Insights on investment opportunities in China from Bill Li, MD of Walden International!
On 27 Oct, BLOCK71 Singapore played host to Mr Bill Li, the Managing Director of Walden International, for a Kopi Chat. Bill shared his views and insights on the innovation-led investment opportunities in China to an eager audience. Having served as a Managing Director of Walden International since 2008 and a Managing Partner of Kaiwu Walden Capital since 2013, Bill is intimately acquainted with the China venture capital landscape. Walden International has an impressive track record of 30 years with US$2.6 billion under management, invested in 501 companies in 12 countries, 101 IPOs on 15 Stock Exchanges and 71 M&A exits. If you would like to know more, read the takeaways we have assembled below!
On investing in logistics
When Walden first invested in Best Logistics, the logistics sector in China was not up to date and not many investors wanted to invest in the sector as it was seen as a labor-intensive, traditional business with no upside. But from the e-commerce angle, there is a lot of potential to make logistics more efficient.
On strategic investors
Strategic investors can help start-ups to scale quickly. However, corporate investors also have their own corporate agenda. Issues surface when business focus of start-up differs from corporate investors. You can have 2 corporate investors to bring balance, if possible. Start-ups need to consider carefully the trade-offs if and when to bring corporate investors on board. Generally advisable to have corporate investors at later stage.
The second wave of mobile internet is different from the first wave of mobile internet. It is more about improving the efficiencies of B2B interactions than garnering more user traffic.
As an example of the disruption of the sharing economy — given the popularity of bike-sharing, people in China are now buying fewer bicycles…this is a challenge for bicycle manufacturers.
Companies in China have adopted technologies/business innovations from US and have successfully adapted and localised for the Chinese market. There are a lot of untapped markets in SE Asia and many Chinese companies are expanding to the region. There are language barriers, political issues etc. to contend with but the potential for expansion is definitely a draw.
Currency is a major policy tool of any government. I think it will be difficult for ICO to flourish in a country where the government exerts a lot of control. If the country depends on international trade, it might be easier for ICO to proliferate.
Walden keeps an eye on ICO as it does believe there is a future. It also recognizes the challenges and problems. The question is which application of ICO can be adopted in the mass market.
On China vs US
I have some friends and ex-colleagues in US who left large companies to start their own companies. These start-ups I know about in the US are later sold or acquired at valuations in the range of US$100 million. In the case of Best Logistics, it only took 7 years to reach a valuation of ~US$4 billion. China has a massive consumer market. In addition, the manufacturing and supply chain is already established in China so it is very easy and cost-effective to make a new product there. It is almost impossible to achieve the same economy of scale anywhere else.
On competition in China
If you are going to start a mobile app business in China, the first thing to think about is how to effectively generate traffic as the market is very saturated and user/ traffic acquisition is very expensive. Other factors to think about include which field has less competitors etc.
Sometimes competitive advantage are more easily gained in second, third and even fourth tier cities. In some of our investees, profits generated from those cities are used to fund operating cost in first tier cities.
Advice for entrepreneurs
Focus on people, bringing on good people and building the team and the culture. As companies grow, some early employees may not be able to scale — have to be prepared to make difficult decision of letting some early employees move on or helping them to take on new responsibilities that are suitable.
Also be prepared to adapt — for successful companies backed by Walden, the business model that worked invariably was different from the initial business plan at the time of funding.
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