I was invited for a panel on cross-border A.I. along with Lu Gang, Founder of Techcrunch China and Sophie Yao at Fenox Ventures. We discussed many topics, including how over-valued A.I companies have been due to the hype of the space. It quite predictable to see all of us agreed that investors need to very cautious in investing in today’s AI companies.
However, it’s worthwhile to point out that we are at a unique time and space where A.I. is packaged just right for its commercial applications. And the packaging is everything.
Mobile internet was talked about and being invested in as early as the late 90’s but none was viable until the wireless speed caught up and the iPhone showed up in the late 2000s. Similarly, A.I. is not a new thing. It was talked about roughly 40 years ago as an academic topic. But not until decades later when a) data accumulated to a high volume for A.I. training and b) cloud/ AI computing advanced further, it is now possible to have A.I. “package ready.” Ready to be efficient, accurate and invisible for the main applications.
I often say that the startup ecosystems in China and the US are very much like Yin and Yan. They are parts of the global innovation hub but they provide different flavors. It’s the same with A.I. innovations.
The US’s A.I. companies often come from top universities such as M.I.T, CMU, Stanford and Berkeley. We have seen some incredible innovations coming from these campuses/ labs. These companies are backed by well-known VCs, doing frontier A.I. researches and related breakthrough tech.
On the other side of the world, China’s A.I. companies are good at figuring out business applications for A.I tech. Look at SenseTime (TCL Capital is an investor), Face++ and Bytedance — all three companies utilize AI in true commercial use cases and gain business traction because of it. More importantly, China, being a huge market it is, seems to be more willing and quicker to adopt newer tech and bring it to scale. Another factor is the speed to gain data cost-effectively and at scale. Due to regulation and culture differences, China’s A.I. companies seem to have a leg up here too.
China is in at a unique crossroad of the history in that — on one side, China still craves for top talents and deep researches to fuel such tech needs; on the other side, China is experiencing a societal upgrade where the economy is shifting from labor-heavy production economy to a high-tech economy.
As cross-border investors, we are at a very unique timing in the global tech evolution. The US and Silicon Valley will continue to be the center of gravity of tech innovation, as it always has been. However, just perhaps, the next Google and Facebook will be more global, more AI-driven, and may be created in China. YC made its bet in China by convincing Lu Qi to found and run YC China. I think that’s a brilliant move.
The optimistic side of me is very intrigued to see how the next iconic A.I. companies are founded in this new era global economy. That will be the topic of the next post…
I just returned from a two-week long business trip from China. It felt like it has been two months. In a good way.
A lot of activities were jammed in those 14 days. Starting with speaking at SLUSH conference in Shanghai to meeting many China entrepreneurs, the trip was packed with much energy and many late-night meetings (and many high-carb meals!)
It was first formally introduced to the valley community via Sequoia’s Mike Moritz article on China earlier this year. It was controversial and I understand why. China shares a very different work culture than the US, in that it is (still) very top-down driven with a blurred line between work and personal life. For example, it’s no secret that in China, people conduct business conversations over after-work meals and over Wechat. As a result, the business response cycle is much faster. However, as a regular tech worker in China, it’s hard to take a real break.
In addition, on a higher level, China has the so-called 996 (9 am to 9 pm, 6 days a week), which I heard it’s now evolved into 007 (0 am to 0 am, 7 days a week). I think that’s just too much and it compromises productivity. But many companies are doing it.
You can perhaps interpret it from two angles:
Which one is it? Probably China has both. And the next Google, next Uber for China will have to come from the companies who view work from the 2nd angle. Just like how the valley has been over the past decades.
"You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future." — Steve Jobs
I’ve been thinking about the past a lot lately. Some meaningful events of the past often define who we are today.
I read two (old) books last year and this year. One is called “eboys” by Randall E. Stross and the other is “Startup” by Jerry Kaplan. Both are fascinating stories — the former is about starting the legendary VC firm Benchmark while the latter is about starting the first “pen computing” industry and lessons learned. Both stories took place during 1980s to 1990s.
Strangely enough, I can relate to the tech background of both stories, even though I was half the earth away.
In mid 1990s, my parents, both business persons, were among first ones in China to adopt the pen-computing “palm assistant” — I couldn’t remember the exact brand or name but I recall how cool it was that I could write on the device and it would just recognize the letter that I draw. Of course, most of the time, I used it to play simple games like Hangman Words, which I never mastered.
In late 1990s, not too long after Jack Ma made his first visit to the US, China was embracing its first wave of internet. Again, my parents were among the very few who were willing to spend 10,000 RMB (roughly $2,000 USD) at the time to buy a personal computer — a Lenovo desktop.
To put things in perspective, 10,000 RMB equated to roughly 5 months of salaries in the small town where we lived. It was a BIG investment. So big that dad was at times paranoid and insisted that we keep the “computer room” clean so that it would not catch “viruses.”
This is a 3D program by Lenovo to help people understand programs better. One might say it’s the first VR program in the 90s. Nonetheless, since I can’t find the real photo of my computer, this one should do the justice — and yes, I do usually paint while I work on my computer stuff, just as the pic showed :)
I loved my first computer. I loved that you can simply “dial-up” and be connected to the world.
From there, I joined BBS (Reddit of stone age if you will), feeling like a big shot. I created by my own email address, exchanging “deep thoughts” with people who I had never met. I learned to program my first website and showed it to my mom — she was so proud that she just keep refreshing my site to help me boost up my “visitor count number.” (thanks mom!)
Little did I know that I was so fortunate being able to play with a computer, being able to connect to the internet at a very young age. Little did I know that from there, I would commit my career and the rest of life time to technology.
Looking back now, those dots were connected beautifully. To that, I’m thankful.
It’s quite common to hear startup founders say: “I just want to finish fundraising quickly so that I can get back to building.” Understandable and I would probably have said the same thing if I were in their shoes. However, there is a fine balance between raising capital too quickly V.S. taking your time to know your funding partner.
In other words, speed matters when you are launching your rocket ship, not necessarily when you are building it — because getting it right is way more important than rushing rough it.
I saw this tweet couple days ago and couldn’t help but respond:
No question that early stage (seed and pre-seed) investing is hard. So is the company building, especially at its earliest stage. The conventional logic for startups raising capital quickly (via convertible notes) is that they can get back to building the product, securing early customers and get to the next series A milestone. While the logic is sound, it heavily discounted the value that seed stage capital could (and should!) bring to the table. Entrepreneurs at this stage (typically the first $500K — $1m) are severely underserved by quality capital.
On the VC side, the mega funds trend is accelerating — we now have over twelve Sand Hill funds with $1B+ AUM — and it’s mathematically difficult for $B-size funds to be meaningfully engaged with pre-seed/ seed stage companies. On the angel side, we have come to somewhat accustomed to the idea of party round, of optionality, and of FOMO. While I still believe many angel investors add great values to companies they back, I don’t believe the set value is the same when you have an institution who takes on a more proactive partner approach to helping a company. Even at pre-seed /seed stage.
The analogy of marriage V.S. fundraising is overused. So I might try a different one. Perhaps wholesome food V.S. fast food? Both satisfy your hunger but the former will benefit you in the long term, even though it might take some time.. To be clear, fast food is fine, but you don’t want to over do it and do it for too long (i.e. a $5m seed convertible party round that you raised over 3 years).
If we go back to the origins of venture capital — it’s all about writing the very first check, backing the very audacious companies. It was the same when Sequoia wrote the first $100K to Apple at$3m pre, and then $1m to Yahoo at (amazingly, still) $3m pre. It remained the same when First Round Capital backed Uber at $4m pre.
There is something magical when you are part of the founding team at the earliest stage. And there is a reason why venture capital had “venture” in its name. The very first meaningful check is the driver for extraordinary venture returns, for both founders and investors.
Finding a good long term partner matters. Surely, investors vote with their capital. But hopefully, they vote with their intelligence, network and value-adds along the way as well. For founders, the fundraising process could be incredibly distracting. But it doesn’t have to be. Founders should note that it’s a two-way streets. Ideally, each time you have a investor meeting during the fundraising, it’s a learning process for both sides. Don’t partner with the ones you wouldn’t onboard as a “cofounder” nor have a good chemistry with, despite the fund size and the its name.
I fear that, in today’s world, in the name of speed, we often forget to take our time to find the right partner for the long journeys ahead.
P.S. Fred Wilson wrote a similar post today on "Time and Money" where he said: "If one has time to evaluate the time commitment issue as part of an investment process, it becomes a bit easier for both sides to get this right. A rushed financing makes it harder and can lead to miscalculations on both sides." --- Different angles but similar conclusion.
My first organized meetup was in October 2013. It was creatively titled “What’s New in Tech” with my partner Chris Hollenbeck at Granite Ventures. At the time, I had no idea what we were going to talk about or where the venue is going be at. So, nervously I posted the question on Founders & VCs page : “Any venue suggestion :)?” Surprisingly, somebody quickly responded and volunteered their work space! That was the first time I felt the magic of a community.
Ok, the venue was set. So was the starting time of 6pm. Around 5, I started walking up to Jackson Square from SOMA. I still remember the unsettling feeling of “what if nobody is going to show up — that’d be embarrassing!"
It was a chilling day October in San Francisco but it seemed to get warmer as I got close to the venue. There were couple of people who arrived early as well, chit chatting with each other — maybe a bit confused of how to get in, just as I was. Eventually, we figured it out. I was moving chairs around and putting pizza (of course!) on the table. And then more people showed up… 26 people to be exact. More people that I expected but it was a very intimate event. We chatted about tech (duh!), fundraising and shared some laughs over jokes about VCs.
It was A LOT OF FUN!
So we went on to have 18 more and the community grew from the initial 26 people to now 2800-member strong! Who’d have thought!
Thankfully, To make us look less crazy, many kind luminaries have joined the conversation --
We hosted David Hornik from August Capital to chat about the importance of finding a good VC partner; we talked with Ethereum Co-founder Gavin Wood when Bitcoin was not even a thing in the valley; Hans Tung from GGV Capital shared his VC journey with us and encouraged many companies to go global; Rotten Tomatoes’ co-founder Patrick Lee told the untold story of the early days of the company and its ultimate exit; Mayfield’s Tim Chang showed how VR could be an “empathy machine” and how founders can take advantage of a new tech platform.
There are simply too many who I need to be thankful for.
Many oversea founders told me that the event gave them an first hand experience of what Silicon Valley was like on a true community level. Many founders appreciated the platform where they could socialize and mingle with other VC investors informally instead of simply pitching to them.
At the core of Silicon Valley where I live, it’s about being nice to each other (for no reasons); it’s about building relationships; and it’s about giving rather than taking.
In truth, I’m the one who have benefited the most. I’ve got a chance to work with my volunteer co-hosts Cris Miranda, Kim Pham and Donna Zhou, who had attended a community event once and then decided to help out the community generously and unconditionally. Along the journey, I have also been fortunate to meet with founders from all over the world. Sometimes, I even got to see startups and partnerships been formed because of our events. Heck, I even sourced good investment from the community!
In a blink of an eye, it has been almost 5 years. So where do we go from here?
In short, I’d like to continue the conversation. But in a larger scale way. I’m starting my own website called www.amisfit.vc (that’s me!) where I will blog regularly and host “fireside chat” podcasts with highly respected founders and VCs. To that end, I will turn off the meetup group on meetup.com shortly.
As for offline meetups, I am not ready to let it go yet. But interestingly, I want to scale it down — in a way that’s more intimate, more of a safe place to share the dos and donts in startups and venture. The meetup will be on a invite-only basis, prioritizing more involved members in the amisfit.vc community.
As always, feel free to say hi. And don’t be a stranger! :)
Onwards and upwards.
The world is not always the one that we perceive. I have come to realize three mental traps that are counter-intuitive enough that we would quickly dismiss and yet powerful enough that we can not ignore. I want to share these with you.
Lesson #1: Attention > Time > Money
Compared to time and attention, money is actually the least valuable.
Born in China, I was raised to be humble and to be frugal. I still recall the time when China was poor. Clothes need to be worn long enough, often time with patches, before passing down to the younger cousins. Money was squeezed and saved. Like regular working-class families in China, mine was no different — money was more valuable than our time.
However, as I grow up and see the world, I observe how successful people are able to leverage their money to save their time. I learned to happily spend money on services and productivity tools that I need so that I’m not drawn into the ocean of trivia tasks and so that I stay focused on the things that I really want to do. But that’s not enough.
Plenty of time with no attention given is a waste of time.
In a fast-paced, tech-enabled society, we are accustomed to attention-harvest machines like Facebook, Twitter, and Snapchat. Those apps were designed to be highly sticky. And they are great businesses. But they have adverse consequences on people, both adults and children. Just like sugar — subtle yet addictive. They are the enemies of your attention span. Could you think of a productive time when you were using social media?
I bet you couldn’t. And neither could I.
Attention is the most valuable resource one can have. To command such valuable resource, you would need to stay in the present. With the help of “time,” one would be able to observe, to learn and to get things done.
Next time when you are in a meeting, I challenge you to close your laptop and turn off your phone and say “Now you have my full attention.”
Lesson #2: The best way to gain return is to expect no return.
It’s the ultimate long-term view.
I learned this lesson a bit later, when I become more secure about myself.
This lesson applies to both life and investments. On the life side, it’s fairly straightforward. Give first, and expect no return. And when it comes back, it would truly surprise you and delight you. I’m fortunate enough that I can attribute many life-turning events and life-long friends to this valuable framework.
But I do want to talk about the effect on the investments side, especially the early stage investments. It’s true that venture capital is long-term capital because (again, with the help of time) that’s the only way to gain superior returns against other asset classes.
However, psychologically, it’s often seen that many VCs would fall into the trap of “sunk cost,” which is always a tricky one to deal with. In other words, investors often times could not help but discriminate investments based on ones’ own dollar amount and self-interests, instead of the company’s. The trap is enticing but harmful. Not only it sours the investments returns (good money after bad) in the long run but also produces unhelpful service to the companies during the tough times.
I have confronted such psychological traps myself. And I've learned the best mental remedy is to forget about the return for a while but focus on the company’s long-term value creation. With time, the market always decides if a company gets to thrive, survive or die — strangely similar to how nature works.
Warren Buffett famously said: “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” With the extreme long-term view of “forever,” the investors can then truly zoom in on the fundamental value of the business they are funding.
The best breed of investors understand this, accept this and are able to achieve the best returns by expecting no returns.
Lesson #3: The amount of efforts for staying mediocre is the same for thriving to be the best.
Over the years, I’ve observed different levels of efforts and struggles — by companies, by people; for achieving the best or simply staying mediocre — and strangely, it felt like the both directions equally take a lot of your time, energy and happiness. Such lesson magnified itself in the startup and venture world, where power law rules.
It’s not uncommon to see the best founders and VCs putting countless hours, thoughts and mental energy into their work. The journey of getting to the top is undoubtedly tricky, twisted and often less traveled. It’s hard. But even if you are not at the top, it seems equally hard treading water constantly to stay afloat. You are still putting *just* as much time, thinking and emotion into things — mostly smaller things, on surviving and staying afloat. Interestingly, it’s often not the case that work/life would become easier, if you simply settle.
The difference between the two outcomes lays in the factor of passion. Passion is like light — it’s hard to describe and you can’t touch it, and yet it gives you direction. Once equipped with passion, one can go on to find the courage and to pursue one’s “personal legend.”
Here is the question: if you are putting in just as much the work and time in life, why not be the best?