Top VCs on Tech Trends in China: Takeaways from 2014 TechCrunch China Conference

Hans Tung, Managing Director at GGV, Ji Yue, Partner and Managing Director at Sequoia Capital China, Li Feng, IDG Capital Partners, and Zhu Lin, General Partner at Gobi Partners, joined our 2014 TechNode/TechCrunch China event that shared their insights on China tech scene.

Here are my takeaways,

— There were way many more investments happened in the first half of this year in both Silicon Valley and China than the last whole year. And Chinese startups were valued very high, even higher than those in the US. The smart device and mobile service provider Xiaomi, being a private company, now is valued at over US$5 billion. For a long time, money will chase the quality startups.

— But they don’t think it’s a bubble like what happened in 1999-2000, for (1) there were 75 million Internet users worldwide back then while the users in India now are more than 100 million, not to mention the Chinese. Also tens of millions of smartphones have been sold in the US and China in the past year or so that the mobile app market keeps growing;(2) It actually took many years for the highly valued Chinese tech companies to grow big and stood out of thousands of startups founded in the past several years in China.

—  A flock of Chinese tech companies went public last year and this year. Unlike many earlier ones whose major revenue source was advertising, the recent ones, such as 58 and Alibaba, have built business models based on online transactions.

— In the past 15 years, advertising and gaming, two major monetization approaches adopted by Chinese tech companies, have created a RMB 20 billion (US$3.3 billion) market in China. The transaction-based business models must create a way bigger market.

— Only 2-5% of the venture-backed startups can become Great companies. The few will come from three sectors, online shopping, smartphone content and online-to-offline service.

— Tech companies, especially those focused on mobile, who are able to build a global team, no matter in which sector, can grow to be giants, for the user base outside China is much bigger than the Chinese and the competition in China market has been already very fierce.

— The mobile Internet is an opportunity for Chinese companies to expand overseas, for (1) a plenty of Chinese entrepreneurs and developers are experienced in developing mobile services and will be able to come up with new ideas; (2) The mobile app distribution/promotion channels and approaches are similar around the world.

Sequoia Capital China has backed more than 200 Chinese companies in TMT (technology, media and Telecommunication) in their early stages, such as Qihoo, VIPShop and Jumei. Jumei, a cosmetics retail site that went public on the NYSE this May, took only four years from zero to one of the largest online retailers in China with a US$50 billion in market cap.

IDG Capital Partners (formerly IDG Ventures China) is one of the well regarded venture firms in China. Xunlei, a download and cloud service provider, launched IPO on the NASDAQ this June.

GGV Capital, with team in both Silicon Valley and China, has backed many Chinese tech companies such as Alibaba Group, Tudou (listed on the NASDAQ in 2011), YY (listed on the NASDAQ in 2012), Qunar (listed on the NASDAQ in 2013), and many others. Hans Tung joined GGV Capital last year. Before it he was with Qiming Venture Partners where he led early-stage investments in many Chinese tech companies including Xiaomi. Since joining GGV, Mr. Tung has led investment in cross-border mobile commerce app Wish and gaming platform Curse.

Gobi Partners is focused on travel, cloud computing and smart hardware. Tuniu, an online travel service with Gobi being one of its backers, went public on the NASDAQ this May.