China Creation Ventures, founded by KPCB China veterans, aims to identify and cultivate more early-stage Chinese startups. "The China local innovation trend will go global soon, with many unicorns being born in China." Zhou predicts.
BEIJING, Sept. 21, 2017 /PRNewswire/ -- Recently, Zhou Wei, the founder of China Creation Ventures (CCV) received an interview given by All Tech Asia. In the article named "Chinese innovation is taking off and China Creation Ventures was founded to fuel the trend", Zhou Wei shared his vision on Chinese technology startups.
As China's domestic innovations have thrived in recent years, the argument that Chinese entrepreneurs are copying Western startups could be incorrect.
Ever appearing mobile payments, convenient bike-sharing products and drones are a few strong examples of how China's innovations and its entrepreneurial landscape are at a turning point.
Competition among Chinese startups at home is becoming extremely fierce and more entrepreneurs are eying to expand abroad.
Venture capital (VC) firms backing these startups need to not only know the Chinese market well, but also have a global vision so that they can help their portfolio companies grow and thrive.
It is the vision to do this better that inspired Zhou Wei, former Managing Partner at Kleiner Perkins Caufield & Byers (KPCB) China, to leave the American venture capital firm after working there for 10 years, and founded his own VC: China Creation Ventures (CCV).
Tech innovation and young generations generate new opportunities in China
Since 2011, Internet industry in China has seen rapid development. The landscape has been especially reshaped by the startup boom fueled by local innovations. In Zhou's opinion, with the open systems of iOS and Android having global reach, Chinese startups now have equal opportunities to compete with the rest of the world. It has been reported that China has the largest number of mobile developers worldwide.
The rise of China's tech firms has stunned the world in recent years. Tencent and Alibaba were among the world's biggest 10 companies in terms of market capitalization by June, as reported by the Financial Times.
Five Chinese startups, including Alibaba finance branch, Ant Financial, ride-hailing company, Didi Chuxing, and smartphone maker Xiaomi, are among the world's top 10 unicorns (a startup valued at USD 1 billion or more).
"Chinese startups can be competitive. After fierce domestic competition, the surviving ones are ready to explore the global market," Zhou said.
A plethora of innovative startups and 170 million burgeoning young consumers, who are tech savvy and willing to spend on online products, make China a lucrative market for investors.
"I see starting my own VC as a true opportunity to make more possibilities happen," said Zhou.
He went on to say, "As China's innovations spring up, if VCs, especially early-stage investors like us, don't have an efficient and localized policy-making system, we will be forced into a very unfavorable situation."
A veteran team will breed unicorns from a top American VC.
Founded in April 2017 by a team of former venture capitalists and other staff members, CCV intends to invest the most promising Chinese startups with technology innovation. In less than six months, they successfully raised 10-year RMB funds amounting to more than USD 200 million. CCV operates both RMB and USD funds.
Zhou, Managing Partner of CCV, was a seasoned entrepreneur for 10 years before becoming an investor in 2007. He holds an M.B.A. from the Wharton School of the University of Pennsylvania. Tang Xin, another CCV partner, has 20 years of investment and operational experience, and he been working with Zhou over 10 years in KPCB China. He identifies interesting business models and has a strong track record of investing in projects which have gained quick exits. Liang Yu, the third CCV partner has 16 years of investment, technological and operational experience, and been partner with Zhou and Tang in KPCB China for 4 years.Zhou explained that even though the firm is quite new, the founding team is experienced and complete, since nearly all of the members are former TMT (technology, media, and telecom) group members of KPCB China.
As for himself, Zhou said that he followed an inner calling to seize the opportunity of establishing his own VC to back Chinese startups. He said the name 'China Creation Ventures' reflects his belief that the era of Chinese technology innovation has arrived. He observed now as the right timing, having gained his vision and experience as an entrepreneur and VC for 20 years. Recently, Zhou was selected as one of the Top 30 Influential Investors by Fortune China in 2017.
"Unlike most investors, I was once a startup person," Zhou said.
In 1994, he designed the first generation of point of sale (POS) machines for a Chinese computer company based in Fujian Province, followed by years of work in E-payment space. This experience equipped him with an in-depth knowledge of the Fintech space and fostered his vision as an investor in this area. Later as a venture capitalist, he led A round investments in China's leading financing companies, including JD Finance, CreditEase and Rong360.
Investing in the 'big guy' of the future
CCV's main investment focus is in the TMT area. Specifically, startups in Fintech, big data, artificial intelligence, and general entertainment industries will be its investment targets. Zhou is also interested in Internet startups that expand their business outside China.
Moreover, CCV prefers to invest in early-stage startups that have the potential to become large platform conglomerates with positive social impact.
Zhou made more than 75% of his investments in Series A as lead investor. For Zhou, that strategy has paid off so far, with nearly 30% of them becoming unicorns.
He recalled the early days when he invested in JD.COM and sat down with Liu Qiangdong, founder of JD.COM, to find the best strategy for his company.
When JD.COM was losing money from its heavily logistics-focused system and facing doubts from other investors, I never questioned its future and have always backed them," Zhou said. The JD.COM investment generates superior return for the fund."
Today, JD.COM is China's second largest e-commerce platform, claiming 258 million active customer accounts by the end of June 2017. Liu made a public endorsement of Zhou, stating "There are many people who claim they support entrepreneurs, but few actually do. Wei is one of the few who delivers on what he has promised. He provided me with significant support when JD was developing critical verticals such as logistics."
Zhou values quality over quantity, and has an appetite for startups that have a chance to become platform.
"We don't invest in companies which are 'small and beautiful'. We prefer those who might be a big guy, a platform-like company," said Zhou. "Our principle is smaller quantity but better quality. Among all the companies in which we have invested, about 30% of them have become a unicorn."
In the Chinese online-wireless-content field, Zhou has invested in Ximalaya FM, an audio content giant which has attracted 400 million users. Another winner backed by them is the short-video app Miaopai. Miaopai's parent company, Yixia Tech, gained a valuation over USD 2 billion by its latest financing round at the end of last year. In the Fintech space, they have invested in CreditEase, a large financial services company in China whose P2P branch went public on NYSE in 2015. They have also invested in JD Finance, the finance branch of the second largest Chinese e-commerce site JD.COM.
Group-hunting instead of individual-chasing
CCV differentiates itself from other VCs by not only having a founding team with a unique background but also in how their team works. "Investors in most of the VCs work independently. They put up their own investment proposals and the investment committee will decide to invest or not," said Zhou. "But here at CCV, we do group hunting instead of individual working."
He said that CCV members would sit down to discuss future trends rather than chase current hot sectors like many other VCs. If the team concludes that a certain sector will thrive in the near future, they will meet every top team they can find in this sector to identify the best startup. Their next step is to invest in these best ones and build a relationship with the founders to figure out ways to grow their startups.
Zhou believes that the group-hunting strategy is efficient and will help young colleagues grow.
"We make sure that everyone has a deep understanding of the industry to be invested and makes their own contributions. We do not rely on a certain celebrity investor and our team is stable," added Zhou.
Zhou also believes that people matters most in investment, because investment is an industry that sells no physical product. He said it would be very hard to succeed unless the team understands China very well and can have their local team make decisions.
"It's more pragmatic for limited partners to trust those who really understand Chinese markets and manage those investments for them," said Zhou.
Zhou is very proud of his team at China Creation Ventures. The majority of the members are from the TMT investment team of KPCB China. He feels blessed to have such a stable and mature team, in which people who have already worked with each other for many years have decided to do one big thing together. CCV's investment team has in-depth knowledge of the local markets in China. They hold sound investment records of many Chinese unicorn companies including Asia Innovations Group, a leading global mobile social entertainment group, CreditEase, one of China's top business consulting firms that offers wealth management services, and many more.
The goal of China Creation Ventures is to become a top VC both within China and globally, Zhou said.
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