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What economists want in China


After two years of struggling to make ends meet, Chinese start-ups are seeing interest from those who are making capitalism take over, while much of the US is crossing the pacific.

“Winter is over, the competition is fierce,” said Ming Liao of Prospect Avenue Capital. “You have to bring something to the table other than money to agree on it here.”

China’s retail sales increased by 56% in the first quarter since last year, the fourth in a row following rising employment, while the first was pulled in Rmb354bn ($ 55bn) in sales, according to data providers ITjuzi.

The state-of-the-art market and the influx of foreign currency have helped. Tencent, a highly regarded stockbroker, found some of the aforementioned accomplishments three times last year. VC companies such as GGV Capital, Qiming Venture Partners and Matrix Partner China have secured a lot of new revenue.

In some ways investing in China and the US is the same; All these markets are large enough to encourage the establishment of major technical groups and Chinese investors say the resumption is now compared to their American counterparts.

Giving money to China also has its quirks. This new concept often brings out a few cats, even the competition for the most talented giants in the country. A different culture from state laws adds to the difficulties.

Cultural differences extend to the types of businesses that operate. In contrast to the US, which has seen a major overhaul of software-like-a-service (SAAS) companies to large companies, this segment has not started in China. Shaun Lim of Hopu Investments says it can be difficult for software companies to register registered customers.

“People here don’t like the unseen things. They are ready to pay for anything they see and touch, ”he said. Lim said one of the AI ​​software companies it supports expanded its business by placing its software on the servers it sold.

Other factors that have hampered the establishment of SAAS include a history of free software as well as low-cost services to eliminate some of the functions that the program can perform.

A chart on Chinese business start-ups over the past six years

Consumer technology has been pulling a lot of VC money and making huge sums of money, which led to the hot parts of the day in booms and busts. While copy ideas come from everywhere, they can be very different in China.

In China’s “famous Groupons war” in early 2010, 1,880 start-up research companies adopted a group of consumer groups of Groupon. Horse rides have encouraged 214 competitors, at least 20 companies have pushed to share the bike, and 208 have set up businesses that rent portable power banks to manufacture electronic devices.

With this fierce competition, investors say that killing and working hard can overcome not being the first to run a new sector.

For Jixun Foo of GGV Capital it was faith in founder Yang Lei that led him to the back of Hellobike to enter the division of the bicycle when a rainbow of orange, yellow and cloud bikes was blocked on China’s main roads.

“I was convinced that [Yang] he can do this in a very effective way, ”said Foo. “The first founder gives you a chance. . .[but] How are you doing in comparison with your peers? This will become apparent in due course. Five years later, Hellobike reaffirmed nearly $ 1bn in sales last year with a slight reduction. Many opponents have failed.

In a competitive competition for the electronics bank, Wanlin Liu, who specializes in Carlyle’s technology in China, decided to make a successful investment out of the very beginning of a business venture. However, after weighing in on the Energy Monster, he was concerned that Chinese companies Big Tech had intervened.

“You have to understand all the top players and any competition that can take place from the big tech giants, before we call,” he said. Monster Energy has been leading even though the $ 240bn grant company has joined Meituan. “It’s all murder,” Liu said.

In order to enlighten those with the requirements, Nathan Zhong of M31 Capital sometimes goes unexpectedly to the offices starting at night before making any money. In another recent issue, he found the office of the data starters empty.

“Their efforts were not very quick – the CEO’s determination to continue fighting was diminished,” he said. “Early departure from work represented this.” The M31 chose not to invest.

Patrick Zhong is chairing one of the weekly meetings on Monday at M31 Capital

Patrick Zhong, at the weekly meetings at M31 Capital, says the extraordinary visits unrelated to the process of judging the realization of the economic potential © Ryan McMorrow

These unconventional missions are part of what M31 founder Patrick Zhong says is “feeling hot” for those who want to sell. “Everyone in China is smart; if you fall asleep at the wheel, your competition will get faster. ”

Government policies can also be a source of uncertainty. In January, China’s largest bank proudly announced the termination of any online credit provider in the country – up from a peak of 6,000 – ending a campaign that ended VC betting.

“You should always know: ‘Is this company right on the side of Chinese law?'” Said Gary Rieschel, who founded Qiming Venture Partners 15 years ago. “Chinese businessmen have to deal with a lot of secrecy,” he added.

The VCs say there is a slight difference in the overall trading time. Startups often help financial advisors or the FA, as they are often referred to, to reach out to investors. Candidate messages may be hard to find. And investing in a new company that might one day need a new leader is probably not over. Getting senior executives to “change the trust they had in the original founder,” is a challenge in China, Rieschel said. It’s a place of real interdependence. ”

Although SAAS businesses have not yet moved to China, Zhong’s M31 Capital believes that the program is a future and sees the need to re-evaluate what is happening in the US. At a recent meeting each week, his team spent an hour studying how growth returns to the vegetable company MongoDB and how its cases are handled and review its accounting.

“In the next 20 years China will follow the US in using software to improve efficiency,” Zhong said. “We’re not saying it will be the exact same approach as the US, but it’s a starting point.”


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