This article about the work of Lisa Zhang's predecessor (and, for a time, joint) Managing Director Intel Capital China office - Richard Hsu - is really interesting for XPE followers for three reasons:
1. It gives a good account of the purpose and focus of the work that Intel Capital does in China (and therefore an insight into the level and type of work that Lisa Zhang did with Intel Capital)
2. The potential that Intel Capital sees in China-based IoT (particularly wearable and home automation) start-ups
3. While it was written before Intel Capital's investment in Telink, it explains the logic for investment in start-ups such as Telink (e.g. "seeking out young teams in China making stuff that could make an impact – and could go global")
Intel Capital’s Richard Hsu on the rise of China’s startups
Steven Millward5:28 PM at Feb 4, 2015
Richard Hsu has been based in China for just over a decade and has seen some momentous changes in the tech industry in that time. He arrived in Beijing in 2004 as Intel Capital’s managing director for China, moving away from his Silicon Valley role with Intel’s venture capital arm.
That was a perfect time to arrive, he says. “In 2004 to about 2007, it was really the re-ignition of venture investment in China. You had all that stuff that happened during the [earlier] 2000 timeframe – the bubble crash, SARS, and all that stuff – and the startup scene here was really depressed,” explains Hsu to
Tech in Asia. “And in 2003 to 2004, it all started picking up again.”
But then China’s tech ecosystem bogged down again a few years after his arrival.
Then you had too much money chasing the same ideas, from about 2007, 2008, to 2011. My indicator there was that you had… what… 4,000 Groupon clones in China at one point. And I think there was a real change of mindset after all that collapsed. After that collapsed, I think that [people saw] you can’t just take what’s happening in Silicon Valley and copy it in China. It doesn’t work. You really need to create your own innovative, unique thing in China.
Now, thanks to things like booming smartphone usage, China’s tech industry is rocking again. “The last couple of years is the most exciting time to be in tech investment in China,” Hsu adds.
Despite the strength of Baidu, Alibaba, and Tencent, China’s troika of tech titans, Hsu feels that Chinese startups are riding the rising waves. “I’m more positive on all that’s going on here in China in the startup scene than in the last couple of years.” He believes that China’s startups are now in the swing of “doing something unique and something interesting – and something different from the rest of the world. I think you’re going to see some cool stuff out of China,” he says.
Hsu, who first joined Intel Capital in the US in 2000, points to serious hardware as the most visible signifier of what China’s most interesting startups will be producing. “I think there’s going to be some really cool stuff coming from drones and robotics,” he says.
But the Intel VC boss doesn’t see this startup growth as limited just to hardware, and views China’s software startups as a vital part of the shift to local innovation. The challenge for all of these young firms, he adds, is to build a brand, lock down patents, and find new markets.
“It’s about branding. Once Chinese companies learn more about how to brand […], I don’t think it’s going to be a matter of whether it’s hardware or software – but it’s just going to be a matter of their ability to create a brand that resonates with consumers,” explains Hsu.
Promising partners
Intel Capital revealed at the end of 2013 that it has
invested over US$2 billion in Asian startups since 1991. Of that sum, US$670 million went to Chinese tech companies. Now that figure is up to US$700 million for China, with about 40 active Chinese firms in its investment portfolio.
With so much money, Intel’s VC arm is the second most active funder in Asia behind Tiger Global.
Intel Capital’s recent investments in China
are diverse, from CSDN, the country’s top IT professionals community,
to Lewa, which makes an Android ROM. It tends to invest at series A or series B stage, once a product is already established – but does not necessarily have traction in the market.
Intel Capital invested in Lewa in 2014.
Hsu says that Intel’s VC war chest is strategic as well as financial, so that means the funding is often a sort of partnership – whether it’s a startup that makes consumer gadgets or an enterprise business focused on cloud computing. However, Intel’s own interests in chip-making often discount it from startups already committed to using ARM-based chips from rivals like Qualcomm. But the recent rise of wearable gadgets and smart home technology seems to be a chance for Intel and Intel Capital to get back into the hottest hardware.
“I would say almost all of our investments strive for our strategic agenda. That means working with companies that want to work with Intel and are interested in pushing Intel’s products and ecosystem. So from that perspective they’re all partners,” Hsu says.
The firm’s most recent investments highlight the way it now works, seeking out young teams in China making stuff that could make an impact – and could go global. Hsu points to
Gotye, a “communications layer for apps and wearables” that Intel Capital invested in in October last year. As an API-based service, it could be used by developers to build in gaming live chat, for example, to an app or a gadget. Another investment that Hsu is enthusiastic about is
Lewa, the Android ROM that could be sold to phone makers in a manner similar to Cyanogen’s business.
Both fit the bill as startups that Intel Capital could help connect with large corporations or new markets as part of their funding partnership.
Hsu splits his time between Beijing, Shanghai, and Shenzhen. Although Shenzhen has emerged as a hub for hardware startups thanks to its manufacturing prowess, Hsu says that Beijing is still the undisputed tech capital due its resident tech titans and the prestigious universities in the city. “There’s so much gravity there,” he says.
https://www.techinasia.com/how-intel-capital-invests-china
(20min delay)