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Nurturing Technopreneurship Nurturing Technopreneurship in in ChinaChina

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

What does a technopreneur need?

Infrastructure•Market

•Talent Pool& Language of Communication

•Turnkey Services

•Early Stage Investors

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Culture•Entrepreneurship

•No Fear of Failure

•Innovation

•Re-Circulationof Knowledge and Capital

An early stage ecosystem!

Chinese Internet: largest market + low cost

Source: iResearch

500M internet & 300M mobile internet users

$250K Chinese “lean start-ups”

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Chinese Internet: a unique confluence

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Simultaneously!Sequentially

Some characteristic facts:

Different Usage of Internet

Chinese Internet: “an animal of its own”

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.•Exposing corruption, enabling civilian ‘paparazzi’.

A market reserved for locals:

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… with cut-throat competition!

“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

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 averse but 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:

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Hungry for success.

Familiar with the local market.

Able to iterate quickly.

Grew up with the Internet.

Starting-up in China: the problems Nascent angel network.

• Angel investors are few and immature: minimal value-add and unreasonable expectations.

• No technical/ market understanding to evaluate early-stage opportunities.

Home-grown CEOs need mentoring.

• 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.

Legal complexity – the “SINA” structure.

• Difficult to assemble a complete and complementary team.

• Limited access to resources, network, and industry information. Information flow is not fluid in China.

Tough to assemble a full team early-on.

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A nascent angel community …

Lei Jun (雷军 )

Incubators

VC

Founders

Angels

Zhou Hongyi (周鸿祎 )

Angel VC

?

$28B$28B$19B$19B

$7B$7B

Xu Xiaoping (徐小平 )

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… and a growing but later-stage focused VC market2002 – 2010 Total VC Funds Raised and No. of New Funds

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• Already the 2nd largest 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.

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.11

Investment – Angel / Series A stagesIncubation – Formative / Seed stage

Operations Investment Full-TimeProfessionals

8,000 m2 a unique collocation environment in Beijing

IW as a case study: the process

1. Invest in key themes.

3. Double-down on winners.

HighGrowth

HighValue

Low Capex Localizable &Differentiable

100%

10%

25%

40%

Seed

Angel

Series B

Series A

2. Help “lean startups” scale up quickly.

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4. Apply learnings to find more winners.

Concentrate investments on specific themes

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Group-Buying

2009

Covers 210M devicesin 1.5 years

>1M Tapas Phones + >10M apps

600M app downloads in 2 years

35M users in 2 years5M users in 1 year

Alexa global 1500 in 6 months

100M downloads in 1.5 years

7M users in 1 year

Users 3x, Revenue 10x in 3 months

Zynga-likeplatform

HTML5 game platform

No barrier to entry, competes on cost only, lacks merchant value.

LBS PlatformB2C E-Commerce

iPad/iPhone edutainmentfor toddlers

Not currently suitable for China.China LBS should focus on:food/fun + make/save money.

Mostly in trouble; One having massive lay-offs.

Price & marketing war leading to likely bubble.6500 clones, 500 dying/month.

High user acquisition costs.No longer “lean startup”.

20112010

Android Ecosystem Casual + Mobile Game Ecosystem

Unfilled Need In SNS

MonetizableO2O Service

Attract “best-of-class” Founders / CEOs

He HuangCo-founder, LeiyooPM Director, Tencent

Jack XuCEO, DiandianCo-founder, Renren.com (multi-billion US$ IPO)

Binsen TangCEO, XingcloudFounder, Elex Tech,4th largest social game developer in the world

Ye WangCEO, Doodle MobileSpecial Assistant to CEO, Google China

Ryan XuCEO, BudingFounder & CTO, Tsinghua Tongfang Micro-electronics

Lei ZhangCEO, TapasBaidu Mobile director; 8 yrs. Huawei experience

Erik HuangCOO, ZhihuSr. Editor, Sohu

Jeffrey MaCEO, NevelVP of R&D, Rising10+ experience in security

Chuan LuoCEO, AppChinaCEO, MSN ChinaCEO, Myspace ChinaCOO, China Mobile 139

Serial Entrepreneurs Experienced Executives

Junyu WangCOO, WandoujiaSenior designer, Google ChinaLimin ZhouCEO, WandoujiaChief Architect, Baidu

Fan JiangFounder, UmengGoogle China

Hongfei TianCEO, LOOAOracle USA

Mily YouPresident, TapasPM Director, Tencent MobileFei ZhaoCo-founder, LeiyooEngineering Director, Renren

Zhenyang ZhanCEO, XinyouCOO, Kingsoft GamesJing JianCEOCo-founder, Lianzhong GamesJun XiongCEO, TongbuCTO, NetDragon

Innovation Works Confidential 14

Help start-ups scale quickly with services

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The IW company-building processThe IW company-building process

11 22 33 44

Legal / GR

Offshore set-up

Share issuance

Term sheets

Local licenses

Finance

Payroll

Taxes

Budget

Rent

Tech / UX

System reviews

Code reviews

Design reviews

Introductions

Mentoring

Mentoring sessions

Executive coaching

Team building

X-company clubs

PR/Marketing

Grants & subsidies

PR events

Product promotion

Speaking slots

Recruiting

Internet headhunter

Resume database

Campus recruiting

EIR program

Aiming to save >50% time spent by entrepreneurs on these areas.

Recruiting, mentoring, and “everyday” DD

Speech: 8000 people

Written exam: 1000 people

Interview: 100 people

Offer: 30 people

Welcome!

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Recruiting at Top Schools

1:1 Mentoring and “everyday”

DD

Weekly Distinguished Guest Mentors

Jerry Yang, Yahoo

Ray Ozzie, Microsoft

Huang Brothers, Guitar Hero

Steve Chen, Youtube

Bill Buxton, Microsoft

Gary Wang, Tudou

500,000Resume Database

IW results in 2.5 years: 13 Series A & 2 Exits

Partnering with top VCs in China:

Two M&A Exits = 17X return in ~ 1 year

47 Series A

13Closed

4 M&A

2

Ongoing (Seed + Pre-Series A)28

13 Series A delivering 20x step-up from seed

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40m Users in <2 Years

90m Users in 1.5 Years

210m Devices covered in <2 years

Amazing growth stories

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Contact me at:

chris@chuangxin.com

You can also find me at:

http://twitter.com/evdemon http://www.weibo.com/evdemon