In the decade before pre-pandemic China, Chinaaccelerator in Shanghai was a high-profile connector of Internet startups with multinationals in the country looking for new ideas. An arm of venture capital firm SOSV, Chinaaccelerator re-branded as Orbit Startups last year, has stopped investing in mainland China, and changed its approach. It’s now focused on using growth strategies developed in China with startups in 30 countries spanning Asia, Africa, the Middle East and the Americas.
SOSV has invested an average of $150,000 in more than 300 Orbit companies – about $13 million annually in recent years. That’s a relatively small share of SOSV’s $700 million of funds invested, but creates the potential for good returns in emerging technology markets. Last year, it helped generate total follow-on investments of about $220 million for its portfolio companies with partners such as Reflect Ventures of Boston.
I recently exchanged with Orbit managing director and SOSV general partner William Bao Bean about how his strategy has evolved and how he’s applying his China experience in other countries. Earlier in his career Bean was an executive at SingTel Innov8 Venture and SoftBank China & India Holdings, as well as a research analyst for 11 years at Deutsche Bank. Edited excerpts follow.
Flannery: What was behind the change with Chinaaccelerator and Orbit?
Bean: Orbit Startups is a rebranding and re-focusing of Chinaccelerator and MOX, which was another program based in Taiwan. Our parent organization SOSV is very much focused on a sustainability mission, which includes global emerging frontier markets where we can leverage our know-how and capital to drive economic independence. As part of sustainability, SOSV is also centered on health and climate, which of course also have lots of applications in emerging markets.
We’re a lot different than VCs that break up the world by geography, such as Europe or India. We think tech is global, and view the world in terms of vertical strengths. We all invest through our fund SOSV, but we have Orbit, which focuses on the Internet and software, HAX for hardware and IndieBio for biotech. We want the best innovation from all around the world. Often times, that’s in Silicon Valley or London, but sometimes it’s in Jakarta or Lagos.
Flannery: What happened in China?
Bean: By 2018 and 2019, Alibaba and Tencent controlled a lot of the startup ecosystem, which is why we diversified out of China. The Orbit program hasn’t invested in China in three years.
What we’re doing today is applying to startups outside of China what we learned during China’s incredible 20-year ramp up. We started in 2017-18 in Southeast Asia, and then India, Pakistan and Bangladesh. Two years ago it was sub-Saharan Africa, and then last year we had the Middle East and Latin America. So we’re bringing what we learned in China, Indonesia and India to global emerging markets and tech entrepreneurs eager to an economic transformation similar to what happened in China. A lot of what raised 800 million people out of poverty in China was driven by technology. We’re bringing the best practices, the tips and tricks, and the models that we learned in China to entrepreneurs all across the world.
Flannery: You have portfolio companies in all those regions?
Bean: Yes. We help them grow in their own market, and also focus on cross-border market expansion. When you’re coming from a small market, it’s not the same as coming from the U.S. and China. You can’t really become a transformational company unless you’re in multiple markets. And that’s why people take our capital and join our program.
And unlike the past, when our programs lasted a set period – usually six months – the Orbit program lasts forever because no company is going to go cross-border all at once in six months. We now have companies that we invested in when they were in two markets, and now they’re around 20. And keep supporting our companies as they expand into new markets.
We took our programs virtual a year before Covid because our companies are in many different markets. Calling them into one physical spot for a long period of time often doesn’t make any sense. We do have in-person interaction with learning modules — four fundraising modules a year where people come together in person. We have two road shows where we bring our startups around to meet our corporate partners each year. And we have two hybrid growth summits where we bring people together. It’s still very important for startups to not go through their journey in a vacuum, but getting people physically in one spot doesn’t really help the companies achieve their goals of scaling up and scaling cross-border.
Flannery: How much have you invested in these new markets?
Bean: About $12-13 million a year across all these markets, but no one works with us for the money. They’re working with us for the program and the help. Last year we helped our companies raise about $220 million in follow-on funding. Our part of that follow-on funding was not actually very large, but they received 45 follow-on transactions. In 2021, we helped companies raise about $230 million. So even though last year was a tough year, it was roughly flat with the year before that. That shows the strength of the model.
Flannery: What’ve you applied from your China experience?
Bean: Digitizing mom and pop shops is a big area, and a common theme in Pakistan, Sub- Saharan Africa, the Middle East and Latin America. The challenge that you see across all of those regions is that they have many little shops — many with a history of three-four generations. There’s not much logistics, supply or financing. There’s a lot of walking, We’ve invested in Dastgyr in Pakistan, MarketForce in sub saharan africa, Suplio in Latin America. First, we fix their physical supply chain and cut middlemen. They get 30 to 70% more cash in their pocket at the end of every month.
After we fix their physical supply chain, there’s some real opportunities in digital services. The person in the local neighborhood knows the local community and customers have a sense of trust. And we’ve seen that in China and Indonesia. It’s the same opportunity. You bring technology that’s putting much more money into people’s pockets by bringing efficiency. It’s almost like water. It’s impossible to stop. In Pakistan, for instance, we invested in 24SEVEN , which is bringing digitalization to retail.
Flannery: Do you have strategic partners that invest with you after you locate the startup?
Bean: Yes, they include for instance Reflect Ventures, a group of angels that includes many of our mentors. We invested together in Dastgyr in Pakistan, a B2B business that connects retailers to suppliers.
Flannery: You recently held a networking event in New York. How does that fit into your model?
Bean: We’re looking for cross-border innovation arbitrage. We have invested in a U.S. company called Voila whose founder grew up in China, worked at Google in the U.S., and has created a rapidly expanding business that connects social sites to e-commerce storefronts, helping creators monetize.
One company we invested in in India is VideoVerse, which uses generative AI to do smart video editing. For instance, they produce sporting event video highlights automatically and have signed Premier League as a client. They’re doing very, very well and have probably put tens of thousands of post-production video editors out of work.
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