How a Hong Kong start-up finds itself caught up in the US-China trade war – TechCrunch

Taylor Host has been operating its artificial intelligence business in Hong Kong for over two years. The American entrepreneur has clients from Europe, North America and Asia, but he has settled in the city for its proximity to the huge market of Southeast Asia and China mainland.

Miro, whom Host co-founded in 2017 with a British software engineer, had already transported six employees before raising a small investment. Supported by Silicon Valley-based SOSV, he is now seeking $ 2 million in a new round of funding. As trade tensions between China and the United States continue, the company plans to relocate for the first time because being a Hong Kong entity is beginning to deter Western investors.

Miro uses computer vision to mark images and videos of runners of the marks they carry. He then badigns this data – sporting goods purchases – to consumer profiles that are part of his clients' Customer Relationship Management (CRM) system. Miro's artificial intelligence processes data in markets around the world, but data for China, in particular, is desirable for Western sports brands.

The rising Chinese middle clbad has stoked the marathon fever in recent years while she was looking for a healthier lifestyle. When participating in a race, Miro's sensors could follow their shoes and outfits for event organizers and sponsors. Until now, the technology has been used in nearly 500 events around the world and has badyzed more than 10 million athletes. Most of the technical development took place in Hong Kong.

"My co-founder and I spent a lot of time in Hong Kong. Most of our team members call themselves Chinese from Hong Kong. So we are very active in Hong Kong and we love that, "Host told TechCrunch during a phone interview.

"Recently, it has become very difficult to rationalize the maintenance of activities in Hong Kong. There are many reasons for that, but I think the ones that stand out are geopolitical. "

Among other things, Host experienced a "dramatic" change in sentiment among Western investors towards Hong Kong, where a controversial extradition bill triggered a wave of mbadive protests. The fear that the special administrative region will give up its autonomy in Beijing is at the heart of the problem. Critics cite examples of the disappearance of a Hong Kong bookseller and a Financial Times journalist visa denied by the local government.

In an alarming move, the US government has stated that the extradition bill "threatens the strong relationship between the United States and Hong Kong," which includes a special trade agreement that is independent of that of mainland China.

Hong Kong leader Carrie Lam announced in early July that the bill was "dead", but the dice were thrown out as Hong Kong's autonomy status persists.. Businesses in the territory are now at risk of being dragged into the US-China trade war.

In March, Miro won a pitch contest at SXSW and has since attracted institutional investors of all sizes. But two of its potential US-based founders have decided to leave the negotiating table by viewing Hong Kong as a risk.

"No company has ignored the fact that we are a Hong Kong-based company," said Host. "US investors have no appetite for which we have now asked to invest in our Hong Kong entity."

The risk of supporting Miro, which deals with data seas with image recognition capabilities, is more pronounced than that of companies that have little or no basic technology, with intellectual property being one of the main targets of negotiations between the United States and China.

"Foreign venture capitalists have become more vigilant when they invest in Chinese companies with artificial intelligence and chips, even when they do not have basic technology," said Joe Chan. founding partner of MindWorks Ventures, based in Hong Kong. TechCrunch said in an interview.

Meanwhile, the trade war has had a tangential impact on US funding for Chinese startups that focus on education, lifestyle and other non-deep technology sectors, according to a handful of investors to whom we talked in the last few months.

South East Asia wins

With the help of legal and tax consultants, Miro recently migrated to a US entity by enrolling in Delaware. but will keep its operations in Hong Kong. It's a move that, in Host's words, has "delighted and enabled the company to move forward" with some of its interested US investors.

"Our conversations with US investors have required that they invest in a US entity – not Hong Kong," said the founder. "If you are firmly committed to making your business the largest company in your industry, why would you even consider finding yourself in a place where there are so many uncertainties and risks?"

For China-based companies whose cross-border activities are anchored in Asia, South-East Asia could be a haven against the trade war. As Chan observed, some Chinese start-ups had the intention of settling in Singapore "to become less politically sensitive".

Miro is also facing the risks by turning to Southeast Asia, which, according to many, is becoming a winner of the US-China battle. Along with China, the burgeoning middle clbad in the region is starting to run, along with many other hobbies and habits that will spark startup ideas.

Indeed, there is a lot of talk about the region's boom, which has 640 million inhabitants. Some well-known global investors, including Warburg Pincus and TPG Capital, have set aside new funds in recent months to support startups in Southeast Asia. Corporate investors, including Tencent, Alibaba, Didi Chuxing and JD.com, also want to gain a foothold in this emerging part of the continent, as we wrote two years ago.

"At the macroeconomic level, the trade war certainly has a considerable impact on the Chinese economy. So we see a lot more money flowing into Southeast Asia, "Chan said.

"For example, some manufacturers have moved to Indonesia where the workforce is cheaper. The Chinese technology industry – and this is not entirely related to the trade war – is saturated and dominated by the BAT [Baidu, Alibaba and Tencent]The window of opportunity is small. Meanwhile, Southeast Asia is still developing. "

In a way, the trade war has accelerated the shift of attention from China to neighboring countries. This is what prompted Miro to visit recently one of the largest technical conferences in the region, Techsauce.

"Nobody talks about the trade war here in Bangkok. We are talking about the explosion of Southeast Asia. And they are not just Chinese investors. It's also Western investors, "said Host.