Billionaire-Backed Fintech Becomes Hong Kong’s Latest Unicorn With $458 Million Round, Baillie Gifford Joins As A New Investor

Charles Li, cofounder and chairman of Micro Connect.

Courtesy of Micro Connect

Financial technology startup Micro Connect – backed by the likes of Hong Kong billionaire Li Ka-shing and property tycoon Adrian Cheng – announced it raised $458 million in a Series C funding round, valuing the two-year-old startup at $1.7 billion.

The funding round included participation from new investor Baillie Gifford, a Scottish investment firm that’s backed tech giants Amazon and Tesla, Micro Connect told Forbes Asia. Also participating in the round were returning investors such as billionaire Neil Shen’s Sequoia China (which Sequoia will rebrand as Hongshan next year), Lenovo Capital, Vectr Fintech and Dara Holdings.

The fresh capital brings Micro Connect’s total equity raised to $578 million, on the back of its $70 million Series B funding round last March.

“MCEX [Micro Connect’s exchange platform] is a new market, and we expect to see more ecosystem partners to join us, pool their wisdom and insights, and explore the investment opportunity in the blue sea of China’s micro and small businesses,” said Charles Li, 62, cofounder and chairman of Micro Connect, in a statement.

Founded in 2021, Hong Kong-based Micro Connect facilitates global institutional investments in micro and small businesses across mainland China. To date, Micro Connect has invested in more than 9,000 brick-and-mortar businesses in 198 Chinese cities, tripling the number of stores from the exchange’s opening in March. These stores span industries such as retail, food and beverages, services, and culture and sports. The startup expects 30,000 businesses to list on its platform by the end of the year.

Defined as enterprises employing less than 300 people and garnering less than 3 million yuan ($435,700) in annual revenue, micro and small businesses contributed 60% of China’s GDP in 2021, per official statistics last March, the latest figures available.

On Micro Connect’s exchange, which was authorized by Macau’s chief executive last December, investors can trade an all-new asset class known as Daily Revenue Obligations (DROs). Enabled by blockchain technology, DROs are tradable instruments that provide direct exposure to an agreed percentage of a store’s daily revenue over a specified period. They allow small businesses to tap into fresh capital without becoming saddled by debt, while allowing investors the ability to incrementally collect their returns, according to Micro Connect.

Micro Connect’s ribbon cutting ceremony in March. From left: Charles Li, cofounder and chairman of … [+] Micro Connect; Chan Sau San, chairman of the board of directors of the Monetary Authority of Macao; Ma Nai Fang; Lei Wai Nong; Ho Iat Seng, chief executive of the Macao Special Administrative Region (Macao SAR); Liu De Cheng; Chui Sai Cheong; Li Guang; Gary Zhang, cofounder and CEO of Micro Connect.

Courtesy of Micro Connect

Helmed by Li, the former chief executive of Hong Kong Exchanges and Clearing, Micro Connect has attracted investors from Hong Kong and mainland China. Across previous funding rounds, Micro Connect’s backers have also included ABC International (the investment arm of the Agricultural Bank of China), Chuang’s Capital, Hong Kong’s richest man Li Ka-shing’s Horizons Ventures, and Adrian Cheng, the CEO of real estate giant New World Development and son of Hong Kong billionaire Henry Cheng.

In 2021, China had 40.3 million micro and small businesses, per government statistics. These businesses, which contributed around 80% of the country’s employment, were hit hard by the pandemic – widespread lockdown measures in cities, along with policies that restricted travel, brought the economy to a halt.

As China slowly reopened its borders, micro and small businesses were touted as a “driving force” in the country’s recovery. In his final government work report in late 2021, former Premier Li Keqiang halved the income tax required for qualifying micro and small businesses until 2024. China’s President Xi Jinping, speaking a month before starting his unprecedented third term in March, vowed to support these businesses’ development. And in July, China’s central bank pledged further financing support, including VAT exemptions for banks providing microloans.