A Quick Trip To Chengdu

At long last, I was able to go to cross off a key travel destination on my checklist and visit Chengdu – a town known for spicy food, ancient history, spicy food, mountains and more spicy food.  The trip had 5 main attractions: the city itself, pandas, SanXingDui, JiuZhaiGuo (a short plane trip to the west), and spicy food. 

Chengdu is a city that contrasts traditional culture with cosmopolitan allure.   The new infrastructure of Chengdu immixes modern office high rises - home to the world’s biggest software companies - and traditional Chinese temples and dark - brown stained wooded housing and markets.   Some hi-lights included:

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• Wenshu Yuan Monastery - a beautiful buddhist monastery
• An open-air market called Jinli Street. Our team (Jeff, Clare, and Ben) visited the same hot pot place that Michelle Obama went to.  While the food was pretty good, the ‘changing of the face’ show was the best attraction.  My favorite part was the switch between Spiderman and Doramon.  Here are a few videos.
•  A XuJiaHui type of area with modern bars and clubs.  We had a party at the beach club with sand on the ground!
• Asia’s biggest building home to a waterpark, two hotels, and 2 dozen restaurants.  This building was closer to the airport 

A short 30-minute car trip from the city is every tourists major attraction, the Panda village.  The spacial, open-aired Panda village is created to allow for tourists to meander through a forest setting while seeing the animals.  In the morning, I marveled at watching the pandas gnaw through thick, bamboo tusks.  The more charming sister of the panda - the red panda - resembled a big, fuzzy, fox with a panda face and could be faintly detected up in the trees.  The attraction is a nice half-day visit especially for kids.

A further 60-minute car trip away is SanXingDui, a historic area where remnants from 6000 years ago were only discovered 20 years ago.  It was not so much a museum as it was an archaeological site that had 4 distinct museums and an active scientific community that was working on other discoveries.  The site had 4 distinct attractions:  a sacrificial alter, a museum for the bronze faces, a museum of other artifacts like pottery, swords, clothes, and finally a museum for the large money tree (tree that pointed to the gods as an offering).  All of the artifacts had some spiritual connotation.  My favorite artifacts were the bronze faces with the eyes dangling out of the heads. 

A further 60-minute plane trip away is JiuZhaiGuo.  JiuZhaiGuo is often described as the US Yosemite. It's China’s most visited national park with beautiful lakes, mountains and scenery.   Unfortunately, it rained most of the day and though it was described as low season, there were still millions of people.  The efficient bus system made it bearable to get from place to place, though.  JiuZhaiGuo is quite a beautiful place with lots of hotels. While I may not visit the National Park again I would consider a few days relaxing at a nice hotel, breathing the fresh air, enjoying the BBQ lamb and local hotpot, however.

And the food was fantastic and every spicyness that I had yearned for.  Hot pot is on every corner and I think locals must eat it almost every day.  The more adventurous eaters may enjoy their hot pot with any parts of the animal like curded blood – which I didn’t try after just recovering from salmonella poisoning in Japan.   Some of my favorite other foods were bbq lamb, pear tea, spicy vegetable soup, chicken and mushroom soup, spicy packaged tofu, spicy braised pork knuckle, and one of my favorites, spicy fruit cocktail.

Chengdu is a great city to visit for a long weekend to get a different feel for China. 

SV Needs to Embrace China and Japan

Although Silicon Valley has many Asian born immigrants and descendants, a strong cultural Asian influence and is a relatively short commute to China and Japan, Silicon Valley entrepreneurs and investors (SVEI) know surprisingly little about how to successfully grow businesses in Asia or stimulate investment from abroad into their companies.  As new technology firms realize that the opportunity is tapped in the west, many are now looking towards Asia for growth and learning how to navigate the Asian treasures.

Below is a snapshot of the cash balances of some of the largest Internet and telecom companies in China and Japan:

Tencent: $40B

Alibaba: $30B (post-IPO)

Baidu: $6.37B

Qihoo: $2Bn

Rakuten:  $4B

Softbank:  $19B (post Sprint)

Because many of these companies are US listed entities, analysts and investors are putting pressure on these firms to continue growth in order to uphold their stock prices.  Similar to their US counterparts, these technology companies have slowing growth in their own markets.  And for many of them it is not just simply growth they want but it's the hubris of world domination and not to be second to US technology firms like Google, Amazon, eBay, and MSFT.  In order for Asia to successfully compete with these firms, these Asian firms are going to need the help of SV technology startups.  Both Asian companies and US will benefit significantly in looking towards partnerships, investments, and acquisitions. 

For example, just last week, Alipay and Stripe concluded a landmark deal, one of the first of its kind in the consumer Internet space.   This partnership is allegedly a two-way partnership for Chinese consumers buying things overseas as well as US consumers buying things in China.  I'm not sure if I entirely buy that strategy but whatever is the actual objective, this is the beginning of a working relationship that will help Alipay to understand the massive payment problem that Stripe is solving – the ability for any merchant to accept credit cards online without the hassle of integrating a payment service provider like Chase or a clunky Paypal. The Alipay – Stripe partnership is a direct attack at Paypal.  While sitting in my hotel room in Riyadh, this news was rampant across every TV channel throughout Asia. Its likely that this partnership ends up in a acquisition of not less than $18bn – Mike Moritz will make a mark on the world with his last investment and will not be outdone by Jim Goetz’s Whatsapp deal.

Alibaba is not the only Chinese Internet firm seeking partnerships abroad.  Tencent and Baidu are currently focusing on SE Asia, Middle East, and India as next expansion steps since they are closer to home both geographically and culturally. Qihoo is actively looking at partnerships in SV and looking to bring new technology back to China.   Chinese companies are now not only ready to expand to the US but they are also seeking technology to bring back to China.

Whereas Chinese companies may have been distrusted with technology before, that distrust is now likely easing.  One executive mentioned, “we are looking at ways to sell more product to our 100M users back at home.  We are running out of ideas and need partners to help us.”  This trend indicates that Chinese companies are learning to understand the value of partnerships and innovating together.  One of the most obvious examples of this is Riot Games – an American game company with astounding success throughout Asia.  Who would have ever thought that an American game company would take a significant share of the Chinese game market? Tencent saw the value in their product and community and leveraged this when they brought the game to China.  There was not even an attempt to copy the game.  One executive said, “We did not have the time nor the knowledge to try to copy that game.”  The $400M investment has been a smashing success and Riot has continued to grow with revenues in the billions.  This investment, two years ago, was a key indicator of the coming Chinese investment.

And alas, many reading this blog would like the Chinese to just buy their companies. As of yet, Chinese companies have not made any multi-billing acquisitions in the US. But that will change soon.  Only last month, Alibaba acquired app stores UCweb for more than $2.1B in response to Baidu’s purchase of 91wireless for $1.9B.   In addition, Albibaba has been investing in the US including Lyft, Shoprunner, and Tangome but have not closed any major acquisitions as of yet.  It’s just a matter of time before they make some outright acquisitions.  These indicate that the Chinese companies are ready to make big acquisitions and the next ones will likely be overseas.

The Chinese are not the only active investor in SV.  Over time, the Japanese have been a stalwart investor in the US and their activity is continuing to grow.  Rakuten acquired Viki and Viber for $300M and $900M respectively.   Other notable deals include Softbank – Supercell ($1bn); DeNA- ngmoco ($300M); Gree – openfeint ($100M) & ); Gree – Funzio ($200M); Docomo-Buongiorno ($50M).  Though DeNA and Gree have suffered a small slow down in 2013, there are signs of them coming back in 2014. Gree’s new game has recently taken over the #1 game slot held by Puzzles and Dragons for almost 2 years.  For Rakuten, Docomo, and Softbank, this is only the start of the acquisition spree for some of these companies

An acquisition may be the end goal for many startups but it’s unlikely that the Japanese firms will lead with a heavy hand in all cases. It is in the Japanese DNA particularly to try before they buy or take majority shareholding positions while allowing founders to retain shares.  Japanese firms often like to purchase just over the 20% or 50% mark so that Japanese companies can accrete earnings to their balance sheets.   Recently I sat down with the head of corporate development at one firm and he asked me about crowd funding projects and all the cool new stuff in SV. He is clearly interested in what the valley has to offer and what could be a platform for them to expand in the west.  Mitsui just invested in Box and aside from the larger companies, there are many other active strategic Japanese investors now including Sumitomo, Cyberagent, Recruit, Docomo Ventures, KDDI ventures, and GMO Ventures (leading payment gateway).  SV should reach out to these companies to better understand their investment thoughts. 

Even with these positive indicators in mind, SVEI have always had a tenuous relationship with the Japanese investors claiming they are slow, too diligent, and have lengthy funding processes.  Even recently one of the big Japanese acquirers mentioned that they were not interested in SV because of this reputation and felt like SV did not understand how to work with Japanese companies. They decided to avoid SV in favor of Europe and Israel – businesses who are naturally more global than businesses originated in SV.  I could sympathize with him because when I was at Mitsui, it was a constant fight to get investors to let us in deals to prove our value.   And this was in 2006 when there was a lot less money in SV!  (Cough cough - the Mitsui fund I worked for from 2006-2008 returned 10x their money with investments including IPOs Ruckus Wireless and A10 networks and acquisitions including Smart Signal (first internet of things before it was called that), and Beceem.

Even so, these slight annoyances should not detract from the value Japanese partners can bring to SVEI.   Sunbridge Japan successfully expanded Sales force and Oracle into Japan.  The trading firms Mitsui and Sumitomo have been actively investing in SVEI and bringing the technology back to Japan.  One of Mitsui’s investments, A10 networks, recently went IPO off the back of significant revenues in Japan, created by a small merger of one of Mitsui’s distribution channel companies. Carriers such as Softbank or KDDI have been great distribution partners for startups. Softbank has partnered with Fon and Fitbit.  KDDI has had several successful partnerships like KKBox (Taiwanese startup created by a UCBerkeley graduate) distributing it as an early leader for music streaming.  

As young companies are looking abroad more aggressively, SVEI should embrace the Chinese and Japanese in a much more meaningful way.  While this post focused solely on internet and mobile companies, it is not limited to this industry.  Clean energy, healthcare, and new hardware companies all will rely on Asia for growth and adoption of technology over the coming years. Asian investors cannot only invest they can help build companies.  SVEI should allocate people to help build this bridge between the different countries; business development associates should spend ample time scouting out opportunities and developing partnerships.   The future rewards will benefit all parties.

Davidson +15

Paul’s blog post inspired me to write a quick note about my thoughts of our reunion weekend and reflections of Davidson College.  I do agree with Paul that I wish we were able to find a way to keep in touch more regularly with Davidson friends and acquaintances. Even with increasing communication mediums like Skype, Facebook/Whatsapp, and Facetime, staying in touch is still difficult. Paul is right: as our lives diverge, it is just harder to make the time to stay in touch and when we do get in touch, the first few moments may seem a bit awkward.  But, alas, that is why we have reunions – to allow us to come together, to celebrate our time at Davidson, and to remember what makes us so similar, our Davidson-molded minds.

I enjoy our reunions and stupid fun that i have at them.  I get to see who is balder than me (damn Fritz you are winning!), have good laughs with old friends (Covell, Nurica, and Brown twins), pretend like I’m dancing at Phi Delt, drink beer at Pika with Fritz, Case, Denise, and Graham (which I didn't do 15 years ago), eat lots of quesadillas (which I ate 4 at 2AM), steal golf carts (no attempt this time), take batting practice and so on and so forth.  I get to do all of the fun things I did 15 years ago that I don’t get to do anymore.

That is exciting, indeed, but that is not the reason I eagerly come back to Davidson.  The joy in returning to Davidson is to learn where their lives have taken them.  In my travels across the world and in meetings with people - I meet a lot! - I do not often meet people who think like we do.  And for years, I could not understand why I have a different impression from Davidson people than all of the others I meet.

At first I thought it was because of how we lived our Davidson lives.  We studied so darn much just to pass.  Nah, that was not it because some of you didn’t.  Perhaps, it was the parties down at the court. Nah,  you never really remember parties, do you?  Then, I thought it was because we shared some common interests but surely that's not right because not everyone likes baseball as much as I do or even at all.  But, Eureka! This year, I think that I may found have the answer.

The Davidson College education imparted to each of us a similar approach to how we think, work, and act in our everyday life.  This approach is a value system that many of us embody.  We respect all people regardless of where he may come from.  We take the Davidson College work ethic to our jobs and personal lives and we have the desire to continuously learn. Most importantly, we try to search for meaning in our work and feel a sense of duty to make the world a better place. Most young college graduates do not leave college with these traits.   And that common value system is why I have always felt this inexplicable bond with people from Davidson.   Furthermore, these values I seek out in my friends and people with whom I work. 

Where does this way of thinking come from?  It comes from our four years of Davidson College.  Our honor code system taught us to do what is right, to always take the high road – except when borrowing golf carts of course; our religious studies opened our minds to different ways of thinking - who would have thought Davidson’s Buddhist and East Asian Studies would have driven my interests in Asia and meditation; our discussions with professors and students offered a forum to debate topics and to not accept the status quo; the rigor needed to just pass our courses set our work ethics for the rest of our life – I still pull all-nighters several times a year; lastly, our course work always taught us to think, draw our own conclusions, solve problems, and offer ideas on what would we do to make this world a better place.  The way our professors and coaches helped to shape us is the reason we have some commonalities.

For those reasons we possess a common bond even though what we do is not in common. When I caught up with all of you during the two days, it tickled me to not only hear southern accents again but to hear all of the great jobs people were doing:  teaching and leading at schools, starting a publishing company, architecture firm, restaurants, organic farms and a doggie shop, buying new companies, starting new funds, living in different places around the world, MCing at a radio station, working for the Obama administration, preaching the good word, saving lives, and doing just against corporate greed.  I revel in the diversity of professions of our classmates because what each of us chose to do are are all worth doing because each of you has found meaning behind it.  This is the search for meaning that Davidson instilled in us during our 4 years.

In the next five years, many of us may not speak again or perhaps David, Cabell, Paul, Jeff, and I won’t cut a business deal together but each of our lives will evolve in different directions.  Some of us may finally have families and some families will grow up.  Some companies will go bankrupt and few will succeed.  Others will continue strive to help change lives in their day to day activities in the classroom, the courtroom, the churches, and for our country.  Some of us will lose more hair and some of us may pass away…. We should not wait till we are 57 to stay up and drink beers with each other until 5AM. 

But in 2019, I hope to see all of you again, share more stories, and learn about how our lives are so different.  And in 5 years, when you approach that person you have not from in 5 or 10 years, or maybe you did not even speak to much when you were at Davidson, you can remember that we are not entirely different.  Then, that first moment may not be so awkward.  

Top 10 Reasons Why San Franciscans Would Love Tokyo

1. Foodies! – Everyone knows I don’t like super expensive tasting menus and would always prefer a burrito or Yoshinoya. That said, I’ve always said SF has the best restaurants whether a cheap burrito or expensive Michelin rated; Tokyo has cheaper, better restaurants and cheaper, more Michelin rated ones as well. So take a bunch of great restaurants and a city full of foodies and Tokyo takes my #1 foodie spot. Whether its sushi, Japanese style Italian, a kobe beef burger, matsuzaka beef teppanyaki, or Yoshinoya beef bowl, you just can’t go wrong, 2. The food is fresh, not processed, and the meat is organic. I’ve met two vegetarians whom moved to Tokyo and became meat eaters. 3. The Great Outdoors! a. Skiing and Hiking - The Japanese Alps is as good if not better than Tahoe and much more accessible - only 90 minutes train b. Surfing - Only 90 minutes by train at amazing beaches and warm water c. Biking – there is big road biking culture with lots of great, long rides right from Tokyo and even nice, longer rides around the country. (I’m finally bringing my rode bike back in the summer) 4. Alcohol – Like most of Asia, there is no homegrown wine, but there is lots of great sake, whiskey and beer. 5. Much of the country is single - both guys and girls can benefit 6. Nightlife – we all know this is what SF doesn’t have, you can party till you drop; but, everyone knows reading this thread that I’m in bed by 12, unless I'm jet-lagged then party on! 7. Green – the country is very green, and has adopted all types of green energy as well as recycles. They have more Unesco heritage sites than any country in the world. 8. Health - Japanese are big now into the ‘healthy boom’. There is a big Yoga culture in Japan and one can find lots of small temples or outside places for a nice picnic or meditation. And the busy Tokyo workforce is slowly accepting a general appreciation for taking it easy and being healthy. 9. Its warm in the summer – maybe too warm 10. Music scene – Tokyo has a pretty good music scene with lots of international musicians who visit.

Sequoia History to Invest in "Fun and Easy Ways to Communicate"

After several years off of blogging, I’ve decided to start again.

The success of Whatsapp did not amaze me so much as did Sequoia’s ability to have chosen the right messaging application at exactly the right time.  As I look back over a 10- year period, the trends that allowed for a massively successful company in this space are very clear.  I can also only assume the Sequoia must have a very methodical way and formula – per se – to track these trends, find the right company and invest at the right time.  Below is my historical account of emergent trends of messaging applications as well as a few tidbits about Sequoia.

When I was working at GE in Hong Kong in 2001-3, I looked at many different emerging consumer mobile companies in Asia.  Several companies offered consumers fun ways to send text messages: in China, there was Linktone and KongZhong (invested by one of the first Sequoia China partners Fan Zhang) both which went public on Nasdaq; in Japan there was Cybird and then the eventual emergence of DeNA; and then there was a US based mobile company, Funmobility where I worked upon returning back to the US in 2006.  At the time, I had a big passion for consumer mobile products and I still do but I became to old to understand the consumer so i went to payments :).

Many of these companies had unique ways to send message people using graphical images and fun pictures.  At that time in China, Linktone was using 128 bytes formatted into a cool graphics of pets - this one application drove the company to 10's of millions of users and a successful IPO.  The consumer adoption for these services was apparent when the distribution via carriers was achieved. 

Another trend in China at the time was the use of MSN messenger to communicate for work; it seemed that almost all of our day to day interaction occurred via MSN messenger.  Almost everyone in China used MSN to discuss business matters: it was fast, efficient, informal, and you didn’t have to speak to someone J.   These characteristics of communication perfectly fit the Chinese culture and business environment.

After returning to the US and after working for Mitsui in 2007, I had a short stint advising my friend’s company, Heysan.  Heysan was a converged IM (Yahoo, MSN, AOL) on mobile devices, pre-iphone.  While spending time with them, the trends were apparent, the engagement on the mobile web site was several hours per day. Once Heysan launched the emoticons, the ARPU($) was almost in the teens.  The math worked - even at that time. Unfortunately we did not continue with the business and sold it right at the infancy of the launch of the iPhone.  However, during the sales process we discussed a potential exit with Meebo which was a similar PC messaging business. At that time, they wanted to invest massively in mobile which they didn’t. At the end, in typical Sequoia fashion they sold for a profit but did not build anything meaningful.  Again, Sequoia would have seen the emerging trend on mobile….

After consulting with Heysan, I joined Funmobility. From the time I met the company in 2002, they  had grown to 100+ people, very profitable, and their mobile consumers services - which consisted of a graphics communities, a Tinder type application, and music communities - were highly adopted across all the major carriers and consumers in the US.  In most of the Funmobility communities, users would message each other selfie pictures, music, and graphics made by Funmobility.  The amount of messages sent daily far surpassed the number of users we had on the platform.  During the high growth time, Funmobility considered raising more capital.  Mike Moritz and Roelof from Sequoia visited once and in typical Sequoia manner of saying very little only commented, "fun and easy ways to communicate are a great business model."

Once the iPhone came out, the business quickly began to decline and we were unable to learn from the trends on feature phones and apply them to smartphones.

Reflecting on these experiences to almost 10 years ago, the early indicators of the messaging trends were completely obvious. However, it took until now for the distribution and encumbrances of carrier over the top (OTT) services to eventuate. 

Once carrier distribution was overcome by Apple and Google, messaging apps like Wechat, Line, Kakao, Viber and Whatsapp took off, and as expected this initially occurred in Asia.   WeChat (China), Line (Japan), and Kakao (Korea) are highly adopted and users frequently use the emojis and fun messaging components.  While Whatsapp has eschewed the ‘funness’, it has the highest utility.  Most users in Asia use both a Line/Wechat/Kakao application and Whatsapp.  Whatsapp, by far, is the most widely used of the applications.

After reading Sequoia Capital's article on the history of Whatsapp, one line jumped out at me, "...It’s easy to take this novel model for granted. When we first partnered with WhatsApp in January 2011, it had more than a dozen direct competitors, and all were supported by advertising. (In Botswana alone there were 16 social messaging apps)."  I can only think that Sequoia must have a very methodical way that they historically and globally track all of these trends, across their portfolios in India and China as well.  Then at just the right time, they are able to spot the leader and invest.

Undoubtedly Sequoia has the ability to see the best opportunities in the market but that doesn’t mean they have to invest. Surely all of these experiences led them to a very significant decision to scope out an investment in this space and they clearly picked the right one.