Kai-fu Lee: Why do early entrepreneurs fail easily?

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On the day of interview with Kai-Fu Lee, we saw an English tome on his desk next to a teacup that was "being a decoupled Dad today". Well, Kai-fu Lee is not like a man who still needs to learn how to be a good dad-he spends a lot of his time on his microblog with the warmth of his two daughters.

If it were to be far-fetched, the lead (CEO) of the innovation Workshop, or the early investor, might have been a "Dad" role in some way or another. Does he need to keep learning?

Lee's office is unlocked, he says, as an open and benign part of the culture of innovation workshops.

In the September 2009, when innovation workshops were announced, the industry had a voice of doubt. Kai-Fu Lee himself even in the micro-blog name on the existence of innovation Workshop Ecapital Capital CEO ran, hope that the television station can invite him to participate in the program discussion. At that time, ran in his blog on the Innovation Workshop of the "incubator" the focus is: the real creative entrepreneurs can be judged, selected out of it? Can real creative entrepreneurs be mass-produced?

In fact, ran's two-point fears were partially validated in the later practice of innovation workshops. However, many people at that time rejected the idea of "workshop", also showed that at that time the "incubator" in fact, there is a gap in the concept or understanding of the deviation, in many people's ideology, "hatching" seems to be a person without entrepreneurial experience and genetics, "nurture" and "transformation" into an entrepreneur.

Not really. Why did the innovation workshop survive in three years? and the first issue, two dollar Fund and RMB Fund, one is the incubator to the entrepreneur's role is "amplification", "acceleration" and "catalysis", rather than "genetically modified" work, which is feasible in reality; On the other hand, Innovation Workshop in practice also timely adjust its own operating methods, the most important--is from the creative looking for entrepreneurs, into a direct investment in the entrepreneur.

In fact, for now, more incubators are being built at home. And with three of years of experience and lessons accumulated in the innovation workshop, there is a more than others on the incubator and the early (investment) thing more.

Therefore, today we invite Lee Kai-fu to talk about early investment and early entrepreneurship.

"Early" advice to entrepreneurs

1, "20-year-old entrepreneurship" is not very good

Kai-Fu Lee: There is now a "20-year-old entrepreneurial" phenomenon, many people see Facebook, Apple These companies are founded by the 20-year-old entrepreneurs, but in China, the more than 20-year-old entrepreneur Road will go very hard, the reasons for three:

First, the Chinese education is relatively single, the cultivation of professionals, more difficult to develop a versatile, student age is difficult in finance, products, exchanges have made achievements.

Second, the United States is to encourage doing things to follow their own heart, and China still pay attention to first read the book before you say.

3rd, is China's internet is serious, "3Q", "small 3" wars emerge endlessly, a newly graduated people are difficult to go to war.

It can be seen that in the past 10 years, the average age of Chinese Internet listed companies when they start their business is 33 years old, when the market is nearly 40 years old. In the "hatching" process, we also found that the success rate of mature entrepreneurs is 4 to 5 times times higher than the first entrepreneur.

The outside thought we were looking for a group of 20-year-olds and then turned them into entrepreneurs and entrepreneurs, and we actually thought it was not going to work, and it wasn't what the factory was doing.

Of course, we still prefer to do the training. Help those first-time entrepreneurs through lectures, events, or training. And there is no doubt that the vast majority of future success stories will not come from young start-ups.

2. Take the failure case of the innovation factory as an example to see where early entrepreneurs are prone to failure

Lee: 4 of the more than 50 projects invested in innovation workshops have been liquidated.

Usually the biggest problem is that in execution, execution and focus should be tied together. Not focusing on what smart people want to do, nothing to give up, and the result is nothing. In fact, this era is "lean Entrepreneurship" era, is to do a little bit of fine, and then slowly promote product development, do "subtraction" than do "add" more reasonable--but the smart people are often like to do "addition."

The second reason for failure, I think, is that the founder is too technical to focus on user needs. So, if it's too technical, we're not going to vote. We have one or two projects in this trap, the founders always say how great the technology, but become the technology to find the user, rather than the user needs to find technology, ultimately did not solve the user's needs and pain points.

The third problem is that the founding team is too thin. The most perfect entrepreneurial team should be two to three people, is a long-term familiarity, trust and complementarity. Unfortunately, the entrepreneurial team rarely has such a perfect situation. What is the reality? The founding team may have just met, or we've set up, or they're looking for a partner to get our investment. If there is no sufficient trust, causing the founder's friction, may pass to the team some bad information. Moreover, equity inequality could be a problem. There is also the growth of the founder can not match the growth of the company, sometimes a good entrepreneur is not necessarily a good operator.

About early investment

1, kai-fu Lee's eyes on the unique innovation workshop

When it comes to the difference between innovation workshops and other American incubators or "class incubators", Lee paints a picture on the glass. Of these, Y Combinator (YC) and PnP are two famous incubation institutions in the United States, while Andressen Horowitz and Ron Conway are two famous early investors.

Mark the number of places, is Kai-Fu Lee think each family has the ability and elements, the thumb, is he think Innovation Workshop especially has the advantage. #p # subtitle #e#

Of course, this only represents the views of Lee Kai-fu. Let's share this picture with you.

We specifically asked, why the famous incubator YC only does "seed" instead of "VC", Lee's explanation is that YC founder Paul Graham's personal style dictates that he only likes "hatching" rather than "investing", which he believes will not be a conflict of interest and can be treated equally for all projects.

2, Innovation Workshop experienced early embarrassment, "self-plotting" mode has retired

Kai-fu Lee: in 50 projects in innovation Workshop, half of the project is probably our own to find (including with ideas to find entrepreneurs, or to find entrepreneurs to discuss ideas), half of the entrepreneurs with the idea to find us. We're not going to be looking for someone with an idea right now. Early on, but at the time it was forced, because no entrepreneur (would want to) come to us at the beginning.

After doing it for some time, I found that I was busy. There will be potential conflicts of interest (LP will think we're putting money in the right pocket for the left pocket), so I think it's still focused on investing, which means we need real entrepreneurs to take over our role as entrepreneurs and creators. So the model is retired.

In fact, this model is not good, then realized that there may be advantages and disadvantages, now it looks more flawed, and its biggest drawback is that the entrepreneur should have thought of the idea as his baby, but now it seems to be the same as the other people to his task, although the initial six projects we did in this way to find a good CEO, has also entered a new round of financing or acquisitions, and graduated successfully, but that does not mean that the model is reliable, because it consumes a lot of resources and it takes more time to find a CEO than to find an entrepreneur.

But there was a certain helplessness, so there is no way.

If it's our idea, the stakes will be higher. But now this pattern has stopped.

"Business value" at the end of 2011 reported the distress of the initial model of innovative workshops:

Kai-Fu Lee know that they have to use (Innovative factory creative) in such a way to make several successful products, in order to attract external VC and mature entrepreneurs to pay attention to and recognition, but the immediate consequences of this early thinking is that several founders in the role of investors, hatching, Be involved in these projects as a product manager. The creation team's pattern of multiple roles is so inefficient that the original innovation workshop left the impression that a group of experienced people and newly graduated college students "Play House" was more like a workshop with several product lines than a pure investment institution. This kind of positioning and pattern of pain has also become the first year after the Start-up innovation Workshop theme.

............

The slump in business and the slow pace of funding put the innovation factory at the bottom of its 3-month period. "At that time, innovation Workshop is too bitter, the wages have become difficult, open and recovery of their own money to needless to say, even Hua and other people's own money is quickly taken away, some employees really reluctantly chose to resign." "Innovation Workshop COO Taoning afterwards recalls.

"Indeed, the first 3 months of entrepreneurship are constantly hitting the wall, by the end of the 2009-year October snack and pea pod Two internal projects started, these projects began to do a certain scale I will try to finance, many people say interested, but are on the sidelines, no one is willing to invest, so at that time there are some operational difficulties. Lee said.

Kai-Fu Lee recalls: the first year to cast very little, about 10 projects around, the next two years is about 20 a year or so. Because at first many entrepreneurs do not trust us, the top entrepreneurs will not stay, so that when we go to the initiative, the founders will think we have no investment experience, the fund size is small, even in the beginning, we do not have a penny, funds are still raised.

When we first set up, we had only 15 million U.S. dollars in investment commitments, that is, Gou, Liu, their money, and this money is also waiting for seven or eight months before the account, and the first fund-more than 100 million dollars spent more than a year to raise the account. At first, I got paid from my own account.

In fact, the outside world for us is a step-by-step process of trust, just when the media and engineers in the attention of us, a year later we won the trust of entrepreneurs, did two years before we get VC acceptance, now international investors and institutional investors are beginning to recognize us.

3, to "Occupy large shares" and "cottage factory" criticism of the response

Not long ago, Kai-Fu Lee on Weibo on the initiative to respond to the industry to create a large share of innovation workshops: Innovation Workshop for a total of 50 projects, an average of 17.6% shares, some have cast 2-3 rounds, so each round on average share lower.

Kai-Fu Lee: The situation in fact in the industry has been, to the recent existence, but not so serious, mainly because the investment has become more transparent. We also helped publish "Why Invest in You" and other books to let you know more about Angel investment. More Angel investment terms need further reasonable transparency.

I feel that we do not understand the idea of "plagiarism workshop". The vast majority of our projects are based on the needs of Chinese users, and the starting point is not based on a successful foreign project. Of course, if you clearly see a solution to solve the user's strong needs, (you go to the reference) is understandable, in the process of reference, it is not to copy all the details over. Some people do not like me to talk about "micro-innovation", then I change the word good, with "lean entrepreneurship" bar-it means to solve a problem for a group of users to see if it is likely to be rapid iteration. I would like to say that no Chinese company is always successful by plagiarism, a truly successful company to the needs of users is absolutely enough focus, faith. Also has is the execution strength is not strong enough, the olfactory sensitivity is not good enough.

4. Early investment must be helpful, aggressive people are not suitable for angels

Kai-Fu Lee: I think the competition for early investment is actually not fierce. To be honest, we invest in projects that basically don't look for other funds and angels--I think it may be that every founder actually has an angel for him. Of course, some entrepreneurs are obviously our cottage, such as Dombinson, when we evaluate social games we think he is very powerful and try to get in touch with him.

In the United States, you will find that early investors in the United States are friends, because in the United States, early investment is not a lot of competition.

Because the people who really do early investment, are holding the mentality of helping others, if you hold the opponent to kill the mentality, then you are more suitable to do the company. Aggressive people are not suitable for angels, so most angels are more approachable, the cause has reached a certain degree, not even for the money to do these things.

So there is no patience for money and we will not absorb it. The average fund for innovation works is now 10 plus 2 years. This is probably the average of the early funds. But when we were raising renminbi funds, it was hard to understand that mainland investors didn't quite understand the concept of 10+2, or even a shorter time. Now a lot of PE packaged into 5-year private placement, hoping to get short-term returns, this is not what we want to do, and some rich people want to use their ability and resources to add points to the entrepreneur, we do not want to find such a LP, we hope to find a decentralized, patient investors.

Innovation Workshops collect standard management fees. That means our wages are lower, we have no money for our employees in the short term, we look at long-term returns. The people in the workshop are not aggressive, short-term need to earn a lot of money, but you will find that the people of creative workshops love their work, believe that we do valuable, and enjoy.

Now our investment team has several more than 10 years of investment experience, the vast majority of products are experts, their background has to do products, have to do the analyst, there are reporters, but also a large company Bd.

5, to the B round, the competitiveness of innovative workshops is not obvious

Kai-fu Lee: Seed wheel is our advantage, a round or have a certain degree of competitiveness, but to the B round of our competitiveness is not obvious, if possible, we will cast a little bit, B-round needs like Sequoia funds.

My idea is that what the start-up companies need to be based on the needs of entrepreneurs, I think that in the B-round, the company will need a strong medium and late VC to lead, such as to lead them to go public, we do not have a strong experience in the partners, so do not want to hinder the entrepreneurs, we want to focus more

Tiger Sniff: After the first 180 million dollar Fund, innovation factory recently successfully raised 148 million dollars in funds. It was only the first round of the Fund's collection, after news that the amount could reach $300 million trillion. Of the 50 projects it has invested in, 4 have been liquidated, 17 projects have been financed by a round, and two projects, including the Magic Chart Elves, have been acquired. Lee said that there will also be the acquisition of the case occurred.