Francis Leung has worked as an investment banker in Hong Kong for more than thirty years. He has been dubbed “father of the red chips” for leading efforts to get Chinese companies listed on the Hong Kong Stock Exchange.
The one-time investment banking pundit has invested in a series of internet companies, such as ChinaHR.com, JD and 91 Wireless, as an individual investor in recent years. He recently joined the board of Dianrong, a P2P lending platform which just secured funding from Hong Kong’s leading financial institution SHK in October. Here’s what he had to say on the startup environment and the investing market.
Why have you started to invest in startups?
Some friends once suggested I set up funds on my own when I first left investment banks, but I preferred to become an angel investor. Chinese internet companies, especially startups, have promising prospects.
I invested in the recruitment service ChinaHR.com in 2001 and followed another round to help it get though the tough times when the internet bubble burst. I sold shares in ChinaHR.com to an U.S. company in 2008 and recorded pretty good yields.
I poured the funds earned from ChinaHR.com into JD in November 2008, just after the collapse of Lehman Brothers, because I saw a huge Chinese consumption market with most of the industries still in a pre-digital age, which were ripe to be upended by the internet. The success of my investment in JD has reinforced my determination to focus on startups.
As an angel investor, I can bring funding and experience in terms of capital and M&A operations. Most of the companies I’ve invested in over the past few years are growth enterprises. Of course, you can choose more mature companies like CNPC, SINOPEC and China Mobile, or to trade in the secondary market so as to lessen the risks, but for me, I enjoy the process of growing with them and the sense of achievement that follows. It is not only about the money.
What’s your investment philosophy?
The biggest determinant of my investment decisions is the market prospects of the industry or sector which the startups are in. I invested in JD because I saw the upcoming exponential growth of e-commerce, and in 91 Wireless because of the rise of mobile internet. I am bullish on the prospects of the bio-health industry. The bio-pharmaceutical company I invested in recently went public on the NASDAQ recently.
Why did you invest in Dianrong?
Chinese e-commerce services have potential because the multiple middle links in the traditional sales chain raises product prices. It is the same for China’s financial industry, which is on its way to marketization.
The sales and services for consumer electronics need standardized operations, which means that scale management is a crucial factor for e-commerce sites and only a few near-monopolies will survive. But online financial companies may find more opportunities, as financial products celebrate diversity and innovation. However, it is much tougher to achieve success in finance as compared with retail. Online finance is finance in essence; it needs innovation, service, and risk control.
Some valuable characteristics I found in Dianrong are the innovative spirit of the team, solid technical support and the attention to risk control. Dianrong’s board members have varied backgrounds and experiences, enabling effective brainstorming during meetings.
What support will you bring to Dianrong?
As an experienced and probably the eldest investor and board member, I can give strategic advice to the company from a different perspective. I have worked in financial industry for over three decades and would like to share my social network resources to boost the development of Dianrong. I am also a board member of SHK, the investor in Dianrong’s latest round. My previous experience in the financial industry, especially on funding, enterprise financial affairs and capital markets, will benefit the future development of Dianrong.
Originally from: Zhu Guilin
Editing by Mike Cormack (@bucketoftongues)