1) Let’s talk about the three things I found interesting and weird about the Chinese VC ecosystem

- Corporate Venture Capital regimes supreme
- Much shorter fund time horizons
- LPs are mostly government
1) Corporate VCs (CVC) are the corporate venture arm of established firms. In the west they often get a bad name since they’ve had a history of blocking sales of startup to their competitors or applying a corporate mindset to venture.
2) Google venture seems to be the exception to the rule, but often western founders typically want a CVC to follow in a round. When they are leading its a bad signal.

The opposite is true (at least by rule of thumb) in China. Startups think of CVCs as credible
3) They are perceived to bring actual value add (Alibaba and Tencent give their own platforms’ traffic or other forms of partnerships to the startups). Startups are more happy to partner with them than typical VCs. Though maybe there is a murkier side
4) There are reports that CVC (esp tech ones) will present an ultimatum to startups of taking their money or they will 1) clone their offering or 2) invest in their competitor or 3) both.

CVCs also are perceived to be more reliable to stick around for longer because
5) Fund horizons in China are generally less than 7 years (typically 5 years from my convos), and as a result this influences the returns they are able to get. Most of them do not last more than 1 fund.
The shortened time horizon also mean VCs push startups to grow fast
6) Often leading to unsavoury hyper growth conditions in these places such as a working 996 culture or even worse.

I’m surprised at the lack of patience for VC funds given that the backers are typically government (esp local governments who want to stimulate growth)
7) Analyst estimate that up to 75% of VC funds come from government. I also have read reports that HNWI make up a lot of the rest of the capital.

Why the LP base type will want a shorter fund horizon could be a few things
8) The top administrators in local government get cycled through at a 2-3 year pace. For quicker promotion and to minimise local corruption. But this also means they have a quicker need to see results from their investments. And VC funds with more than 7 years can’t cut it
9) HNWI’s net worth is often quite tied to the up and down of the macro environment. When there’s a hint of a recession they might get eager to draw down funds, and having their capital locked away for a decade is not the way to do that
10) Collectively the VC ecosystem makeup means a general trend towards investing in explosive consumer ideas (hence why B2B gets over looked) that often follow the trend of what the tech giants wants since they have more powerful CVC arms

asia.nikkei.com/Spotlight/Caix…
I’ll be doing threads like this for the rest of Jan, follow me to get these spam on your TL

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More from @lillianmli

24 Jan
1) Let's talk about how to think about applying a successful Chinese tech trend to your tech ecosystem.

Let's deconstruct the elements of what made livestreaming take off in China, and what is easily replicable and what isn't
2) So I've discussed before that I view livestreaming as both an entertainment product as well as a distribution channel. So when people are asking whether livestreaming can take off, they are really asking two questions about monetisation.
3) - Will people tip livestreamers?
- Will people buy things from a livestream?

The answer to both these questions involves understanding the technological, institutional and cultural underpinnings of Chinese tech. Yeah, bummer we gotta know all that.
Read 20 tweets
23 Jan
1) Let's talk about the stealthiest player in the short-video war and the implication on Bilibili, Kuaishou and Bytedance as well as the longer direction of travel for western social media in the future.

I'm talking about WeChat video
2) WeChat Video was launched silently last January and broke through 200m DAU by June 2020 and is estimated by third parties to be at 350m DAU currently.

By comparison Kuaishou took 5 years to reach 300m DAU in June 2020.
3) WeChat's video feature is a response to other short videos platforms (Douyin / TikTok being the biggest one) and though it had a late start, it has some distinct advantages.

An existing collection of brands and influencers who built their house on WeChat official accounts
Read 9 tweets
20 Jan
1) Let's talk about the product philosophy of the pioneer in short video app. Founded in 2011, they currently have 776m MAUs as of June 2020. On average, users would spend 85+ minutes over 10 sessions per day in app.

I'm talking of course, about Kuaishou (Kwai).
2) Kuaishou was founded in 2011 as a tool for creating animated GIFs (and initially called KuaishouGIF) by Yixiao Cheng. Cheng was a product manager at DianDian(Chinese Tumblr). Morningside Ventures led an angel round of 2m RMB to back Cheng after finding his GIFs on Weibo
3) In 2013, money was running out. Morningside Ventures introduced Su Hua to Kuaishou to be their new CEO.
The company pivoted to a short-form video social platform. Bolstered by the roll-out of 4G, it quickly picked up traction and had 10m DAU by 2015.
Read 14 tweets
19 Jan
1) Let's talk about the question of 'how should we think about Chinese tech'

What do we talk about when we talk about Chinese tech? Who is 'we' here? How do you pronounce Elema?

I've hit 10k in followers and it's time to earn my stripes as a thinkboi.
2) Chinese tech is a loaded term. The very fact that we have to say 'Chinese' tech rather than tech demotes its otherness.

So what does a place of origin signify? The different market conditions, political context and imo most importantly, the development stage of the country.
3) I think @benedictevans and @ToniCowanBrown's podcast on 'How to think about Chinese tech when you know fa about China' (my title, not theirs), lays some of the groundwork here.

China's different market conditions and political context often means a parallel tech world
Read 14 tweets
18 Jan
1) Let's talk about the crazy growth of Perfect Diary. It's now the 3rd biggest beauty empire in the world after LVMH and L'Oreal. It was only founded in 2016.

It's mastered the hearts and wallets of Gen Z Chinese girls though.....
2) Since starting in 2016, Guangzhou-based Yatsen Group, aka the parent company of Perfect Diary (完美日记) aka the biggest name in Chinese DTC cosmetics brand. It has been on a juggernaut rise with an implied 204% CAGR from 2018 to EoY 2020.
3) Yatsen is so-called since their three founders all graduated from Sun Yatsen university; their backgrounds are all in multinational and domestic FMCG companies. The founders came away with a data-driven methodology to market a product effectively.
Read 13 tweets
17 Jan
1) Let's talk about the playbook to make a billion-dollar-plus Chinese consumer tech company.

This is foolproof but not easy to execute on.

Thank me when you're rich.
2) Had this been pre-2010, I would ask you to find a highly popular US consumer business that doesn't exist yet in China right now.

Now you have to look for a 'fengkou' or a focal point of opportunity that at least three other start-ups are getting into.
3) Now that you've found your newest trend or opportunity.
(past examples include livestreaming e-commerce)

It's time to start getting a group of people - preferably with degrees in CS from Tsinghua / Peking and other Ivy leagues with a sprinkling of oversea experiences.
Read 23 tweets

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