Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
VC William Bao Bean, managing director of Orbit Startups explains how Asian companies can learn from the example from Chinese companies. Not by simply copying the China models, but by learning the lessons and applying them in a new situation, he tells the Future Investment Initiative Hong Kong.
VC William Bao Bean, managing director of Orbit startups, explains how tech transfers can limit – for example – carbon emissions in food production at COMEUP 2023. His 20-year experience in China helps other Asian startups to avoid mistakes China has made.
Tech investor William Bao Bean, managing director of Orbit startups, shares the major stories he learned from the tech revolution in China, at a Pakistan conference. “The government chooses to go out of the way of change,” he tells his audience. Why startups do not need to be squeezed between China and the US.
Leading VC William Bao Bean, partner at SOSV and managing director of Orbit Startups explains how he started to develop startups in Pakistan, using his Shanghai experience as a stepping stone.
Serial startup investor William Bao Bean, general partner of SOSV in Shanghai, started in 2021 to invest in his first startup ventures in Africa. In Disrupt-Africa he explains how his experience in China helps him to make his first investments in Africa.
Disrupt-Africa:
Heading up SOSV’s efforts in Africa is general partner William Bao Bean, who has previous VC experience with SingTel Innov8 Ventures and Softbank China & India Holdings, having been a research analyst previously. He says the firm backed its first eight African startups in 2021, including MarketForce and Treepz, and makes comparisons between what is happening on the continent now and what he has seen in Asia over the last few years.
“Africa shares a lot of similarities with other mobile-first markets such as India, Southeast Asia and China, where I have been investing for two decades – 300 million in Africa will get online for the first time using a smartphone, having leapfrogged the use of PCs entirely,” he said.
“The availability of low-cost smartphones, easy access to the internet, and ubiquitous digital payments make Africa a fertile ground for breakthrough technology startups.”
That said, customer acquisition is still a pain for early-stage startups, he said.
“Under the stranglehold of Facebook and Google, companies are forced to spend venture capital money on ads, effectively selling equity to acquire customers,” Bean said.
To address this, he founded SOSV MOX, an SOSV programme that invests in mobile-first, mobile-only startups, and helps them acquire users through partnership models instead of advertising.
“We have over 100 million daily active users in our internet portfolio as of August 2021. Any African tech startup backed by SOSV can take advantage of this ecosystem,” said Bean.
SOSV’s approach may be quite different, but it seems to work. Among its investments globally are crypto-product trading platform BitMEX, the first unicorn to go through an accelerator programme in Asia, and AI English pronunciation assistant ELSA, the first investment in Asia by Google’s AI venture arm Gradient Ventures. Its limited partners are corporates, financial institutions, family offices, and high-net worth individuals from around the world, including Credit Suisse, Tiedemann Advisors, Davy Group, Nan Fung Group, ZX Ventures, HP Ventures and Sumitomo Corp. Its fourth fund raised a whopping US$277 million.
“We’re interested in startups in all stages, focusing on software internet companies that are providing scalable solutions for e-commerce, education, fintech, SaaS and media,” said Bean.
“We’re committed to leveling the field for the best teams around the world: we are bullish on Southeast Asia, South Asia, MENA-Pakistan, Eastern Europe and Africa.”
Marketing guru Ashley Dudarenok explains what basic requirements you need to set up your business in China. “You need loads of time and money to get started,” she says at her vlog.
VC William Bao Bean, a general partner at SOSV (the most active global venture capital firm) explains how his global fund helps startups grow in Asia, with much attention to the pros and cons of working from Taiwan.
The US used to be a benchmark for many innovative companies and startups, but China is now leading the way, says VC William Bao Bean with a major portfolio in China, Asia in a webinar of NYU SPS Integrated Marketing and Communications. He explains what lessons can be learned from China.
Shanghai-based VC William Bao Bean explains that entering a new market means leaving behind the experience to collected in the past, leave behind your cultural baggage, and learn from your mistakes. William Bao Bean is a General Partner at SOSV – The Accelerator VC – the #2 most active angel and seed-stage investors in the world 2019 with US$700m under management.
William Bao Bean, Shanghai-based managing director of startup accelerator Chinaaccelerator, discusses his investment strategy as the world is in disarray because of the coronavirus, at Focus Wire. “When things are bad, no one really does anything, and when things are hot, everybody's investing,” Bean says.
Focus Wire:
William Bao Bean, a general partner at SOSV and the managing director of startup accelerator Chinaaccelerator, says that venture capital investors “often have a herd mentality.”
“When things are bad, no one really does anything, and when things are hot, everybody's investing,” Bao Bean says.
“The best time to generally invest is when things are bad and the best time to exit is when things are hot.”
Although a global economic slowdown has an obvious impact on public equity investors, Bao Bean insists that earlier-stage investors are shielded due to a longer investment cycle over several years.
“The first thing that happens during any sort of a crisis or economic downturn is things just slow down measurably and significantly,” he says.
After years of growth and immense venture capital funding, China has experienced a funding slowdown - known as a “capital winter” - since late-2018.
Bao Bean attributes this slowdown to the closures of underperforming venture capital funds and a drop in funding from the Chinese government.
Despite a surge of global venture capital deals in 2019, Bao Bean says that funding has started to dip and attributes some of that to activity around the SoftBank Vision Fund.
“The SoftBank Vision Fund deployed a huge amount of capital very rapidly and that threw off the numbers in terms of total investment because they deployed $100 billion over a couple of years,” says Bao Bean.
“We also had some mega-rounds in 2018. That throws off the numbers.”
“The biggest thing to happen is the whole model of using money as a weapon and buying growth and mega-rounds and negative unit economics where you spend a dollar to make 50 cents - that is out the window.
“Now it's prove your model first, then raise money.”
The Indian startup TryNdBuy has been adopted by the Chinaccelerator, and Shanghai-based managing director William Bao Bean explains why the virtual fitting room has a good chance to succeed in China, he tells at Livemint. Up to now, every virtual fitting room including Amazon and Microsoft, makes the consumer look bad, he explains.
Livemint:
Chinaccelerator MD William Bao Bean explains why he took a chance on the Indian entrepreneur.
“Every virtual fitting room I’ve ever seen makes the consumer look bad. Amazon and Microsoft make the person look like a plastic dummy. The consumer is not going to buy something if she looks bad in it," he says.
He says TryNDBuy’s computer vision solution does a better job of making a 3D virtual avatar that won’t make a consumer cringe while getting a sense of how she will look in a dress. Chinaccelerator is helping the startup with the tough act of business development outside India.
“It’s a B2B (business-to-business) sale, step by step. There’s interest from brands in China and then we just have to navigate Alibaba, which is never an easy thing," he says.
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Getting customers in the China market was already expensive and the 2019 capital winter makes live for startups even harder, says William Bao Bean, managing director of the Shanghai-based SOSV. That might be bad news initially, but makes them more competitive in the longer run, he says according to Pymnts, quoting the Financial Times.
Pymnts:
A foreign investment law passed in March by Beijing leveled the competitive turf, although roughly 50 percent of the 20 priciest “new economy” startup busts in the past 20 years happened in 2019.
Startups are expected to lose money initially, but competition and knock-offs in China often trigger aggressive spending to gain market share.
Customer acquisition expenses in the country are among the highest in the world. William Bao Bean, a partner at SOSV Investments in Shanghai, calculated that app downloads cost an estimated $10 to $100 each.
When companies cannot pay enough, they often give their key people fancy titles, like Chief Marketing Officer (CMO). But startup guru William Bao Bean, the managing director of Shanghai-based startup accelerator Chinaccelerator, warns against titles with a 'C' in it, unless it is your CEO, especially when you are a startup, he tells Phocuswire.
Phocuswire:
When you have a startup, you don’t put the word 'C' in too many titles, except for CEO,” says Bao Bean. “The skills required in the early days are different from the skills required later, and it's often hard to demote people.”
Bao Bean says that startups should avoid bringing on a CMO because “a startup by definition is looking for scalability and repeatability and there is no point in selling something that is not scalable and repeatable. “Startups shouldn’t hire a CMO until they have something in the market, and you don’t have something in the market until its scalable and repeatable.” Bao Bean says that companies with a CMO generally have “product, market and fit,” but an early-stage startup likely hasn’t achieved this yet because it doesn't have a product that people want. “A startup is like a party where once you get into the front door, there's no one there. A customer journey needs to be in place.”... Instead of hiring a CMO, Bao Bean recommends filling a head of growth role first.
“You need a head of growth from day one,” he says. “You never move from startup to company without somebody who's using data to drive a startup.”
Eventually, once "product, market and fit" is achieved, then it is time to split marketing responsibilities away from the head of growth and to hire someone to fill up the funnel.
China's economic slowdown has mainly hit local VC's, says William Bao Bean, managing director of the Chinaccelerator, at OZY.com. A government crackdown on risky investments and the fallout from the trade war is hitting the industry after the 2017-2018 boom.
OZY.com:
Local venture capital firms that raise money and invest in renminbi have been hit hardest, says William Bao Bean, a partner at SOSV Investments in Shanghai.
“Almost all those VCs didn’t get a return … and a lot of funds have gone out of business,” Bean says, noting that while dollar investment from traditional VC funds has cooled, it hasn’t been hit to the same extent...
Hurun Report noted that even though the pace of creation of unicorns has slowed, China still leads the world, with 206 unicorns to the United States’ 203.
But the Chinese economy is now growing at its slowest pace in three decades, a worrisome trend that is twinned with a rocky stock market and concerns about the sky-high valuations for startups. “It’s another Chinese winter, since basically last September everyone on the local side, investing renminbi has been on vacation,” says Bean.
Workers in China's tech industry have been fighting the long work hours they make, the 996 - nine to nine working, six days a week. It's difficult, admits William Bao Bean, managing director of startup accelerators Chinaccelerator and MOX, in the Asia Nikkei. The art for leaders at startups is motivating their teams.
William Bao Bean
As Alibaba Chairman Jack Ma put it: "If you find a job you like, the 996 problem does not exist. If you are not passionate about it, every minute of going to work is torture."
For new entrepreneurs to compete in China's talent marketplace, they must appeal to prospective recruits' desire to make a difference and be part of something great. They must sell this vision because they cannot match the high salaries of Alibaba or Tencent. The stock options they can offer are too uncertain to ever come into value. If there is a lack of both money and vision, the startup bosses are stuck.
Members of startup work teams are more like co-founders than employees in the traditional sense of the word and this phenomenon transcends age. College dropouts burning the midnight oil are common but most companies are led by entrepreneurs in their 30s or even 40s who lack the child-care worries common in the West because their kids are often looked after by up to four grandparents.
The 996 regime is also not limited to Chinese startups. International technology companies, both in their operations within China and in their home markets, drive hard too. The free food provided at Google company cafeterias is not just a perk but a tool to help keep employees in the office longer.
Chinese tech leaders must build an environment where everyone feels they are part of a team, not just an employee, where they are empowered to make a difference, and where they are persuaded to believe in the company's vision. Tech chiefs cannot simply demand long hours of staff and expect to retain talent in this very competitive labor market. People who see themselves as busy changing the world for the better don't tend to count the hours they spend doing it.
The main reason for the current tech winter in China was the flush of money that has hit the industry, especially by the government, says VC veteran William Bao Beanto the BBC. A re-structuring of China's start-ups' scene is long overdue and that is good news for investors, he argues.
The BBC:
"What drove things completely insane was too much money," argues William Bao Bean, managing director of Chinaccelerator, a Shanghai-based start-up accelerator.
There was a "real push for economic growth from the government" and big funding from state coffers, he says.
This has levelled off.
"Before, you could get $3m with two people knocking and a smile. Now you can get $3m with two people knocking and a smile and six weeks of meetings," he says.
Dockless bike sharing rivals Mobike and Ofo were pedalling off with investors' money last year in a bitter duel for market share.
That sector's now hit the brakes...
But there are advantages to China's tech bubble deflating.
For investors, things are "actually much better in a downturn than a hot period, so good companies have a chance to shine," says Mr Bean.
When everybody can get money, "it makes it difficult for the best to stand out", he says.
Traditionally China's youngsters wanted a job with the government, but Alibaba's Jack Ma changed that perspective and starting a startup became the choice of many, says William Bao Bean, a Shanghai-based partner at venture capital firm SOS, one of the largest VC's, to Bloomberg. How Jack Ma changed China.
Bloomberg:
“The China startup scene wouldn’t exist in the same way without Jack Ma,” said William Bao Bean, a Shanghai-based partner at venture capital firm SOSV. “The celebrity of Jack Ma and the success of Alibaba made startups an acceptable career choice, which has fueled one of the biggest technology markets in the world."
Ma wasn’t just successful. He broke the mold for China’s business leaders, typically faceless chiefs running mammoth state-owned enterprises like PetroChina and China Mobile. He dressed up like Michael Jackson and tried the moon walk. He wore a three-foot feather Mohawk and makeup to perform at a company party. And he dispensed Yoda-like axioms that were collected in dozens of management books.
"To many he’s the face of China’s internet -- no one really knows what Pony Ma looks like," said Bean, referring to the CEO of Tencent Holdings Ltd.
A massive inflow of capital for startups has a negative influence on the market in China, says William Bao Bean, managing director of the Chinaccelarator in US News. VC's are under pressure to deliver to their shareholders, and that makes them less picking in selecting startups.
US News:
"You have like $70 (billion)-$80 billion a year going into venture (capital), but you are getting funded not just the good companies but also the bad companies," says William Bao Bean, managing director of Chinaccelerator, a Shanghai-based startup accelerator for software companies in China. That's happening, Bao Bean says, because of the pressure put on VCs to invest from shareholders and owners.
A bad company is not necessarily one that is unprofitable, experts say. Entities that are poorly conceived and put together present a much higher risk of never being successful. Such companies, although having the potential to temporarily create jobs, might ultimately hurt investors and damage consumer confidence...
Money also ends up being used as a "weapon," experts say, with the richest companies more easily attracting talent and destabilizing competitors.
"So if one company gets more funding than the others, the others just go in and steal all the competing company's employees or they'll take out the key employees," Bao Bean says. "And most people have an impression of China (as being all about) cheap labor, but compensations at (the) senior level are similar to Silicon Valley, and at the middle level maybe slightly below."
"At the end of the day (even if those startups don't make money), they can always fold it in," says Shaun Rein, managing director of China Market Research Group, a Shanghai-based strategic market intelligence firm, and author of a book on Chinese innovation. "It's not like in venture capital firms where you have to be a lot more thoughtful on valuation because that is your only source of revenue. (Alibaba and Tencent) approach pretty much anything that comes out and hope that 1 of the 100 investments makes money."
Public officials in China have also created investment funds for startups, a result of Beijing's priority to create well-paying jobs for China's growing middle class. Premier Li Keqiang frequently boasts of the country's "mass entrepreneurship and innovation initiative," but rarely acknowledges the failures along the way...
These days, China's big tech companies appear willing to overpay for the development of new products that look good in the eyes of their shareholders, Rein says. This is bad, he adds, because new companies might need to struggle less with developing a workable business plan and simply focus on the concept they put forward.
"Tencent and Alibaba are not just throttling the market, but in many ways they are hurting innovation," Rein says. "Because right now basically people are saying, 'Let’s start a company. Let’s create something that sounds innovative, even if it’s not. Let’s not necessarily plan on research and development for five years, let’s instead create something that sounds good and then sell it to Tencent or Alibaba.'"...
"If you are a tech startup you either have to get money from Tencent or Alibaba or you won’t be able to grow because these two companies control the tech ecosystem," Rein says. "Basically, any new idea is getting funded by one of the two and its major competitor is funded by the other one of the two."...
Competition exists among investors in China's startups, as well. If "you come up with something cool, very soon there's going to be investors hanging around your doorstep because there's just so much money here and there's so few investments that investors in many ways have to beg to get in on deals," Rein says.
To compete against the wealthy tech giants – namely, AliBaba and Tencent – experts say VCs need to do a better job at selling their services and expertise. This can prove challenging, Rein adds, because many venture capitalists in China lack entrepreneurial experience: "Most of them are deal-makers," he says.
