Following China’s economic slowdown, the tech start-up investment craze has also slowed down since 2011. However, some funds are still very bullish on China’s opportunity and for good reason. According to an earlier report by ZhenFund, China has the greatest number of internet users, highest volume of e-commerce sales and has the world’s largest online gaming market. To take advantage of such solid fundamentals, Sebastian Kübler and Jackie Chen have created their second generation investment company, TaishanXD (TXD).
Combining Jackie’s local Chinese business savviness and Sebastian’s mind of German precision and efficiency, the duo co-founded and ran their first fund, Taishan Angel with great success. Starting from 2008, it was one of China’s first business angel funds which co-founded and invested into several fast growth companies. Only investing less than US$10 Million, their portfolio companies raised a further US$250 Million.
With a heavy focus on consumer e-commerce, their first fund portfolio includes Urbanara, one of Europe’s first online home ware brands that is now preparing for Europe’s biggest crowdfunding round. ByeCity, China’s online outbound travel market pioneer. Xishiwang, a leading wedding portal to find the best wedding locations for Chinese couples. Famously, Taishan was a co-founding investor of Lashou, one of China’s first and most successful group buying companies during the peak of China’s group buying craze.
By working closely with promising teams at their formative early stages, Taishan has been able to make a large impact on each start-up. This is evident in the calibre of follow on round investors that have supported their portfolio, such as Blumberg Capital and Ventech in Europe and GSR, NVP, Intel and DCM in China.
The new ‘XD’ is short for XiongDi in Chinese which translates to ‘brother’. The name of the fund reflects Sebastian and Jackie’s commitment to work extremely closely with their start-ups, not just as traditional investors, but brothers who look after their siblings like family. This means getting down and dirty to help their start-ups devise strategy, market entry tactics, financial and KPI planning, PR, fundraising and doing everything they can to support their brothers.
The new TXD fund with about US$10 Million is squarely targeted towards China’s consumer spending market and start-ups that leverage web and mobile technology, which Sebastian sees as having a lot of opportunity for young, fast growing companies to disrupt and serve the customer better. Industry wise, TXD likes B2C healthcare, outbound travel services, food, data driven business intelligence as well as product brands in certain verticals. TXD has flexibility to invest in RMB or USD, the typical investments range from US$50-500K but they can also coordinate Series A financing of up to US$3-5 Million.
On the types of teams TXD looks to support, Sebastian says “We look for entrepreneurial teams who want to make a difference and bring a great service / product to the Chinese customer. We like both founders with deep industry expertise open for new ways as well as a fresh industry outsider ready to challenge the status quo and make things much better for consumers. In any case, they need to be extremely customer orientated, living and breathing it or as we call this “sleep with the customer”.
Based on their strong track record, TXD secured top tier investment partners such as Xu Xiaoping of Zhenfund, Norman Lui (founder of 51job and LUMI), Peng T. Ong (founder of Match.com), Porsche Family Office, Dr. Uli Sigg Family Office (one of China’s first JV managers for Schindler Elevators) and many other mainly private investors.
With a sound understanding of China’s fierce competitive landscape, Sebastian knows there will always be hundreds of companies doing exactly the same thing as their portfolio companies. So the key question he always asks is firstly “How to make a difference to this company; how to be a little bit better, grow a little bit faster? To differentiate from the competitors and take a leading position in their vertical. There is too much of everything in China, too many restaurants, too many shopping malls, too many brands – so how can you get the attention of your customer, make them trust that you deliver a great product or service and deliver such, so they come back to you? The second question is then, ‘Are these companies really making money?’ In the last few years, there was an overflow of capital into e-commerce and a lot of companies never had to worry whether they ran their business efficiently. Today, this has changed so TXD spends a lot of time focusing on Business Intelligence and Efficiency improvements for their portfolio companies.”
In China, there are a number of active early stage funds such as ZhenFund, Shunwei, China Growth Capital and K2 Ventures. TXD sticks out of these other funds by carefully selecting only a handful investments a year, in order to really walk step by step with their companies. Additionally, TXD is very focused on consumer spending models only in which they gathered a lot of expertise, meaning no pure technology plays. Finally, being able to not only utilize a very local Chinese team on the ground, but take advantage of international resources of both expertise, know-how and finance in Europe, gives TXD a unique position.