Ted, Partner of KPCB: Four Models of American Venture Capital Entering China
Ted, Partner of KPCB: Four Models of American Venture Capital Entering China
Ted, Partner of KPCB: Four Models of American Venture Capital Entering China
KPCB has been in the venture capital industry for 35 years. The company's main investment targets are those start-ups, and the areas of most interest are information technology (IT) and IT infrastructure. One of our plans a year ago was to enter the international market. This is a brand-new challenge. To be honest, 90% of our investment is in companies within 60 square kilometers of Fiona Fang. Our previous "foreign investment" was actually Salt Lake City, Utah.
In the past, most venture capitalists in China came from the financial industry, while venture capitalists in the United States all had business background. For example, it took me ten years to set up a software company before I started venture capital. China's venture capital is concentrated in IPO (initial public offering)-I think this idea is very bad. In the venture capital industry, we prefer to think of ourselves as the founders of the company. The purpose of our trip is to set up a company. IPO is only a link in this process, and it is one of the ways for us to get the return on investment, but it is not the end of the game.
Since 2000, there are 39 IPOs of technology companies in Asia, of which 25 are equal to or lower than their inquiry. This shows that people don't care about the future, that is, the development of the company, and the capital market will eventually realize this, and there will be a confrontational situation. The blind pursuit of listing also illustrates other problems: existing talents can't digest investment, and management talents are scarce ... There are really many smart people there, but their work efficiency is really not high, and the responsibility system has not been established.
In addition, the enforcement of China's contract law is not enough. This is another reason why we don't do a lot of venture capital related to intellectual property rights in China. But the government is also aware of this problem, and they don't want their intellectual property rights to be infringed.
In a word, investing in China is a bit beating drums, because you don't know how things will develop, and you don't know "what attitude the government will take tomorrow". At present, the government is open to all investment, but if they suddenly don't welcome investment, the situation may change.
The "chain store" model can be implemented for a long time
The first mode for American venture capital companies to enter the China market is the "leaderless" mode. This model was chosen by venture capitalists when they first entered the China market. They will "fly to China in a hurry and then leave in a hurry". It's almost like sitting on the board of a China company that we invest in: I live in the United States and come to China twice a year. We agree to keep in touch at any time by telephone and email. When companies make selective investments, venture capitalists adopt this "leaderless" model.
The second mode is "baked eel roll". American venture capital companies will hire many inexperienced or inexperienced talents in China, but they will not really be empowered. Then one of the central figures is a new American. They make decisions, but they have no local operation experience and don't know what factors need to be considered in local investment decisions.
Next is the "Beijing Roast Duck" mode. "Beijing Roast Duck" means investing in local investment funds: "We will invest directly; We have invested $6.5438 billion in their fund, so that we can see what they have invested with the money and learn some experience. " But this road is not feasible. Maybe you can see what investments they made, but you can't learn anything. You just have a superficial understanding of these people's investments.
The last mode is the persistent model. I call it "chain store" mode. You can find professional managers and venture capitalists in the local area, and then pay. They will become part of your company, or they can become general partners. But they are all local talents in China. They are all venture capitalists with practical experience. They are qualified enough to make their own decisions. You don't need to control them remotely in America. I think this is the only long-term venture capital model in China.
In India, our investment standard is selective investment. That is, the "leaderless" model is adopted. However, we will also look for some relatively junior talents in the local area, which belongs to the above-mentioned "leaderless and baked eel rolls" model.
We only made two investments in China. One is passive, that is, we did not join the board of directors, and the other is to join the board as a director. I spent most of my time looking for the CEO. I have to trust this man. You know, there are many things like making false accounts. I must convince myself that even if I am five or six thousand miles away, I can believe that this management team is doing the right thing, the right and legal thing.