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 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.
The SOSV Chinaccelerator has been a successful Shanghai-based VC in China for a decade. Managing director William Bao Bean, explains to Russel Flannery of Forbes how they re-invented themselves and started to export their China strategy to other emerging economies as Orbit startups and stopped investing in China.
Forbes:
Flannery: What was behind the change with Chinaaccelerator and Orbit?
Bean: Orbit Startups is a rebranding and re-focusing of Chinaccelerator and MOX, which was another program based in Taiwan. Our parent organization SOSV is very much focused on a sustainability mission, which includes global emerging frontier markets where we can leverage our know-how and capital to drive economic independence. As part of sustainability, SOSV is also centered on health and climate, which of course also have lots of applications in emerging markets.
We’re a lot different than VCs that break up the world by geography, such as Europe or India. We think tech is global, and view the world in terms of vertical strengths. We all invest through our fund SOSV, but we have Orbit, which focuses on the Internet and software, HAX for hardware and IndieBio for biotech. We want the best innovation from all around the world. Often times, that’s in Silicon Valley or London, but sometimes it’s in Jakarta or Lagos.
Flannery: What happened in China?
Bean: By 2018 and 2019, Alibaba and Tencent controlled a lot of the startup ecosystem, which is why we diversified out of China. The Orbit program hasn’t invested in China in three years.
What we’re doing today is applying to startups outside of China what we learned during China’s incredible 20-year ramp up. We started in 2017-18 in Southeast Asia, and then India, Pakistan and Bangladesh. Two years ago it was sub-Saharan Africa, and then last year we had the Middle East and Latin America. So we’re bringing what we learned in China, Indonesia and India to global emerging markets and tech entrepreneurs eager to an economic transformation similar to what happened in China. A lot of what raised 800 million people out of poverty in China was driven by technology. We’re bringing the best practices, the tips and tricks, and the models that we learned in China to entrepreneurs all across the world…
Flannery: What’ve you applied from your China experience?
Bean: Digitizing mom and pop shops is a big area, and a common theme in Pakistan, Sub- Saharan Africa, the Middle East and Latin America. The challenge that you see across all of those regions is that they have many little shops — many with a history of three-four generations. There’s not much logistics, supply or financing. There’s a lot of walking, We’ve invested in Dastgyr in Pakistan, MarketForce in sub saharan africa, Suplio in Latin America. First, we fix their physical supply chain and cut middlemen. They get 30 to 70% more cash in their pocket at the end of every month.
After we fix their physical supply chain, there’s some real opportunities in digital services. The person in the local neighborhood knows the local community and customers have a sense of trust. And we’ve seen that in China and Indonesia. It’s the same opportunity. You bring technology that’s putting much more money into people’s pockets by bringing efficiency. It’s almost like water. It’s impossible to stop. In Pakistan, for instance, we invested in 24SEVEN , which is bringing digitalization to retail.
Shanghai-based VC William Bao Bean explains how his global SOSV fund helps startups to fight against the big internet, and bring innovation into the traditional VC world, at the Asian Investors podcast.
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.
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.
Try to solve a problem, do not focus too much on your own product, tells Chinaccelerator managing director William Bao Beanat a CNBC tech talk panel in Singapore entrepreneurs looking for VC money. He saw too many entrepreneur trying to enter China and Asia without asking themselves whether it was needed.
William Bao Bean has joined Singtel Innov8, a US$ 150 million venture capitalist firm as managing director in Shanghai. Singtel Innov8 has been established in September. Singtel Innov8 is focused on investing in and driving innovative services and technology from around the world, especially China, to its 350m subscribers in Asia and Africa.
Before this William Bao Bean was for three years partner at Softbank China & India Holdings, an early stage venture capital firm that is backed by Softbank of Japan and Cisco and focused on the technology, media and telecom sector.
The China Speakers Bureau congratulates William with this new step in his VC career.
