China Innovation: Disruption, Not Duplication
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The document discusses the vibrant innovation ecosystem in China, highlighting the role of cross-border investment and the emergence of local super angels and funds in driving technological advancements. It covers various sectors like technology, healthcare, and internet companies, detailing how universities and governments are fostering collaboration and support for startups. Key players, such as Tencent and Xiaomi, are noted for their significant investments in innovation and their roles in transforming local industries.
China Innovation: Disruption, Not Duplication
- 1. China Innovation: Disruption, not Duplication Bruno Bensaid 15 July 2015
- 2. 布鲁诺 (Bu Lu Nuo) INSEAD/East China Normal U./ Aerospace Engineer + 15 Years Investment banker, former VC Angel Investor Social Entrepreneur & Community builder Mentor to incubators & Startups Public Speaker
- 3. Pioneering investment banking advisory firm focusing on cross-border M&A and capital raising transactions between China/Asia & Europe. Shanghaivest was set up in 2010 by veterans from the M&A and technology investment industries. Shanghaivest has presence in Shanghai, Paris and San Francisco Building cross-border synergies in : 1. Technology and advanced manufacturing (Internet and telecom, automotive, aeronautics, electronics, clean energy, etc.) 2. Cosmetics, Luxury, Retail 3. Healthcare Clients include SMEs, funds looking for cross-border exit or expansions strategies (Europe -> China, China -> Europe, Europe -> US, etc.) Shanghaivest at a glance
- 4. R&D Center & Assets In the Acquisition of Some Achievements in the Mobile Industry In Raising Series A from
- 5. Launched in 2006, MobileMonday (Beijing + Shanghai) is a pioneer mobile networking community in China. Hosting regular events with 100+ guests. 30+ events since 2006 Organizer of China-wide Competition during Mobile World Congress Shanghai since 2011 Partner of Choice for: + The Largest independent group of angel investors in Mainland China, now expanded into Hong Kong and Singapore Over 100 angels across the region 30+ portfolio co., in Asia and US Syndicating deals up to $1 Mil Average size deals: $150K-200K Partner of Choice for:
- 6. Fueling Innovation: a vibrant investment community 1/3 Home grown super angels and funds have taken center stage in China’s tech scene and drive innovation Millionaire/billionaire angels: e.g. New Oriental’s co-founders Xu Xiaoping and Wang Jiang created their own funds (Zhen Fund), former Kingsoft CEO Lei Jun launched superstar startups, like UCWeb, Joyo (purchased by Amazon), YY, Xiaomi etc Foreign-led angel groups, funds or accelerators are sprouting, and bringing together foreign and local entrepreneurs on their quests of the local digital market. On the hardware side, Shenzhen-based accelerator HAX offers access to widest hardware ecosystem available o Angelvest, a 100-strong angel investor network, originating from Shanghai, has invested in over 30 companies o Chinaccelerator (software accelerator in Shanghai) and HAX (hardware accelerator in Shenzhen) backed by SOS Ventures.
- 7. Local corporate superstar CEOs have also had their (successful) way at joining the innovation investment bandwagon and used their celebrity to raise capital and attract top quality project deal flow and employees: o Innovation Works (IW): created in 2009 by Ex-Google China CEO, Canadian-Taiwanese Lee Kai Fu (50+ million Weibo followers). IW started by incubating handpicked projects, then raised several funds to support the growth of these “gems” (e.g. Wandoujia, China’s largest app store, raised $120 Mil). Lee Kai Fu raised over $385 Mil in 2 funds o Raymond Yang, ex-CEO of Linktone, the first Chinese internet company to IPO in the US, later went on to found West Summit Capital, a $400 Mil US-China cross-border fund o Former Alibaba CEO, David Wei, set up Vision Knight Capital in 2012. its second fund closed $550 million fundraising within four months only Fueling Innovation: a vibrant investment community 2/3
- 8. Internet companies setting up corporate VC funds are challenging ecosystems and pushing innovation forward: o Tencent earmarked $1.5 Bil to small and large scale investments in China and overseas since 2011… o Qunar.com (online travel company acquired by Baidu in 2011, and IPO in 2014) launched a U$160M incubator fund to help entrepreneurs in the online travel space in 2014 o Xiaomi is heavily investing in content ($290 Mil co-investment in iQiyi), wearables ($35 Mil injected in Huami) or even IP / patents ($35 Mil co- investment with Kingsoft and others to create a pure IP fund). o Qihoo 360 is to establish a $60M Internet-Of-Things Venture Fund and is also becoming a limited partner in $197 Mil Israel-based Carmel Ventures, along with Baidu and Ping An Insurance…. Fueling Innovation: a vibrant investment community 3/3
- 9. Top local universities and governments are creating innovative cooperation models, including venture funding: o In 2001, Tsinghua University set up Tsinghua Science Park Business Incubator, Tsinghua Science Park Technology Asset Management, and Tuspark Ventures (raised 3 funds since 2006) o Tsinghua University’s x-lab, an accelerator program launched in April 2013, with 80+ teams in the program at end of 2013, is aiming to expand from 500m² to 5,000m² within 3 years! o Virtue Inno Valley, a Tsinghua-affiliated (x-lab alike) accelerator Privately or publicly backed co-working spaces: o Government-backed Z-innoway is a CNY 200 million, 45,000m² project. It covers 339 startups. 123 have raised funding o 3W is one of the accelerators operating in Z-innoway o 36KR, Cheku Café, Moment Café, Bingo Café etc, are among the cafés/ co-working space / media outlets / accelerators Fueling Innovation: Government Fully Playing Their Role
- 10. 3.5 4.0 5.0 3.0 6.7 7.3 5.0 4.2 13.6 2006 2007 2008 2009 2010 2011 2012 2013 2014 China VC investments (Bil USD) Source: Dow Jones VentureSource, startintx. Tribute: Nicolas Du Cray, Iris Capital Large VC rounds to finance Chinese unicorns (麒麟 Qilin) Marketplace, Mobile and E-commerce are Key Topics
- 11. 520 574 625 672 704 500 550 600 650 700 750 2014 2015F 2016F 2017F 2018F smartphone users (millions) A Key Innovation Driver: Mobile-First Market & large Smartphone adoption (700 Mil by 2018, 50% of population) Source: eMarketer. Tribute: Nicolas Du Cray, Iris Capital
- 12. China’s Early King Innovator: Tencent’s Wechat
- 13. Wechat, initially a mobile messaging platform, now ubiquitous (PC, Mac + Android/iOS/WinOS)
- 14. True innovation -> Versatility Providing voice, video, streaming, walkie-talkie, emoticons, radar, group chats, web chat, broadcast..) + Becoming a platform (from ordering food, taxi, services, m- commerce* *Full platform only available in China for now
- 15. Clone Wars Lead to Innovation: Uber competitor, Didi-Kuaidi integrating competing payment platforms & integrating with social networking platform Wechat, launching carpooling app, raising Bil $ Source:Technode
- 16. Incorporates data from Alibaba’s credit rating system Sesame Credit to better secure the safety of users + provides more personal experience to landlords and tenants China’s Airbnb Clone Xiaozhu Secures $60M USD Series C Funding -> Building trust into the system through Alibaba Partnership Source:Technode
- 17. Chinese Offline Payments Giant Lakala Taps $240M USD In New Financing -> From hardware innovator to a full-fledged diversified financial services company Source:Technode
- 18. 78M MAU, $26M 15Q1 revenue, incl. $13M paid membership A Typical China Innovation Story -> Diversification-driven MOMO: initially a hook-up app, now lifestyle, youth-oriented social network with people nearby/location-based/communities… Tribute: Nicolas Du Cray, Iris Capital
- 19. Tribute: Nicolas Du Cray, Iris Capital Everybody is a delivery man, on-demand “go fetch me stuff” service Chinese Entrepreneurs “Ren Ren Kuai Di 人人快递” inventing “Uber for Food Delivery”
- 20. “Xiaomi is a software and ecommerce company that just happens to manufacture hardware” Hugo Barra, VP International, Xiaomi
- 21. Xiaomi innovative model -> Creating Buzz and Going Online (almost) Exclusively
- 22. Xiaomi innovative model -> Commoditizing What Can Be Source: Benjamin Joffe, Partner, HAX Hardware Accelerator
- 23. Xiaomi innovative model -> One-Stop Shop, selling all kinds of devices, accessories
- 24. Xiaomi innovative model -> Becoming Content Publisher, Selling e-books etc.
- 25. Xiaomi innovative model -> Hooked up customers also buying mobile phone skins!
- 26. Innovation through M&A and Vertical Integration -> LeTV (online Streaming) Becoming 2nd Largest Shareholder of Mobile Phone OEM CoolPad ($350Mil investment)
- 27. Drone Developer DJI Pockets US$75M from Accel Partners and sets investment vehicle to develop its ecosystem
- 28. Twitter | @brubrushanghai WeChat| brubrushanghai Email | bensaid@fastmail.fm