The Russia-China Investment Fund, a private equity vehicle backed by the governments of Russia and China, last month led a $460m funding round for Megvii, a China-based facial recognition technology producer. Megvii, whose Face-plus-plus technology has been billed as the world’s largest face-recognition platform by publications such as MIT Technology Review, counts among its clients e-commerce and internet group Alibaba, which uses the software to verify the identity of employees entering its buildings.
Alibaba, while an impressive client, is just one of more than 300,000 customers of the platform – companies, financial services firms, individual developers and municipal governments. The last use Face-plus-plus for applications ranging from ensurinh citizens have paid for their train ticket to detecting known criminals on CCTV.
Megvii – the name derives from “mega-vision” – was founded in 2011 and has never been shy about its ambitions. Yin Qi, chief executive and one of the company’s co-founders, has gone as far as describing the platform as a “brain” for visual computing, according to the Economist.
Facial recognition may seem a futuristic concept – or a dystopian one, depending on your point of view – but after many years of the technology having been predicted as a game-changer, it appears these forecasts are finally coming true. Take, for instance, consumer technology firm Apple’s latest smartphone, the iPhone X, which has ditched fingerprint verification in favour of facial recognition. With Apple’s clout, and market share, the move is likely to herald widespread adoption of the technology in the western world.
More adoption will inevitably mean more startups and corporates trying to join the field, so Megvii’s fresh cash injection should help the company stay ahead of the curve. The involvement of Russia and China in that funding round is also good news for the company.
The platform is a dominant player regionally, especially in China, and Megvii hopes to enter verticals ranging from retail to autonomous driving. But the fact that it is now aligned with the governments of China and Russia could prove a difficult sell to western investors and regulators.
Western governments have been mostly on friendly terms with China, thanks to economic interdependency, but they have been far less keen on Russia. In the US, purported links between the White House and the Kremlin are even subject to a large-scale investigation that has already led to the indictment of high-profile figures.
While the technology would undoubtedly be valuable to investors such as In-Q-Tel, the venture capital affiliate of the US intelligence community, their involvement is now highly unlikely.
Even beyond money, the idea of handing citizens’ personal data – and it hardly gets more personal than someone’s face – to a company backed by two governments that have values different from those of western democracies is sure to send chills down most regulators’ spines.
So an expansion beyond Asian markets appears to be off the cards. That might be fine for a lot of companies – with approximately 4.4 billion people, more than half the world’s population lives in Asia – but for a business as ambitious as Megvii, this may pose an interesting dilemma down the road.
And the fact that Megvii’s systems draw partially on identification files the Chinese government holds on its citizens is hardly a selling point to European or other regulators.
So far, Megvii’s backers have all been from Asia – diversified conglomerate SK Group and contract electronics manufacturer Foxconn participated in the $460m funding round, which reportedly included Ant Financial, the financial services affiliate of Alibaba.
Foxconn had previously supplied $20m in November last year in a $100m funding round also backed by CCB International Holdings, a subsidiary of financial services group China Construction Bank. It is unclear whether the $100m was a first tranche of the most recent round.
Innovation Works and Qiming Venture Partners participated in a $22m series B round in 2014, before later adding $25m in series B-plus funding. Innovation Works had already taken part in a seven-figure series A round in 2013. Legend Star, a unit of conglomerate Legend Holdings, provided an undisclosed amount of seed capital for Megvii.