Chinese investors who arrived in Mexico earlier | Undercurrents to See the World
Written by | Ren Qian
Edited by | Liu Jing
Over the past year, Mexico has gradually become a new destination for Chinese entrepreneurs and investors.
After several investigations, the answers of everyone are vastly different. Some are full of confidence: "The VC ecosystem in Mexico is thin, and there are huge opportunities for early-stage investment"; some are waiting and watching: "In the future, the European and American markets will still be the main ones"; some directly conclude: "There is no country in this world that is the next China and can replicate China's rapid development model of the past four decades."
A thousand people have a thousand Hamlets. Just like now, Chinese VC's overseas investment has already reached a fork in the road. We have systematically discussed the complexity that is difficult to summarize in different regions in the article "A Globalization Guide for Chinese Founders: Horizontally Cutting the World".
Later than the markets in Southeast Asia, Europe, and the United States that we are more familiar with, Mexico's first unicorn company, Kavak, was born in October 2020. This number increased to 6 in 2022 and is now fixed at 9. In addition, there are more than 30 companies with a valuation of 300 - 500 million US dollars.
Little known is that the four mega funds that once dominated the Chinese Internet wave - SoftBank, Tiger, Coatue, and DST - have been frequently appearing on the investor lists of these companies since about 2016.
SoftBank is even an investor in at least 5 unicorns such as the used car online trading platform Kavak, the smartphone-based credit card payment platform Clip, the automated digital freight forwarding platform Nowports, the e-commerce brand aggregator Merama, and the online lending platform Konfio for Mexican SMEs. Although Tiger, Coatue, and DST do not invest as much as SoftBank, they are each shareholders of at least 2 - 3 companies.
However, although they laid out their positions in Mexico, where the wind is strong and the fish are expensive, earlier, according to the statistics of "Dark Flow Waves", the financing process of the above-mentioned unicorns mostly stagnated in 2021 and before (except that Clara raised a round in 2023).
The key variable for Chinese investors to start marching into Mexico is the emergence of the fintech company Stori. In 2018, the Chinese-American Chen Bin and four co-founders established Stori. Behind this unicorn company that has emerged most prominently in Mexico in recent years -
Vision Capital led the Series A round when there was almost no business data in the earliest stage. BAI led the Series A+ round for the first time and has been increasing its investment in every round since then. Source Code also entered at the same time as BAI, and GGV has also made multiple investments later. As the only angel investor of Stori, Ye Daqing, the co-founder, chairman, and CEO of Rong360 Group, is also one of the earliest Chinese investors to invest in Mexican technology projects.
For Chinese dollar investors from a Chinese perspective, purely localized projects are obviously not the best starting point. Mexico will not become an ideal investment highland for everyone. But in any case, those who arrive first always have the right to speak.
"Dark Flow Looks at the World" is a new column of Dark Flow. Over the past three years, we have successively launched a series of globalization content, and next we will launch a series of reports more systematically. Mexico is the research focus of our first stage.
Rong360 Ye Daqing: The NPC Triggering the Plot
Among all the early investors of Stori, Ye Daqing is the source and the Bole of this unicorn.
In fact, when Chen Bin and the team first brought the business plan to look for investment, they were not recognized by the investors. It was not until later that they had a digital finance business focused on Mexico. And Ye Daqing did not go with the purpose of investment at the beginning. What he is more willing to see is "recognizing the team's ability, discovering the fintech track in the emerging market, and incubating new projects together."
Investing in Stori is probably something that will happen within Ye Daqing's ability radius. In his more than 20 years of career, Ye Daqing has successively worked for technology and financial giants such as PayPal, America Online, Capital One, and American Express. In 2011, Ye Daqing became one of the earliest entrepreneurs to leave Capital One and founded Rong360 in the Huaqing Jiayuan residential building in Wudaokou, Tsinghua. And his connection with Chen Bin also occurred during the Capital One period.
Since that year, the people who returned from Capital One one after another have formed the "Whampoa Military Academy" of China's fintech. Either they started their own businesses and successfully went public, such as PPDAI, Lufax, Wacai, and QuantGroup; or they became executives of Internet giants and banks, such as Alibaba, Tencent, Baidu, Ant Financial, and JD Finance, occupying half of China's fintech market.
Ye Daqing smelled the potential of the Mexican fintech industry very early and visited Mexico very frequently - he has been there eight times. Having lived in the United States for more than ten years, he witnessed the growing population base and proportion of the Latin American population in the United States, as well as the increasing influence in the economic and political aspects. In early 2018, he discussed the market direction and team structure with the Stori team and anchored the target market in Latin America - starting with Mexico, which has a population of over 100 million and an annual per capita GDP of more than 10,000 US dollars.
Ye Daqing's investment logic is very simple, "The most important thing is to invest in people and the track." Ye Daqing evaluates Chen Bin as a very business-minded person with the drive and tenacity of the Chinese. What he values is Stori's growth space and the ability to surpass Nubank, the largest digital bank in Brazil. At that time, Nubank's valuation was 8 billion US dollars, "Reaching 20% of Nubank is already a unicorn." Now Nubank's market value has reached 60 billion US dollars, and Stori's valuation has also exceeded the initial expectations.
Ye Daqing not only became the earliest angel investor of Stori, but also helped Stori introduce subsequent financing and provided support in strategic direction, talent introduction, and user growth.
Vision Capital Liu Yiran: An Accident
For Vision Capital, which has never invested in Mexico before, it has had many successful investments in the Southeast Asian market before, which made them start to pay attention to the opportunities of cross-border overseas investment, but they have been waiting for the emergence of a suitable Chinese entrepreneurial team. At this time, Stori came along.
In the summer of 2018, in the dim lobby of an ordinary hotel in Midtown Manhattan, New York, Ye Daqing made an appointment to meet Liu Yiran, a partner of Vision Capital, who was on a business trip in the United States. The two talked about the Latin American market and Stori until the middle of the night, and became more and more excited.
At that time, Liu Yiran happened to be visiting investment institutions in the United States. When several American VCs talked about the Latin American market, they were all skeptical, thinking that the timing was not yet mature. In addition, many institutions were investing in Southeast Asia at that time (for example, the fintech project Advance invested by Vision Capital was highly sought after). Liu Yiran was filled with worries - Why was this case given to me across the ocean instead of others? Why don't Americans invest?
But he vaguely sensed that this would be a new opportunity. Just after meeting Ye Daqing, the Vision Capital team decided to go to Mexico for on-site research. A few months later, when Stori had almost no business data in the very early stage, they led the Series A round, "The market demand is clear, and at the same time, an entrepreneurial team with such a background can get a high score even in the mature Chinese market," Liu Yiran said.
In globalized investment, it takes some courage to act earlier than American VCs. This is the prelude to the heating up of Mexico. Soon, many American VCs went south again, and SoftBank also established the first Latin American fund in 2019, with half of the money invested in fintech.
Stori is the only project that Vision Capital has invested in Mexico so far. Its overseas investment is mainly in North America and Southeast Asia, and also involves Latin America, the Middle East, and Africa. In 2017, the Vision Capital team proposed the "time machine" theory of cross-border overseas investment. They believe that China's PC Internet has learned from the United States in the past ten years, and the development path of China's mobile Internet in the next ten years will provide a reference for other emerging markets. In the past two years, this theory has been iterated: "Cross-border overseas investment is to find opportunities for mismatch in various fields in emerging markets."
In terms of specific design and strategy, Vision Capital takes hard technology, computing iteration, and cross-border innovation as the three key areas of dollar investment, focusing on "What are China's strengths, what is the global trend, and what is the combination of China and the world".
BAI Capital: A Firm Gold Digger
Among all Chinese investors, BAI Capital is probably the only fund that has become more determined to invest in Mexico because it follows the main line of fintech and sees the underlying logic behind Stori's development.
Two manifestations: It quickly led the Series A+ round of Stori in 2020 and continued to increase its investment in every round after that (acting as the lead investor in many rounds); In addition to Stori, it has also invested in 6 Mexican companies.
At that time, Chen Bin and the team returned to China to find financing and asked, "Who in China is better at investing in fintech?" Friends in the Fintech circle introduced him to Zhao Penglan, the investor in charge of Fintech at BAI at that time, at the first time.
Stori is indeed a project that conforms to BAI's mainstream cognitive track and also conforms to the aesthetic standards of the founding and managing partner Long Yu. BAI has systematically laid out the fintech theme since 2014 and has publicly disclosed a set of data: It has invested in more than 20 companies, more than half of which have grown into leading companies in their respective细分 tracks, 10 have achieved large-scale profitability, 7 have grown into unicorn companies, and 7 have become listed companies or are in the process of going public.
The feeling that BAI has gained from many years on the front line is that none of the Fintech products and projects in overseas emerging markets in recent years is a model that has never appeared in China. China's fintech capabilities are globally leading and have the ability to be exported, and the reasons for the formation of this ability cannot be replicated. Exporting China's fintech advantages to overseas emerging markets has always been the most important logical origin for BAI to invest in Global Fintech.
Source Code Capital: Early Three Consecutive Rounds of Investment
Another Chinese investment institution that invested in Mexico earlier (mainly Stori) is Source Code Capital.
Fintech innovation contains a lot of opportunities in emerging markets and is also one of the tracks that Source Code focuses on in the overseas field. Source Code Capital has started the exploration and practice in this field since 2017.
The institution follows the "Global+" theme in the "Three Horizontals and Nine Verticals" investment map, covering multiple细分 tracks such as finance, e-commerce, and life services in key regions, and has invested in several overseas enterprises such as OPay, Zenjoy, Panpay, Stori, and Xingmai, accumulating investment experience in team building, industry research, and on-site investigation in the process.
GGV: A Key Role in Promoting the Unicorn Process
In addition to the above-mentioned investors, GGV (formerly known), the managing partner Hans Tung (Tong Shihao), who has invested in projects such as Xiaomi, Wish, and Xiaohongshu, is also enthusiastic about Mexico. According to sources close to the matter, in addition to focusing on investing in North American projects, Tong Shihao has also been traveling frequently to Mexico in the past two years and has invested in at least 4 projects in Mexico. According to public information, the business credit card and expense control platform, unicorn Clara Card, is one of them.
GGV led the $125 million Series C financing of Stori in November 2021 and continued to add to the $150 million Series C+ financing in July 2022. These two investments are crucial to Stori - after that, the company's valuation exceeded $1.2 billion and successfully became a unicorn.
In September 2023, GGV announced that it will be split into two institutions in the United States and Asia, becoming two completely independent operating entities, and the English name GGV, which has been used for 18 years, will no longer be used.
In the latest round of financing of Stori, it is Notable Capital (GGV's American brand) that jointly led the investment with BAI.
As a fund based in the United States, Notable's investment stage in Mexico is still relatively late. This seems to confirm the observation of an investor about the VC ecosystem in Mexico - no more than 20 local VCs can only invest in rounds A and earlier, while American mega funds are more willing to invest in later rounds such as round C, "The $15 - 20 million round B is a huge vacuum".
And this may precisely be an opportunity for Chinese VCs.
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