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Hans Y Combinator Presentation on Lessons from China for Global Entrepreneurs

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GGV Capital Managing Partner Hans Tung talks about lessons learned from China that can benefit global entrepreneurs. Initially presented at Y Combinator in October 2017

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Hans Y Combinator Presentation on Lessons from China for Global Entrepreneurs

  1. 1. Lessons from China for Global Entrepreneurs Hans Tung Managing Partner, GGV Capital October 2017
  2. 2. q With investments in China and the U.S., we have gained a deep understanding of both markets with access to global resources q Managing eight funds, $3.8 billion in total q Over 240 portfolios, invested in 33 companies with over $1 billion market cap and 29 public companies The GGV Advantage: One Team in Two Markets with Global Perspective 2
  3. 3. Background on GGV, Hans Tung and 12 Unicorns Experiences E-Brands E-Commerce * Flipkart and Snapdeal are personal investments. GGV currently does not have any portfolio in India.3
  4. 4. Data Replacing Oil and Credit as Most Valuable Commodities And the Rise of Internet in China Highlighted: Tech Companies; Red Text: Chinese companies; Source: CapitalIQ. Capitalizations are in millions. Data as of 8/18/2007 and 8/18/2017.4
  5. 5. Why China? 5
  6. 6. China Surpassed the US as World’s no.1 Market on iOS App Stores Source: App Annie6
  7. 7. 400 million people moved to cities in one generation ≈ creating a new NYC every year, for 40 years Hangzhou Home to Alibaba Net talent inflow No. 1 in China Many Silicon Valley returnees Shanghai $400 billion GDP (≈GDP of Michigan/Washington state) 24 million people (≈population of Texas) All in one generation (40 years) 1997 2017 1997 2017 7
  8. 8. China is No. 1 and No. 2 in Internet Users and Online Consumption World’s Top 10 Countries by no. of Internet Users World’s Top 10 Countries by Online Consumption (in $billions) Source: CNNIC; Internet Live Stats; BCG Analysis8 710M 460M 290M 140M 120M 100M 90M 70M 60M 60M
  9. 9. China Accounts for ~40% of Valuation of World’s Largest Internet- related Public Companies and Unicorns *Naspers has a market cap of $95 billion (Naspers owns 1/3 of Tencent); Softbank has a market cap of $90 billion (Softbank owned 32% of Alibaba in 2016) Source: CrunchBase; BCG Analysis; Yahoo Finance Note: Sample includes 63 Chinese companies and 112 American companies with valuations over $1 billion World’s 10 Largest Internet Companies by Market Cap (in $billions) Distribution of Unicorns by Number 211 in Total China is Home to Five of the World’s 10 Largest Public Internet Companies (as of 2017) Distribution of Unicorns by Valuation Total Valuation: $796 Bn China is Currently Home to a Third of the World’s Unicorns; Their Valuations are 41% of All Unicorns 9
  10. 10. No. of Millennials + Gen Z Users Online: 107M in US vs 390M in China Source: China’s National Census Bureau, Otcom, BCG Analysis Age Distribution of Internet Users in China (2016) Age Distribution of Internet Users in the US (2016) 10 37% 54% Total no. of Internet users: 290 million Total no. of Internet users: 710 million
  11. 11. Chinese Internet Users Congregate Around Fewer, More Complex “Super Apps” Source: Google’s Global Mobile Research, China’s National Census Bureau, Localytics, eMarketer, BCG Analysis Average No. of Apps Installed per Person (2015) % of Time Users Spent on Apps (2015) Only 15% of apps in China are used more than 10x 11
  12. 12. Takeaways 1) High >> low frequency, be a Portal/Entry Point (WeChat Pay vs. Apple Pay) 2) Multiple functionalities > Focus, be a “Super App” Quickly (WeChat vs. WhatsApp) 3) Verticalized start-ups pick a Super App ecosystem (Tencent, Alibaba, Baidu, Xiaomi…etc.) to join 12
  13. 13. 13 Case Study: Mobile Payment (WeChat Pay) = a “Super App” in China
  14. 14. Aspiring “Super App”s in CN Incentivized to Raise $ & Freemium Model to Blitzscale Source: BCG Analysis14 # of Years for App Penetration to Reach 50% Market Share in US vs China
  15. 15. Uber in China: A Success? • Uber spent over $2Bn in China 7/2014-8/2016 • After <24 months, >30% of total Uber rides a day worldwide are from China alone • Uber obtained 17.7% economic interest in Didi + Uber China in 8/2016 = ~$10B now? 3 Months 6 Months 3 Months 6 Months 3 Months 6 Months 9 Months 3 Months 6 Months 9 Months 3 Months 6 Months 9 Months 9/2015 Uber’s Exponential Growth in China 15 1st (unofficial) meeting between Uber and Didi in Spring 2013 Question: Maybe Uber could have invested $10M for 15% economic interest in 2013?
  16. 16. China’s Urbanization Model: Driver of Transportation Revolution? Tokyo (8M rides/day) Beijing 2005 Beijing 2015 (9M rides/day) New York (5.7M rides/day) 16
  17. 17. High Speed Rail (120-180 mph) = Backbone of Economic Growth & Ecommerce Boom China 1978 Mileage: 51,800 km (32,000 miles) Current mileage: 124,000 km (77,000 miles) US 1860 (before Civil War) mileage: 48,300 km (30,000 miles) Now: 225,000 km (140,000 miles) Japan 1950 mileage: 19,800 km (12,300 miles) Current mileage: 27,300 km (17,000 miles) 17
  18. 18. 18 Hub & Spoke: High Speed Rail + Subways Rides & Bike Sharing
  19. 19. 19 Alibaba’s Sales on 2016 “Singles Day” (11.11), China’s Black Friday: $18 Bn > Black Friday + Cyber Monday 2005: Yahoo invested 1Bn dollars + Yahoo China and owned 40% 2015: after IPO, Yahoo's 20per stake is worth 40Bn dollars > Yahoo's market cap $3.34B $3.45B $17.8B Black Friday 2016 (US) Cyber Monday 2016 (US) 11/11 Singles Day 2016 (China) Total Sales in a Single Shopping Event ($Billions) (Online + offline)
  20. 20. Millennials are the New Mass Market 20
  21. 21. How Will Your Business Go Global? Case Study: Airbnb 21 "Chinese tourists represent the fastest- growing user group on Airbnb" (Bloomberg, June 2015) “Airbnb will quadruple its China tech team in Beijing.” (Bloomberg, August 2017) "Chinese millennials are driving this growth, given their general desire for different experiences, rather than the typical package tour. They want to be different — they are always looking for unique experiences." (Bella Ling, Head of Communications in Airbnb China, July 2016) Airbnb’s platform within WeChat Source: Sheffield Wang, 2017
  22. 22. Who Are the Key Players in China? 22
  23. 23. The Big Three: “BAT” vs. “FANG” Market Cap 2016 Revenue B $82 billion $10 billion A $449 billion $23 billion ($68 billion in GMV) T $407 billion $19.5 billion F $497 billion $28 billion A $476 billion $135 billion N $79 billion $8 billion G $646 billion $90 billion 23
  24. 24. Alibaba’s Market Cap is Approaching Amazon’s 24
  25. 25. Valuation Gap Between Leading Chinese and US Internet Players Narrowing 2005 vs 2017 25
  26. 26. China’s “40 Under 40” in Internet ZHANG Yiming Founder of Toutiao 34 Jean LIU and CHENG Wei President and CEO of Didi 39 and 34 WANG Xing CEO of Meituan 38 HU Weiwei Founder of Mobike 35 Frank WANG Founder of DJI 37 SU Hua Founder of Kuaishou 34 WU Xinhong Founder of Meitu 36 Louis YANG and Alex ZHU Co-Founders of Musical.ly 36 and 39 DAI Wei Founder of ofo 26 26 Miranda QU and Charlwin MAO Co-founders of Xiaohongshu (Red) 33 Cindy MI Founder of VIPKid 34
  27. 27. Lessons from China for Global Entrepreneurs 27
  28. 28. UberBlack was great but niche…until UberX. What is your UberX? Source: The Numbers Behind Uber's Exploding Driver Force, Forbes Article by Brian Solomon28
  29. 29. The Fastest-Growing Brands: Mass Market & Fast Fashion (Not Luxury Goods) Brand Price Range $60-7000 $4400 $130-1460 $ 30-7300 $17-174 $5-322 Founding Year 1837 1854 1913 1921 1963 1969 1975 1980 1981 $45-300 $ 8-145 $1-90 Market Cap $38 billion $76 billion $8.5 billion $14 billion $9 billion $109 billion $1.2 billion $37 billion $37 billion 29
  30. 30. Rise of the Rest: a $1M/Month Zip Code for Wish 30
  31. 31. Go Global. It’s Worth It. $21 Tn $18.6 Tn $8.7 Tn $4.9 Tn $4 Tn $3.7 Tn $3.1 Tn $3 Tn $2.8 Tn $2.7 Tn 2016 GDP 2050 GDP $58 Tn $44 Tn $34 Tn $10.5 Tn $7.5 Tn $7.1 Tn $6.9 Tn $6.8 Tn $6.1 Tn $5.4 Tn CAGR 3% 4.9% 1.7% 3.8% 2.6% 1.9% 5.7% 0.94% 1.25% 1.95% 31
  32. 32. Reaching Global Mass Market Consumers is the Secret to Becoming a Unicorn Serve the 99 Percent (e.g. America’s Heartland) Experience is the Product, Curation is Key Millennials without Borders Go Global 32
  33. 33. Want more on China? We have a newsletter. 33
  34. 34. Thank you. Hans Tung Managing Partner, GGV Capital Hans@ggvc.com Hans.VC and 996.ggvc.com

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