Asian companies have always had a presence in Silicon Valley. Over the last few years, it looks like their investments have increased dramatically in scale. 2017 saw a record $157 billion USD flow into venture funding globally. According to analysis by the Wall Street Journal, 40%, or $61 billion USD, came from Asian investors. That is eight times more than a decade ago, and represents just 3% less then US venture firms spent last year.
Andreessen Horowitz and Sequoia Capital are big names in venture capital (VC). Now it looks like they will have to compete with both ICO’s, and Asian majors like SoftBank and Tencent. Asian VC hasn’t been able to get into promising new tech companies that established US-based VC firms have had the first-crack at. That has changed, and it looks like blockchain might be a part of what is driving the shifting VC landscape.
Asia has been a hotbed of blockchain and crypto development. Even though China took a harsh stance on cryptos and blockchain last year, that position has seemingly changed. Chinese President Xi has called blockchain, “a breakthrough technology.” The President’s opinion seems to have been taken on as state policy, and China’s party mouthpiece the People’s Daily just released a blockchain guide for Chinese government officials.
Asian Markets are Open for Business
The same Asian actors that are making big investment in Silicon Valley start-ups are also looking for opportunities in their own backyard. Softbank’s Vision Fund is looking at a fresh $100 million USD investment in Chinese online insurance company ZhongAn. SoftBank already has a stake in ZhongAn, who is looking at novel uses for blockchain technology in a range of industries.
ZhongAn has created a blockchain-based platform to track chickens in China. They are working along the same lines as Alibaba, who is looking at ways to use blockchain to increase the level of oversight and accountability in China’s massive agricultural supply chain. Both companies want to create a solid chain-of-custody, and blockchain is a perfect fit.
SoftBank is apparently looking to expand the use of ZhongAn’s technology abroad, especially in the area of insurance, healthcare and FinTech. Francis Tang, ZhongAn’s CFO, had this to say about the combined future expansion,
“They (SoftBank) use their network; we use our technology,” Mr Tang commented, “The natural (strategy) was to go to Softbank’s portfolio. Working on that will help us take the company global.”
This wouldn’t be the first time that an investment group from outside of China looked at a tapping a Chinese blockchain platform for global use. Earlier this year the Hong Kong Monetary Authority decided to use a platform that was designed by PingAn, for a trade finance system that is currently under development. The platform seems to have gained the support of some of Asia’s largest banks, including HSBC and Standard Chartered.
Major Developments Seem Inevitable
Regardless of where it is coming from, $150 billion USD+ is a lot of development money. Blockchain based-companies probably aren’t the only recipients of those funds. Even if they are getting a double-digit percentage, it is going to spur along an industry that is already growing rapidly. Despite the swoon in China’s official blockchain policy, it appears that Asia is still in a leading position for global blockchain development.
Eric Ly helped found LinkedIn, and also worked as their CTO. He recently expanded why Asia is a vital market for new FinTech innovations,
“It’s a region that is not to be dismissed, especially in the crypto world in terms of the interest and the activities that’s going on there.”
It would appear that Mr. Ly is correct, given the level of interest and available funding in Asia. Over the next few years some of the biggest developments in the crypto and blockchain space could come out of Asia, or Asian funded projects.
It remains to be seen if US-based VC groups are able to keep-up, or even tap rising Asian talent on their home turf. Many of the largest cryptocurrency exchanges are run by Asians, which could put companies US-based like Coinbase on their back-foot as they enter a global marketplace that is free from the slow-moving US regulatory apparatus.