China’s tech crackdown, which has eventually developed the “common prosperity” wing, is about to claim another victim.

The Financial Times reported Monday, citing sources, that Beijing is moving to break up Alipay, and create a separate app for the company’s highly profitable loans business.

The crackdown started with focus on the fintech industry, with Beijing aiming to curtail the extravagance of the industry players who had enjoyed uncommon freedom under President Xi’s leadership. The Ant Group, whose halted IPO was gearing up to be the largest in history, with $37 billion raised for a post-IPO valuation of $300 billion, was the starting point of what has now escalated to other sectors, including edtech and ride-hailing.

The report said that Chinese regulators have already ordered Ant to separate the back end of its two lending businesses, Huabei, which is similar to a traditional credit card, and Jiebei, which makes small unsecured loans, from the rest of its financial offerings and bring in outside shareholders.

“The government believes big tech’s monopoly power comes from their control of data,” said one person close to financial regulators in Beijing. “It wants to end that.”

Alipay has more than one billion users whose data have been collected by the payment service. With the crackdown shifting focus on how the tech firms manage private data, Beijing looks to be moving to break up companies in possession of millions of users’ data.

The report said officials now want the two businesses to be split into an independent app as well. The plan would also require Ant to turn over the user data that underpins its lending decisions to a new credit scoring joint-venture which would be partly state-owned, according to two people familiar with the process.

Under the new rules, the companies affected will no longer be at the helm of decision making, as the responsibility will be shared by stakeholders appointed by the government.

Per FT, Ant has been struggling with regulators for control of the new joint venture, but a compromise was reached under which state-owned companies in its home province, including the Zhejiang Tourism Investment Group, would hold a majority stake.

The people said pushing for local state-owned groups to become Ant’s new partners was a favor from the provincial government.

“Given the mutual trust between Ant and Zhejiang, the fintech group will have a big say on how the new JV (joint venture) operates,” said a former official at the People’s Bank of China. “But the new set-up will also make sure that Ant listens to the party when it comes to critical decision-making.”

Ant is believed to have the upper hand in decision making because its partner doesn’t know a thing about fintech.

According to the report, a person close to Ant said that for the time being Ma’s team would be at the helm of the new venture. “What does Zhejiang Tourism Investment Group know about credit scoring — nothing,” the person said, while noting Ant executives were still concerned they could lose control in the future.

This whirlwind of misfortune is the latest major blow to Ant since its IPO was halted late last year. Watching its shares divided among government appointed stakeholders and having a little say in decision making was not the future the company foresaw.

In an earlier report, Reuters had revealed the make-up of the joint venture, reporting that Ant and Zhejiang Tourism Group would each take 35 percent stakes with other state-owned and private partners allocated smaller shares.

Financial Times reported that the new venture will apply for a consumer credit scoring license, which Ant has long coveted. China’s central bank has issued only three licenses — all to state-run operations — preventing Ant from fully monetizing the vast reams of data it has collected on Chinese citizens, the report said.

Credit scoring companies have now become part of lending business in China under the new rules. This means, apart from Ant, other lending companies will go through the third party credit scoring process to have their customers loans approved. This summer the central bank told industry players that lending decisions must be made based on data from an approved credit scoring company rather than proprietary data, one of the people said.

Per FT, this means that a future Alipay user in need of credit would see their request first routed to the new joint venture credit scoring company where their credit profile is held and then on to the new Huabei and Jiebei lending app to issue the credit.

The new rules, among other things, will hamper the swiftness with which Alipay executes transactions due to the creditworthiness process that is entirely integrated within Alipay. Ant said it made “credit decisions within seconds” in its prospectus for its suspended IPO. But there is more, Ant’s value will suffer long term consequences emanating from these changes.

MailChimp has been acquired by Intuit for $12 billion. I am not necessarily sure where MailChimp fits  into the Intuit playbook, except maybe QuickBooks, which has a dose of small and medium scale businesses which can be juiced by what MailChimp has prepared.  Intuit has a history of picking winners when you look at Mint, Credit Karma and other recent properties. In short, I have a playbook after Intuit which I called Fish Bait Acquisition Construct by merely observing how the tax-filing giant picks companies.

Founded in 2001, Mailchimp’s landmark cloud service enables businesses to design and send promotional emails and newsletters to customers. The company have since expanded, launching a software that allows online sellers to include a link to their ecommerce stores, a development which some speculate has contributed to the firm’s high asking-price. The company are still owned by their founders, and – surprisingly – have never raised venture capital.

Yet, that Intuit is spending $12 billion (about 8% of its market cap) in cash and stock to swallow MailChimp is not the main story; the main thing is that MailChimp generates close to $1 billion annual revenue now (extrapolated), and has NEVER raised a single venture capital dime! Yes, $0.00 venture funds. 

There are many things to learn about this company – expect many case studies from business schools. Yes, a company never raised venture funds, grew revenue to $1 billion and exited at $12 billion. That is a great business mission, executed!

The acquisition press release below.

Intuit (Nasdaq: INTU), the global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma, today announced that it has agreed to acquire Mailchimp, a world-class, global customer engagement and marketing platform for growing small and mid-market businesses. The planned acquisition of Mailchimp for approximately $12 billion in cash and stock advances Intuit’s mission of powering prosperity around the world, and its strategy to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic Big Bets: to become the center of small business growth; and to disrupt the small business mid-market.

Together, Intuit and Mailchimp will work to deliver on the vision of an innovative, end-to-end customer growth platform for small and mid-market businesses, allowing them to get their business online, market their business, manage customer relationships, benefit from insights and analytics, get paid, access capital, pay employees, optimize cash flow, be organized and stay compliant, with experts at their fingertips. Delivering on the promise to be the single source of truth, small and mid-market businesses will have the power to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

The Fish Bait Acquisition Construct

Microsoft’s Teams supports an excess of 100 million students around the world. Today, we are learning that the software giant has acquired TakeLessons: “We’re so excited to announce that TakeLessons has been acquired by Microsoft. We believe this will further support TakeLessons’ mission: to empower people to learn, connect, grow, and live more meaningful lives through education.” 

TakeLessons is an aggregator, orchestrating students and tutors. Indeed, a “platform for students to connect with individual tutors in areas like music lessons, language learning, academic subjects and professional training or hobbies, and for tutors to book and organize the lessons they give, both online and in person.” By this acquisition, Microsoft is connecting atoms with bytes which is what most digital technology firms are doing these days.

Microsoft said in January this year that Teams, its online collaboration platform, was being used by over 100 million students — boosted in no small part by the COVID-19 pandemic and many schools going partly or fully remote. Now, it’s made another acquisition to continue expanding its position in the education market. [..]

Terms of the deal have not been disclosed but we are trying to find out. San Diego-based TakeLessons had raised at least $20 million from a range of VCs and individuals that included LightBank, Uncork Capital, Crosslink Capital and others. TakeLessons posted a short note in the form of a Q&A confirming the deal on its site. The note said that it will continue operating, business as usual, for the time being, with the intention of taking its platform to a wider global audience.

The message from this acquisition for Africa is simple: anything is an opportunity and some of these big technology giants will be looking for platforms and ecosystems with huge numbers as they expand into Africa at lower consumer levels.

 A credible ecosystem that makes it possible for parents to find tutors in Lagos, Kano, Owerri, etc may not be Microsoft’s interest but could be for  Flutterwave, Interswitch, etc as they need those pipelines for the future.

Simply, in summary, begin to build.

The gig business model being used by both ride-hailing and delivery services has continued to meet stiff opposition from labor unions and governments, and courts have been pandering to their yearning.

The bone of contention has been the classification of drivers as independent contractors instead of employees, which denies them minimum wage and workers’ benefits. Across markets, ride-hailing companies, mainly Uber and Lyft, are increasingly losing the fight to save the gig economy.

On Monday, a Dutch court ruled that Uber drivers are employees rather than independent contractors and are entitled to greater workers’ rights and in some cases are entitled to back pay.

The judgment follows a landmark ruling in London in February, classifying Uber drivers as employees and forcing the California-based taxi app operator to grant employment status to its drivers.

The Federation of Dutch Trade Unions had filed a complaint with the court arguing that drivers deserve the same benefits as other workers in the taxi sector. The Amsterdam District Court sided with union, upholding the labor law as it’s applicable to taxi transportation.

As it had responded in other places where the court had ruled in favor of drivers, Uber said it “has no plans to employ drivers in the Netherlands” and will appeal against the decision.

“We are disappointed with this decision because we know that the overwhelming majority of drivers wish to remain independent,” Maurits Schönfeld, Uber’s general manager for northern Europe said. “Drivers don’t want to give up their freedom to choose if, when and where to work.”

The ruling was based on the collective labor agreement for taxi transportation, which recognizes taxi drivers as employees, which the court found that Uber has flouted by giving them the self-employed status.

“The legal relationship between Uber and these drivers meets all the characteristics of an employment contract,” the ruling said.

The FNV hailed the ruling as “a huge victory for drivers” who it said will gain more pay and benefits.

“Due to the judge’s ruling, the Uber drivers are now automatically employed by Uber,” said Zakaria Boufangacha, FNV’s deputy chairman. “As a result, they will receive more wages and more rights in the event of dismissal or illness, for example.”

The judges also ordered Uber to pay a fine of 50,000 euros ($58,940) for failing to implement the terms of the labor agreement for taxi drivers.

Uber was forced by UK Supreme Court to accept drivers demand including the right to form a union, after it lost its bid to keep the classification of more than 70,000 drivers as independent contractors in February.

In March the ride-hailing giant, in an apparent effort to take the attention of the authorities off its business model, said it will improve workers’ rights, including the minimum wage in London, and allowed drivers to form a union for the first time. It also includes giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury.

While the battle cuts across its markets, including Uber’s largest market California, where the government has enacted the AB5 law to force Uber to classify drivers as employees, Europe is swiftly kicking against the gig economy.

Last September, the Spanish Supreme Court ruled that delivery drivers are employees not independent contractors, prompting the Spanish government to enact a law backing the ruling up early this year.