Blued’s new service connects men with overseas surrogates. Will China’s government mind?
The urge to have a child hit Geng Le hard after age 35. A former cop from China’s Hebei province, he’d launched a gay dating app called Blued a couple of years earlier, in 2012, and had become something of an icon for the Chinese LGBT community. Still, he felt his life was somehow incomplete without a child and that he owed it to his parents to sire a new generation.
The next question was how to go about it. A friend had become a parent to triplets via surrogate, but that seemed sketchy because surrogacy is illegal in China. Another option was Thailand, a popular, relatively low-cost option, but by 2015 that country had banned foreign surrogacy. Geng decided on California, which offered the best legal protections for “intended parents” such as himself, excellent advanced medical care for the surrogate and the newborn, and a U.S. passport for the baby. “I thought about how the child, after it was born, might feel a lot of pressure, experience prejudice, feel insecure—‘other people have mothers, I don’t have a mother,’?” he says. “But he’d have U.S. citizenship, so I could send the kid to study overseas.”
The surrogacy process was a long drumbeat of tests, contract signings, and administrative details. When the due date came around, Geng flew to Los Angeles for the birth and held his son for the first time. “I was just a person, I was used to that,” he says. “After you become a father, you experience this love and this responsibility.” He returned home with his son, Xiao Shu, in March 2017.
He also brought back a new idea for Blued: an overseas surrogacy service for gay men. The app was doing well, on its way to building up 40 million users and more than $130 million in venture capital; he figured many of the people on Blued would be willing to pay if the system could be made easier to navigate. A few months later, he launched Bluedbaby.
The service, part of a larger strategy of diversifying into new business lines for the LGBT community, has seen modest success. Blued has its eyes on an initial public offering—ideally in the U.S., which offers a simpler IPO process and deeper capital markets. The trick for Geng will be convincing investors that he can expand his operations in a country where gay people have few legal protections and where every new service pushes the frontiers of government tolerance and social acceptance.
Not so long ago, Geng was known by his birth name, Ma Baoli, and was married to a woman. But online, he was living a parallel life as Geng Le, creator of an increasingly popular website for gay men. In 2012 local media exposed his offline identity. When his superiors told him he could stay on the police force if he shut down the site, he decided to resign. In a country where stable government jobs are highly prized, the news that he was quitting horrified his parents. Their distress was compounded when they realized he was gay.
His life transformed, Geng decided to double down on his online venture and launch a smartphone app. It was promising enough that, two years after it was released, Shunwei Capital and DCM invested a total of $30 million. At the time, Blued had fewer than 40 employees, no revenue, and no business plan, recalls David Chao, a DCM co-founder and general partner. What it did have was online traffic from a sizable community that, outside of urban centers such as Beijing and Shanghai, remained isolated and hidden. The wager was based on demographics. “We believe that all human beings are alike, so China, with 1.4 billion people, could potentially have 140 million LGBT members,” he says. “Hence you have a large enough community to support an entire economy of its own.”
Chao’s 10 percent estimate might be too high—recent studies suggest that a lower percentage of people are gay—but in a country as populous as China, the market is still well into the tens of millions. Gay consumers are also wealthier consumers, says Eric Huet, a general partner at Ventech China Ltd., which invested in Blued in 2016. He estimates that in China they have five times the spending power of straight people, because they tend to have better jobs and no children (at least for now). And then there’s the international market; Geng estimates that two-fifths of Blued’s 40 million users are overseas. The company doesn’t disclose financial figures, but he says the domestic business has been profitable for the past two years.
A few days before Chinese New Year in February, Geng leads a reporter on a tour of Blued’s headquarters in east Beijing. On the street below, workmen on rickety scaffolding are putting up signs for a Bluedbaby shop front, intended to advertise the service and give clients and staff a place to talk, away from the bustle of the main operation a floor above. The offices upstairs are adorned with rainbow flags, posters from global pride parades, and vivid murals depicting cartoon men (and a few women) wearing lab coats, hard hats, rainbow rocket packs, or mermaid fins. The current meeting room for Bluedbaby clients features a cardboard cutout of two young fathers embracing a burbling baby. Geng waves at a clutch of lawyers who’ve come to discuss IPO plans, his “Just Do It” T-shirt contrasting with their dark suits.
Blued, like other dating apps, uses geolocation to help men find dates and connect with friends. Its most popular and lucrative service allows users to broadcast videos that followers can reward with virtual gifts and money; Blued then takes a cut. The app also brings in money from traditional advertising. In addition to Bluedbaby, the company is trying to get into the pharmaceuticals market by applying for a license to market PrEP, an HIV-prevention drug regimen. Geng, who’s on PrEP himself, says it’s impossible to get the drug in most Chinese cities, and it’s very expensive when available. The eventual plan is to market and sell it directly to Blued users and to leverage its sales power to negotiate lower prices.
The company’s investors have suggested to Geng that he develop his diversification plans more before taking the company public. He says he hopes to have a $1 billion valuation by the end of the year—an ambitious target, to be sure. “The biggest difference between us and other companies listing is our ideals and beliefs,” he says. “We want to showcase a Chinese company diligently serving the LGBT community, showing that we do things with value, with philanthropy. That’s what I want to do the most.”
There’s some irony for Geng that, as he’s worked to promote Bluedbaby, he hasn’t been living with his son. Xiao Shu is in Geng’s hometown of Qinhuangdao, about 190 miles east of Beijing, being cared for by Geng’s partner and parents. He video chats with Xiao Shu frequently and visits when he can. The air quality and lifestyle are better in Qinhuangdao, Geng says, and his parents are overjoyed to have their grandson with them. He credits his son with helping mend family ties; his mother was so shocked to learn he was gay, he recalls, that she fell seriously ill.
His experience with the surrogacy came to inform Bluedbaby. Hoping to have twins, he’d chosen for the surrogate to be implanted with two embryos. When only one came to term, he regretted not working with a second surrogate, a surer but more expensive bet. Bluedbaby shepherds clients through such choices, connecting them with steps such as choosing an egg donor, finding a surrogate, signing contracts, and navigating American culture. (Among other differences, Chinese custom often dictates that pregnant mothers stay inside and eschew computers, nail polish, and sex.) Three employees in L.A. book hotels, pick up clients at the airport, and help get them around the city. Fees for Bluedbaby can run to thousands of dollars, on top of what clients pay directly to fertility clinics and egg donation and surrogacy agencies. Geng estimates he paid $200,000 to such providers for his own child.
Bluedbaby tries to eliminate some of the uncertainty inherent in the surrogacy process, he says. But there are contingencies no company can claim to prevent, such as miscarriages or stays in a neonatal intensive care unit. And for Chinese would-be parents, there’s the uncertain legal climate back home. Going abroad to have a baby by surrogate isn’t specifically banned, but China limits the amount each citizen can send offshore each year to $50,000, making transfers to providers difficult.
There’s also risk after the child is born. China maintains an arcane system of residency permits, or hukou, which determine where children can get public schooling and health care. Parents have no standard process to ensure that babies borne by overseas surrogates get these permits, raising the hugely expensive prospect that, as “foreigners” with a U.S. passport, the children will someday have to attend international schools.
Still, the profit margins and potential demand are promising, and Geng expects Bluedbaby to be making money by the second half of this year. During the interview prior to the Chinese New Year, he describes the holiday period, known as Spring Festival, as a difficult time for the LGBT community, and an illustration of the need for a service such as his. “If, like me, you’re in your 40s and you still haven’t married, you still don’t have children, how can you face your parents, how can your parents face their friends?” Geng says, describing the holiday stress the LGBT community faces. “The regret is that your life isn’t complete enough. The second regret is that you owe a debt to your parents.”
Bluedbaby wouldn’t make any of the clients it has signed up available for an interview, citing privacy concerns, but other gay men who’ve sought out international surrogates recount similar motivations. One, a 37-year-old marketing specialist for an international company who asked to be identified only by his English name, Russell, worked with a California agency called Los Angeles Surrogacy to arrange an egg donor and a surrogate for the child he’s planning to raise with his partner of five years. Family pressure, he agrees, was a major motivation. “I’m thinking maybe I can just skip the step, skip marriage, just to babies—that’s much easier for me,” he says. He’s already hatching a story about a girlfriend leaving him with the baby.
Russell is exactly the kind of client Bluedbaby is targeting, though he hadn’t heard of the new venture when he started looking around. He expresses surprise on hearing that Blued is openly promoting a surrogacy business. “That’s a very controversial thing,” he says. “Our government is very communist. You don’t know what they’re going to do in the future. Maybe one day they’ll say, ‘OK, we have to stop this. You cannot do surrogate babies in China and you cannot promote it.’ What do you do?”
It’s not illegal to be gay in China, and the days when the police would round up men who met surreptitiously in parks and charge them with “hooliganism” are mostly gone. Homosexuality was removed from an official list of mental disorders in 2001. On the other hand, China has no explicit legal protections against discrimination based on sexual orientation or gender identity. And the government has in recent years broadly suppressed civil society groups, including ones that promote gay rights, according to Darius Longarino, a senior fellow at Yale Law School’s Paul Tsai China Center.
“Advocates in China don’t think the government is targeting LGBT issues per se,” he says, “but they are wary of any form of organization where people are finding each other and trying to create movements.” A few years ago, for example, one of the biggest apps for China’s lesbian community, Rela, was shut down following an event in Shanghai aimed at raising awareness of gay rights. (It later relaunched.) There’s also been some retrenchment of rules relating to public depictions of homosexuality. In 2016 the government banned portrayals of “abnormal” sexual behavior, including homosexuality, on Chinese television. The next year a government-affiliated group issued similar rules for online content, leading some platforms to ban anything gay-themed.
Geng’s approach has been to cultivate relationships with officials and work assiduously to align Blued with public-health objectives such as HIV prevention and education. And when controversy has erupted, he’s managed to make his points to officials without drawing their ire. After the online content rules were issued, for example, he didn’t comment publicly, despite uproar in the gay community. Instead, he reached out to one of the officials responsible, who explained that he’d applied the TV rules without realizing what would happen. Geng framed it as a business issue, and suggested that next time there be opportunity for public comment. In January, when rules were issued for short-video platforms on subjects ranging from criticisms of the Communist Party to foot fetishes, they didn’t single out homosexuality. Geng considers it progress.
Connecting gay men to surrogates is an especially challenging business, he acknowledges. It’s politically complex, high-touch, and slow compared with most e-commerce. Still, it’s coming along. Blued has so far helped a few dozen clients get to the U.S., and Geng anticipates good news within weeks. One of the surrogates is due on April 9. The first Bluedbaby baby is coming soon.
by Dune Lawrence and David Ramli – New Economy Forum
Source – Bloomberg