Why We're Betting on Chinese E-Commerce
TL;DR
Through Qupital, we found merchants doing $50M+ ARR paying 13-15% interest—despite 0.1% default rates. Massive mismatch. Royalty Tokens give merchants 10% cost of capital (better than 13-15%), no equity dilution, and better valuations than HK IPOs. Investors get institutional-grade yields with daily liquidity that traditional markets can't offer.
How We Found the Mismatch
Two years ago, we met a Hong Kong-based lender serving South China merchants selling on Amazon (plus some eBay/Shopify).
Their clients were doing:
- $50M+ ARR with 30-100% YoY growth
- 10-20% net margins (healthy, sustainable businesses)
- Paying 13-15% interest rates
Here's what caught our attention: Default rate is 0.1%.
Think about that. These merchants are paying 13-15% for capital, but only 0.1% of them default. Traditional lenders see 2-5% default rates at 8-12% interest.
There's a massive mismatch between cost of capital and quality of cashflow.
Why This Gap Exists
These South China merchants have nowhere else to go:
- Banks: Too slow, and don't know how to read platform API data for underwriting—despite sales data being available real-time
- Equity raises: Uninteresting businesses with no clear exit path. Mature, profitable operations don't attract equity investors due to illiquidity
As a result, merchants resort to lenders who understand their businesses, but pay 13-15% interest rates due to lack of options and limited supply of capital.
Why Royalty Tokens
Here's the comparison:
| Option | Cost to Merchant | Equity Dilution | Setup Cost | Time to Capital |
|---|---|---|---|---|
| E-commerce Lending | 13-15% interest | None | Low | Fast |
| HK IPO | 6-7x PE valuation | 20-30% | $2M+ | 1-2 years |
| Royalty Tokens | 10% revenue (~10x pseudo-PE) | None | None | 1-2 months |
Why Royalty Tokens bridge the gap:
We created a fast-track for merchants to raise pseudo-equity capital—1-2 months vs 1-2 years for IPO, at a fraction of the cost. But unlike equity, merchants retain debt-like cashflow commitments.
This creates perpetual incentive alignment:
- Merchants: Get liquid tokens (pseudo-equity) but keep 100% ownership
- Investors: Invest in predictable, growing cashflow that's inflation-resistant
- Token value grows with merchant revenue—when merchants win, investors win
Our commit-to-perform tokenomics ensures no dumping. Most tokens are locked to merchants and only unlock when they hit revenue targets. No time-based unlocks. No rug pulls.
Market validation exceeded our expectations:
- Found primary market buyers willing to underwrite valuations despite being a novel concept
- Every merchant we spoke to wanted their own token—better economics than lending, better valuations than HK IPO
- E-commerce lenders wanted to participate—solves their churning client problem (successful merchants leave for lower APY, but Royalty Tokens are permanent structures)
- A tool that unites all incentives—merchants get capital, investors get yield, lenders retains best clients
And only with Berachain's PoL can we build deep liquidity pools easily. BGT rewards incentivize LPs to provide liquidity, solving the illiquidity problem that kills traditional equity raises for these merchants.
We found the arbitrage: merchants paying 13-15% for capital with 0.1% default rates, while investors can't access these returns. Royalty Tokens bridge the gap—combining China's manufacturing excellence with Western capital markets.
Now that you understand why Chinese e-commerce merchants are compelling, the question becomes: how big is this opportunity? Read our deep dive: The $8 Trillion Opportunity No One's Talking About
Explore available Royalty Tokens and start earning.