Shen: Entrepreneur very impatient a turn to B round some only two months

"The 14th annual China Equity Investment Forum" was held on December 03, 2014-December 04 at Park Hyatt, Beijing. Shen, the founding and executive partner of Sequoia Capital China fund, shared his views on mobile Internet investment in the era of creation.

The following is a transcript of the speech:

This year I found a very interesting phenomenon, two extremes: on the one hand, from the beginning of the year to hear a lot of investors to remind everyone, is not the winter is coming, to prepare for the worst; on the other hand, venture capital market is unusually active, this year, whether VC or PE, investment scale, especially in the information technology industry, More than any year of activity.

On the one hand, we are worried about whether we have arrived at the apex of a market, there will be a big adjustment period. But obviously it's a very different environment from 2008-2009 years. Because the people who have the money use their hands to vote and use their cheques to vote, their investment proves very, very bullish about the market. But the market is full of some anxiety, full of some hope, we also have a lot of worries.

So I have two points to share with you, one is as an entrepreneur, in such an environment, how to grasp their own. I feel that a company's growth rhythm is very important, of course, we see a lot of business development, now there is an acceleration, I remember last week at an investment annual meeting, they are talking about non-linear growth, indeed today many excellent entrepreneurs grow faster than the early days of the Internet. When he was doing roadshow in Hong Kong, the company's history was only 3 years and 06 months, and the company's market capitalisation was at 3 billion, or higher. When the United States on the U.S. market, the market value is similar to the scale, history is only four years.

In such a case, many entrepreneurs are impatient, hope to establish their own market position as soon as possible, this idea and mentality completely understandable. Because of this, everyone in the financing is particularly aggressive, the previous a turn to B round the time of one year to 1.5, this year may only two months of time.

But we also see that there is a phenomenon in the market, the amount of financing in the market is somewhat exaggerated. It is true that we often hear entrepreneurs say that the numbers are bigger, and that competitors also say the numbers are much bigger. This is a special need to guard against a mentality, to do a business or should hold the idea of a century old shop, we have invested in many traditional industries, in the traditional industry in five decades to build a brand, to create a business is very normal energy consumption. Go too fast, enthusiasm, often to the company's development left some shadows, leaving some potential lessons to fill, this law is no way to change.

Financing is also normal, only financing to get money to constantly expand their market share. Today, we all understand the market, the Internet needs is the size of the user, the need is the market share, rather than a start to pursue profits, the pursuit of cash flow. In such a competitive environment, I feel that the market participants should still have a clear mind, after all, the cost of capital input and output in the long term is to be settled, not more capital will certainly be able to bring a successful enterprise, I believe that five years ago there have been such a lesson, 10 years ago had such a lesson, There have been lessons in China, too, in the United States.

So as an entrepreneur, I feel like I should put a little more peace in my mind. In the long run, the need for financing is not to compare their own funds is not the most of the market, but to see the capital efficiency is not the highest, do not because of their own competition, and disorderly their own, this is the 1th I want to share.

2nd, in China to see in many industries, there are direct two to four companies in the competition, even in the O2O industry saw a number of enterprises very direct competition to carve out the market. This is a lot different from the United States, our company, which has risen in the last five decades in the United States, has a very interesting phenomenon in the development of companies from Twitter to LinkedIn, where almost every vertical industry, or every application, quickly forms a single company. In general, these companies occupy a market share of 70 and 80%.

Why did not the entrepreneur imitate these leading enterprises, knowing this market is very big, go to the market a piece of, so that in two or three years there are two giants carved up the market? My American friend told me, summed up for 180 days phenomenon, 180-day phenomenon has occurred for some time, what is called 180 days? A company when your product is released, within 180 days because your competitors have not had time to respond, you quickly build up their reputation and user base, so in that industry, competitors have been difficult to catch up. This observation is very interesting, because we know that in the traditional industry this is difficult to do, a traditional industry, such as the real estate industry within 180 days to establish technical barriers is impossible, in the traditional manufacturing in this way to build their own technical barriers is not possible.

But it's perfectly possible in the consumer Internet industry, in six months, because your product has the first advantage, in a very short period of time, you may have built a very deep brand and his product basic attributes, so your competitors will be difficult to copy. Of course, what is behind the 180-day phenomenon? First the product must be original, must be that entrepreneur according to the market own unique understanding, produces has the market very differentiated product and the application, these products and the application is today the big company has not thought, has not exited, this 180 day phenomenon is the Internet domain very special condition.

Even in the mobile internet age, the 180-day phenomenon has come a little too long, and the mobile Internet may have the opportunity to build a brand advantage in a shorter time. Of course, if you slow, your competitors may not be in six months to catch up, in less than two months to catch up, in the mobile Internet access cost is too low, this is a very interesting phenomenon, it is also worth a lot of Chinese entrepreneurs to think.

Because today we see some of the fierce competition in the industry, nothing more than product differentiation, I am afraid not enough. I am afraid that in the course of development, we still learn some overseas business model, when you are learning when others are learning, the 180-day phenomenon is afraid that there is no.

So back to the point where every entrepreneur needs to settle down to have a long-term plan, to create a company, to create a product, or to create a product that you think is right for your users, based on your own unique understanding and interpretation of the market.

If every idea is original, I believe that whether the 120-day phenomenon, or 180-day phenomenon, will allow you in a considerable period of time to establish their own barriers to avoid possible vicious competition, but also through this method, no longer through the capital, through the continuous financing scale to establish their own technical barriers, I believe this is a feature of China's future batch of outstanding enterprises.

We have seen this from the stranger, I believe in the future of a large number of young entrepreneurs, this will become more obvious. Thank you!