll be able to move some units to an early adopter crowd that’s generally aching for this type of stuff. Most of these Kickstarter upstarts are peddling pipe dreams, but Looking Glass has been working on this stuff for awhile and whether or not you actually do need it, they’ve got it.

If you were on the edge of your seat wondering what Facebook’s next major consumer privacy headache would be, the wait is over! The Wall Street Journal reports that Apple has deemed Facebook-owned app Onavo in violation of its App Store policies and will be giving it the boot shortly.

In a statement to TechCrunch, an Apple spokesperson explained the reasoning behind its decision to pull the app:

We work hard to protect user privacy and data security throughout the Apple ecosystem. With the latest update to our guidelines, we made it explicitly clear that apps should not collect information about which other apps are installed on a user’s device for the purposes of analytics or advertising/marketing and must make it clear what user data will be collected and how it will be used.

In some ways, it’s a wonder that Onavo has lasted this long.

Onavo, which Facebook bought back in 2013, does two things. As far as regular consumers are concerned, Onavo comports itself like a VPN, offering to “keep you and your data safe” and “blocking potentially harmful websites and securing your personal information.”

But Onavo’s real utility is pumping a ton of app usage data to its parent company, giving Facebook an invaluable bird’s-eye view into mobile trends by observing which apps are gaining traction and which are fizzling out. That perspective is useful both from a product standpoint, allowing Facebook to get ahead of the competition (Snapchat is a fine example), and giving it an edge for considering which competitors to acquire.

That dual personality is likely part of the problem for Apple. In its descriptions, Onavo leans heavily on its promise to “protect your personal information” and the cover story of a fairly legitimate looking VPN.

With no meaningful opt-in for users who want to use Onavo’s VPN services but might be hesitant about sharing data with Facebook, the app’s true intentions were buried deep in its description: “Onavo collects your mobile data traffic… Because we’re part of Facebook, we also use this info to improve Facebook products and services, gain insights into the products and services people value, and build better experiences.”

By February of this year, the Onavo app had been downloaded more than 33 million times across both iOS and Android. While the app is no longer showing up in searches within Apple’s App Store, it’s still alive and well in Google’s considerably more free-wheeling app store, so Facebook will have to lean more heavily on its Android eyes and ears for now.

You can tell a lot about what’s going on in a home from how much electricity it’s using — especially when that information is collected every few minutes and recorded centrally. It’s revealing enough that a federal judge has ruled that people with smart meters have a reasonable expectation of privacy and as such law enforcement will require a warrant to acquire that data.

It may sound like a niche win in the fight for digital privacy, and in a way it is, but it’s still important. One of the risks we’ve assumed as consumers in adopting ubiquitous technology in forms like the so-called internet of things is that we are generating an immense amount of data we weren’t before, and that data is not always protected as it should be.

This case is a great example. Traditional spinning meters are read perhaps once a month by your local utility, and at that level of granularity there’s not much you can tell about a house or apartment other than whether perhaps someone has been living there and whether they have abnormally high electricity use — useful information if you were, say, looking for illicit pot growers with a farm in the basement.

Smart meters, on the other hand, send exact meter readings at short intervals, perhaps every 15 minutes, and these readings may be kept for years. With that much detail you could not only tell whether someone lives in a house, but whether they’re home, whether the fridge has been opened recently, what room they’re in, how often they do laundry, and so on. The fingerprints of individual devices on the house’s electrical network aren’t that difficult to figure out.

To be sure this can help the utility with load balancing, predicting demand and so on. But what if the government wants to do more with it, for example to establish whether someone was home at a certain time in a criminal investigation?

A group of concerned citizens sued the city of Naperville, Illinois, which mandated smart readers several years ago, alleging that collection of the data was unconstitutional as it amounted to an unreasonable search.

An earlier court decision essentially found that by voluntarily sharing electricity consumption data with a third party, residents surrendered their right to privacy. No privacy means it’s not a “search” to ask for the data.

But as the 7th Circuit pointed out in its ruling on appeal (hosted at the EFF), there isn’t really a third party: the city collects the data, and city authorities want to use the data. And even if there were, “a home occupant does not assume the risk of near constant monitoring by choosing to have electricity in her home.” So it is a search.

Collecting the data is not an unreasonable search, however, when it is done with no “prosecutorial intent,” the court ruled. That means that when the city is acting in its own interest as far as administrating and improving the electrical grid, it’s perfectly reasonable for them to collect this information without a warrant.

But should it be required for more than that, for instance in a criminal investigation, a warrant would certainly be required.

This distinction is important and not always observed. Systematic collection and analysis of metadata can produce remarkably detailed records of a person’s movements and habits, and it can be difficult to find and plug the holes by which that data pours out of protected containers like the Fourth Amendment.

Although it’s possible that this could be appealed up to the Supreme Court, it seems unlikely as this is not a major issue of free speech or government access. A warrant for electrical usage is rarely, one presumes, a matter of life or death, but could indeed be critical in a court battle — for which reason requiring a warrant is not an unreasonable requirement.

It seems more likely that the city of Naperville, and others in its position, will abide by this decision. That’s a win for your privacy and a foot in the door for other data collection practices like this one.

Facebook’s vice president of partnerships Dan Rose will leave the company early next year. Rose announced the move on his public Facebook page, indicating that he would stay on through Mobile World Congress in February.

During his long tenure at the company, Rose oversaw Facebook’s transformation into a media giant, steering it toward partnerships with TV networks and traditional news publishers.

In a comment on his announcement, Facebook COO Sheryl Sandberg summarized Rose’s influence on Facebook’s direction over the years.

“Your idea that we should be a partnership company and work closely with others in the industry has been key to some of our greatest successes,” Sandberg said. “I’ve been lucky to have you not just as a colleague but a friend – and you will always be a part of the Facebook family.”

Per his Facebook post, Rose will step down from his post to spend more time with his wife and children, who relocated to Hawaii a year ago.

“Mark and Sheryl changed my life and my career. I would walk through fire for them, or fly across the ocean on a regular basis,” Rose said. “But they deserve someone in my role who is present and fully engaged every day in the many opportunities and challenges that lie ahead.”

Rose sounds like he’ll be involved in the search for his replacement and the transition, leaving the door open to remaining involved and “helping Facebook from a distance.”

Prior to his time at Facebook, Rose spent seven years at Amazon as a director of business development in the Kindle’s early days. Rose is the latest major departure announcement from Facebook in recent months, following the planned exit of chief legal officer Colin Stretch and chief security officer Alex Stamos.

You can read Rose’s full announcement, embedded below.

On August 16, Xiaomi celebrated the seventh anniversary of the release of its first phone, and the eighth anniversary of MIUI’s launch. As an early investor in Xiaomi in spring 2010 and a former board member of the company, I attended Xiaomi’s IPO in Hong Kong on July 9. I felt nostalgic and grateful, and marveled at how much Xiaomi — which seemed like a crazy idea to many back in January 2010 — has achieved over the past eight years.

Xiaomi’s business model is not the easiest to appreciate if you have never tried its products. Its holistic value proposition doesn’t have an easy equivalent in the US. I frequently get asked questions about how the company works and what justifies its valuation for each round over the years. Here’s my take on the five most asked questions:

1. Why is Xiaomi an “Internet company”? Isn’t it just a manufacturer of cheap smartphones with really low margin?

At first glance Xiaomi may seem like a hardware company, which traditionally has lower gross margins. But if you look at the company as a whole and how it engages with users, it’s much more – it’s an Internet company.

It is true that around 70% of Xiaomi’s revenue comes from smartphones, 20% comes from connected devices and lifestyle products, and 10% comes from Internet services in 2017. Yet, you can actually think of smartphones as Xiaomi’s customer acquisition tool for its Internet services.

Once users get a taste of Xiaomi through its smartphones, they fall in love with the brand’s superb design, ease of usage, quality, and amazing price-to-performance ratio, and are more likely to buy a Xiaomi smart TV next, then Xiaomi’s smart home appliances, and finally use Xiaomi’s apps. Over time, Xiaomi’s Internet service revenue will grow more rapidly than most people think.

As of March 2018, Xiaomi already had 38 apps with more than 10 million monthly active users, and 18 apps with more than 50 million monthly active users, including the Mi App Store, Mi Browser, Mi Music, and Mi Video apps. Rather than paying search engines to acquire users, Xiaomi is essentially getting paid for acquiring users through selling its smartphones. This allows Xiaomi to have a negative CAC (customer acquisition cost) for its Internet services.

Another under-appreciated pillar of Xiaomi’s growth is its “ecosystem strategy.” Xiaomi strategically invests in many startups as well as the many Internet services providers they work with, both in China and outside of China. Companies in the Xiaomi ecosystem include SmartMi (air purifiers), Zimi (power banks), Huami (Mi bands), Chun Mi (rice cookers), and 80-plus more.

Thanks to these prolific investments, you can find a wide variety of products in any Xiaomi store, from scooters to ukeleles (see below). As a result, every time consumers visit a Xiaomi store, they can find something new, and the frequency of store visits is a lot higher than typical smartphone brands, even Apple. 

Xiaomi’s users are often loyal to the brand because there are so many great Xiaomi ecosystem products consumers can buy. Over 1.4 million users already own more than five connected Xiaomi products (excluding smartphones and laptops). The rising middle class in China and other emerging markets trust, embrace, and identify with the Xiaomi brand – similar to how Muji and Uniqlo from Japan are loved by consumers worldwide. Overtime, as more users become “Mi fans”, Xiaomi’s Internet service revenue will grow, but there is a lagging effect, which many public investors don’t fully appreciate yet.

In addition, Xiaomi also invests in Internet service providers. It then preloads their content into its own apps, or preloads their apps into its own phones and smart TVs. For example, within the Mi Video app, you can access content from top Chinese video platforms like iQiyi and Youku Tudou, because Xiaomi was an investor in these companies. Xiaomi shares advertising and subscription revenue with these platforms, allowing it to rapidly grow its revenue from Internet services, which have extremely high margins.

• What key factors made you want to invest in Xiaomi? In your opinion, what was the biggest risk about this investment?

I have known CEO and founder LEI Jun for almost 10 years. We first met when he became an angel investor in early 2008. When Lei Jun first told me about his idea for Xiaomi in January 2010 in Beijing, I listened to his pitch (there wasn’t even a PowerPoint) and it took about 90 minutes before I decided to invest. He used five arguments to convince me.

1. In the next 10 years, smartphones will replace laptops as the dominant way people interact with technology.
2. He believed that listening to consumers’ feedback and iterating on products rapidly based on that feedback are essential for success, especially for building customer loyalty. This is a different approach from the one that Apple, HTC, Samsung, Motorola, Nokia, etc. had at that time. He wanted to build a phone that is Android-based but with a localized wraparound “MIUI” so that users will feel it’s an OS that listens to them and can grow with them.
3. Internet companies have high margins and therefore are less likely to fully commit to a low margin business like hardware. Think Google and Amazon.
4. Ensure the price of the hardware is as low as possible so the company can grow market share and users. Sell the phones online, direct-to-consumer, bypass the middlemen, and past the enormous cost savings to consumers. Overtime, the company will monetize on Internet services.
5. Build a world-class team that has a combination of overseas returnees and locals.

The team he assembled was the only one that had experience in four out of the five areas that I considered to be critical to the success for his “triathlon model”:

1. E-commerce (via his second startup Joyo.com, which was sold to Amazon in 2004),
2. Software (via Kingsoft, where he was the CEO)
3. Internet services such as online gaming (via Kingsoft, where he was the CEO).
4. Online brand building (via the startup Vancl, where he was an angel investor)
5. Smartphone design (this is the area where his initial team did not have direct experience, but I was confident that he would hire the best talents in smartphone design given his 1 million Sina Weibo fans in 2010)

No one else had all these skills under one roof. This is why I thought Xiaomi might have the chance to do something very special.

However, for anyone who passed on Xiaomi early, it was very a reasonable and logical decision. In the history of mobile phone companies around the world, no startup had ever been successful. Some even predicted that for Xiaomi to succeed, Motorola, Ericsson, and Nokia would all have to fail. In 2010, that seemed a crazy idea. But the rest is history. 

• What do you think of Xiaomi’s international expansion strategy?

Xiaomi did a great job in recruiting Hugo Barra, who was formerly an executive at Google Android, to join them as Head of International in 2013. Hugo’s experience lent credibility to Xiaomi, as he became the international face of the company for the next three to four years. He also recruited several young executives and country managers, mostly in their late 20s or early 30s back then, many of whom were first-generation Chinese Americans or Western educated immigrants. These executives have helped Xiaomi become a global company, and they all have a bright future ahead of them with more responsibilities to come. It’s really important to hire the right head of international and country managers to make it work.

Conversely, when US companies go to China, it’s harder to hire young millennials to spearhead the China business because the Chinese Internet space is a lot more difficult to navigate. But as there are more and more Gen Z and millennial consumers in China, American and international companies can take more chances, recruit young entrepreneurs to join them, and form an advisory board of industry veterans and investors around their China initiative.

• How can Xiaomi expand into the US, given Huawei and ZTE’s troubled relationship with the US government and the recent trade tensions between the US and China?

In my opinion, the US market is not an immediate priority for Xiaomi today. Emerging markets, which include India, Southeast Asia, Eastern and Southern Europe, and Latin America, represent much bigger and immediate opportunities.

Xiaomi is already in 74 countries today. In the first quarter of 2018, over 36% of Xiaomi’s revenue came from markets outside of China. According to IDC, in Q4 2017, Xiaomi was among the top five smartphone brands in terms of unit shipments in 15 countries, including India (No. 1), Indonesia (No. 2), Russia, Poland, Greece, and Israel. Xiaomi also has plans to double down on markets in Latin America such as Mexico.

Why is this significant? Allow me to share a historical lesson. When Yahoo! Invested in Alibaba (another GGV portfolio company) in 2005, the world had 1 billion Internet users. Now, the world has 3.5 billion Internet users. Over the last 13 years, Alibaba’s valuation increased 100 times from $5 billion to $500 billion. The fact that China was the fastest growing market for Internet users during this period, coupled with Alibaba’s amazing ability to execute, turned the company into a growth miracle. In the next 12-13 years, the world will most likely grow to 5 billion Internet users. The world’s next 1 billion Internet users that will come online in the next decade – via affordable but high-quality smartphones – are outside of the US. They are in the 74 countries that Xiaomi is already in today. Going forward, Xiaomi is very well-positioned to take advantage of the next phase of growth through selling hardware, software, and bundled Internet services, as well as by investing in partner companies in those countries.

• What do you think of Xiaomi’s IPO price?

I think Xiaomi is undervalued at HK$17 per share. Xiaomi’s was the world’s largest tech IPO since Alibaba’s in 2014 and it has a relatively complicated business model, so it might take time for public investors to understand and appreciate. I believe Xiaomi will deliver performance that beats expectations going forward.

If you look at the IPO price of HK$17 a share, Xiaomi was valued using a revenue multiple of 10x for its Internet services (a discount to Alibaba and Tencent), and 2x for its hardware-related revenue (an average multiple for one of China’s favorite brands), based on the 2017 numbers. So there is still a lot of potential for upside both in terms of operational growth and multiple expansions. I remember when Facebook went public in 2012, its share was priced at $38 and its first day of trading ended at $38.23. Obviously, six years later, Facebook is now worth about five times its valuation at IPO. Similarly, there’s a lot of room for Xiaomi to grow. 

I’d like to give a shoutout to other major early investors in Xiaomi, including Richard Liu of Morningside Venture Capital, Tuck Koh of ShunWei Capital, and Yuri Milner, Shou Zi Chew (now Xiaomi’s CFO) of DST Global. Their continued support has been instrumental to Xiaomi’s success.

For more on our take on Xiaomi, listen to the latest episode of the 996 Podcast where we discussed Xiaomi’s IPO and an earlier episode of the podcast where we interviewed Xiaomi’s cofounder Lin Bin. You can find the show on Apple Podcasts, Overcast, Spotify, or SoundCloud. Just search “996” wherever else you listen to podcasts. You can also watch Hans discussing Xiaomi on CNBC and Bloomberg, or read his previous TechCrunch article “Xiaomi on Its 5^th Birthday. 

To reach Hans and Zara directly, join the 996 listeners’ community via WeChat/Slack at 996.ggvc.com/community

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