Virtual reality is one of the hottest trends in the Chinese tech market, as proximity to manufacturing and abundant local capital have seen a splurge in VR investments. But according to Cai Wensheng, a well-known angel investor in China, 2016 may not be the year that virtual reality takes off.
“In 2000, during the dot-com bubble, everyone thought the internet could change everything. But when it all crashed, we found out it was all a lie,” said Mr. Cai, drawing a comparison to the recent hype around virtual reality during a panel event at this year’s Asia Beat conference in Xiamen.
Entrepreneurs can start entering the virtual reality industry, but should manage their expectations, he said. However, despite his caution toward virtual reality, Mr. Cai has invested in VR startups as he would rather “make the wrong investment, than miss an opportunity.”
Currently, one of the main issues with VR is the limited amount of time that users can experience it, says Li Feng, the founder of venture capital firm Freesfund, at the same event. “It can cause vertigo if used for a long period of time, especially totally immersive VR,” he said. “And time is a very important factor in a business model. If a cannot be used for a long period of time due to physical reasons, the full potential of VR will be hidden.”
“This year, many companies are still conceptual or just part of the [VR] bubble,” said Mr. Li, echoing the caution of Mr. Cai.
“There are trends that seem hot but there’s always the danger of being pulled in,” said Bernard Moon, a co-founder of SparkLabs Global Ventures, in an interview with TechNode at Asia Beat. A seasoned investor and serial entrepreneur, Mr. Moon is also cautious when it comes to following trends, though his team does track certain industries, such as fintech, IoT, cybersecurity, food tech, and e-commerce.
“I think a good example is – I don’t want to be blacklisted – but Kleiner [Perkins Caufield & Byers],” said Mr. Moon. “For awhile, Kleiner got pulled into the whole green tech thing. I think it’s the second wave of recent internet investments. So I think there is a danger of trying to overly focus too much on trends.”
For a seed-stage fund like SparkLabs Global Ventures, team dynamics are a more important metric when accessing their viability than trends or the “hotness” of their product.”What we’ve learned is regardless of how hot the deal is, you really need to know the team better [and] do the reference checks,” Mr. Moon told TechNode.
“There’s no exact metric on it, but I would say a third of startups fail because of team dynamics, founders fighting, or a founder had too big of an ego,” he said.
At Asia Beat, Mr. Moon advised entrepreneurs to be flexible on valuations, as “it’s not a time to be arrogant.” He believes winter is hitting the global startup ecosystem, with valuations decreasing and down rounds already occurring in Silicon Valley. For seed-stage startups, Mr. Moon recommends that entrepreneurs seek multiple investors in a seed round and to double down on metrics – “the benchmarks of your industry” – in order to succeed in raising a Series A or B round.
This article is part of Technode’s coverage of Asia Beat, where Technode was a media and organizational partner.
Update (3/21/16 16:56): This post was updated to clarify that TechNode interviewed Mr. Moon at Asia Beat, where he also gave a talk.