Yesterday I have joined a VC talk in Sanlitun, the main topic is what kind of business will success in China(from VC’s point of view), here’s quick notes to share with you, my friend:
1. It’s hard to describe successful business, some of them are successful only because they’re lucky, most experience he mentioned will be based on their investigation of failed businessJ
2. When VC is going to judge a startup business, they’re mainly focus on three areas:
a) People(team)
i. To VC, people means everything. With great people in startup, even the direction is incorrect, these people can figure out new direction leads to success.
ii. People are far more important than business plan/proposal, especially leadership team’s personality/capability is the key to success/failure. If the leadership team understand the industry, willing to share stocks with employees, they have better chance to win the game.
iii. More and more VC tend to judge whether to invest a startup based on casual interaction between VC/entrepreneurs.
iv. Too much emotional connection between entrepreneur and his startup will make the entrepreneur blind.
b) Market
i. If your market is not big enough, VC won’t invest you.
ii. Almost all successful internet/mobile business in China are local-based, run by Chinese with specific model works well in Chinese market. The reason is they understand Chinese market better. At the same time, VC thinks there are more opportunities in Chinese market than western market.
iii. Only big market can endure great business, that’s why in China most VC are focusing on internet and mobile(two biggest market VC like to invest)
c) Execution
i. There are lots of copycat in China, if you can’t focus on one thing, execute, execute, no business will succeed in China.
ii. In execution phase, startup need to understand the best way to promote his product in China, understand the best way to routing uses in China and the best way to control the cost in China.
3. Every VC will invest 6-10 startups every year. Among them, 1-2 startups will succeed(to VC, succeed means income ROI is 20 times than investment.)
4. Lots startup fail because their founder can’t grow themselves when the business grows up.
5. Business model innovation is much more important in China than technology innovation.