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From the U.S. to China, Korea, India and Europe, antitrust action against tech is gaining serious momentum – TechCrunch

After decades of global expansion and consolidation in the tech sector, antitrust is now a headline issue for the industry across the world. What has been a slow and sputtering series of disparate actions over the past decade has coalesced in just the past few weeks into a rapid and comprehensive series of actions against […]

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After decades of global expansion and consolidation in the tech sector, antitrust is now a headline issue for the industry across the world.

What has been a slow and sputtering series of disparate actions over the past decade has coalesced in just the past few weeks into a rapid and comprehensive series of actions against the industry, with the United States being a notable laggard worldwide.

Nowhere are these actions more prominent than in China, where the competition authorities have — after many years of a reasonably laissez-faire policy to its internet giants — suddenly decided to take sweeping action against its largest tech companies.

That movement started after Chinese regulators thwarted Ant’s record-shattering IPO in early November. Ant is one of China’s most important tech companies, a fintech company that was looking at a valuation north of $300 billion and that has 1.3 billion active users globally centered on China and the overseas Chinese diaspora.

That regulatory action led to a $60 billion dollar immediate drop in Alibaba’s market cap, given Alibaba’s 33% stake in Ant.

The bad news from Beijing has continued for the tech industry though. Earlier this week, market regulators laid out a “rectification” plan for Ant, including tougher lending standards that are expected to deeply impact the high-flying company’s revenues, margins, and growth. The Wall Street Journal reported this morning that China also specifically intends to “shrink” Jack Ma’s own influence over his business empire, with the government itself potentially acquiring larger ownership stakes in tech companies.

Furthermore, Beijing seems ready to force Alibaba and Tencent to play nicer with each other and create breathing space for startups outside of their two inter-locking corporate webs. Earlier this month, authorities fined Alibaba a nominal amount and also reviewed a Tencent acquisition, actions that were perceived by analysts as the opening shots in a new round of antitrust intervention. More action is expected in 2021.

It’s not just China though that has been bringing tech companies to heel. Almost exactly a year ago, Germany-based Delivery Hero announced a $4 billion takeover of Seoul-based Baedal Minjok, a popular food delivery app. Yesterday, South Korean competition authorities ordered Delivery Hero to divest its existing local delivery assets to get approval for the acquisition — a demand that undermined one of the reasons for acquiring Baedal Minjok in the first place. Delivery Hero has said that it will sell its unit to complete the transaction.

Meanwhile this month, Europe and soon-to-be-Brexited Britain announced a spate of new policies and regulations designed to heighten competition in the tech sector, including increasing legal liabilities for illegal content, broadening transparency around services, and mandating open competition on major platforms. Those policies have been a long-time coming, but now that they are starting to gain traction, they portend huge changes on how the highest-scale tech companies can operate on the Old Continent.

While many of these global policies are designed to undo the consolidation and scale of the industry, in India, regulators are working to prevent such scale in the first place. Local competition authorities there announced in November a framework that would prevent any company from owning more than 30% of local payments volume, and also mandating financial interoperability standards. That policy appears to be designed to avoid the kind of fintech duopoly seen in China between Alipay and WeChat Pay.

With all this global antitrust action bubbling, the laggard has actually been the United States, perhaps since the largest tech giants are all headquartered domestically. While Congress, the president, and dozens of state attorneys general have become increasingly strident on the scope of companies like Amazon, Google, and Facebook, action remains very early against the giants.

The largest and most notable action so far has been a massive lawsuit by 46 states against Facebook that was filed earlier this month. As we reported then, the lawsuit “alleges that the company bought competitors ‘illegally’ and in a ‘predatory manner’ in order to grow and preserve its market power. The suit cites Facebook’s acquisitions of Instagram and WhatsApp as prominent examples.”

Of course, as some of us remember from the 1990s with the U.S. government’s case against Microsoft, antitrust lawsuits often take years to full wend their way through the courts — and often don’t even lead to much if any change in the end anyway.

Whether a Biden administration will dramatically change the course of these actions remains unclear, with the transition offering very limited insight as it prepares to take office next month.

Nonetheless, all of these antitrust actions happening simultaneously across the globe within weeks of each other portends huge regulatory fights for tech in 2021.

Source: https://techcrunch.com/2020/12/29/global-antitrust-gaining-serious-momentum/

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Samsung vice chairman Jay Y. Lee faces nine-year sentence in bribery case – TechCrunch

Samsung Electronics vice chairman Jay Y. Lee faces a nine-year prison term in the bribery case that contributed to the downfall of former president Park Guen-hye. Prosecutors argued that the length of the sentence is warranted because of Samsung’s power as the largest chaebol, or family-owned conglomerate, in South Korea. “Samsung is a group with […]

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Samsung Electronics vice chairman Jay Y. Lee faces a nine-year prison term in the bribery case that contributed to the downfall of former president Park Guen-hye. Prosecutors argued that the length of the sentence is warranted because of Samsung’s power as the largest chaebol, or family-owned conglomerate, in South Korea.

“Samsung is a group with such overwhelming power that it is said Korean companies are divided into Samsung and non-Samsung,” they said during a final hearing on Wednesday, reports the Korea Herald. The final ruling is scheduled for January 18.

The bribery case is separate from another trial Lee is involved in, over alleged accounting fraud and stock-price manipulation. Hearings in that case began in October.

The bribery case dates back to 2017, when Lee was convicted of bribing Park and her close associate Choi Soon-sil and sentenced to five years in prison. Prosecutors allege the bribes were meant to secure government backing for Lee’s attempt to inherit control of Samsung from his father Lee Kun-hee, then its chairman. The illegal payments were a major part of the corruption scandal that led to Park’s impeachment, arrest and 25-year prison sentence.

Lee was freed in 2018 after the sentence was reduced and suspended on appeal, and returned to work as Samsung’s de facto head, a position he took after his father had a heart attack in 2014.

In August 2019, however, the Supreme Court overturned the appeals court, ruling that it was too lenient, and ordered that the case be retried in Seoul High Court.

The elder Lee, who was reportedly South Korea’s wealthiest citizen, died in October. He was worth an estimated $20.7 billion and under the country’s tax system, and his heirs could be liable for estate taxes of about $10 billion, reported Fortune.

TechCrunch has contacted Samsung for comment.

In August 2019, however, the Supreme Court overturned the appeals court, ruling that it was too lenient, and ordered that the case be retried in Seoul High Court.

Source: https://techcrunch.com/2020/12/30/samsung-vice-chairman-jay-y-lee-faces-nine-year-sentence-in-bribery-case/

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Estonian proptech Rendin raises €1.2M seed for its long-term rental platform – TechCrunch

Rendin, an Estonian proptech startup that wants to improve the home rental experience, including offering a no-deposit feature, has raised €1.2 million in seed funding. Backing the round is Tera Ventures, Iron Wolf Capital, Truesight Ventures, Atomico’s Angel Programme, and Startup Wise Guys. Launched in Estonia in March this year and currently expanding to Poland, […]

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Rendin, an Estonian proptech startup that wants to improve the home rental experience, including offering a no-deposit feature, has raised €1.2 million in seed funding. Backing the round is Tera Ventures, Iron Wolf Capital, Truesight Ventures, Atomico’s Angel Programme, and Startup Wise Guys.

Launched in Estonia in March this year and currently expanding to Poland, Rendin operates a long-term rental platform that promises to smooth out the process between landlords and tenants. Its headline feature is an insurance-backed solution that means no deposit is required from tenants.

The broader premise is that by digitising the rental process and adding an insurance layer, further trust can be generated between parties, therefore increasing occupancy rates.

For landlords, Rendin has created a “letting agreement service” with certain guarantees and has insured those risks via a partnership with ERGO Insurance SE (Munich Re Group). So, for example, if a tenant causes damage or ends up in debt, the property owner is covered. The letting agreement is handled via the startup’s app and platform that plugs into rental marketplaces and real estate CRMs on the backend to provide a fully digital experience.

“We launched publicly in Estonia on March 10th, 2020, two days before the country went into pandemic lockdown,” Rendin co-founder Alain Aun tells me. “It really looked like the world was going to fall apart and a lot of the risks in home renting skyrocketed. We had to reinvent some parts of our product insurance very quickly to adjust to the changes around us.

“Suddenly we had desperate tenants losing their income, expats leaving the country in a hurry, and more. Our learning curve was tremendous. We figured, if we can survive this, we can survive anything. The last eleven months have been constant proof to us that the concept of Rendin can endure”.

Longer term, Rendin is building what Aun describes as “a new standard in home renting”. The first step is to manage the rental process risks to help establish trust between landlords and tenants. This has seen the proptech startup build an “end-to-end value chain,” from contracting, evidence-based handover, preventive insurance flows, loss control, and claim handling.

Aun says Rendin’s insurance product offers landlords more safety than regular deposits, while some risks for tenants are also covered. “The insurance is a tool that helps Rendin to solve real-life, often complicated situations in renting, both for landlords and tenants,” he explains. “Tenants in the Rendin platform don’t have to pay the security deposit, but this is just a feature, not the core product. Trust is the name of the game”.

To generate revenue and cover the insurance costs, Rendin charges a fee of 2.5 percent of the monthly rent. It can be paid by the tenant or by the landlord. “More and more landlords choose to pay the Rendin fee themselves as it helps find new tenants faster,” adds Aun.

On the competition, Rendin isn’t competing with real estate listing sites or letting agencies, and instead can be thought of more as a plugin that can be easily integrated into listing sites and agents’ business processes.

“There are a few no-deposit startups around but their business models, although similar at first glance, are entirely different from ours,” claims the Rendin co-founder. “Most of them are set up to be essentially lending businesses that collect interest from tenants with real estate agencies serving up demand for them, but they don’t really do anything to help mitigate risks for the parties [involved]”.

“We launched publicly in Estonia on March 10th, 2020, two days before the country went into pandemic lockdown,” Rendin co-founder Alain Aun tells me. “It really looked like the world was going to fall apart and a lot of the risks in home renting skyrocketed. We had to reinvent some parts of our product insurance very quickly to adjust to the changes around us.

Source: https://techcrunch.com/2020/12/29/rendin/

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4 keys to international expansion – TechCrunch

Adopt a “hire slow, fire fast” mentality for your expansion strategy. Don’t be afraid to pull the plug if things don’t work out.

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Levin joined Heartcore Capital in 2019 from Global Founders Capital, the billion-dollar VC arm of Rocket Internet, where he was responsible for investments in Canva, Heyjobs, Instarem, Anyfin and others.

During my five years with Global Founders Capital, Rocket Internet’s $1 billion VC arm, I saw more than a hundred of Rocket’s incubated companies attempt to internationalize. For background, Rocket Internet has helped launch some very successful businesses internationally, including HelloFresh ($12.9 billion market cap), Lazada ($1 billion exit to Alibaba), Jumia ($3.2 billion market cap), Zalando ($21.2 billion market cap) and many others. Rocket often followed the Blitzscaling model popularized by Reid Hoffman — earning them an appearance in his book of the same name.

After an initial success helping Groupon scale internationally via a merger with Rocket’s incubation firm CityDeal, Rocket’s team have aggressively scaled businesses from Algeria to Zimbabwe — sometimes in a matter of weeks. No surprise, Rocket also has a graveyard of failed companies that were victims of bad internationalization efforts.

Many companies make the costly mistake of launching abroad too soon.

My personal observations on Rocket’s successes and failures start with this crucial point: These learnings might not apply to your unique combination business model, market and timing. No matter how well you prepare and plan your internationalization, in the end you need to be agile, alert and smart as you dip your toes into your first foreign market.

Fail fast and cheaply

Internationalization can be a big driver of growth and consequently enterprise value, which is why investors always push for it. But going abroad can also destroy value just as quickly. As a founder, it’s your job to manage financial and operational risks. Finding the right balance between keeping costs in check and not underinvesting can mean doing things more slowly than your board would like. For example, you might launch new markets sequentially instead of rolling 10 out at the same time.

Adopt a “hire slow, fire fast” mentality for your expansion strategy. Don’t be afraid to pull the plug if things don’t work out.

Our team at Heartcore Capital use the following framework and learnings to guide internationalization strategies for our portfolio companies. A successful internationalization strategy needs to answer and address the “Four Ws”: When, Where, Which and With whom to internationalize. (Regarding the fifth W from journalism, you should not need to ask the “Why” question if you want to build a large business!)

1. When is the right time to start?

Many companies make the costly mistake of launching abroad too soon. They look at internationalization as a detached function, isolated from the rest of the business and then launch their second market prematurely. Follow this simple rule: Wait to internationalize until you hit product/market fit.

How do you know exactly when you’ve reached product/market fit? According to Marc Andreessen, “Product/market fit means being in a good market with a product that can satisfy that market.” He adds that experienced entrepreneurs can usually feel if they’ve reached this point.

Let’s take the man for his word and move on to the actual argument: Until you have product/market fit, you will not be able to distinguish between what you’ve learned from your business model and what you’ve learned from your in-country experience. Mistakes will compound. Complexities and costs will multiply. I contend that insufficient understanding of their business and operating model is the main reason why companies fail with their expansion strategies.

Founders should also consider the underlying costs of internationalizing before they decide to expand (more about this in the “What” section below). Some companies are global by default — think mobile gaming companies — or simply require language localization. Others need to build new warehouses, hire local teams or build entirely new products. The costs and respective risks of expanding prematurely depend heavily on the business model.

There are edge cases where companies need to move quickly to internationalize for strategic reasons — despite uncertainty about their market fit. For instance, companies like Groupon or those engaged in food delivery face winner-takes-most markets, where opportunities for product differentiation are limited. “Blitzscaling” makes sense in cases like these.

However, you should tread carefully if your only reason to start scaling abroad is a large fundraise or to match a competitor’s internationalization efforts. Scaling prematurely for the wrong reasons might just cost you your entire company.

When Rocket Internet announced it would launch the Homejoy model into European markets with Helpling, the American “original” company launched quickly in Germany in an effort to squash their new competitor. In the early days of “on-demand everything,” a managed marketplace for cleaning services sounded like the next unicorn in the making.

In 2013, Homejoy had a fresh $24 million Series A from Google Ventures and First Round — considered a huge round at a time when Instacart had just raised an $8 million Series A and Snapchat had done a $13 million Series A round. It must have seemed like a good idea to squash the German competition early.

As it turned out, Homejoy’s product was not yet ready to scale internationally. Just 13 months after launching in Germany, Homejoy had to cease operations globally, while Rocket’s Helpling is still alive and kicking. Helpling focused carefully on product, automation and making their unit economics work. A rush to crush an international competitor caused the demise of a would-be unicorn.

Homejoy expanded internationally in 2014 in a rush to squash a new German competitor Helpling. Their websites in 2020 show starkly different outcomes.

Homejoy expanded internationally in 2014 in a rush to squash a new German competitor Helpling. Their websites in 2020 show starkly different outcomes. Image Credits: Homejoy/Helpling

2. Where should you internationalize?

When deciding which new international market to tackle, it is vital to do your homework. Analyze the competitive environment, partner availability, infrastructure, culture, regulation and synergies with your home market.

In the early days of e-commerce, it was rather easy to analyze if a market was an expansion target. In the absence of professional competition, Rocket chose new countries based solely on GDP and internet penetration.

Adopt a “hire slow, fire fast” mentality for your expansion strategy. Don’t be afraid to pull the plug if things don’t work out.

Source: https://techcrunch.com/2020/12/28/4-keys-to-international-expansion/

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