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Nurturing Technopreneurship in China

Nurturing Technopreneurship in China. Chris Evdemon ( 易可睿 ) Partner, Innovation Works Development Fund (IWDF) Director, Finn Evdemon Capital Partners Pte. Ltd. Director, Business Angels Network South-East Asia (BANSEA) July 2012. 1. What does a technopreneur need?. Infrastructure

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Nurturing Technopreneurship in China

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  1. Nurturing Technopreneurship in China Chris Evdemon (易可睿) Partner, Innovation Works Development Fund (IWDF) Director, Finn Evdemon Capital Partners Pte. Ltd. Director, Business Angels Network South-East Asia (BANSEA) July 2012 1

  2. What does a technopreneur need? Infrastructure • Market • Talent Pool& Language of Communication • Turnkey Services • Early Stage Investors Culture • Entrepreneurship • No Fear of Failure • Innovation • Re-Circulationof Knowledge and Capital         An early stage ecosystem!

  3. Chinese Internet: largest market + low cost $250K Chinese “lean start-ups” 500M internet & 300M mobile internet users Source: iResearch

  4. Chinese Internet: a unique confluence Sequentially Simultaneously! Some characteristic facts: • E-Commerce is a $100B market where the majority of transactions are still cash-on-delivery. • It costs $1.50 to courier a standard item from Beijing to Shanghai with same day delivery. • Low-end Androiddevices have already reached the $150 price point and decreasing. • Total Android devices are estimated at 100m by the end of 2012. • Sina’sWeibowent from 0 to 250m users in less than 3 years. • Tencent’sWeixinapp went from 0 to 100m users in less than 1 year. • Internet is growing 5x faster than GDP.

  5. Chinese Internet: “an animal of its own” A market reserved for locals: • Various social phenomena: • Curious users, hungry to explore(much less goal-oriented). • Entertainment-centric. • Information-overloaded. • Users eager to have a voice for self-expression. • Exposingcorruption, enabling civilian ‘paparazzi’. Different Usage of Internet … with cut-throat competition!

  6. “The internet is like a mirror, reflecting our society. If we do not like what we see in that mirror the problem is not to fix the mirror, we have to fix society.”Vint Cerf

  7. Entrepreneurship in China • Today Chinese entrepreneurship is in transition. • Still a new concept for local graduates. • Peer and family pressure towards ‘secure’ corporate jobs. • Older generation is risk aversebut grass-roots entrepreneurship from young people is improving. • “Returnees”, with prior overseas experiences, are coming back to start their own companies. • Few home-grown role models. Gradually, a new class of serial entrepreneurs is emerging: Hungry for success. Familiar with the local market. Able to iterate quickly. Grew up with the Internet.

  8. Starting-up in China: the problems Nascent angel network. Tough to assemble a full team early-on. • Angel investors are few and immature: minimal value-add and unreasonable expectations. • No technical/ market understanding to evaluate early-stage opportunities. • Difficult to assemble a complete and complementary team. • Limited access to resources, network, and industry information. Information flow is not fluid in China. Home-grown CEOs need mentoring. Legal complexity – the “SINA” structure. • Entrepreneurs are often uni-dimensional. • Limited innovation and imagination. • Limited business, industry, and operational experience. Fear of failure. • The Chinese culture is less tolerant of failure. • Many engineers and managers are well-paid and risk-averse. • Low burn-rate allows “living dead” projects to survive for years before admitting failure.

  9. Angel VC A nascent angel community … $28B Incubators Angels $19B VC Founders ? $7B Zhou Hongyi (周鸿祎) Lei Jun (雷军) Xu Xiaoping (徐小平)

  10. … and a growing but later-stage focused VC market 2002 – 2010 Total VC Funds Raised and No. of New Funds • Already the 2ndlargest VC market in the world but still only about 1/4th of the U.S. • Chinese VC industry increasingly becoming more local, both in terms of currency as well as GPs / LPs. • Very little attention to early stage and few GPs with the right skill-set / background.

  11. IW as a case study: a unique platform to fill the gaps Innovation Works (IW) built based on: • A team with entrepreneurial mindset. • Offering fair economics. • Patience and passion to mentor. • Product and technology expertise. • Supporting professional services. Operations Investment Full-TimeProfessionals 8,000 m2a unique collocation environment in Beijing Incubation – Formative / Seed stage Investment – Angel / Series A stages

  12. IW as a case study: the process 1. Invest in key themes. 2. Help “lean startups” scale up quickly. High Growth HighValue 100% Low Capex Localizable & Differentiable Seed 40% 3. Double-down on winners. 4. Apply learnings to find more winners. Angel 25% Series A 10% Series B

  13. Concentrate investments on specific themes Monetizable O2O Service Android Ecosystem Casual + Mobile Game Ecosystem Unfilled Need In SNS Covers 210M devices in 1.5 years 100M downloads in 1.5 years 35M users in 2 years 7M users in 1 year Zynga-likeplatform 5M users in 1 year 600M app downloads in 2 years HTML5 game platform Users 3x, Revenue 10x in 3 months Alexaglobal 1500 in 6 months iPad/iPhone edutainmentfor toddlers >1M Tapas Phones + >10M apps 2009 2010 2011 Group-Buying B2C E-Commerce LBS Platform No barrier to entry, competes on cost only, lacks merchant value. High user acquisition costs.No longer “lean startup”. Not currently suitable for China.China LBS should focus on:food/fun + make/save money. Price & marketing war leading to likely bubble. Mostly in trouble; One having massive lay-offs. 6500 clones, 500 dying/month.

  14. Attract “best-of-class” Founders / CEOs Serial Entrepreneurs Experienced Executives Jack Xu CEO, Diandian Co-founder, Renren.com (multi-billion US$ IPO) Binsen Tang CEO, Xingcloud Founder, Elex Tech,4th largest social game developer in the world Ryan Xu CEO, Buding Founder & CTO, Tsinghua Tongfang Micro-electronics Lei Zhang CEO, Tapas Baidu Mobile director; 8 yrs. Huawei experience Chuan Luo CEO, AppChina CEO, MSN ChinaCEO, Myspace ChinaCOO, China Mobile 139 Jeffrey Ma CEO, Nevel VP of R&D, Rising 10+ experience in security Junyu Wang COO, Wandoujia Senior designer, Google China Mily You President, Tapas PM Director, Tencent Mobile Ye Wang CEO, Doodle Mobile Special Assistant to CEO, Google China Zhenyang Zhan CEO, Xinyou COO, Kingsoft Games Limin Zhou CEO, Wandoujia Chief Architect, Baidu Fei Zhao Co-founder, Leiyoo Engineering Director, Renren Hongfei Tian CEO, LOOA Oracle USA Jing Jian CEO Co-founder, Lianzhong Games Fan Jiang Founder, Umeng Google China He Huang Co-founder, Leiyoo PM Director, Tencent Erik Huang COO, Zhihu Sr. Editor, Sohu Jun Xiong CEO, Tongbu CTO, NetDragon Innovation Works Confidential

  15. Help start-ups scale quickly with services 4 1 2 3 The IW company-building process Aiming to save >50% time spent by entrepreneurs on these areas. Recruiting Internet headhunter Resume database Campus recruiting EIR program PR/Marketing Grants & subsidies PR events Product promotion Speaking slots Mentoring Mentoring sessions Executive coaching Team building X-company clubs Legal / GR Offshore set-up Share issuance Term sheets Local licenses Tech / UX System reviews Code reviews Design reviews Introductions Finance Payroll Taxes Budget Rent

  16. Recruiting, mentoring, and “everyday” DD Recruiting at Top Schools 500,000 Resume Database Speech: 8000 people 1:1 Mentoring and “everyday” DD Weekly Distinguished Guest Mentors Written exam: 1000 people Jerry Yang, Yahoo Interview: 100 people Gary Wang, Tudou Huang Brothers, Guitar Hero Welcome! Offer: 30 people Bill Buxton, Microsoft Ray Ozzie, Microsoft Steve Chen, Youtube

  17. IW results in 2.5 years: 13 Series A & 2 Exits 13 Series A delivering 20x step-up from seed Ongoing (Seed + Pre-Series A) 28 Partnering with top VCs in China: 47 Series A 13 Closed M&A 4 2 Two M&A Exits = 17X return in ~ 1 year

  18. Amazing growth stories 40m Users in <2 Years 210m Devices covered in <2 years 90m Users in 1.5 Years

  19. Contact me at:chris@chuangxin.com You can also find me at: http://twitter.com/evdemon http://www.weibo.com/evdemon

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