Cryptocurrency and blockchain bring Asia funds to the forefront of U.S. tech

Since early 2017, there’s been a new trend in the U.S. where a number of Asian funds have been actively involved in early-stage crypto investing. Many folks in traditional tech have not heard of them before, but these funds will only be growing more important as cryptocurrency and blockchain solidify their position in the American tech industry.

Funds with Asian money, primarily from China, have been in Silicon Valley for a long time. However, in the past, they were rarely heard or seen in the press, mostly because their assets under management (AUM) and investment check sizes were smaller in size and fewer in frequency than their American counterparts on average. These funds were often only found investing in later-stage rounds, since they weren’t able to compete against the top venture funds in the early rounds for highly-coveted startups, as many entrepreneurs weren’t familiar with them.

This has changed in the last few years and recent investment stats are very telling of a different trend. In 2017,  Asian investors directed 40% of the record $154bn in global venture financing, versus their American counterparts at 44%, according to an analysis by the Wall Street Journal. Specifically, deals led by U.S.-based venture capital and tech investment firms, such as Sequoia Capital or Andreessen Horowitz, made up of $67 billion in venture financing, just slightly more than the $61 billion led by Asian investors, including Tencent and SoftBank. Asia’s share is up from less than 5% just ten years ago.

Not only is there more money coming from Asia, but U.S. funds are also coming to realize the growing and massively underinvested tech opportunity in China and the rest of Asia. In a joint study issued by China’s Ministry of Science and Technology affiliate and a Beijing-based consultancy, the 2017 China Unicorn Enterprise Development Report showed that in the same year, China had 164 unicorns, worth a combined US$628.4 billion, while the most recent U.S. figures suggested 132 unicorns. Companies such as Meituan Dianping (the Yelp equivalent of China) and Didi (the Uber equivalent of China) are examples of large disruptive technology companies from China that have garnered massive valuations.

Subsequently, more U.S.-based funds are branching out geographically. In the past, some funds may have had an understanding of China’s large market opportunity and had a China-focused partner, team, or partnership relationships in Asia. But now, there is increasingly more focus on Asia from these funds than ever before, not only driven by the potential investment opportunities, but also by the untapped market opportunity for their portfolio companies.

Several funds have been ahead of the game. For example, Y Combinator recently made a big entrance into China with their announcement of a new China office headed by Qi Lu, the former COO of Baidu. Additionally, Connie Chan, who has been responsible for spearheading Andreessen Horowitz’s China network, was promoted to general partner earlier this year, the first to be promoted from within the company.

Cryptocurrency and blockchain accelerate West-East investment ties

Now, cryptocurrency and blockchain have accelerated this cross-border activity. The global, or rather, the censorship-resistance nature of cryptocurrency and blockchain have brought Asia – and specifically China – to the forefront of the focus. In the blockchain space, Chinese companies make up more than 80% share in mining compute power, while Asia in aggregate makes up a significant market share in cryptocurrency trading. The top Cryptocurrency exchanges, including Binance, OKex and Huobi, are also run by Chinese teams.

The cryptocurrency phenomenon began in Asia and the U.S. around the same time, but Asia got a head start due to a favorable set of regulations compared to the U.S. While certainly not laissez faire, blockchain technology has been hailed by regulators throughout countries such as China, Japan and Korea. Since the start of this year, blockchain has been highlighted as one of the most promising technologies by China’s President Xi Jingping, calling it “a breakthrough technology.” Japan has also placed a spotlight on the technology in an effort for the country to re-invigorate itself and its economy. And last but not least, Korean regulators have started debating the idea of using blockchain technology as part of the democratic process, with advocates calling for the introduction of blockchain-powered voting systems.

As a result, Chinese and Korean cryptocurrency and blockchain funds for the first time have an edge, with access to proprietary information and relationships, along with a massive market that cryptocurrency companies in the U.S. can no longer ignore.

Eric Ly, a former CTO and co-founder of LinkedIn, recently started a blockchain based company called Hub. And in our conversation, he has recognized the importance of Asia as a market: “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.” With more funds coming from China and Asia, and many crypto projects coming out of Asia, there will be more cross-border activities on both the investment as well as business development front.

Given the global nature of cryptocurrencies and blockchain, it’s increasingly important for entrepreneurs to raise money from investors who are not just local to where their team is based but also globally useful to one’s success as a cryptocurrency and blockchain company. Not only can overseas investors bring a vastly different point of view to the table, but they can also provide access and market opportunities in the other half of the hemisphere that otherwise would have been difficult.

Strong examples of this fundraising pattern are emerging. Take Messari for instance, a company based out of New York with the mission to create an authoritative data resource for crypto assets. CEO Ryan Selkis has mentioned how he has made a conscious effort to raise from Asian and other global funds when he initially raised the company’s seed round.

Typically, regional investors will have better information and relationship with the local businesses and regulators, and that should prove to be useful as the company scales and grows overseas. Additionally, local investors will likely be more in touch with the policies and the regulators, which is crucial when it comes to treading through the gray areas in cryptocurrency and blockchain space. Having someone who recognizes and can predict regulatory inflection points would be hugely valuable for the company as they map out their global strategy.

Gaming in Asia may be crypto’s killer dApp

As money and talent flows into the crypto and blockchain worlds, a persistent question keeps coming up: what is going to be the “killer app” that drives adoption for these nascent technologies? The answer may well be quite simple: gaming in Asia.

That’s the theory for Cryptokitties, the notable purveyor of cute cats. The company has started expanding into China, Japan, and Korea as it attempts to capture a large market of gamer and crypto enthusiasts there, and it is building on the playbook pioneered by Uber when it launched in China in 2014.

Back in March, Andreessen and Union Square Ventures led a $12 million Series A round into Cryptokitties. A portion of that money went into Cryptokitties’ ambitions to expand into Asia. In fact, Cryptokitties’ largest user markets have been, and still are, the U.S. and China, followed by Russia.

For those unfamiliar with Cryptokitties, it’s often been alluded to as a digital version of Beanie Babies. Cryptokitties are virtual collectibles in the form of cute cats that can be bought, sold, collected and traded with cryptocurrency, with all the transactions listed on the blockchain. Owners who purchase these kitties can then breed them with other kitties to produce new baby kitties.

The company is part of Axiom Zen, the Vancouver and San Francisco-based design studio that originally built the game. Since its launch in 2017, Cryptokitties has also built a third-party app platform for crypto developers called the Kittyverse, open-sourced their digital asset licensing platform, and started a crypto gaming investment fund. The company currently has about 70 employees and is headquartered in Vancouver.

One of the main purposes why Cryptokitties raised venture capital was for geographical expansion. Having ample capital to not worry about cash flow as the company steps on the gas is certainly quite helpful. But as a business, Cryptokitties was already doing fine. Back in June when I was having a discussion with the company, Cryptokitties was already profitable starting in week three.

The company has successfully differentiated itself from many other crypto decentralized apps (dApps for short) companies out there by proving that they could make money first and have a sustainable user base. Jimmy Song from Blockchain Capital once said, you can make money three ways in crypto, and those are “selling mining machines, starting up Crypto exchanges, and organizing Crypto conferences.” Nonetheless, Cryptokitties was an outlier. With its newly raised money, the team was looking to deploy the capital for hiring, building out it’s Kittyverse, and expanding in Asia.

Asia and China has a Large and Untapped Crypto Gaming Market

Benny Giang, one of the co-founders of Cryptokitties, has been tasked with Cryptokitties Asia expansion since late 2017. Since then, the team has launched Cryptokitties in China, Hong Kong, and Taiwan. During the launch, in order to avoid another one of Ethereum’s network clogs like what happened in late 2017, the iOS app launch was initially limited to 5,000 new players, based on selected WeChat accounts.

Benny believes blockchain games in Asia are a huge untapped market but with increasing competition. Whereas the intersection of gaming and blockchain users is still pretty limited in the Americas, in Asia, that audience is significantly larger. This is primarily due to three reasons: 1) the awareness of cryptocurrency and blockchain is more prevalent in Asia, 2) the regulatory markets are more developed and sophisticated (for better or worse) in China, Korea, and Japan, and 3) there is a proportionally higher number of gamers in Asia than the U.S.

China is the biggest market in this intersection, but there have been challenges. As Cryptokitties launched and grew in the last year, the company saw competition and copycats (pun intended) from China moving quickly into the market. In the beginning of 2018, just as Cryptokitties was launching in China, Xiaomi, the mobile phone maker that recently IPO-ed on the Hong Kong Stock Exchange, launched their own crypto collectible called Cryptobunny. Baidu, the large search engine of China, also recently launched Cryptopuppy.

Go to Market Learnings from Uber in China – Identifying the Right Local Partners and Hires

As Benny and team began doing research on the Asia market, they realized that working in a market that’s twelve hours away is not easy. Taking some of its lessons from Uber’s experience in China, they decided that they needed to localize their go-to-market approach.

One of the reasons Uber ended up exiting the Chinese market was that it did not successfully build a product catered to Chinese citizens. Despite the large sum of money it was pouring into the Chinese market, Uber was still losing market share to Didi. Another suggested reason for the failure was that Uber should have gone to market with a local partner like Didi instead of going head to head with them. The Cryptokitties team knew that they wanted to expand correctly, and subsequently identified a local partner in China to target the market there.

In January 2018, Axiom Zen partnered with Animoca Brands to publish the Cryptokitties game on mobile in China, Hong Kong, and Taiwan. Animoca is a Hong Kong-based, privately-held developer and publisher of games, with a number of games using popular IP such as Garfield, Ultraman, and Doraemon. By working with Animoca, Cryptokitties was able to build out a localized website for its Chinese-speaking audience, provide native-speaker support services, and host numerous giveaway events.

In my discussion with him, Benny provided some insightful advice on go to market strategy in Asia. First, he mentioned that for a blockchain gaming company like themselves, it is best to find two local partners – one in blockchain and one in gaming – to help navigate the landscape. This kind of well-thought-out, go-to-market strategy requires hard work and local community understanding that very few cryptocurrency teams have achieved.

Currently, most Western crypto companies do not apply a traditional tech-oriented go-to-market strategy when trying to expand into other regions. Instead, most of them choose to leverage their “global communities.” They would incentivize these regional token holders to do local marketing and encourage them to find more token supporters and buyers in their region. Nonetheless, that type of marketing approach effectively identifies people who want to make a quick buck, rather than users who can sustain a platform.

Secondly, tasteful and culturally-appealing design is also very important when it comes to dApps. Cryptokitties originally differentiated themselves from other dApps by creating beautiful cats on the blockchain that immediately caught people’s attention. They have also decided to apply a similar local strategy in China.

Momo Wang is the creator of the highly popular Tuzki character, a black and white line drawing of a bunny that’s used widely across various instant messaging platforms, particularly WeChat .

The popular character Tuzki (Photo courtesy WeChat)

Cryptokitties hired Momo as a brand ambassador and contributor to the Artist Series to design kitties for them. By doing so, they are able to appeal to an audience who may have a different local taste.

Benny adds that it is essential for dApp companies to create beautiful websites and great user experiences that appeal to local communities. However, there are also cons when building beautiful websites for a blockchain company that is decentralized by nature. Smooth user interfaces in the form of a traditional website or an app fall under the jurisdiction of a traditional tech business. Internet companies in China, for example, require approval and licensing from the government to be able to operate and serve its citizens.

China has become the wild west of crypto and blockchain, and there will continue to be unforeseen obstacles. It certainly isn’t easy for Cryptokitties to be the first western dApp company to venture into China, but in the next five years, we’ll see a significant number of Western companies heading east – and these early learnings will be invaluable.

Y Combinator is launching a startup program in China

U.S. accelerator Y Combinator is expanding to China after it announced the hiring of former Microsoft and Baidu executive Qi Lu who will develop a standalone startup program that runs on Chinese soil.

Shanghai-born Lu spent 11 years with Yahoo and eight years with Microsoft before a short spell with Baidu, where he was COO and head of the firm’s AI research division. Now he becomes founding CEO of YC China while he’s also stepping into the role of Head of YC Research. YC will also expand its research team with an office in Seattle, where Lu has plenty of links.

There’s no immediate timeframe for when YC will launch its China program, which represents its first global expansion, but YC President Sam Altman told TechCrunch in an interview that the program will be based in Beijing once it is up and running. Altman said Lu will use his network and YC’s growing presence in China — it ran its first ‘Startup School’ event in Beijing earlier this year — to recruit prospects who will be put into the upcoming winter program in the U.S..

Following that, YC will work to launch the China-based program as soon as possible. It appears that the details are still being sketched out, although Altman did confirm it will run independently but may lean on local partners for help. The YC President he envisages batch programming in the U.S. and China overlapping to a point with visitors, shared mentors and potentially other interaction between the two.

China’s startup scene has grown massively in recent years, numerous reports peg it close to that of the U.S., so it makes sense that YC, as an ‘ecosystem builder,’ wants to in. But Altman believes that the benefits extend beyond YC and will strengthen its network of founders, which spans more than 1,700 startups.

“The number one asset YC has is a very special founder community,” he told TechCrunch. “The opportunity to include a lot more Chinese founders seems super valuable to everyone. Over the next decade, a significant portion of the tech companies started will be from the U.S. or China [so operating a] network across both is a huge deal.”

Altman said he’s also banking on Lu being the man to make YC China happen. He revealed that he’s spent a decade trying to hire Lu, who he described as “one of the most impressive technologists I know.”

Y Combinator President Sam Altman has often spoken of his desire to get into the Chinese market

Entering China as a foreign entity is never easy, and in the venture world it is particularly tricky because China already has an advanced ecosystem of firms with their own networks for founders, particularly in the early-stage space. But Altman is confident that YC’s global reach and roster of founders and mentors appeals to startups in China.

YC has been working to add Chinese startups to its U.S.-based programs for some time. Altman has long been keen on an expansion to China, as he discussed at our Disrupt event last year, and partner Eric Migicovsky — who co-founder Pebble — has been busy developing networks and arranging events like the Beijing one to raise its profile.

That’s seen some progress with more teams from China — and other parts of the world — taking part in YC batches, which have never been more diverse. But YC is still missing out on global talent.

According to its own data, fewer than 10 Chinese companies have passed through its corridors but that list looks like it is missing some names so the number may be higher. Clearly, though, admission are skewed towards the U.S. — the question is whether Qi Lu and creation of YC China can significantly alter that.

Chinese tech stocks tumble from more than just trade tensions

Editor’s note: This post originally appeared on TechNode, an editorial partner of TechCrunch based in China.

Reports of trade tensions between China and the US in the past few months have been hard to ignore. In early July, the US imposed $34 billion on Chinese goods, prompting the Shenzhen Component Index, dominated by technology and consumer product stocks, to fall to its lowest point since 2014, igniting fears among investors.

“The U.S. tariffs, coupled with a falling yuan, will significantly increase the cost for many Chinese technology companies that rely on imported raw materials, such as semiconductors, integrated circuits, and electric components,” Zhang Xia, an analyst for China Merchants Bank Securities, told the South China Morning Post.

Additionally, the U.S. commerce department announced yesterday it will place an embargo on 44 Chinese companies—including the world’s largest surveillance equipment manufacturer Hikvision—for “acting contrary to the national interests or foreign policy of the United States.” The move caused the companies’ share prices to fall by nearly six percent.

However, the focus has shifted to more than just the trade war. And a number of big Chinese tech companies have seen their share prices plummet for other reasons.

Pinduoduo, China’s latest e-commerce giant to list on the Nasdaq, found that an initial public offering (IPO) is not a panacea. Conversely, its listing has drawn attention to the company’s counterfeit products. And investors are not happy.

Tencent’s shares have nosedived by over 25 percent since its peak in January, erasing $143 billion in market value over the past seven months.

Search giant Baidu also hasn’t been immune. The company’s stock price dropped by nearly 8 percent this week following news that Google plans to re-enter the Chinese market.

Government crackdowns

While IPOs are usually a cause for celebration, Pinduoduo has proven this past week they can also be bad for business. The company—which has integrated e-commerce and social media—caters to low-income consumers living outside first and second-tier cities. It has been plagued by accusations of facilitating the sale of counterfeit low-quality goods.

Just days after going public, its share price tumbled by 16 percent, falling below its offer price of $19. The drop was, in part, initiated by requests made by television maker Skyworth to remove counterfeit listings of its products from the e-commerce firm’s marketplace.

The company announced (in Chinese) this week that it had removed 10.7 million listings of problematic goods. However, this did little to assuage concerns from investors and regulators after the latter launched an inquiry into Pinduoduo’s product listings. Its stock price dropped to 30 percent below its closing price on its first day of trading, wiping out over $9 billion in value.

This is unlikely to be helped by the fact that seven U.S. law firms have launched investigations into the company on behalf of its investors. The statement issued by the firms shows that investors suffered financial losses after Chinese regulators began looking into the company’s dealings. The company met today with regulators and agreed to improve its products’ vetting procedures.

However, it’s not only e-commerce platforms that have been affected. Video streaming service Bilibili has seen its stock price drop by almost 21 percent since July 20. The decline comes amid renewed efforts led by the Cyberspace Administration of China (CAC) to crack down on what it deems to be “vulgar” or “inappropriate” content.

The company has subsequently had its app removed from app stores in the country for one month. Nasdaq-listed Bilibili responded by saying it is “in deep self-review and reflection.”

Screenshot of the drop in Bilibili’s stock price. Accessed August 3, 2018

Rumored competition

Baidu, which runs China’s biggest search engine, found that even unconfirmed competition can cause stocks to tumble. In a move which could mark its re-entry into the Chinese market, news broke this week that Google has plans to launch an Android app that could provide filtered results to users in China.

Baidu currently commands nearly 70 percent of China’s search market. Google shut down its search engine in China in 2010 over censorship concerns, giving up access to a vast market. China’s online population now exceeds 770 million, double the entire populace of the U.S. and more than that of Europe.

Baidu’s income is still highly dependant on ad revenue, which increased by 25 percent in the second quarter. Google’s return is clearly seen as a threat, causing Baidu’s stock price to fall from $247.18 on July 31 to $226.83 on August 2. This marks the most significant fall since the company announced the departure of its chief operating officer Lu Qi in May.

Steady decline

Nonetheless, all these losses seem insignificant in comparison to Tencent’s. The company saw its stock price increase by 114 percent in 2017, reaching a record high in January 2018. However, since then, the price has dropped by nearly $130 per share, eviscerating a considerable portion of its market value. In July alone, its stock price fell by 9.9 percent. The company’s devaluation tops Facebook’s $130 billion rout following its earnings call last month.

In April, the company lost over $20 billion in value after South African investment and media firm Naspers — an early and loyal backer — announced it was trimming its stake by two percent. Additionally, Martin Lau, the company’s president, sold one million of his shares in the company. This, added to the Naspers sale and warnings of margin pressure, led to a loss of $51 billion in market value.

“Investors are increasingly pricing in lower expectations for Tencent’s interim results,” Linus Yip, a strategist at First Shanghai Securities in Hong Kong, told Bloomberg.

Yip expects the downward trend to continue, and not just for Tencent. “Overall, tech companies are facing a similar problem. They have been enjoying fast profit growth in the past few years, so it will be difficult for them to maintain similar growth in the future as the competition grows and some segments are saturated,” he said.

Daimler deepens ties with China’s Baidu on automated driving

Daimler, the owner of the Mercedes-Benz brand, and China’s Baidu are expanding their partnership with plans to cooperate more closely on automated driving and connectivity services in the German automaker’s vehicles.

The two companies have signed an agreement to collaborate in these two areas, specifically with Baidu’s Apollo program, an open-source autonomous driving platform. Both companies said they will also work to explore new fields in vehicle connectivity services.

What this deeper relationship will produce isn’t entirely clear, although there is at least one component of the announcement that provides a bit more detail.  Baidu’s connectivity services will be integrated into Mercedes-Benz’s new infotainment system known as MBUX, Daimler said.

Daimler’s relationship with Baidu has strengthened as it has expanded its presence in China. Daimler was one of the first partners to join Apollo, which Baidu launched in April 2017. Daimler is also a member of the Apollo Committee, a group that wants to accelerate research on safer solutions in automated driving in China and promotes the drafting of related laws and regulations.

Daimler  was granted in July a license to test self-driving vehicles on public roads in Beijing, making it the first international automaker to receive such permission. The automaker was given the test permit by the Chinese government after extensive closed-course testing. Daimler said, at the time, that is marked an important milestone in its research and development efforts in China.

Baidu’s open source Apollo program reflects the Chinese search engine’s strategy to gaining a piece of the autonomous vehicle industry pie. Baidu isn’t interested in making the actual car — just the software that drives it.

Baidu has focused its effort on delivering services, like data and high-skilled computing. And it’s betting that its tech will help it become China’s leading developer of self-driving vehicles.

The goal, of course, is to persuade as many companies as possible to use its Apollo platform. Some 116 partners are now on the Apollo platform, including new partners Jaguar Land Rover, Valeo, Byton, Leopard Imaging and Suning Logistics. Daimler was one of the first.

Baidu unveiled an upgrade to the Apollo platform at its developer conference in July.  Apollo 3.0, as it’s being called, aims to better support autonomous driving in geo-fenced areas. It also includes new solutions to support valet parking, autonomous mini buses and autonomous microcars.

A previous update, announced in January at CES 2018, included support for new computing platforms, new reference vehicles and more HD mapping services.

Daimler can now test self-driving cars on public roads in Beijing

Daimler has been granted a license to test self-driving vehicles on public roads in Beijing, making it the first international automaker to receive such permission.

The owner of the Mercedes-Benz brand was given the test permit by the Chinese government after extensive closed-course testing, the company said in a statement, adding that it marks a milestone in its research and development efforts in China.

Daimler, which also has licenses in Germany and the U.S., said it will now begin road tests in Beijing.

There are other companies testing autonomous vehicles in China, notably Baidu, which has been on public roads since at least 2016. For Daimler to qualify, the company said it had to add to its Mercedes-Benz test vehicles technical applications from Baidu’s Apollo platform. Daimler had to undergo testing at the National Pilot Zone (Beijing and Hebei) for Intelligent Mobility, with test drivers receiving rigorous automated driving training.

Daimler has also deepened its relationship with Baidu, specifically in R&D efforts focused on safety and autonomous driving. The goal is to understand the special requirements for automated driving in China, and to develop an early intuition regarding local technical trends, Daimler said.

Earlier this week, Baidu announced an update to its Apollo autonomous driving system, which is capable of Level 4 operations, a designation by automotive engineering association SAE International that means the vehicles take over all driving in certain conditions.

The Apollo program is an open-source autonomous driving platform that has been under development for years. Baidu isn’t interested in making the actual car — just the software that drives it. And it wants as many companies as possible to use its Apollo platform. Some 116 partners are now on the Apollo platform, including new partners Jaguar Land Rover, Valeo, Byton, Leopard Imaging and Suning Logistics.

Baidu just made its 100th autonomous bus ahead of commercial launch in China

Baidu is preparing to launch a driverless service in China — and elsewhere — with another update to its Apollo autonomous driving platform and the mass production of Apolong, an autonomous mini bus that seats up to 14 people.

Baidu made the announcements at Baidu Create 2018, the company’s annual AI developer conference. Baidu has started volume production of the autonomous mini buses in partnership with Chinese manufacturer King Long. The buses are being produced at King Long’s manufacturing facility in Xiamen, in southeastern China’s Fujian province.

Baidu’s Chairman and CEO Robin Li introduced the milestone while livestreaming the 100th bus rolling off of the production line to more than 6,000 attendees at Baidu Create 2018 in Beijing.

Baidu plans to launch the autonomous bus service in several Chinese cities including Beijing, Shenzhen, Pingtan and Wuhan. But the company has aspirations beyond China. Baidu is partnering with SB Drive, the  autonomous driving subsidiary of SoftBank Group, to bring Apolong autonomous mini buses in Japan early next year.

Apolong is outfitted with Baidu’s Apollo autonomous driving system, which is capable of Level 4 operations, a designation by automotive engineering association SAE International that means the vehicles take over all driving in certain conditions. The buses, which will initially deployed in tourist spots, airports, and other controlled, or geo-fenced areas.

“2018 marks the first year of commercialization for autonomous driving. From the volume production of Apolong, we can truly see that autonomous driving is making great strides, taking the industry from zero to one,”Robin Li said during his keynote address.

The autonomous buses are the physical embodiment of Baidu’s Apollo program, an open source autonomous driving platform that has been under development for years. Baidu isn’t interested in making the actual car—just the software that drives it. Baidu has focused its effort on delivering services, like data and high-skilled computing. Baidu is betting that its tech will help it become China’s leading developer of self-driving vehicles.

And it wants as many companies as possible to use its Apollo platform. Some 116 partners are now on the Apollo platform, including new partners Jaguar Land Rover, Valeo, Byton, Leopard Imaging and Suning Logistcs.

The latest upgrade to the Apollo platform —also announced at Baidu’s developer conference — aims to better support autonomous driving in geo-fenced areas. Apollo 3.0, as it’s being called, includes new solutions to support valet parking, autonomous mini buses, and autonomous microcars. The aim is for this update to help its dozens of partners deploy volumes of autonomous vehicles, not just one or two.

A previous update, announced in January at CES 2018, included support for new computing platforms, new reference vehicles and more HD mapping services. At the time, Baidu also said it would offer support for the four main computing platforms: Nvidia, Intel, NXP and Renesas.

Baidu and Softbank’s SB Drive are bringing an autonomous bus service to Japan

Chinese search engine giant Baidu have partnered with Softbank subsidiary SB Drive and manufacturer King Long to deploy a self-driving mini bus service to Japan early next year.

The agreement was announced at Create Baidu, the company’s annual AI developer conference in Beijing. Under the agreement, a version of Baidu’s Apolong autonomous mini bus will be exported to Japan from China in early 2019. This agreement, which for now includes an order of 10 buses, marks the first time autonomous vehicles will be exported from China.

Apolong, co-developed with King Long, is outfitted with Baidu’s Apollo autonomous driving system, which is capable of Level 4 operations, a designation by automotive engineering association SAE International that means the vehicles take over all driving in certain conditions. The buses, which will initially deployed in tourist spots, airports, and other controlled, or geo-fenced areas.

Baidu announced earlier at the conference that it has started volume production of the autonomous mini buses in partnership with King Long. The buses are being produced at King Long’s manufacturing facility in Xiamen, in southeastern China’s Fujian province.

Baidu plans to launch the autonomous bus service in several Chinese cities including Beijing, Shenzhen, Pingtan and Wuhan.

Baidu and Ford China team up to bring AI and connectivity to the driving experience

China’s Baidu continues to make inroads in the automotive space after it inked an agreement with Ford China that will see the two companies work together to make the driving experience smarter in China.

The two companies have collaborated before, most notably by jointly investing $150 million into LiDAR sensors startup Velodyne, and this China initiative will bring help technologies like connectivity, artificial intelligence and digital marketing into the car.

That will include a new in-vehicle system and services that are based on Baidu’s DuerOS Ai platform, which in turn is part of Baidu’s Apollo platform aka ‘the Android for cars’; it counts Ford as a founding member. Some of the more notable features of Duer in the car include voice recognition, natural language understanding and image recognition.

In addition, the duo will establish “a joint connectivity lab to investigate innovation opportunities across their automotive and mobility businesses in China.” In particular, that will focus on cloud-based services which include AI and potential integrations with Transportation Mobility Cloud (TMC) which is being developed by Ford subsidiary Autonomic.

The well-funded startups driven to own the autonomous vehicle stack

At some point in the future, while riding along in a car, a kid may ask their parent about a distant time in the past when people used steering wheels and pedals to control an automobile. Of course, the full realization of the “auto” part of the word — in the form of fully autonomous automobiles — is a long way off, but there are nonetheless companies trying to build that future today.

However, changing the face of transportation is a costly business, one that typically requires corporate backing or a lot of venture funding to realize such an ambitious goal. A recent funding round, some $128 million raised in a Series A round by Shenzhen-based Roadstar.ai, got us at Crunchbase News asking a question: Just how many independent, well-funded autonomous vehicles startups are out there?

In short, not as many as you’d think. To investigate further, we took a look at the set of independent companies in Crunchbase’s “autonomous vehicle” category that have raised $50 million or more in venture funding. After a little bit of hand filtering, we found that the companies mostly shook out into two broad categories: those working on sensor technologies, which are integral to any self-driving system, and more “full-stack” hardware and software companies, which incorporate sensors, machine-learned software models and control mechanics into more integrated autonomous systems.

Full-stack self-driving vehicle companies

Let’s start with full-stack companies first. The table below shows the set of independent full-stack autonomous vehicle companies operating in the market today, as well as their focus areas, headquarter’s location and the total amount of venture funding raised:

Note the breakdown in focus area between the companies listed above. In general, these companies are focused on building more generalized technology platforms — perhaps to sell or license to major automakers in the future — whereas others intend to own not just the autonomous car technology, but deploy it in a fleet of on-demand taxi and other transportation services.

Making the eyes and ears of autonomous vehicles

On the sensor side, there is also a trend, one that’s decidedly more concentrated on one area of focus, as you’ll be able to discern from the table below:

Some of the most well-funded startups in the sensing field are developing light detection and ranging (LiDAR) technologies, which basically serve as the depth-perceiving “eyes” of autonomous vehicle systems. CYNGN integrates a number of different sensors, LiDAR included, into its hardware arrays and software tools, which is one heck of a pivot for the mobile phone OS-maker formerly known as Cyanogen.

But there are other problem spaces for these sensor companies, including Nauto’s smart dashcam, which gathers location data and detects distracted driving, or Autotalks’s DSRC technology for vehicle-to-vehicle communication. (Back in April, Crunchbase News covered the $5 million Series A round closed by Comma, which released an open-source dashcam app.)

And unlike some of the full-stack providers mentioned earlier, many of these sensor companies have established vendor relationships with the automotive industry. Quanergy Systems, for example, counts components giant Delphi, luxury carmakers Jaguar and Mercedes-Benz and automakers like Hyundai and Renault-Nissan as partners and investorsInnoviz supplies its solid-state LiDAR technology to the BMW Group, according to its website.

Although radar and even LiDAR are old hat by now, there continues to be innovation in sensors. According to a profile of Oryx Vision’s technology in IEEE Spectrum, its “coherent optical radar” system is kind of like a hybrid of radar and LiDAR technology in that “it uses a laser to illuminate the road ahead [with infrared light], but like a radar it treats the reflected signal as a wave rather than a particle.” Its technology is able to deliver higher-resolution sensing over a longer distance than traditional radar or newer LiDAR technologies.

Can startups stack up against big corporate competitors?

There are plenty of autonomous vehicle initiatives backed by deep corporate pockets. There’s Waymo, a subsidiary of Alphabet, which is subsidized by the huge amount of search profit flung off by Google . Uber has an autonomous vehicles initiative too, although it has encountered a whole host of legal and safety issues, including holding the unfortunate distinction of being the first to kill a pedestrian earlier this year.

Tesla, too, has invested considerable resources into developing assistive technologies for its vehicles, but it too has encountered some roadblocks as its head of Autopilot (its in-house autonomy solution) left in April. The company also deals with a rash of safety concerns of its own. And although Apple’s self-driving car program has been less publicized than others, it continues to roll on in the background. Chinese companies like Baidu and Didi Chuxing have also launched fill-stack R&D facilities in Silicon Valley.

Traditional automakers have also jumped into the fray. Back in 2016, for the price of a cool $1 billion, General Motors folded Cruise Automation into its R&D efforts in a widely publicized buyout. And, not to be left behind, Ford acquired a majority stake in Argo AI, also for $1 billion.

That leaves us with a question: Do even the well-funded startups mentioned earlier stand a chance of either usurping market dominance from corporate incumbents or at least joining their ranks? Perhaps.

The reason why so much investor cash is going to these companies is because the market opportunity presented by autonomous vehicle technology is almost comically enormous. It’s not just a matter of the car market itself — projected to be over 80 million car sales globally in 2018 alone — but how we’ll spend all the time and mental bandwidth freed up by letting computers take the wheel. It’s no wonder that so many companies, and their backers, want even a tiny piece of that pie.