Tech Junction V: Chinese money pours into Silicon Valley, Europe and Israel, but India is difficult to conquer

Last summer when the stock market crashed in China, it caused a domino effect that hit Chinese startup scenes badly, resulting in financing difficulties. Word spread that “the winter for capital has arrived.”

It was not entirely true. Months later, investors picked up their speed and continued to pour money into what is in their eyes the promising sectors: digitization, robotics, and the AR and VR industries. These are the sectors that are likely to rise in the next 24 months, as predicted by Julian Ma, Corporate Vice President at Tencent.

Directing Tencent’s efforts in maps and location services, as well as autonomous driving and connected vehicle technology, Ma also has deep knowledge of the Chinese IT industry.

AllChinaTech interviewed Ma at Tech Junction to share his insights. Below are some highlights:

All China Tech: Looking at 2016 what areas of IT related businesses are you most excited by in China?

Julian Ma: Right now, we’re going through an interesting transition. If we see the past 10 years of internet, most developments were in pure online services, like social networks, online gaming, and e-commerce.

We are fast moving to the stage of online transforming offline. It’s a process of digitizing every transaction and every movement, and every behavior of people offline – manufacturing, logistics, medical services – this kind of vertical based digitization of traditionally offline activities will have a very profound impact. The data generated is the basis of much big data and artificial intelligence capabilities. This will create a lot of additional products and services

There are possibilities for new interactions, such as AR, VR, and robotics. So, overall: digitization, robotics, and AR, these are the most interesting things happening within the next 24 months.

All China Tech: What are the opportunities for Chinese companies?

Julian Ma: In the China market, Chinese companies have a certain few advantages: when it comes to offline services, local companies normally have certain advantages. When you’re dealing with people and situations offline, local knowledge becomes more important.

For example, my team is working with a Chinese company to whom we provide location services; we manage the ETC cards for shipping and logistics, and in return they get digitized data for trucking and shipping. Taking that as an example, the guys – they operate in a very rough environment. They are not the guys sitting in fancy offices. A local company knows how to deal with a local situation in ways that a foreign executive does not.

Another example is medical technology – you have to work with local hospitals and the people in them. A company with local culture and rules fits better in with the local offline services.

Technology is still important, but technology can be bought – this kind of online/offline integration requires a sort of corporate DNA which cannot be bought.

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AllChinaTech’s Nathan Wakelin-King interviews Julian Ma, CVP of Tencent. Photo by Justin Ding at DayDayUp.

All China Tech: What is your advice that you would give to those looking for investors to fund their startup? What should an aspiring startup company do to prove that their dream is worth investing in?

Julian Ma: In this aspect, there’s no real difference about nationality or background, what matters most is the team, and the concept itself. It is indeed a very flat world: all of the major VCs are in China, and all of the major Chinese corporations and money are going to Silicon Valley, to Europe, and to Israel. We’ve met startups in different stages.

First of all, it’s about quality of the team, especially the number 1 and number 2 founders of the company. Sometimes the idea may not be that viable, given the specific background of the founder at that time, but we can see through a few conversations that the founders are able to maneuver themselves, to figure out their next step, and overcome practical problems that stand in the way of success.

Some founders may be too rigid. The ability to move around the possible challenges, curiosity, and persistence; these are the characteristics that we would like to see demonstrated by the team and co-founders.

Second is the concept itself. Ideally, the concept is a platform potential – there is a distinct difference between a business and a platform. Try and not make it like a “business” – that is, something that is easily copied, that you can find thousands of the similar businesses easily.

Thirdly, if it can’t be a platform, it should at least be a very unique technology, something that can be licensed and applied broadly.

All China Tech: What do you see as the main trends in terms of angel investing in China?

Julian Ma: I think it’s overall a very positive trend, because there is indeed an overflow of money, on the market, there is lots and lots of money that is looking for a project.

I think the macro trend is that over the last few years the angels have become more and more experienced, they’ve realized that they want to provide additional value to VCs.

Previously, the scene was very bipolar: there was a handful of very professional investors, and then there was a lot of what we might call the much less professional “sudden rich”, the coal bosses and so forth, who had made their money elsewhere and started investing without much expertise.

Right now, there are more experienced entrepreneurs, more professional investors who invest their own money, and more who professionally invest other people’s money, and they’re all thirsty for new projects. Over time there has been a sequential tier up of the investment scene in China.

There’s another interesting trend, that is companies like Tencent are providing open platform services. We can provide a full suite of open platform services to entrepreneurs. It’s more than just space and money, it’s also distribution, traffic distribution, and cloud services, and even with some of the slightly larger apps, we have our own advertising system that is available to help with monetization. With that, an entrepreneur can focus on their core concepts.

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Audience at Tech Junction. Photo by Justin Ding at DayDayUp.

All China Tech: For the past decade there have been strong trends of Chinese companies investing abroad. What are your thoughts on this phenomenon?

Julian Ma: If you go to Silicon Valley these days you bump into the same faces, in the airport or wherever. It’s already a fact that most of the Chinese companies, the large ones and the medium ones, they see that in particular Silicon alley is a very deep source of new technology, and also an ideal place for very advanced research and development, because that’s where the talent is. So investment in Silicon Valley by Chinese companies is already a very obvious trend. So Silicon valley, and to a less extend Israel, as well as the rest of North America, they will all be a very significant source of technology and IP for Chinese companies.

Europe, and South East Asia, will first become the market for Chinese companies. How Chinese companies will manage that part of the market may vary. Some may choose to go there by themselves and establish their own team, some might invest into local leaders [companies], and participate in their growth, as we do.

Also everybody is focusing on India right now. I think for Chinese companies, India is not an easy market for them to build their own team, because of all of the cultural differences. The local consumers are inherently closer to Google, Amazon, these types of western culture and product.

I would say that the most suitable approach entry is through an investment into a leading local company. That is what most Chinese companies do in India.

About Tech Junction:

A meetup group in Beijing with a stated goal of exchanging ideas in short, sharp dialogues among startups, tech and media professionals in order to shed light on the tech scene in China. Our mission is to establish a tech community to connect with thinkers and dealmakers around the world. This monthly meetup is co-organized by AllChinaTech and DayDayUp. Find out when the next Tech Junction is on meetup.com.

AllChinaTech is a Beijing-based startup media platform, dedicated to providing timely news and analysis on the Chinese tech industry in English. Read about some of our other Tech Junction interviews here.

DayDayUp is a co-working space in Beijing creating an international collaboration community for entrepreneurs from China and all countries.

(Top photo from AllChinaTech)

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