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Growing alongside New Economy Businesses on a Journey of “Discoveries”
Over the past decade, the new economy, germinating from the information technology revolution and spearheaded with the hi-tech industries, has grown into a major pillar of China’s growth. Some predict that by 2024, the new economy will account for 37.5% of China’s GDP. By then, China will likely be home to a number of industry giants that are globally competitive in the new economy space.
The founding of Mobvista in Guangzhou in 2013 coincided with the big data explosion, just in time for it to catch the first wave of Chinese Internet companies’ venture into the global markets. While enjoying a growth spurt by helping Chinese developers connect to overseas clients on its advertising platform, Mobvista found itself mired in huge maturity mismatch and a shortage of working capital.
However, with only a few computers and a handful of researchers, the asset-light company was then too young to figure out a clear-cut path to debt financing. Clement Cao, Co-founder and CEO of Mobvista, was among those who had long been troubled by the problem.
At the time of its first encounter with HSBC, Mobvista, barely one year old, saw its business growth tripling by the month. But Clement Cao grew anxious for what would otherwise be good news. “B2B companies like Mobvista have to wait on maturity of receivables. Shortage of funds is inevitable as outgoings always outpace incomes.” said Cao.
The company was facing a dilemma: it would either quickly go for equity financing, or borrow from banks. Equity financing, however, couldn’t take place over night. Investor compatibility and appropriate timing in view of the company’s growth stage were important considerations; debt financing, on the other hand, would often require collateral assets. Mobvista felt stressed in both directions.
“We were already doing business with top Internet companies at the time, but as an asset-light business, we were considered by most banks to be ineligible for a loan.” said Cao. But much to his surprise, HSBC stepped in with considerable support without requiring any collateral.Maybe this is a question about what HSBC sees as top-of-mind priority when it comes to supporting new economy businesses.
The business mix and corporate structure of new economy industries are different from those of traditional ones. When we review a financing request and decide upon the line of credit, our primary concern would be whether this is a fast-growing industry. Going from there, we will also consider the company’s competitiveness, in particular the long-term competitiveness of the company itself, and its products and technologies. Thirdly, we will look at the management style for evidence of practical approaches being taken and focused efforts being made in advancing the company’s core business to ensure robust and steady growth in the long run. Of course, financial aspects such as fixed assets and asset size are also weighed but against a different set of metrics than for traditional loans. Many new economy businesses are barely making profits in their start-up stage and comparable businesses for benchmarking purposes can be hard to identify. Banks need to go the extra mile to come up with tailored financing solutions.|
“We are from an industry that runs on obscure concepts and difficult jargons. Different from a brick-and-mortar business, our industry and, in particular, our business strategies don’t easily get through to a general audience.” Cao explained, “It would be a major challenge for a company like ours to convince and gain trust from investors in the shortest time possible.”
The growth of Mobvista is largely driven by technology rather than sales. Eight years on, the company has grown into a technology platform with a global reach and a serious commitment to building a SaaS tooling ecosystem that empowers the growth of businesses around the world. The company now operates a family of brands including Mintegral, Nativex, Solar Engine, Reyun Data, GameAnalytics, SpotMax and Maxcloud with its business offerings spanning AdTech, MarTech, cloud computing and artificial intelligence. In particular, Mobvista’s programmatic advertising platform Mintegral has made its way to the top echelon of third-party advertising platforms in the world, having recorded a staggering USD 160 million in revenue in the third quarter according to the latest quarterly report, up 72.86% year-on-year.
Companionship as a lifecycle commitment
A year after its successful debt financing, Mobvista successfully closed its Series A round. In 2018, the company became listed on the main board of Hong Kong Stock Exchange under the code 01860.
As it grows bigger, the company begins to see increased complexity in its needs. According to Joseph Ma, Mobvista, with its China root and a globally distributed client base, requires financial services that are accessible across global locations. With digital DNA running through its veins, the company also sets higher expectations for its smart products. Its ongoing business expansion, growing client base and more diversified product offerings all contribute to more complex needs for financial services.
“Addressing the pain points and demands of individual companies with tailored lifecycle solutions is what HSBC has been doing.” According to Ma, banks need to keep a watchful eye on the varying needs of the businesses at different stages of development in order to step in and help out.
Such varying needs may include, among other things, FX settlement, capital for growth, debt financing vs equity financing at different stages, and M&A activities across the value chain.
Cao also revealed that since FX management involves dealing with the complexity of the laws and regulations of multiple countries, Internet start-ups working with a big global clientele need to create synergy with an able partner for risk control and compliance purposes. Effective cost control is equally important, as it relates to the convenience and timeliness of settlement. “The capability for sophisticated FX management with pinpoint accuracy is what we need to better serve our clients and stakeholders, ensure maximum return for our shareholders and minimise forex risks in a volatile market.”
In response, HSBC has launched a foray on multiple fronts to bring down each of the obstacles. For example, the batch processing of online payments, enabled by HBSC’s innovative digital banking solutions, helps address high volumes of cross-border settlement and provides additional features of real-time tracking of payments and trade transactions. In terms of FX services, HSBCnet enables real-time preview of FX quote for each payment, thereby empowering clients with significantly enhanced control over FX rates during settlement. Meanwhile it also allows query for spot and forward FX rates and online booking of rate in order to meet more sophisticated FX needs of corporate clients.
In addition, companies venturing overseas are bound to face more currency volatilities. In this regard, HSBC China is committed to working with its clients for currency risk management to drive more robust business growth by fostering a proper understanding of currency risk neutrality, performing a key role as a member on the China Foreign Exchange Committee and leveraging its global connectivity to help the clients execute need-based hedging strategies.
In April 2021, Mobvista announced its plan to acquire Reyun Data (“Reyun”), a third-party mobile measurement and marketing technology company, for a total consideration of over RMB 1.5 billion (in cash and stock).
HSBC also stood with Mobvista throughout this deal.
In July this year, HSBC offered Mobvista an additional line of credit of up to USD 120 million in support of the company’s acquisition deal. The new loan was meant to afford extra financial flexibility and fuel the development of Mobvista’s SaaS tooling ecosystem.
“We have been working closely with HSBC every step of the journey. We see HSBC as a core banking partner for our business growth.” Cao said.
“For banks, the rapid growth and fluid nature of new economy businesses present both opportunities and challenges. We can’t possibly make the best calls at every turn over a company’s lifecycle without the ability to go deep enough in our understanding of the industry and to move quickly enough to stay on top of the dynamics of the industry.” Ma believes that discovering promising businesses and growing alongside them is both a responsibility and a test for banks. But one thing is for sure: HSBC will stay on course with continued dedication to this important role.
Article Source: Yicai