Moderator: Good morning my friends! Today we are guests invited Sequoia Fund is a partner of China Mr. Zhang Fan. Please Mr. Zhang say hello to everyone.
Fan: Hello everyone!
Moderator: Another guest was the South a new President, please say hello to everyone!
South Lixin: Good!
Moderator: We have today the subject of notice to the users called "Internet business we can do anything", and now the Internet has been a hot business topic, and even for some time I wanted to write a great article articles, to encourage everyone to start, and now it easier to spend money on. The vast majority do now is copy, very little real innovation, or copies of the relative maturity or abroad has been validated, we prefer the model of success. What the Internet at home what should be done? Today, we may need to give our guests the two friends some answers. Today's interview is an hour's time, my main question on behalf of users, now chaired by a new pass the baton to the south, by her question to do some things.
South Lixin: Mr. Zhang Fan and I know in 2002,算起来more than four years, which is more than four years of venture capital in China when the situation changes. Over the years of the venture capital event, I would like to ask you, you take back from this years event such risks which the investment? What is your feeling like?
Fan: domestic organization in 2002 the meeting of a larger scale, many people felt was caused by the onset of winter and the contrast between the actual operations. Those meetings, it seems to me it is a good starting point, as a venture capital as Sequoia after 35 years in Silicon Valley history. After a number of industry ups and downs, and sometimes in a very good investment, it is indeed in the entire industry is not optimistic about the circumstances, have been the support of venture capital. More personnel at that time, less competitive business, and small businesses deal with the growth of companies it is not like the whole industry comes as the climax of concern, so they give some very good business opportunities. This example illustrates when a lot of VC will be achieved, we are all pessimistic, it is a very good chance. So I put in 2002 as a pioneering event, there are a lot of that time to the VC before gradually decided to withdraw from China, the localization of VC precipitation at that time rather than down into the beginning of the down-to-earth area of its own to . So I think in the business sector, this is a very interesting turning point in the history of the development of China venture should be a very interesting turning point.
some other event to the end of 2003, because of China's Internet companies for a long time silent and the last one is Sohu, after 3 and a half years, China has once again opened up the enterprise market access, in rather pessimistic in the industry as a whole, when comparing the negative and do a solid job of a vertical field of its own Internet services. I think a lot of areas in China there has been such an opportunity, at the time of the enterprises have experienced a lot in the winter, making a lot of energy. In December 2002 when, after many companies have been listed, including China Unicom, COM, the air, as well as grand. A lot of stock in the circumstances, the performance of more than people expected that the realization of China's business enterprises in the Nasdaq as the Internet was a brilliant. After the venture capital in this sector has entered a slow recovery time after 2004, with the grand enterprise of the market, lit one after another like a new rate of value-added wireless services, outdoor media, with a vertical field, so 03 in December should be a very significant moment. After speaking to the Chinese enterprises, there are a number of more meaningful point in time, the summer of 2005 should be regarded as a more important point in time, the summer of 2005 in China for a number of enterprises at that time, and probably a few more than 10 home, has been in more than a year on the Nasdaq, but the performance is not satisfactory. At the same time, the field of wireless value-added time with the government and regulation of operators have a service provider of wireless value-added some of their slow growth rate of profit, the investment in the international human mind, once had a blowout in 03,04-style explosion. Nasdaq-listed in 2003 listed the total of more than 1 / 3, once in the first half of 2005 has created a challenge, wireless enterprise gradually decline.
also been a number of vertical fields of all queries. Under such circumstances, the summer of 2005 I think for the Chinese enterprises once again opened up a new situation, including Focus Media and Baidu listed in their own field of development has been very good. Both of them to further expand the stock market investors look at the growth of Chinese enterprises, diversity, not before, to narrow the field of investment go, but saw the value-added services such as wireless wide world outside, these two events in terms of venture capitalists is an important moment, the two companies have a considerable number of investment institutions to participate in these two listed companies, it shares all the way from the high, such as Focus Media M & A opportunities further enhance the status of its own, this is also a lot of venture capital for institutions and aspiring young entrepreneurs to open up a very good implementation of a new chapter. In particular, when listed Baidu, Baidu and the city was favored by investors in the United States far more than the same sector, so the first time, because the assets of China had already, in the past we did not understand the Chinese that is an emerging market, this event is also very important, from the eyes of investors, they really feel that China's growth is solid, there are fundamental. So this is the venture capital sector, a very important milestone.
from the investment, I think that things inside the big thing is not a lot of attention because one of the characteristics of venture capital companies, investment is often a time when people feel a ghost I do not know, but He listed and exit when suddenly a brilliant show. Therefore, from the venture capital sector is a major event, but also with the exit and the listing, but these things can not conceal some very significant event. From the investment, investors and government, between policy makers, such as the promulgation of the 2003 Regulations on the Management of foreign-invested enterprises, this event is also very important, it's a considerable scope for foreign investment enterprises to enter the promotion of investment projects in China, to establish a better legal and regulatory framework, as well as many Chinese enterprises, investment enterprises and foreign investment enterprises in the formation of a new fund also a better framework. There are many such incidents, I think China's venture investment in a few days in the past experienced a boom, from 2001, 2002, the total investment point of view from about 10%, to 2005, 2006 is a record figure, it is more washed up on a new high. Inside there are many things impressed, so much for me first.
South Lixin: I almost feel like Zhang, in 2002 compared belong to the dark before dawn, the 2004 is a turn for the better, get on the air is slowly let everyone see the signs of recovery. To 2005 is a new, and the Focus on the media and Baidu was yes. More interesting is that 2002 also happens to be Fan of investment in air time, Baidu in 2005 and was on the Focus Media is that these two cases is a very important investment Fan signs, changes in the last two years of your great . You feel your investment over the past few years as well as people on the case and determine whether or not what kind of change?
Fan: on the case and the judge certainly growing, venture capital in China, which in an early stage of development, the formation of a lot of project diversity, the diversity of entrepreneurial talent, 01 years, with the others in 2002, we have been a number of VC accumulation, to judge the case in the selection of cases when people's understanding and grasp of the case is a learning process. Up to now I think we more and more investors become more experienced, so the case and the judge, I think their changes are still quite obvious. Previously may have to contact in order to produce a number of cases and the more solid basis and feel, it can be judged relatively fast. Fast is not correct, but from the project and overall grasp of the judge and I like the whole industry, I think that has undergone a process of learning and growth.
investment ideas and practices I do not think that there is any change, because it was home, I also hold the investment industry in China should not be only a few years the rapid growth of investment in China so I was conviction is 20 years, 30 years, the Chinese breeds in this market no longer exists in many other countries for investment opportunities in many sectors of the domestic or the lack of top international players. We are such a good sound development of the domestic order, and at the time of investment ideas and practices is the coming decades China will have be moved to make the world of business. Within a few years to create a competitive status in the enterprise, in the United States, Japan, other countries have passed, and do not have this opportunity at that time with the concept of such investments. I think that China's investment in the field there are many investment opportunities, including the Internet and Internet and some of the other high-growth industry, we believe that such an environment, China's enterprises are facing great opportunities for development. This includes Baidu, Netease these listed companies have, in fact, than the size of their enterprises in terms of the same type may be the market value and annual net income is much smaller, both of these enterprises, including some very new enterprise . This idea a few years did not change. In 2002, when relatively speaking, because at that time did not like the business style now have a blowout, there is enough time for each company to conduct careful research and analysis. Research on the process of this analysis faster compression, to achieve the efficiency of doing things, so I think the next step forward in China I have just said it needs the ideas and practices, this is a relatively long-term comparison of the concepts and practical way of doing things. Venture capital is not a final victory in the 2-year, 3 years of a good battle, I do the thing to do a good job, regardless of changes in the outside world, but to cultivate consumers and businesses to provide practical services, access to value, with high growth enterprises.
South Lixin: So in fact we only see the way Mr. Zhang Fan for investment performance pretty constant changes inherent in the investment philosophy and practices as before, always in the impression we are very understanding and practical and is always busy investors in particular. In fact, Mr. Zhang Fan is currently the youngest of our industry partners, one of several of his partners, Mr. Neil Shen is a very experienced entrepreneurs to cooperate, so a lot of people said Sequoia Fund is to work fast. Fund set up in less than a year hand 10 projects, how do you evaluate the team you work style or culture?
Fan: On this question, as I said 10 projects in less than a year hand, very fast, implying that the bubble is not generated in the promotion of this or you simply go forward at all on the move跑. This I would like to make a comparison, the 99-year Silicon Valley, many companies at that time a partner every week, there will be many meetings, 5-6 projects a month, but more of a symbolic significance of the distinction is often 5,6 on the same project area, the funds quickly to other projects to follow up 7,8. So I think you look at the speed of a fund or whether blindly forward in time, specifically to see the project and its implementation of a project by going through the process of time is very important, from the specific speed is concerned, I think that is likely to soon give us a feeling, compared to 2002, when in 2003, each year about 3,4 Fund projects, the current is faster than the speed of some of that time. Often quickly, behind a high-quality business more than ever before, high-quality team to be more present in terms of speed I do not think that is our style and culture, I think our speed is based on our resources, first of all, according to the size of funds under management, and the quality of our team and our company for these contributions to these based on the premise of a comprehensive decision under consideration for each case and we set out to determine the investment benchmark.
In our view, the current speed does not mean that we are faster than in 2006, we very much hope that access to so many businesses, they have different growth points, they are also formed between a benign interaction between the ecological groups, among a lot of useful upstream and downstream industry chain, or between related industries for their help and experience. So, in my view, whether it should continue after this rate, more than a month is a project of this I am not sure, because the development of a fund is invested in accordance with the capital resources of the entire team, there are a lot of the whole of China determine the area of macro-drawn conclusions, but we will maintain their own style, to seize the many industries with high growth enterprises. At the same time provide for growth in the value of these enterprises, as long as we seize the resources of this and at the same time that we have invested in a future industry, able to generate very significant rule in the leading position of such leading enterprises, such enterprises will be not hesitate to invest into, but not with the previous three months did not invest in, we quickly get to vote, this is not the direction of our investment.
South Lixin: 10 cases of this in your yard, such as Qihoo, public comments, to be the focus of attention is your investment in the Internet, your Internet time to vote, what kind of industrial distribution or around the idea of what kind of investment this context?
Fan: Actually, a lot that the Internet industry is going to be a long and baptism of, indeed the Internet has become the industry's U.S. 90 business sectors inside the area of a representative. Has its own very important characteristic of Internet technology it is a matter of fact arise from so many years, the last century from the 30's to 40's, computer generated, have a communication network, and then to 90 during the browser technology, there are other related technologies generation. Internet, it does all it can be said that the development of high-tech fields have to use some of the best and play to create a maximum of life is very suitable for some very important business forms. Therefore, the late 90's, people for extraordinary Internet business have been in doubt to flourish, but an analyst said the investment, the Internet business with the charm and the value of Nasdaq's share price will not rise or low-explosive change, while the ultimate value of Internet companies will not be because of the subjective requirements and large-scale influx of money to speed up or slow down by any one technology into people's lives are a process. Although the United States experienced a mutation in the stock market, China has been the impact of the Internet winter, but the so-called emerging Internet industry was a step by step into the person's life, or both of its previous business model did not have the value of the combination, the process has never ceased. Now whether you say over the Internet, the number of terms from a number of investment overheating, I do not rule out is blind. However, the development of the Internet is still very healthy at present, such as future large-scale industries, and even the industry will be integrated into people's lives every day, and a lot of business models and technology is a step by step over time into the depth.
For example, such as Apple's digital music have also been considerable unrest in the area of the whole industry to try, including the failure of the traditional resistance to digital music, as well as the process of acceptance. But digital music is now 10 years later, really see his influence, and now in the United States exclusively in sales of CD's stores began to decline, while consumption of music to download music acts, started slowly from a small number of some of the industry into FANS general audience, this process takes time. I take this as an example, you ask the risk of the entire investment in the Internet context and ideas, I think a very important point, the Internet boom in the industry of the future scenarios and play on people's life is also very important to be generated and deepening, the new business model, the new bright spot will continue to happen. It will not because this year a particularly large number of venture capital, and what happens in the future, the Internet have taken place, it will not be pulled out of next year, venture capital, has entered a low-temperature phase, the Internet business model of the new people to explore and further consumption conduct will stop, this is no. So for us, we will certainly take a long-term, have a strategic vision.
up to now, the traffic management on the site, in the new product development design, Internet web site users to generate a lot of interactivity, many of these technologies have been gradually applied by some companies, Therefore, before the Internet to build a home, be able to fully display its own. Comment page is the same, so that consumers can easily navigate to other people on the hotel or other places of entertainment evaluation and comments, so that their own preferences for the site know, for the other people know, a very good interaction between all information in the side, such an interaction will continue in the future development. The Internet more and more people will bring a sense of intelligence, the future trend of this development is very broad. So for us, from the community to the forum search software provider to the community, all of these small vertical field of new technologies will be applied to people's lives, this process will continue development.
advantage of our investment in this area is also very important to try to use their peer-to-peer technology, the realization of a video program live on the Internet. Video field of the future there will be new developments, I suddenly have a feeling that digital music is that it can do in this area of the vertex. From this perspective, the application of the Internet is still time, combining software and hardware to allow the use of these services to the people's lives. We now see these enterprises is likely to be a very preliminary attempt, a real people's lives will continue to the application of the service, do you think of their service will be useful in all sorts of produce, we invest in the layout of the Internet is such a some enterprises, it is epoch-making enterprises, to include areas of investment that we go. To help them in the whole process of Internet development is the accumulation of their own and experience a success.
Moderator: I have interspersed a few friends of problems, in your speech in which he is more concerned about several points, one is referred to the Internet next year, Sequoia investment forecast relatively low temperature, many venture were relatively difficult to spend money on that.
Fan: I was cited by Internet users misunderstood. In fact, often a risk with any other area of investment in terms of an area, there is a cyclical, because the process of capital gain will have a spontaneous and blindness, it is inevitable from the formation of macro-economic cycle. This area in terms of venture capital, investors are bound to form a high period of optimism and the future when some of the more sluggish, but I am not saying that I am referring to is 2007, or that I have a view of a downturn, I think China's investment and financing from the size of the entire term, if you put it and China's macro economy as a quantitative comparison, China's venture capital and then the United States economy and the size of the economy in terms of venture capital, you will find a whole has yet to the field of overheating. From the whole of China in terms of macro-economic and entrepreneurial development, many venture capitalists, and investment patterns are also generated and development, so this time most of the capital or the creative will be used inside the enterprise will have a corresponding return. A small number of capital in the narrow field of more than gain, but the whole atmosphere of the business will not play a decisive impact.
Moderator: The second issue of more representative, the original venture capital in an enterprise when the vote occurred in the media of the time, and now venture financing are generally very high when and even in the negotiations have not yet signed to be completed when more information on a certain funds for which they voted, but also in investment, the start-up period is now higher than the original tune, how do you view this phenomenon?
Fan: It is a very good question, how companies treat their own process of financing, strategic application of the process, there is a considerable number of factors and conditions, sometimes because the business he hoped to use financing acts as a market, marketing so that their own brands for a wide audience know, this time not rule out the possibility of financing a number of enterprises to take advantage of the success of this landmark event publicity. But at least we Sequoia invested I would suggest that they need if there is publicity, the publicity as soon as possible after the return to the company do things behind closed doors, a core business, the accumulation of his technology and he is constantly creating, really bring valuable service to the need to do his service.
an enterprise only if the attention of their cohesion in the foreign propaganda, regardless of whether the investment and financing, or some other milestone in the development of the company for speculation and propaganda, such companies are often the products and services can not keep up, the lack of core competitiveness of the company. However, such a company because of the relatively high speculation, as I said earlier that the venture capital industry in a positive increase in the time period, it does play a lot of monopoly's line of sight, appear in the media, and I have a looks bigger than it is magnified the effect of a rise in this period, did not rule out such speculation to the surface of looking at a lot of business benefits, the use of these investments can easily move on to the next round of investment, attracting the attention of investors. However, a business team or a good CEO should not be all their attention on how to take advantage of the external environment to their advantage to create a good financing, or development environment, and ultimately the environment itself does not decide the success of an enterprise is your products and services you really bring the Internet, consumers what they want, they are willing to pay and the amount of time.
Moderator: users are more concerned about a problem, a lot of the media and the industry when talking about your past, there is a title called "Wall Street of the hunter" and became what the hunter must have successfully elements?
Fan: In fact, although I have had two years experience on Wall Street investment banks, investment banks on Wall Street do not really relevant with the hunter.
Moderator: Wall Street is not from the hunters to return to China? In fact, many companies want to get money from Sequoia, Sequoia is not given more money, or red cedar are particularly good to speak?
Fan: This is said in front of the somewhat contradictory.
Moderator: Will hunting to large projects?
Fan: That's the word used hunter, I think the choice of investment is very, the success of these companies give you the appearance of a hunt. In fact, venture capital is a very complex industry, it is behind the inside of the breadth of knowledge, there is sense to judge on the case and details of the hold, gets to see the inadequacy of their own, so get hunting as an example, each VC as a hunter, hunting the more the more I need to practice their marksmanship, found at the beginning of the hunting is not difficult to play. Prey a lot of playing later discovered the secret that there are too many, from the understanding of firearms, continue to use an analogy from the environment, weather, hunting hunting ground, as well as the understanding of the natural environment, to the equipment tools, their own mentality, as well as how to understand the game, game day personal eating habits, the animal's own personality and life of the surrounding mountains or the harmony of the environment degrees, all of these things will continue to refine and explore. So I do not think I was the "Wall Street of the hunter" on behalf of our casually firing a bullet with a lot of good words, the money all at once cast into the. More that we are a group of down-to-earth, keep abreast of the hunter hunting skills, able to learn things too much.
South Lixin: the outside world about our impression of Mr. Zhang, I have a few friends often told me that conversation with Mr. Zhang, he will be very serious, when it comes to a case very carefully when . In fact, Mr. Zhang is a very down-to-earth and serious a person, a member of our company are deeply impressed him. Also tell you a secret, which Zhang Fan is our journal of art and do what we often think that my colleagues in the industry we compared Zhang Shuai. 51 things to vote, do you value what is 51?
Fan: from the Internet early, a number of successful cases, they should be called "the founder of the new platform", including "My space", the founder of all platforms have a common that competitors do not care about the situation of financing, how much money I got. Indeed regardless of Yahoo, 51, when they grow up a very large, from the very beginning, the whole company is like a very good machine, it can put a lot of energy to put into service for users is that they provide a practical want services. Resulting in a short time of his products on the Internet by this appeal, to judge from all aspects, from the flow of Internet users online time spent in reflection of their efficiency and frequency. We found 51 and I have already mentioned that the United States is a big enterprise, there are such commonalities. In a very short period of time, the user is willing to use the product, customers of his own weight, will it create a virtuous cycle of interaction and. In these circumstances, I have mentioned many, many companies want to do "My space".
our experience of the founders and platform, in fact, the number of competitors and there is no significant difference, this time as long as the reduction of solid companies on the Internet as the core driver of value, I do everything, and Internet communication should enhance the quality of our products to meet the requirements of users, so that he 51COM their homes as the well-being of the Internet, in it to communicate with friends, explore new hobbies and aspirations, with your friends to interact, to constantly strengthen our competitive edge. The number of competitors, other similar "My spoce" number, this is not important for us. Let me give you an example just now, when there are a number of copies of Yahoo, and finally have slowly Fade away, the competitors will gradually run farther. Therefore, in terms of an enterprise, we will invest in Internet businesses and all non-Internet business exchanges, the development of a project is not simply or in the height of low tide period, and at the same time they are your competitors in the number of this for you how big is the crisis of degree, you do reflect the most important thing for Internet users and consumers what they truly want, as long as you think you are valuable, and we continue to use your product, for me to say it to be "My space" area of the core.
South Lixin: Is the Internet had little chance to start, or what do you think the Internet business opportunity?
Fan: I have just talked about our investment and distribution context, the Internet's investment of 2.0 with the domestic media does not care about the concerns, the media is a trend that hard of a time when speculation of when you do not to expectations, when all of a sudden you are extremely negative. Internet in the future in many industries will continue to produce the valuable products, such as video, music, with an unlimited future, the combination of the Internet. Of course we are concerned about all the high-growth industries, I think the layout of the entire investment in China in a very small part of many enterprises in China contains a lot of as a new platform to create opportunities for this, so the rate of the Internet more recent exposure, take a look at the surrounding businesses, from our investment, the investment in modern America, to the integration of insurance agents, the industry is behind a lot of development opportunities, so I do not think China has no other addition to the Internet.
South Lixin: VC investment in IT and the Internet are nothing new, the investment agent, animation or small, you are told how to find other companies have different IT?
Fan: We are down-to-earth every day to do their jobs, search for new industrial project analysis, these two projects came through the other channels in our hands.
South Lixin: a friend recommended it?
Fan: Yes, we are soon on their interest, constant communication with them, negotiating and decision-making the whole process with us a long time ago that the concept of the investment practices do not much different, that is, in a very short period of time of the enterprises have a good grasp of its entire development in the industry, as well as his competitive edge, in the end what kind of threshold, the entire industry and the company which What is a historical opportunity. It contains a very good fundamental point, he was able to create a new platform, a new industry leader and a very good trend, we have to invest after the evaluation. With them the process of negotiation and investment with the IT enterprise without any distinction between the nature.
South Lixin: valuation on it, relatively speaking, the traditional number of migraine, compared with other high-growth industries, and their understanding of VC is not a lot, how can you look at the valuation and comparison of the Internet?
Fan: We look back at these projects, I think are more reasonable valuation of the company, the founder and the VC is more fair, because if a reasonable valuation, then, regardless of your investment cheap or expensive, the future course of development, slowly between the team and have a common VC. You feel that your vote, and business people too much of a reminder, the VC cheated always feel this way, then, VC and entrepreneurial when the co-operation, in turn, the business team from time to time there is resentment on the VC. I think the most important point is that the concept has been the consensus of both sides, from now on we are an obstacle to the development of what we put together how to cultivate the company into the industry leader in the new platform, a new founder, such a work . Traditional industries in the field and on the Internet have a big challenge, so the process of talking about, and we are all very good to reach consensus. The last valuation are solved, and not from the very beginning on the valuation we have to look at.
Moderator: In the past, there is a data that Sequoia's investment in the value of the Nasdaq is up 10%? In China, what kind of goals?
Fan: This is like 10 percent, including Cisco, Oracle, Google do business in two to three decades in China after the Sequoia all listed companies, regardless of Shanghai, Shenzhen, Hong Kong, New York, all listed companies to participate in our company, its market value to account for the overall worldwide success of Chinese companies listed on a very large proportion of a very high and this is our goal. However, efforts to take a long time, we are prepared to fight a protracted war.
Moderator: Due to the time the relationship between the end of today's interview, to thank the two gentlemen, would also like to thank all the friends.