VC Han Bing: The problems with China’s corporate services industry
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Despite recent buzz about Chinese companies pivoting business models to service enterprises, venture capital investor Han Bing is wary of the trend.
Han founded Shanghai-based Cambrian Venture Capital in 2016. “In China, many industries and companies have achieved a high level of automation and usage of information technology. But they are not at that high a level of systematization yet,” (our translation) he explained.
While the market is brimming with opportunity, venture capital firms must contend with both overstated demand for corporate services and few examples for success.
Han became an angel investor in 2012, and founded Cambrian Venture Capital four years later. Cambrian focuses on early-stage investing and primarily invests in the upgraded consumer market, education, and corporate services sectors. In Han’s seven years as an angel investor, he invested in more than 110 companies, including the women’s health app, Meet You.
The corporate services category ranks first on TechNode’s China Investment Trends tracker, which monitors the number of deals made in China in the past 30 days. In total, 35 corporate services companies in China have secured funding from investors—the highest of any industry in 2019 so far.
Although there is much room for growth in the segment, Han said, it’s necessary to be rational before entering the fray.
The corporate services industry requires entrepreneurs to have a “deep understanding of the entire industry and not just general knowledge about the internet industry,” Han said, adding that those who do not perform due diligence could make “costly mistakes.”
According to Han, American companies have matured and are already aware of the strategies their competition might deploy. At this stage, Han said, companies must save costs, and outsourcing their work becomes “inevitable.”
In contrast, he said, Chinese companies are not yet at a stage where they have a “desperate need to maximize efficiency.”
As an investor, Han considers himself risk-averse. When it comes to investment strategy, Han aligns himself closely with Warren Buffett’s method of long-term value investing. “[Buffett] puts more of his money onto safer bets,” he explained. “He does not lose money most of the time. But over time, the growth is massive.”
No stranger to responsibility, the Peking University’s School of Government graduate was responsible for Uniqlo’s e-commerce operations in China. Even though venture capitalists wield the financial power, Han believes that they should support entrepreneurs, standing behind them for the ups and downs of the entrepreneurial trajectory.
In fact, Cambrian encourages their entrepreneurs to make mistakes. “Only through making mistakes do we realize what the limits and boundaries are,” he said.
Another of Cambrian’s values is “Don’t be Evil”—Google’s former code of conduct and now a renowned adage. “We felt that intelligence was innate, but kindness is a choice,” Han said. “We don’t want to be profiteering individuals, and it shouldn’t be that way.”