Three portfolios nominated as CB Insights China Fintech 50, Michael Mao of Yunqi Partners calls on fintech start-ups to safeguard boundaries and create long-term value



On the afternoon of June 29, CB Insights China held the “Future of Fintech CHINA and CB Insights China Fintech List” summit, and three Yunqi Partners’ portfolios – 360 Finance, Inc, IceKredit and Xtransfer – were included in the List. Michael Mao, founding partner of Yunqi Partners, held round table dialogues and discussions with corporate leaders, exchanging ideas focused on key topics such as national policy direction, financial oversight, data compliance and applications, as well as financial security and privacy. An abstract of the views discussed is set out below:

1. The ups and downs of internet finance: Safeguard your capability boundaries and create long-term value

Prior to founding Yunqi Partners, Mao was a financial team leader at IDG, and looked at quite a lot of financial projects. IDG is China’s first VC involved in investing in internet finance. In retrospect, a wave of internet finance took place in China at the time, triggered by two events in the summer of 2013:

The first was Baidu’s USD1.9 billion acquisition of 91 Wireless. That was a landmark event in the internet finance sector as none of the BAT had spent so much money acquiring a start-up previously.

Another was the debut of Yu EBao. It was an industry and financial sector game changer. There were lots of media reports on fintech every day. Coupled with the proposal for “mass entrepreneurship and innovation”, internet finance start-ups became all the rage, and together with O2O, became the two major start-up booms.

During that time, internet finance enterprises grew very rapidly, and became unicorns in just three to four years. In addition to being technology- and data-driven, domestic policy driven trends were significant as well. Between 2014 and 2016, start-ups in related industries burgeoned, generating enormous economic dividends, but there were poor quality companies as well. As regulatory oversight tightened, a large number of P2Ps imploded, and the fast money bubble burst. Those that ultimately survived were technology-enabled enterprises with sound growth that nourished their businesses, safeguarded their capability boundaries, and created long-term value.

2. Yunqi’s fintech layout: Early stage investment companion with focus on compliance and development

After Yunqi was founded in 2014, we were focused primarily on “technology-enabled industry upgrading”. Fintech was a key layout direction. We invested in a number of technology-driven start-ups in sectors such as cross-border corporate payment, consumer finance, small and micro credit, intelligent risk control, and supply chain finance. As an angel/early lead investor, we accompanied them throughout their growth phase.

When investing in fintech enterprises, we focus on three particular areas: First, financial background and industry experience; second, grasp of technological advantages and enabling industry development; and third, compliance. For instance, among Yunqi’s portfolio of invested enterprises, 360 Finance, Inc‘s former CEO, Jun Xu, once worked at HSBC, and was the youngest partner in McKinsey Asia Pacific in charge of banking, securities and trust operations in China; IceKredit founder Lingyun Gu was a core member of renowned US fintech start-up ZestFinance; Qiang YanMagnet Finance founder  had more than 20 years of commercial banking experience; and Xtransfer founder Bill Deng had more than 10 years of management experience at Visa and Ant Financial.

Some entrepreneurs had conducted finance operations based on an internet finance mindset, which in fact contravened the essence of finance. Although there was no supervision at the time, there was significant risk. We wouldn’t have invested even if these companies were affordable.

On the basis of such knowledge, despite the consistent collapse of a large number of renowned internet finance companies over the last two to three years, we have not only managed to sidestep all the mine fields and remain untarnished, all the enterprises in our portfolio have in fact grown rapidly and steadily, and three of the companies in our portfolio have been included in the CB Insights List this time round.

Going forward, although China’s financial digitalization still has a long way to go, and the 2020 pandemic will accelerate digital transformation among Chinese industries, fintech may well become the frontier of change. Entrepreneurs should grasp growth opportunities, respect objective laws, excel in their technical expertise, and enable and increase the overall value of the industry.

SOURCE Yunqi Partners