A long-term veteran in China’s IT business, David Tang, ex-head of Nokia China and now partner at Nokia Growth Partners fund, spoke with AllChinaTech on their investment strategies in China along with their insights on this hot market.
Nokia Growth Partners (NGP) is a global VC fund managing approximately USD one billion, with a 350 million special fund for smart gadgets. In the past year, how many projects did NGP invest in in China and what are they?
We set up a fund for smart gadgets in February and began to invest in smart hardware companies all over the world. Most of them are about to close so we can’t reveal much about them.
One that we can announce is called Sensoro. It’s a Chinese smart gadget company specialised in beacon and sensor technology. Its business already covers 60 countries, which is pretty impressive. I think beacon and sensor tech will be widely applied in business in the future, as it will facilitate more direct communication with consumers with the easy capture of information.
We have also paid close attention to healthcare-related technology. A few other companies we invested in include Zubie, a company for connected car services, and Whistle, a pet-care smart gadget and monitor maker.
On the consumer-end, we focus more on smart commuting, digital health and smart home technology. Of course, we also have an eye on IoT platforms. The software and services related to this technology connect a lot of smart devices.
Our vision is to connect the world. In the future, we’re looking at billions and billions of smart devices connecting the world. It will generate a lot of services and it’ll change the lives of everyone.
Despite the IoT sector having a significant advantage in your eyes, what improvements should Chinese companies look to achieve to become market leaders globally?
China has its advantages in hardware design, production and especially the logistics chain. Quite a number of foreign countries are beginning to come to Chinese cities like Shenzhen because it used to be highly time-consuming for them to move from a stage of design to mass production. But in Shenzhen, once you have a concept, it’s pretty easy to find outstanding designers and engineers to turn your idea into a product. And all the components you need can be attained easily at a very low price.
The entire production cycle is comprises a very short period of time. And for the hardware production ecosystem, China is at an absolute leading position in the world. With all these conditions, Chinese hardware companies have a great chance to stand out in the world.
Well, there are also things these companies should pay attention to. They should bear in mind that apart from production and manufacturing, user experience, product branding, distribution channels, sales operations and cash flow management are also pivotal for a company to achieve global success.
Healthcare is another notably popular sector to attract investment with a relatively high barrier to entry, what’s NGP’s arrangement in the healthcare sector?
We’ve looked at quite a lot of companies in digital health around the world. Nokia has just announced they’ve acquired a digital health company called Withings. It’s an IoT company focused on health monitoring of babies. Their products include smart scales and baby sleep and activity trackers. Nokia has accumulated years of experiences in healthcare and this new acquisition is also a further step for them into this field.
When we look at digital health, we focus more on the monitoring of people’s health conditions which includes overseeing a person’s fitness status like heart rate or blood pressure. Government regulations may be a factor to take into consideration when it came to healthcare-related fields. But smart monitoring devices are a relatively less-regulated field.
Apart from these smart gadgets, we have also looked at services that connect this hardware, for instance, apps that connect to hardware to monitor diabetes. Other apps include those helping people get medical care and connect doctors with patients. These apps make it easier to get medical care, and also demonstrate the power of mobile internet.
We are looking at too many companies so it’s hard to give you a specific name. But we’d like to look at areas with a large user base such as fields for patients with diabetes, heart disease, and fitness or health condition monitoring.
The Chinese market is perhaps challenging from a venture capitalist perspective, what did NGP do to distinguish itself?
First of all, our investors are very experienced in the industry. I personally brought Apple to China and brought Nokia to a larger scale of business. Our team is experienced in business operations.
We also have successful track records. We invested in two unicorns, UC Web and Ganji. Our return rate is at the top 25% around the globe, ten times that of the average. While in China, we have an even higher return because of our two unicorns.
Apart from that, Nokia has over 100k patterns all over the world covering mobile technology, IoT and communication. Our strong technical background can support many companies and bring them global success.
Can you give foreign companies some advice if they are interested in entering the Chinese market?
It depends on which kind of business they’re doing. The bar of entry for mobile internet companies to enter China is really high. You need to know Chinese consumers and their habits really well.
For hardware companies, challenges will be how to build up your branding and sales channels in China. Also, it’s not easy to manage your product ecosystem and logistics chain.
Normally we suggest that foreign companies have a long-term commitment plan when they decide to enter the Chinese market. Are you really committed to this market? Make sure you have made a long-term commitment first, then you should begin to build local teams and find local partners so as to fulfill your needs and compensate what you lack in here.