Episode 28: Chuhai: Why Chinese Entrepreneurs are Targeting Emerging Markets Across the World

GGV Capital’s Hans Tung and Zara Zhang discuss the trend known as “Chuhai” (出海), or Chinese founders targeting emerging markets outside of China, such as Southeast Asia, India, Latin America, and more.

As the mobile Internet market in China reaches saturation, an increasing number of Chinese entrepreneurs are now eyeing other developing markets where mobile Internet is just starting to take off; in fact, many of these countries are seeing their Internet sector dominated by Chinese companies. Factor Daily recently reported that 44 out of the 100 top apps in India (Google Play) are made by Chinese companies.

What are the reasons behind the “Chuhai” wave? How can they best recruit local talents and bridge the cultural gaps? How can they avoid the same mistakes that the US Internet companies made when then came to China?

Episode 27: George Yan: From Microsoft China to Clobotics

GGV Capital’s Hans Tung and Zara Zhang interview George Yan (严治庆), the founder and CEO of Clobotics, (扩博智能). Founded in 2016, Clobotics is a computer vision startup that seeks to make traditional industries more intelligent. It is headquartered in Shanghai and Seattle with offices in Beijing, Dalian, and Singapore. It currently serves two industries: traditional retail and wind energy. Clobotics owns over 40 patents and has raised $21 million in VC funding. GGV was an early investor in Clobotics in 2017, and our managing partner Jenny Lee is on the board. 

Prior to founding Clobotics, George spent 16 years at Microsoft in the US and in China. As the vice president and general manager of marketing and operations for Microsoft Greater China, he contributed to the double-digit growth for the region’s $3 billion business. He was also responsible for the inception of Microsoft Cloud business in China, and led a massive team in landing Microsoft Azure and Office365 in China within less than 10 months, making Microsoft the first world-wide cloud service provider to land its service in mainland China. Before Microsoft, George worked at Goldman Sachs and McKinsey in the US. He holds a master’s degree in financial engineering from Columbia.

George discussed how to find the “right timing” to leave big tech companies to become entrepreneurs, the lessons he drew from helping Microsoft land in China, and what it’s like to run a startup that is global from Day One.


ZARA ZHANG: Hi everyone. If you will be in Las Vegas for CES, the Consumer Electronics Show, on January 8th, we would like to invite you to the 996 CES meetup. Join GGV Capital, our co-host ZhenFund, global founders, and world class leaders for an evening of cross-border networking, insights, and fun. Our managing partner Hans Tung will have a fireside chat with exclusive VIP guests you won’t want to miss. For more details and to register for the event, please visit ces.ggvc.com. And this is a reminder that all of our events and meetups are announced in our 996 WeChat groups and Slack community. I highly recommend joining these groups by visiting 996.ggvc.com/community.

HANS TUNG: Hi there. Welcome to the 996 Podcast, brought to you by GGV Capital. On this show, we interview movers and shakers of China’s tech industry, as well as tech leaders who have a US-China cross-border perspective. My name’s Hans Tung. I am the managing partner at GGV Capital, and I have been working at startups and investing in them in both the US and China for the past 20 years.

ZARA ZHANG: My name is Zara Zhang. I’m an investment analyst at GGV Capital and a former journalist. Why is this show called 996? 9-9-6 is the work schedule that many Chinese founders have organically adopted. That is, 9 a.m. to 9 p.m., 6 days a week.

HANS TUNG: To us, 996 captures the intensity, drive, and speed of Chinese Internet companies, many of which are moving faster than even their American counterparts.

ZARA ZHANG: On the show today we have George Yan, or Yan Zhiqing 严治庆 in Chinese, who is the founder and CEO of Clobotics, or KuoBo ZhiNeng 扩博智能 in Chinese. Founded in 2016, Clobotics is a computer vision startup that seeks to make traditional industries more intelligent. It’s headquartered in Shanghai and Seattle with offices in Beijing, Dalian, and Singapore. It currently serves two industries, traditional retail and wind energy. Clobotics owns over 40 patents and has raised $21 million in VC funding. GGV was an early investor in 2017, and our managing partner Jenny Lee is on the board.

HANS TUNG: Prior to founding Clobotics, George spent 16 years at Microsoft in the US and China. As the Vice President and General Manager of Marketing and Operations for Microsoft Greater China, he contributed to the double-digit growth for the region’s $3 billion a year business. Jenny and I have known him for over 10 years. He has also been responsible for the inception of Microsoft cloud business in China and led a massive team in landing Microsoft Azure and Office 365 in China in less than 10 months, making Microsoft the first worldwide cloud service provider to land its service in mainland China. Before Microsoft, George worked at Goldman Sachs and McKinsey in the US. He holds a master’s degree in financial engineering from Columbia. Welcome to the show, George.

GEORGE YAN: Thank you. Thank you, guys.

ZARA ZHANG: The majority of your career was spent at Microsoft. What was it like to help a US company run its China operations? And what lessons did you learn about how US companies can go to China?

GEORGE YAN: It was a great experience running the Greater China team. Basically, I’m an engineer and I was born an engineer, so having that engineer discipline and attention to details and the logic to apply to a business world, I found myself able to transition into that role pretty naturally. But the business is so vast for Microsoft. The portfolio extends from the consumer business to hardware to services to cloud to licensing etc., and that gave me a great view of all aspects of the business, as well as how we would need to tweak different knobs to make each one of the businesses successful. So I found that that type of experience was super helpful to lay the ground for me to jump into the startup world.

ZARA ZHANG: I wanted to dive into the details. How did you manage to launch Microsoft Azure and Office 365 in China within such a short period of time? And how did you deal with the regulatory challenges?

GEORGE YAN: I think with a lot of luck to be honest. It’s understanding the Microsoft ecosystem, the business, the technology behind it. By spending a lot of time on the engineering team in the US, I vastly understood how an engineering product needs to shape itself to be here in China. And spending more than 10 years in China, I have a good feel for what the government and the regulators are looking at when a multinational like Microsoft wants to land a service in China. Also, that was the right timing for China getting a lot of weight behind the cloud, and the infrastructure of the internet booming, and wanting to have a multinational cloud provider here to be in the playing field. So I think we were lucky that we were at the right time, the right place, with the right people, and able to be very level-headed with the government about what it takes and how we would need to shape our technology and change our features and write our code differently in order for the product to be localized and able to operate here in China.

ZARA ZHANG: So could you talk about Clobotics? Just give our listeners an overview of how it’s helping to transform traditional industries.

GEORGE YAN: Sure. On the retail side, we’re focusing on digitized products. We think that offline retail today is unfairly challenged because it’s really hard to connect the people with a product in the retail store. And how would you connect those dots through the product in the middle? Recognizing the product is a very hard problem because, at any given time, there are hundreds of millions of different products out there in the market. So how can a person recognize their product so that they can have the interaction that you have so naturally online but don’t have offline? We believe that’s the problem that we want to solve. Digitizing the physical world starting with retail products. And once you do that and once you can build customer interaction building to business interaction with a product, then you have a very different model for how offline retail generates their revenues going forward.

ZARA ZHANG: So what does your product look like in the store and who uses it?

GEORGE YAN: If you were to go into a Walmart store or even a mom-and-pop store in Xi’an, likely when you open up a Coca-Cola fridge, you will see our IoT device stuck on the door. Basically, it’s two cameras looking in so they will understand what products have been taken out of the shelf. And we do local processing on the edge. So there’s a small on the edge chip that does deep learning algorithms to recognize what products been taken. Only the bits that change get sent back to the cloud, but at the headquarters, you’re able to see all the product movements in over a million or a million and a half coolers out in the market. So, basically, giving the headquarters that transparency and that view into how these point of sales devices are working at real time.

HANS TUNG: Traditional retail and wind energy are two very different markets. What’s the commonality between the two that allows you to build a product that can service both? And at some point in the future, do you have to choose which one to focus on more?

GEORGE YAN: That’s a very good question. That’s the question that keeps me awake at night. Essentially, when we got into this business, we saw that the fundamental technology blocks are the same. It’s going to be hardware, it’s going to involve some type of software, it’s going to involve computer vision, it’s going to involve automation. And we fundamentally believe that these technologies should be applicable in very different industries. We went into wind energy first because we had backgrounds in drones, in hardware, and also in computer vision. So entry into that space gave us that natural barrier and the acceleration that we needed to be number one in the market.

So, after two years in this industry, we shipped our first product, and we’re already the China leader in doing autonomous inspection for the wind turbine industry. When we look at the second industry, we see that the retail industry is a trillion dollar industry with still very little technology. And we believe that if we can provide the technology for the offline retailers and the CPG companies, they will use that as tools and weapons to actually have a fair fight against the guys like Amazon, etc. So we want to see how this industry will get shaped in the future, but that takes a longer time. And in order for us to be there when that battle happens, we’ve got to make sure that we can survive on this revenue stream and be a leader in certain spaces that we are sure of. So we look at wind turbine as more of a defensive play. We look at the retail space as an offensive acceleration play for the long term.

ZARA ZHANG: So what kind of industries will you go into next?

GEORGE YAN: We have plenty of things on our plate for us to chew. Our goal is to be number one in those two fields, and I think it’s going to be a while before we can pat ourselves on the back and say we are. So we’re not looking at a third industry. Our strategy is to have a defensive play and an offensive play, and that’s already complete. And we just have to go super deep in these areas to see how we can help these enterprises to extrapolate better value and better productivity from it.

HANS TUNG: Do the wind energy companies have more money to pay you?

GEORGE YAN: They do have a pretty significant budget for the operations and maintenance area. This is actually a $25-billion market, and there’s 450,000 turbines worldwide. So if you do the math, that averages out to $65,000 that they spend on operations and maintenance alone per turbine per year. And today, we’re only scratching the surface. We’re only getting $300 out of that $65,000 that they’re spending. So there’s a lot of technology innovations that we can do to make sure that we get a larger pie. And also the pie itself will get bigger as the technology innovations happen in the wind turbine industry.

HANS TUNG: So what’s preventing you from just focusing on that first?

GEORGE YAN: Again, it takes time for a commercial business to really accelerate. And for us to do that part well, we have already taken the right set of groups to be able to churn and move forward. This is not a game where if you have 10 people, you can go to 10 turbines, and if you have 100 people, it’s 100 turbines. It’s actually just that core set of people that’s churning at the customer sites and fixing bugs and improving products etc. So we’re not increasing the team. We’re just accelerating and making sure the product gets better. And that time is not going to go away by adding people. So for us, we know the trajectory is there and we will have to go deeper. By going in deeper, we’ll just have to take that time.

ZARA ZHANG: Could you talk a little bit about your technology and how it’s differentiated from other solutions?

GEORGE YAN: The requirement for our technology on the retail side is scale. Anybody today can take 10 or 20 pictures, do some labelling, put it into an auto ML engine from a large company, and turn out a fairly decent model that can get 90% or 95% accuracy. But that’s not interesting. It’s great for a demo, but it doesn’t work in a real environment. We’re talking about millions of products that we have to recognize. And on a weekly basis, there are hundreds and thousands of products that get updated, so new things that you have to recognize. So the platform that you provide to capture those images, label those images, find the SKUs that you’re looking for, then building the models and pushing the models in a very small form factor, into IoT and into your devices, that’s our bread and butter. And that’s something that’s really hard to chase or to leapfrog. I always use an example of the things that we previously did at Microsoft. During the search war, we always thought that with more money, with more hours, with more talent, we’d be able to catch up with Google. But we found that that was not the case because that was a data game. They were in the market first.

HANS TUNG: They had a lot more data than you.

GEORGE YAN: Exactly. So it doesn’t matter how much talent and how many hours you add onto it.

HANS TUNG: Right. You’ve got to have the data to train your algorithm.

GEORGE YAN: Exactly. So we believe for us today, we saw this big problem and we’re in there first. We’re capturing data. We’re building better algorithms around it. That gives a first mover advantage for us to scale many, many, many years later on.

ZARA ZHANG: Clobotics is only around two years old, but it already has offices in five cities across three countries. Why do you want your business to be global from day one?

GEORGE YAN: It’s all about talent. I think that talent from multiple different backgrounds coming together will come up with sparks, and these are the insights that I want when we build the team together. And by running global development teams for Microsoft for many, many years, that’s just part of our DNA. And that gives that “unfair advantage” of having the best people in the US and in Asia and in China etc. all coming together and working on the pieces that they’re good at. And today, machine learning, AI in general, is a super hot market, so being able to tap into other markets that haven’t been washed through multiple times gives us an advantage, from a resource and economic perspective, over some of the competitors as well.

ZARA ZHANG: Speaking of talent, you guys have a killer engineering team. Around a quarter of them hold a PhD degree, and over 80% of the team overall has a master’s degree or higher. Many team members come from prestigious Silicon Valley companies like Microsoft, Google, Amazon, Facebook etc. What tips do you have for recruiting technical talent in China? And when you pitch Clobotics to these talents, what do you use to convince them?

GEORGE YAN: I sell them our Clobotics dream but in Chinese, so they understand that we’re about staying here but we can also go global. And the dream has to resonate. I tell the person to close their eyes and imagine the offline retail industry five years from now. If a person walks into a store and the store is no longer aisles after aisles and racks after racks, it’s more of an experience play. When you put on your AR glasses or when you look through your mobile phone, that table in front of you with multiple products now suddenly starts talking to you, starts giving you more information, starts to tell you that there’s alternative products that you can get as well. And by clicking it, you’re getting more personalized information or personal discounts. That’s where I see the offline retail space going. Does that person want to be part of that journey? Does that person want to tell their son and daughter that their father or mother was part of that journey, was part of the mission that changed how the retail industry worked? We believe that if that resonates with a candidate, then more than likely I’m going to get that candidate to join us.

HANS TUNG: In my almost 20-year career in VC, I’ve met many professionals with amazing backgrounds in multinational firms for a long time. Most of them who work in the US tend to stay in the US. And the ones working in China tend to stay in MNCs for a long time as well. So when you and your co-founders, who come from being in multinationals for such a long time, came to do a start up, what changed for you? What was the thing that switched for you to decide to take that risk after all these years? And then, as you start building a company — you’re no longer part of Microsoft, no longer part of a big company; now you have to sell yourself and build your own brand — what are the lessons, both on the positive and negative side, that you can share that will be helpful to our audience?

GEORGE YAN: I think the most important takeaway through my two and a half years in the startup world is I started to recognize that I know nothing. And that’s super, super key for a person to be able to face themselves and admit that you know nothing. If you’re a large fish in a small pond, you get into a position where you think that you know everything. You can execute, you can do anything with your eyes closed. And that’s no longer interesting. So get yourself out of that comfort zone into a newer space because there’s a bigger world out there.

HANS TUNG: But a lot of people don’t want to do that. They enjoy being a cog in the machine at a multinational firm where they know exactly what to do and get paid well doing it. What changed for you and your co-founders?

GEORGE YAN: I think we’re just built differently. There’s going to be lots of these people that are built differently. If you look at the CEO, same thing, right? I think it just takes a special breed of people that become CEOs. Not everybody is fit for that role and we’re okay with that. We recruit a lot of people from multinationals and sometimes they say, “You know what? I like my comfort zone. I’m going to stay there.” That’s totally cool. But out of 10 people you talk to, you’re going to find one or two people that have that spark. All you’ve got to do is give them that nudge and they’re going to leave that comfort zone and join us. And the experience that they get in the next two or three years is going to be totally different. It’s an eye-opening experience for that person, I guarantee it.

HANS TUNG: Any specific incident you can recall that changed for you personally?

GEORGE YAN: Yeah. It was actually at the GGV LP event four years ago. I was sitting at the back table looking up at the startup CEOs giving speeches. Some of those guys are great at articulating their mission. Others not so good. But you can feel the passion that they have in the way that they’re telling the story. And I looked deep down into myself and said, “Okay. Am I just going to be a person who has a fast track to the C-Suite in a large company? Or do I want to do something bigger?” And when I said that to myself, I felt like I also had a mission. I also had a vision where I could digitize the physical world. I’m willing to converge the two together. And I have the talent, I have the tools, I have the people, I have the support, I have the worldview to make that happen. So why not take the plunge and try it?

HANS TUNG: That’s a good tip. For our next annual meeting, we’ll make sure we have the future George Yans and the Claire Chens of the world come to our event and be motivated.

ZARA ZHANG: What was your biggest challenge once you came out of a big company and started to pitch yourself? What kind of challenges did you face?

GEORGE YAN: I think it’s about being able to recognize that now without the big brand, without the reputation, people are going to look at you a little bit different. You have to be okay with that. The pride or the extra accessories that you had with a large company, all that stuff goes away. Today you have to build that reputation. You have to use both your hands, roll up your sleeves with your co-founder and do it from the ground up. And that realization was a shock to me. When you’re going to places where people roll out the red carpet for you, you have time scheduled for you etc., and everything now you have to do it on your own. That shock took five seconds. After that you know that you’re in a different place, the battlefield’s different, the things you do have to be different. The agility of adjusting yourself for the new environment, I think any startup CEO needs to have that and have it quickly.

ZARA ZHANG: You have so many offices across so many geographies. How do you divide up responsibilities across them and how do you minimize the communication costs?

GEORGE YAN: We try to build these themes, a group of folks that are deep in certain areas. And we try to hire around the leaders. For example, the head of our US office is a renowned computer vision scientist and has been in the startup world as a CTO. So we build computer vision capabilities around him. And you can see that, because he has gone down the path previously, the senior talents and the junior talents and also the fresh hires and the interns can all start to come together in that area. So we’ve become this pot of folks who are very deep in certain areas. If you look at our China infrastructure team, these guys are ex-startup or ex-Internet guys, so they know how to quickly roll out a platform and scale to millions and millions of services over a very short time. So we try to go where the talent is and try to hire around where that talent pool has the right DNA and build from there.

HANS TUNG: You have had exposure to both B2B and B2C business models. When you guys were thinking about Clobotics, what made you decide to do this model that’s 2B in nature?

GEORGE YAN: I think in China, the previous internet or mobile internet etc. has been a rush of consumerization of online spaces. And, to be honest, that’s not something I’m very good at. It’s not in my DNA. I’ve been on the enterprise field for all of my career and I keep on watching and waiting. I believe the next wave of change is going to happen on the B2B side. And it’s going to happen with deep technology companies that can help push the business model, working with the traditional industries to help them transform. That’s where my bread and butter is at. You’ve got to do something that you’re good at in a place where all the cards are stacked against you, so we’ve got to find the things that we’re most comfortable with. It’s global, it’s deep technical, and it’s able to scale into services that other people can’t.

HANS TUNG: Knowing what you know now, when you look back at your career in Microsoft, what things do you think you learned that help you do what you are doing today? And what skill sets do you wish you had learned, either on your own or through elsewhere, that would have better prepared you for the role you have now?

GEORGE YAN: That’s a very good question. We were just talking about that in the team yesterday. I spent 12 years on the Microsoft engineering team. I believe I spent a little bit too long of a time there. I would cut down to about eight years so that I learned how to build a product a couple of times and how to scale a product. And I would leave the last four years to go to a company like Alibaba. Because I believe in the earlier days of Alibaba, the agility for you to change, the ability for the pressure to be on a person to deliver, and then to be versatile enough to be in different roles, that type of pressure is what I’m experiencing today. And I’m learning from scratch. But if I had that company where everybody had similar values and everybody had a similar movement, I believe that I’d be more prepared, that I would have a better preparation for where I’m at today.

HANS TUNG: That’s very good advice for our audience. Thank you.

ZARA ZHANG: What advice do you give to entrepreneurs who are debating whether they should train at a big company first or just jump straight into starting a company?

GEORGE YAN: Just from my personal experience, I think that training in large companies— I look at Microsoft as Huangpu Junxiao 黄埔军校. This is a place where you can move into multiple roles. I started as a engineer, then I was in product management, then I ran a large engineering team, then I came to China, then I ran the China business. So large organizations are able to give you these multiple roles and you can excel in these roles. And if you think about it, it’s actually very low risk. You really don’t have much to lose by trying new things in large companies. You don’t have to worry about these 70, 80 people that are with you. You don’t have to be worried about their paychecks. It’s basically a free trial that you try to get as much out of as you can while in these companies. And you’ve got to tell yourself that once you’re ready, jump. Even if you think that you’re almost ready, jump. Because you’re going to have great VCs like GGV and Hans that can back you and help you to really close the last mile, to get you out of that door. Everybody needs a kick-in. And my kick-in is sitting at the GGV event. And sometimes you just have to look straight into Hans’ eyes and Hans says, “Go.”

HANS TUNG: Or Jenny’s.

ZARA ZHANG: How did you know it was the right moment for you after spending so many years?

GEORGE YAN: It’s actually an evolution. It’s not a revolution. I’ve been preparing this thing for the three years, as I was talking about. I believe that the market, the technology, and my experience is now at the place where I think I’m ready. So it just becomes a natural progression of where I want to take my career next with the people that I enjoy working with the most.

ZARA ZHANG: So when you left Microsoft, did a lot of people come with you to join your new venture?

GEORGE YAN: For the record, no. I think you’ve got to have your own road. Once I’m on that road, once I’m telling people my vision, there’s other people, whether it’s in Microsoft or other places, who knew my reputation in the industry and decided that they want to share that dream with me. So everybody has to take their own path and it’s going to be a different timeframe. We welcome anybody from multiple backgrounds who share the same dream to come in at any time during the journey to be with us.

HANS TUNG: I think your advice to get people who are working at big companies to take risks is very important. A lot people think going to a big company is where they’re going to end up and stay. So they’re actually afraid of taking risk, of losing their job. But if you view it as a training ground, battlefield practice sessions, you can actually learn a lot if you approach it with a different mentality and mindset.

GEORGE YAN: Exactly.

ZARA ZHANG: You have served a variety of roles in your careers, first joining the engineering side, and then going to the operational side, and now CEO. Could you talk about your takeaways from these various roles?

GEORGE YAN: These roles are different, but your fundamental principles and how you approach and solve a problem are the same. Coming from a technical background, you’re always very logically trying to dissect a problem into multiple areas, and doing tradeoffs, and making sure the logic supplies the decision-making process. I think that’s just built into me. And I’ve been trying to apply the same skill sets whether I’m in an engineering role or running a product or coming to China. But I quickly found out that in a startup world, it’s not always the case. Therefore I actually have a circle of ex-CEOs, or even CEOs that are currently serving today in companies that are smaller than me or bigger than me, that I talk to on a daily basis. We bounce ideas off each other to make sure that I don’t get blindsided by things that I’ve been avoiding or overlooked. I think that’s critical. Again, recognizing that you don’t know anything and building a vast support system around you for those guys to give you ideas and advice and even just challenge your strategy and decision-making process. I found that to be very, very helpful.

HANS TUNG: As you were assembling your co-founding team, how did you think about who to recruit and what role they should be playing on your team? And how do you complement each other?

GEORGE YAN: I actually didn’t do any recruiting. Most of us had worked together for the past eight to ten years, so we knew each other well. We knew that once this co-founding team came together, we’d have a good chance of achieving something great. So it was a natural progression. And once you took the first step, everybody said, “We want to take the same step.” So it was a very natural path to get there. I think that’s probably one of the benefits for an older person like us, that we have that experience in large companies. So you have a track record. And a track record means a lot. So the advice I would give to the younger guys is make sure that you really cherish your reputation and your track record, whatever you do. Because all that stuff is going to add up and build who you are going to be later on.

ZARA ZHANG: You run a cross-border company across the US and China. How do you deal with the cultural differences and the communication costs? And how do you make sure everyone stays on the same page when you have such a diverse team?

GEORGE YAN: Write it down. A lot of times, by talking, things get missed. A person who’s not there gets missed. By passing words back and forth, things get missed. But once you write it down, it’s on paper. And you quickly realize that when you write things down, you actually have even more structured thoughts. Even things that you thought made sense don’t make sense on paper. So you actually spend more time tweaking it and doing more to make sure the ideas are solid. So we have a writing culture. We use Microsoft OneNote so everybody can contribute to the same service and we can see how our ideas progress over time. Writing it down is the top tool that I would recommend for everybody to do.

ZARA ZHANG: Do you think people work the same hours across your different offices or do you see a difference?

GEORGE YAN: Wow, the questions are getting harder. I think the hours are different, but people are constantly thinking about the problem that we’re solving. We don’t have office hours and we don’t have punch cards. We don’t track how long or how short people work. But you can see through the activities, whether it’s on WeChat or it’s on WhatsApp or on email, you know that people are constantly trying to solve a problem. And the problem’s not going to go away. So whenever you feel like you’re rested, whenever you feel like you’re ready, whenever you feel like the timing’s right, people will jump in. Because a startup is a self-motivating and self-driven service. It’s not just a paycheck. The paycheck that we give them today, any of these guys can walk out of here and go to a com company and get 2X and 3X pay. They’re not here for that. They’re here for that vision. So the faster that we can achieve that, the better prepared we can get, the better it is.

HANS TUNG: How many people do you have in the US now?

GEORGE YAN: We have 12 people in the US. A lot of those guys are pretty senior, very seasoned guys. And, to be honest, those guys also have less financial burdens as well. So these guys, if they believe in your vision and they want to spend time there, the amount of productivity that they come out with is just going to be enormous. It’s going to be super cool.

HANS TUNG: And how many people do you have in China?

GEORGE YAN: We have over 60 people in China. It’s spread over sales, marketing, operations, and engineering. That’s the big piece of it.

HANS TUNG: So what we have seen so far is that some of the engineers in China tend to want to just get going and start building stuff and then reset if it doesn’t work, get feedback from the users and iterate again. The architects in the US, in general, show some tendency to plan, get in sync, test the product before they roll out. It’s more deliberate. How do you reconcile their differences so they can be cohesive and productive for you?

GEORGE YAN: It’s a very good question. We have something called the prototype gurus. The prototype gurus basically help people to really put together that vision. People can see what that looks like six, ten months down the road. But also, we’re fortunate that our business is a scale business. It’s not something that you can just write and give it out and the customer gives you feedback. You can do that today. But how do you scale that service? It’s all about deep engineering, infrastructure work. And that part actually is going to take time. And this is where the US, the guys with a lot of experience, even our CTO who has done this for Bing search, comes in, so the infrastructure that we build today can scale to millions and millions of SKUs that we have to recognize. And our customers are multinational customers, so their expectation of our services, our SLAs, are super high. When customers are putting heat on you to say, “The stuff that you give us—”

HANS TUNG: Better work.

GEORGE YAN: “Better work. You’d better make it work.” That pressure gets on and we want to do the right thing, so we don’t want to waste engineering resources to rebuild and re-architecture. So that culture, fortunately, is very fitting to our background and business.

ZARA ZHANG: What advice do you have for US tech companies who are thinking about entering the Chinese market?

GEORGE YAN: It’s going to be challenging, to be honest. And I can tell you the multinationals haven’t even figured that out yet. It does take a special breed of people who not only look Chinese but understand the China environment, understand the local culture here, know how the US operation works and are able to learn and quickly adapt to the local environment here. It takes a special person or a special group of people to deliver that here. So take your time entering China. It’s not a place where you stick a flag and say, “We’re in China.” You’re going to get slaughtered. So take your time, find the right talent, even groom the talent if you have to. But this is a three- to five-year journey. And, by the way, if somebody finds a secret formula, you should sell that to Microsoft or Amazon or anybody else because they haven’t really figured this out yet.

HANS TUNG: You went through this with Microsoft. Knowing what you know now, what would you have recommended the management team do differently to be more successful in China, whether it’s on the enterprise side or on the consumer side with MSN Messaging?

GEORGE YAN: Ouch! I think on the consumer side, the timing wasn’t right. The team had a different agenda. It was a different DNA. So that part was not going to happen either way. But on the enterprise side, if a large corporation would truly carve out an engineering team dedicated for China and make that China leader responsible not only for sales and marketing, but for engineering, for research, for investment. You make that a true CEO for China, I believe the dynamics will be very different. And that’s still something that none of the multinational CEOs are willing to take a bet on.

HANS TUNG: Maybe except KFC.

GEORGE YAN: Through a joint venture.

HANS TUNG: What kind of person would have succeeded as a Microsoft China CEO in charge of the entire operation including engineering and product? If you were sitting in Redmond and you had to pick someone to be the first Microsoft China CEO, what would he or she look like in terms of background and temperament?

GEORGE YAN: I think I’m a very good choice.

HANS TUNG: But what is it about you that Redmond should have seen?

GEORGE YAN: It’s the things I was saying previously. They need to understand the product, spend a lot of time in corporate, understand how business is run in China, understand the intricacies of government and also regulation policies. But I think when I left Microsoft, even if I was given the role, I wasn’t ready. But having gone through two or three years in the startup world, I feel I’ve learned so much and seen so many things on the ground level, I would say that I’m much better prepared than I was four years ago.

HANS TUNG: Interesting. So you’ve got to have both.

GEORGE YAN: Exactly.

ZARA ZHANG: So now we’ll jump to the final part of the interview which is a round of rapid-fire questions. The first one is who is an entrepreneur you admire the most and why?

GEORGE YAN: I’ll give you two. Chairman Mao and George Washington.

HANS TUNG: Be controversial. Okay, go for it.

GEORGE YAN: Look, I think Chairman Mao is a great entrepreneur. He had a great ideology. He had, I would say, mediocre people. He had very few tools. And he’s able to attack this area he believed in and turn it around and use whatever resources it took in the long game to create what China looks like today. I think that entrepreneur spirit, if you read his writing, it’s always a part of his DNA, his genes. So I respect a person for being able to take that plunge. We’re changing an industry. He changed the world. And similarly with George Washington. When he comes in and says, “Hey. We’re going to do something great.” Again, a great ideology, but very mediocre people, very few tools, all the cards stacked against him. But he took the long road and built what is the United States of America today. I’m a history buff, so when I read these things about how they were able to conquer these difficulties, it makes me think that the things I’m doing are not too difficult.

ZARA ZHANG: What’s a book or article that you read recently that you recommend?

GEORGE YAN: I keep on recommending Principles. Principles is a great book because you basically distill all of these learnings, all of these things that you say, “I wish that I could write those things down.” He wrote it down. He was able to put it together in a book and share it with you. So this is not a book that you read once and put on a bookshelf. This is something that you should carry with you all the time and just flip through the chapters. And there’s going to be these aha moments in these chapters where you say, “If I took a different path, if I’d looked at a person differently, if I knew that person’s background, I might behave a little bit differently and talk to that person differently.” All these things are so resonating and so useful. It’s something that should be pocket book sized and carried by all CEOs all the time.

HANS TUNG: So what do you think about when you get up in the morning? What motivates you to get up in the morning every day? And also, what are the things that keep you awake at night?

GEORGE YAN: The thing that motivates me is that today, 80-something people and some time later it will be hundreds or thousands of people that share the same vision and want to help traditional enterprises to digitize the physical world. And if that dream spreads around, I believe that not only will the world be very different than what we see today, but the wave of changes that we’re going to experience is going to be bigger than the internet wave. It’s going to be bigger than the mobile internet wave. It’s going to be bigger than the cloud wave that we have seen. Digitizing the physical world is the ultimate game where you bring all the talents and all the resources together to shape how we are going to see things differently five to ten years from now.

HANS TUNG: And what keeps you up at night?

GEORGE YAN: It’s going to take a long time to get there. And I need to have the right talent, the right resource, the right customers, the right product to serve the customer. It all comes together to make that happen. It’s a long journey. So I need GGV and the likes to back me up and make sure that we all can achieve that dream together.

HANS TUNG: We’re happy to.

ZARA ZHANG: What types of roles are you hiring for and how can people reach out if they’re interested?

GEORGE YAN: I think in a startup, people define their role. I actually don’t have very clear job descriptions. I have engineers. I’ve sales marketing guys. I’ve operations guys. And when a person comes in, they look at what we’re doing, and they tell me how the job description should be built. That’s how it should work. If you’re looking at a job description, I can get you on www.microsoft.com. There’s a whole bunch of jobs listed there. You can find one for your suiting.

HANS TUNG: So last question: what you do for fun? I know you don’t have much time for fun these days, but I still ask the question.

GEORGE YAN: I’m a saltwater aquarium fanatic. I have a saltwater tank at home. It’s an ecosystem on its own. It has LPS, SPS, it has live corals, it has Nemo. All the things that you can imagine in the sea, I have in my tank. And it’s delicate because you’re basically shrinking the sea into your living room. And the right chemical balance and the right tweaks that you have, the right bells and whistles, alerts to make sure the potassium and calcium are all correct and the right levels, that’s my chemistry lab. That’s something that I can focus on to take my mind off what I do in the startup world. It calms me down. When you look at the fish swimming in the water, you see the starfish and you see the corals waving back and forth, that gets me into a different environment where I can distill, and think, and process, and be better prepared for tomorrow.

HANS TUNG: What were your working hours at Microsoft and what are your working hours now?

GEORGE YAN: I would say the working hours are not different. Microsoft, for me at least, was my own entrepreneur experience. If you look at me coming into China as the first person working on MSN, if you look at me going from engineering to sales marketing, working on cloud which Microsoft or any other company hadn’t done before, jumping into the CEO role, no one had done it before. All these things, I’m taking that as an entrepreneur experience. Just trying it without a lot of risks. So the hours I put in were not your regular hours. I worked six days a week. Whenever there’s a customer call, I’m there. I spent all the time with the sellers going to a customer to see how we would close the deal, how we would structure a deal, how we would get government on our side etc. I looked at it as experience. So that experience continues into the startup world.

HANS TUNG: Except now you work seven days a week.

GEORGE YAN: Exactly. And with more risk. And I need to be more careful because we’re playing with your money and our own money.

ZARA ZHANG: George, thank you so much for being on our show.

GEORGE YAN: Thank you. Thank you for inviting me. Thank you. Take care.

HANS TUNG: Thanks for listening to this episode of 996.

ZARA ZHANG: GGV Capital is a multi-stage venture capital firm based in Silicon Valley, Shanghai, and Beijing. We have been partnering with leading technology entrepreneurs for the past 18 years, from seed to pre-IPO, with $6.2 billion in capital under management across 13 funds. GGV invests in consumer new retail, social Internet, enterprise cloud, and frontier tech.

GGV has invested in over 290 companies with more than 45 companies valued at over $1 billion. Portfolio companies include Airbnb, Alibaba, Ctrip, Didi Chuxing, Domo, Hashicorp, Hellobike, Houzz, Keep, Slack, Square, Toutiao, Wish, Xiaohongshu, YY, and others. Find out more at ggvc.com.

We also highly recommend joining our listeners WeChat group and Slack channel, where we regularly share insights, events, and job opportunities related to tech in China. Join these groups at 996.ggvc.com/community.

HANS TUNG: If you have any feedback on this podcast, or would like to recommend a guest, please email us at 996@ggvc.com.

Episode 19: Grant Horsfield of naked Group: Creating a Lifestyle Brand in China

GGV Capital’s Hans Tung and Zara Zhang interview Grant Horsfield (高天成), a South African serial entrepreneur who came to China in 2005 and founded naked Group, which includes the premium sustainable resort brand naked Retreats (裸心度假村) and the coworking space naked Hub (裸心社).

In 2007, Grant and his wife, Delphine Yip-Horsfield, opened the first naked resort – naked Home – in Moganshan (莫干山), a beautiful mountain 30-minute drive from Hangzhou. Following its success, Grant continued to expand the naked resort business into other high-end, eco-friendly resorts which prioritize sustainability development – naked Stables (裸心谷) and naked Castle (裸心堡).

In 2015, Grant and Delphine launched the coworking space business naked Hub, which seeks to combine hospitality, design, technology, and community. naked Hub offers several services, include open public sharing space, private office, and hot desks. It now has more than 10,000 members across 504 office locations both in Shanghai, and Beijing, Hong Kong, and other offices in Australia, Vietnam and the UK. In April 2018, naked Hub and WeWork China announced that they would join forces to support coworking business in China and throughout Asia.

In this episode, Grant explained why he moved to China from rural South Africa, how he earned the trust of local Chinese farmers in Moganshan, and what differentiates naked Hub from other coworking spaces.

The full transcript of this episode is available at 996.ggvc.com. Join our listeners’ community via WeChat/Slack at 996.ggvc.com/community. GGV Capital also produces a biweekly email newsletter in English, also called “996,” which has a roundup of the week’s most important happenings in tech in China. Subscribe at 996.ggvc.com.

We are excited to announce a new program, “GGV Fellows”, designed to help “sea turtles” or (海归) and Chinese students studying overseas to get to know the Chinese entrepreneurial landscape better. If you’re a Chinese student/professional who is studying/working overseas (or have done so in the past), this is a program designed for you! It’s a weeklong program in Jan 2019 in Beijing (during most US college’s winter break). You will be able to learn from executives at some of China’s most valuable tech companies, and visit some of their offices. You will also participate in mixers with students at top Chinese universities like Tsinghua and Beida to build a local network. Please visit fellows.ggvc.com for the application link and for more information.

GGV Capital is a multi-stage venture capital firm based in Silicon Valley, Shanghai, and Beijing. We have been partnering with leading technology entrepreneurs for the last 18 years from seed to pre-IPO. With $3.8 billion in capital under management across eight funds, GGV invests in globally minded entrepreneurs in Consumer/New Retail, Social/Internet, Enterprise/Cloud and Frontier Tech. GGV has invested in over 290 companies with more than 45 companies valued at more than $1 billion. Portfolio companies include Airbnb, Alibaba, Ctrip, Didi, Grab, Hellobike, HashiCorp, Houzz, Keep, Opendoor, Peloton, Slack, Square, ByteDance (Toutiao), Wish, Xiaomi, Xiaohongshu, and YY. Find out more at ggvc.com.



HANS TUNG: Hi there. Welcome to the 996 Podcast, brought to you by GGV Capital. On this show, we interview movers and shakers of China’s tech industry, as well as tech leaders who have a U.S.-China cross-border perspective. My name’s Hans Tung. I am the managing partner at GGV Capital, and have been working at startups and investing in them in both the U.S. and China for the past 20 years.

ZARA ZHANG: My name is Zara Zhang. I’m the investment analyst at GGV Capital and a former journalist. Why is this show called 996? 9-9-6 is the work schedule that many Chinese founders have organically adopted. That is, 9 a.m. to 9 p.m., six days a week.

HANS TUNG: To us, 996 captures the intensity, drive and speed of Chinese Internet companies, many of which are moving faster than even their American counterparts.

Hi, everyone. On the show today we have Grant Horsfield, whose Chinese name is Gao Tiancheng 高天成, a very ambitious name. Grant is the founder of the luxury resort company naked Group, and the coworking space, naked Hub.

ZARA ZHANG: Grant is from South Africa and first came to China in 2005. In 2007, Grant started naked Group with his wife Delphine. It focuses on developing rural properties in China for rental and tourism, and its flagship resort is located in Moganshan, a beautiful mountain a 30-minute drive from Hangzhou that prioritizes sustainability in design.

At naked Resorts, visitors can immerse themselves in nature and enjoy being away from city life. They can sleep in farm stables, ride horses, climb mountains and the environment encourages them to retreat and bare themselves to nature.

naked Group pioneered a concept of yě shē (野奢) in China, which translates into wild luxury, a concept of combining raw nature with luxury hospitality.

HANS TUNG: In 2015, Grant and Delphine started the coworking chain naked Hub, which also focuses on environmental sustainability and stripped down architecture. naked Hub offers several services including open office, private office and hot desks. It now has 10,000 members across 24 office locations, both in Shanghai and Beijing. It has expanded into Australia, Hong Kong and Vietnam.

In April 2018, a month ago, naked Hub and WeWork announced that they would join forces to support business in China and throughout Asia. Welcome to the show, Grant.

GRANT HORSFIELD: Thanks, guys. Happy to be here.

HANS TUNG: So let’s start with your personal story. Why did you move to China in 2006? Incidentally, in fact, my family and I moved to China in 2005, so around the same time. But you were from South Africa. You were a successful entrepreneur. Why did you decide to come to China?

GRANT HORSFIELD: So yeah, good question. I’d done an MBA and a teacher, a lecturer, had given me a story about China which really caught my attention. It was a crazy entrepreneurial story with a guy who ended up bringing chicken feet to China and making a whole bunch of money in six months.

HANS TUNG: So there’s a billion people here, if everybody just went and bought a pair…

GRANT HORSFIELD: The thing about the story that was interesting is that it was about selling to China. Nobody in that time was thinking about that. Everyone was about buying from China.

HANS TUNG: That’s right.

GRANT HORSFIELD: So I came here thinking, well let me come and explore this place and maybe something will catch my eye. And when I was here, I was searching, constantly searching, for a product. That’s what I thought it was. I thought there was something from Africa that I was going to bring to China.

And after a year, year-and-a-half where I was actually working with a company invested by Naspers —

HANS TUNG: Naspers from South Africa.

GRANT HORSFIELD: Naspers is from South Africa.

HANS TUNG: A major investor in Tencent.

GRANT HORSFIELD: Yes, exactly. I realized that what was missing here was lifestyle. It’s so difficult to explain to people that what you don’t know, you don’t know. And the people here were happy, and it’s a great city, but they just didn’t know.

HANS TUNG: What they were missing.

GRANT HORSFIELD: What they were missing. And I grew up in Cape Town, I mean I grew up in a small town called Knysna, but I went to University in Cape Town, had business and Cape Town and it’s a real lifestyle city, where people genuinely live life more than they work. It’s the opposite of China.

HANS TUNG: Lifestyle is a very popular word these days, and the concept is great, but 12 to 13 years ago, no one thought of it.

GRANT HORSFIELD: No one thought of it. So what I was really trying to do was solve the problem for myself, which would give me something else to do rather than go out to the bars and restaurants and stuff, and live life a little bit better. But that experience, I guess, was what we ended up importing. So we didn’t import a product, we imported a lifestyle, I guess.

HANS TUNG: Did you have to bribe Delphine to move with you? It’s not that easy to convince a wife to move to China in 2005.

GRANT HORSFIELD: I met Delphine in China. She came to China in 2000 to design Xintiandi. So she was the original architect of Xintiandi.

HANS TUNG: So she was more successful than you at that point in time.

GRANT HORSFIELD: Absolutely. I definitely hit well above my weight.

HANS TUNG: You lucked out, you married up.

GRANT HORSFIELD: And I met her in a bar, and if I had actually known how successful she was I would have been too nervous to talk to her.

HANS TUNG: Too intimidated to even talk to her.

GRANT HORSFIELD: Yeah, exactly. But I was the young cocky kid that, I saw a pretty girl and –

HANS TUNG: Ignorance is bliss.

GRANT HORSFIELD: Exactly, exactly. But just as a heads up, Delphine was always involved with me, but she remained as an architect in a separate company for many years whilst I started naked, but I must say, I could never have done any of this without her. She’s the grounding that I need in life, and so I have to credit her for a lot of that.

HANS TUNG: For those who haven’t been to China, Xintiandi was the place to go to in Shanghai in 2005. The first modern plaza, with money from Hong Kong that made it happen.

GRANT HORSFIELD: Yeah, that’s right.

ZARA ZHANG: Grant, I wonder what about the environment you grew up in inspired your interest in nature?

GRANT HORSFIELD: Yeah, I think everyone’s influenced by their background. I was very, very blessed. I grew up in a little town called Knysna which I think is probably one of the most beautiful corners of South Africa. I went to a school that was in the bush. There was no town. It’s just the countryside. I was there from five years old as a boarder, so I only went home three times a year. I didn’t know the city or towns, I only knew nature. We did survival camping from like nine years old, where you are just dumped in the bush with no parents, no teachers, no nothing.

For me, I’m far more comfortable. I always say it Delphine, like when we are in the countryside I can get you anywhere, but put me in a shopping center, I’m lost. I think that’s one’s background influences you and in Africa, I don’t know, I seem to find that all African people tend to have an affinity to love and care for nature. So this is something that’s very important to me now in my life, about not only what we’ve contributed to China and the way we build sustainably and operate sustainably, but now going forward how we can perhaps use our influence to help save some of the animal problems that we have in Africa.

So yeah, I think your background. It always comes back to sort of how you grew up. If you experience that your whole life and then you come to somewhere where there isn’t essentially any nature, it’s kind of obvious and stark.

HANS TUNG: How difficult was it for you to start naked Resort in China back then?

GRANT HORSFIELD: Wow, yeah. I mean the stories go on and on. I mean it was never easy; no business is easy, to be honest. Was it easy to do what I did? I think there was an element of luck for me in the fact that I was African and a farmer. When you go out to the countryside, you know farmers anywhere in the world are the same. And for me, just dealing with the farmers in Moganshan was no different from dealing with the farmers where I grew up.

So I don’t have a great sort of ego towards, well maybe I have a big ego, no question about that.

HANS TUNG: Oh definitely, no question about that. Just look at your Chinese name. We’ll get to that in a second.

GRANT HORSFIELD: I didn’t give myself that name.

HANS TUNG: But you accepted it and kept it.

GRANT HORSFIELD: My name was Ge lan te (格兰特) and when I found out that was an air conditioner I said, “You need to change my name.” But no, the thing is, Chinese rural people, as long as you come down to their level and drink baijiu with them, get to know them, be genuine with them, they fall in love with you, just like any other rural people. So that was my benefit that other people didn’t have.

HANS TUNG: How did you get funding to get the first one started?

GRANT HORSFIELD: Well, that was interesting.

HANS TUNG: And the permit.

GRANT HORSFIELD: Yeah, look, so we start small in China. I think that’s my advice to anyone, get your grounding. Our first resort wasn’t very big, it was 21 rooms, so we just needed a few million dollars. It wasn’t that expensive. But we did use some friends to help invest in that first resort. And I must tell you, that was the first time I realized that I never want other people’s money.

HANS TUNG: I’m not offended.

GRANT HORSFIELD: I knew straight away, they kept asking me “So how’s it going? What’s the performance? Are you going to give me a report?” And I said “No. It’s going fine, and that’s good enough.” And then soon, very soon, I was like okay, I don’t want anything to do with that.

So when we built naked Stables, which was a huge, ambitious task, I decided not to get any investors. I used debt as the primary source of money. That was the greatest thing I ever did, because obviously naked Stables became a massive success and I got off the ground, and life moved on. But I took a massive gamble, and it almost failed. It actually very, very almost failed in 2009, during the middle of the crisis.

HANS TUNG: Of course.

GRANT HORSFIELD: The banks took money away from me that actually was in my account. This is China. I mean, these are like the lessons. It’s like, “No you can’t. You can’t. That’s mine.” “Oh no, we can. You didn’t use it.”


GRANT HORSFIELD: So anyway, it was what it was.

HANS TUNG: How did you survive through that?

GRANT HORSFIELD: Well, it wasn’t easy. I had a heart attack, it was serious. I had a myocardial infarction. I think when you’re an entrepreneur, when things are the worst defines if you are a good entrepreneur or not.

HANS TUNG: Who you are, right.

GRANT HORSFIELD: And I needed money, so nothing else was going to solve my problem. So I was searching and I found two people that were willing to lend us loan shark money, 28 percent interest. I mean you know, crazy stuff, but I needed it in a month. And they trusted, they looked at me, they said, “You look trustworthy.”

HANS TUNG: Trustworthy. Cocky but trustworthy.

GRANT HORSFIELD: I had nothing to leverage other than my smile.

HANS TUNG: Yeah, your charm.

GRANT HORSFIELD: My charm. They helped me out. Both desperately wanted equity, both. I said no.

HANS TUNG: You held on.

GRANT HORSFIELD: Yeah, and then I made it through. I always knew that if I ever got the product finished, it would work. I proved that with a 21-room place, even though the 21-room place would never make money, because I learned later in business, in the hotel business, that scale is very, very important.

So I knew it would work. I just had to get there. I had to just survive long enough. And that’s always been my mantra to being an entrepreneur is, stay alive as long as you can. And if you stay alive long enough, you will ultimately come out okay.

ZARA ZHANG: I also wonder what people thought of your idea at that time, because that concept of combining nature and luxury was pretty much unheard of in China. I think wild luxury was like an oxymoron, because people associated the wilderness with hardships and peasants. They didn’t really think of that as what the middle class would do.

GRANT HORSFIELD: Sure, I mean you’re absolutely right. There are two sides. There’s my friends and my investors, and they thought I was mad. I mean, everybody was going “Seriously? You cannot go and put that amount of money in the middle of nowhere. No one’s going to come.” There was a lot of that, and to be honest, it was maybe one or two people that even gave me the slightest hope. They just wrote me off and said, “This guy’s nuts.”

HANS TUNG: And back then, Moganshan didn’t have much, unlike today.

GRANT HORSFIELD: No, there was nothing.

HANS TUNG: Today, Moganshan is regarded as a resource center.

GRANT HORSFIELD: There was nothing anywhere, to be honest.

HANS TUNG: Outside of Hangzhou, that’s right.

GRANT HORSFIELD: Yeah, but you must know that in my heart, I knew that people would need lifestyle. They would need to enjoy nature and stuff like that.

But coming back to the idea of trying to keep it natural and environmentally friendly and stuff like that, that wasn’t some creative marketing idea. That was just because that’s who Delphine and I are. If we were to build anything, it would be that way. Just to give you a context, when I took Delphine on a honeymoon, it was in a Land Rover, where we slept on the roof of the Land Rover, driving through Africa, six countries in Africa, sleeping with the lions and the elephants.

HANS TUNG: That’s amazing.

GRANT HORSFIELD: And her parents are from Hong Kong. They were very, very, very upset with this, and they were like, “This is ridiculous.”

HANS TUNG: You put my daughter through this danger?

GRANT HORSFIELD: So I don’t know. I don’t think people understood it in China, but I did realize that our name, the Chinese name, luo-xin, that helped everything. Because in a way, no one had put those two characters –

HANS TUNG: Together before.

GRANT HORSFIELD: And when we did that, it kind of made a new word and it linked to nature and it was pure and it was just authentic, and people fell in love. There was just a day, I remember it so clearly, the resort just was full and I was like, All right, we’ve done it.”

HANS TUNG: We got it.

GRANT HORSFIELD: It’s okay, everything is going to be fine now.

ZARA ZHANG: And for our listeners who don’t speak Chinese, luo-xin (裸心) means naked heart. How did you come up with this name?

GRANT HORSFIELD: I have to take credit as a non-Chinese speaking person, but we got lots of input from various people, different names and there was a friend of ours who actually gave us those two characters together. But we did a survey across our company and no one liked it except me. I said, “That’s the name and no other. That’s where we are going.” and they were like, “No, that’s a terrible idea.”

My wife, to be fair, she was ambivalent to the idea. She was like, “Okay, it’s okay. It’s not okay, but whatever you say, we’ll do that.” So I have to take credit for calling that as the name that we were going to be, and it took us a long time. I must tell you that we started the company in 2007, but we only actually finally hit on luo-xin in 2009. So it wasn’t something that was from day one.

HANS TUNG: So when you first had luo-xin out as the brand, the first consumer feedback, what was it? Did people, when they first heard the term, what did they associate it with?

GRANT HORSFIELD: Instantly success. Instantly people were like “Whoa.” Like almost like we were some sage or some Buddhist-like monk, some deeply spiritual person. And everyone was like, “Whoa, that’s so cool. That’s so pure.” I’m not going to lie to you, but we’re not that. But it was cool, and today, all over the Internet people write poetry about it. Obviously everyone tries to copy it, so there’s a number of court cases that we are in all the time, trademark infringements and there is luo-xin everything, everywhere, always trying to use our trademark. But you know, we should be proud of that, I guess.

HANS TUNG: I’ve got to ask you about your Chinese name Gao Tiancheng which means as high as the sky or heaven.

GRANT HORSFIELD: Yeah, heaven. And he fights like Jackie Chan, by the way, I just want you to know. It’s not just the heaven, it’s also his combat skills. When I got here, because my name is Grant, I was given this name Ge Lan Te (格兰特) and I didn’t speak any Chinese, I was trying to learn Chinese at the time.

HANS TUNG: Ge Lan Te doesn’t sound cool.

GRANT HORSFIELD: I was walking down the street and someone said, “There’s your name.” I was, “What do you mean?” And we looked up at this billboard an air conditioning company writing Ge Lan Te. I said, “That’s my name?” And I said, “Well that’s pathetic. That’s going to change immediately.”

So I went to the HR and I said, “Can you come up with a name?” I think they must have been having shits and giggles when they gave me my name, like this huge big name. But I didn’t know. I was like, “Yeah, that sounds cool.”

HANS TUNG: They know your personality so they figure you can live up to it.

GRANT HORSFIELD: Yes, so I was given this name, but in Moganshan, nobody knows Grant or Horsfield or any English name.

HANS TUNG: It’s only your Chinese name.

GRANT HORSFIELD: Lao Gao 老高 is like, if you go anywhere Lao Gao is me. I didn’t even know that Lao Gao meant old, and I started building that place, I wasn’t even 30. I was 29 and they were calling me old.

HANS TUNG: It’s a term of endearment.

GRANT HORSFIELD: I know, I know.

ZARA ZHANG: It’s endearing.

GRANT HORSFIELD: I know, but in a way, I didn’t deserve that at that time.

HANS TUNG: They give you a lot of credit.

GRANT HORSFIELD: Xiao Gao 小高 would have been sufficient.

ZARA ZHANG: How much baijiu did you drink in Moganshan?

GRANT HORSFIELD: I’m the king of baijiu. I have consumed every baijiu brand and huge quantities of baijiu. But remember that baijiu, in those days, it wasn’t, for me, a scary thing. It was like a necessity, because some of those houses were so cold in the winter, my feet would be frozen. If I wasn’t drinking the baijiu I would have died.

HANS TUNG: You wouldn’t have survived.

GRANT HORSFIELD: The baijiu was a form of fuel to stay alive. But no, I got to know all the families through baijiu, through getting horribly drunk and doing stupid things like shaving each other’s hair off.

One night, I’ll tell you a story. I’d been having this massive altercation with Lao Ma 老马, and Lao Ma is, he’s like the strongman of the village. He was kind of like, let’s say the alpha male.

HANS TUNG: The Lao Ma. Same last name as Jack Ma of Alibaba.

GRANT HORSFIELD: Yes the same as Jack Ma, but he was kind of a little different from Jack Ma.

HANS TUNG: A little bigger?

GRANT HORSFIELD: No, but he’s still skinny, but strong. Anyway, so him and I had been having this issue. We started drinking and then I realized there was a ghost house that everyone in the village was scared of, it’s like hidden away in the forest. I said to him, “Come, you and me, we’re going to go sleep there tonight. Just the two of us.” And he was like, “No, that’s a crazy idea.”

But I could see he was scared. I knew if I could get him there, we would resolve our issues. He would have to tell me, show me his fear. I would be able to give him comfort and we might fight, but it will all work out well, as long as I get him to the ghost house. But damn, he was scared. So finally, at about, I don’t know, 1:00 in the morning we get our way up there and we make a little fire inside the house. I mean, in the middle of the house, there was no chimney. There was one bed and it was broken. I said, “You can have the bed, I’ll sleep on the floor.” I was drunk so I was asleep in no time. I woke up and I could see, he was still sitting on the bed and he couldn’t sleep, he was terrified. I sort of said, “Lo Ma, do you want to go back home?” He says, “Yes, let’s go.”

And that was it. We were solved. From then on, we were best friends. He thought I was a hero. Today, Lo Ma will probably tell you that I’m a rock star. So you know, that’s how we solved our problems; getting drunk and doing silly things.

HANS TUNG: That’s a great lesson for anybody from the US who wants to expand into China.

GRANT HORSFIELD: Good luck with that. If you’re an American, good luck.

HANS TUNG: This is what you’re going to have to do. Drink lots of baijiu and go to a haunted house. Before we talk about naked Hub, I am going to ask one more question. Back then, going to Moganshan is like picking out Las Vegas in the middle of nowhere. Why Moganshan, 30 miles outside of Hangzhou?

GRANT HORSFIELD: A lot of people think that this was like some deep decision. All I was looking for was a place that was quiet. In fact, actually it was even more detailed. I was looking for a place at the end of a road. So where they wouldn’t be, it’s not a transient place, it’s a place that you go to and it kind of ends.

So my wife and I and my secretary at the time, and various people, I used to go on these trips outside Shanghai, just looking for a quiet place. And it was quite difficult, because to get off the main roads, all the signage and everything was in traditional Chinese characters. Only the main roads had Pinyin 拼音. So it was quite difficult for me to navigate, and I was driving this old Beijing Jeep, so trying to get off the beaten track was never that easy.

One of these trips I actually took a bicycle trip with a group called Bodi Bikes, and fortunately, the guide was useless and we got lost. When we got lost, we actually stumbled across this little village called Sanjiu Wu which is on the Moganshan Mountain. The whole village was pretty much deserted, there were 12 old people that lived there still, and I just fell in love. I said, “This is it. I found it.” And actually signed the lease that day with Nainai whose husband had just passed away, but she was so happy that I was coming in to share her house with her.

And so the early business was just we long leased, 40-year leases on all the buildings. Later on we ended up buying the land and building the projects. So Moganshan wasn’t detailed research. I just looked for a quiet place.

HANS TUNG: Where your heart took you.

ZARA ZHANG: What kind of traction did you gather for naked Resort? I heard the rooms are booked out all the time. What kind of people go there?

GRANT HORSFIELD: So 92 percent of our customers are Chinese. People don’t realize that. I mean we talk about naked, no one actually knows the word naked, only luo-xin is really what is famous in China, and that was always our mission. But in the early, early days, obviously it was my friends, my network, so more foreigners in the early, early days.

I’ve always believed, no matter what you do, if you make a good product, people with buy it. With a good restaurant, if you make good food, you can’t fail. The good food part is really important, but people mistake that. They think it’s about the ambience. In a resort, it’s about the experience. So it isn’t about the room. It isn’t about the food. It’s about the actual experience, and people sometimes forget that. Fortunately for us in China, I don’t think that we’re that good at what we do. I just think that everyone else is that bad, because no one is actually focused on trying to –

HANS TUNG: Back then, no one was trying to focus on excellence.

GRANT HORSFIELD: Yeah, but still today even, people are building resorts all the time.

HANS TUNG: And neglecting some of the details.

GRANT HORSFIELD: They miss the part about actual experiences and doing things. They just build hotels in the mountain. It’s just random, but they think that’s going to make money. Anyway, that’s their choice.

ZARA ZHANG: Let’s talk about naked Hub, which is your coworking space. What motivated you to go into this space in the first place? Transitioning from a luxury resort to coworking?

GRANT HORSFIELD: Yes, I think the shared economy is something that’s always intrigued me. People don’t realize, but our resorts are actually very much part of the shared economy. Very unusual from any resort you’ll see anywhere in the world, naked Stables, 81 of the 121 rooms are actually shared villas with multiple rooms. Meaning that people travel there as families or groups of friends, and people are actually sharing experiences. Something that a lot of society forgets we used to do hundreds of years ago in society. That’s how people lived, in courtyards and people’s homes. We always used to travel and spend time with each other. So that’s kind of gone, and the only time we get together with people today seems to be in restaurants.

So when we did that, it was kind of bringing people together. That intrigued me. I also realized that we could scale this business, the coworking business, very fast. That our design ideas my wife and I had, we could maybe be more creative, have more chance to do things. And to be very, very frank, a coworking office takes us three months to build.

HANS TUNG: The resort takes much longer.

GRANT HORSFIELD: The resort takes us four or five years. We struggle with getting satisfaction, like this feeling of oh yeah, that’s beautiful, we’ve done it. It takes so long. This is just great, where we can get real, instant satisfaction, instant gratification.

Coworking, people also thought I was crazy being so aggressive in the early stages, but we saw immediately that the future was this idea, but I didn’t actually know the business that well. I just kind of jumped into it and then I learned on the job.

HANS TUNG: So you first heard about it elsewhere, and go hey, we can do it better.

GRANT HORSFIELD: Yeah, exactly. A friend of mine actually said we should do it, but I really didn’t explore what it was all about. We just kind of played with one or two, and they were full very quickly and people loved it, and we enjoyed doing it. So it was a good process.

ZARA ZHANG: At that time, were there a lot of other coworking spaces in China already?

GRANT HORSFIELD: No, and there still aren’t, by the way because I don’t believe most other people are doing coworking. But no. I think 3Q had built one place and that was pretty much it. So it was pretty early on. But I must comment on that. That’s not flippant joke just for sakes, I think coworking is so misunderstood. It’s just so random that people think it’s space, an arbitrage of space.

HANS TUNG: Sharing, yeah.

GRANT HORSFIELD: It’s so far from space, but no one in China seems to get that, which is kind of random for me. Even though I talk about it all the time and I’ve done interviews about it all, Edmund Newman speaks about it all the time. People still continue just to treat this like, let’s rent space and rent it out. Cut it up and rent it out. That’s their problem.

HANS TUNG: What are the five things or three things that you had to get right to make naked Hub a lot more popular and offer better experiences?

GRANT HORSFIELD: So the most important thing is being able to let your members connect with each other without it being invasive. Now you do that through physical space, so your designing of the physical space. How do you create the common areas where people feel comfortable to come together, meet each other? And that’s really important. The whole idea of this business is essentially trying to break down the barriers between companies. The more that companies can interact with each other, the more business they can do with each other, the more successful they can be. And funny enough, the smaller they can keep the companies by using other companies to solve some of their problems, rather than insourcing you outsource.

HANS TUNG: Outsourcing, yeah.

GRANT HORSFIELD: And we see today so many more smaller companies operating in the gig economy, et cetera, that this is the future. There is no question that this is the future. So the physical space.

The second part was the technology to allow people to connect outside of the physical space. How can I promote my business? How can I promote who I am? How can I connect with other people and members? And that was the technology platform which nobody does, but the way, except we work at naked in a very effective way. We spend a lot of energy on that.

I think the third part is scale, realizing that you can run this as a mom-and-pop operation just like a hotel.

HANS TUNG: But you need a network effect.

GRANT HORSFIELD: Exactly. So in a hotel, if you don’t have enough rooms you’ll never make money unless you’re a home operator, like a mom-and-pop.

HANS TUNG: Bed and breakfast.

GRANT HORSFIELD: Exactly. So this is the same. If you really want this to succeed, you have to have huge, ambitious dreams to change, and then realize that you are a solution for landlords. You are not renting from landlords. Just like a hotel, no one’s going to sign a management agreement with you if you haven’t done it before. So you have to invest your own money, build out these spaces, and then the landlords realize well hang on, we don’t have to be competitive. We can work together.

So that’s what happens today. We don’t sign leases, we just sign management deals. But you have to have proven yourself. I read these stories on the Internet constantly like “Aren’t you exposed? What happens if the rental market changes and suddenly there’s a drop in global rent? Wouldn’t that hurt you?” And I say, “Yeah. It would hurt, but it wouldn’t be significant because most of the deals we do aren’t linked to a liability of rent.” It’s a partnership between the companies.

So those are the factors that really most operators don’t get. And you have to be a good product, essentially, for people to want to do management deals with you. If you’re clearly a guy who’s just in it for the short term, ultimately big landlords like Vanke 万科or whatever are not going to go and say “Hey, let’s work together.”

HANS TUNG: So for you, did you take outside money this time, in order to scale quicker?

GRANT HORSFIELD: Well funny this, I didn’t.

HANS TUNG: Again you didn’t.

GRANT HORSFIELD: It is random. So firstly we invested heavily by ourselves at the beginning.

HANS TUNG: Right, from the cash flow from your resort business.

GRANT HORSFIELD: Yeah, so we fed some of our positive cash flow into running this business. And then we did a B round for the first time. By the way, I’ve never done an equity fundraising round in my life, and I’m actually really proud of this. But in the B round, we did a convertible note, with Gold Capital and TrustBridge and another company, Eamon. So these guys, we were imminently about to close our C round, which was finally an equity, like finally. It was a big round, a big valuation, but that’s when WeWork stepped in. And so the guys that were in the B round, they had the opportunity to convert just an hour before the transaction closed. Effectively speaking, you can say that that B round was kind of an equity deal, even though it was only for one hour.

But you know, I am old fashioned. I really don’t like the idea that entrepreneurs are thrown money by investors. I think it’s a flawed thing. It’s worked for a lot of companies, but there’s lots of companies it hasn’t worked for. I think entrepreneurs should have more skin in the game.

HANS TUNG: Have their own profitable business, nobody is going to bail you out.

GRANT HORSFIELD: And they should commit their lives to it. Really feel what it’s like to be imminently bankrupt. That’s what I want to see more entrepreneurs like. Today in China it seems that everyone just goes and gets other people’s money. Anyway, I’m old fashioned, I guess.

HANS TUNG: Got it.

GRANT HORSFIELD: And honestly now I don’t need to use other people’s money, so it’s fine. I’m good. I’m done with this whole, using other people’s money.

HANS TUNG: But I thought you were going to raise a round and expand throughout Asia.

GRANT HORSFIELD: So now, technically, with the merger I’m no longer executively involved in naked Hub. I’m on the board. My wife and I will continue to advise and we are helping on this fundraising round for WeWork, but it’s not my company. Even though I’m a shareholder, I’m just not the alpha male anymore, and no one has to listen to me. I can only just advise on the direction.

HANS TUNG: So what prompted you to do this then? You are clearly good at operating. You’re good at projecting the vision and the brand value of what you’re doing.

GRANT HORSFIELD: Look, this business, WeWork and I were competing on two fronts. We compete in probably acquisition, so where we are making these deals with various landlords, and that hurts us on the one side and we are fighting for the same customers.

So you know, normal competition is healthy between companies, but when you’re competing literally on two fronts with the same company, and that company –

HANS TUNG: Has a lot of other people’s money.

GRANT HORSFIELD: And a lot of money.

HANS TUNG: A lot of money.

GRANT HORSFIELD: I knew that they really didn’t care about how much they lose to hurt me. And I’ve seen enough stories in China, and we have all seen the Didi-Uber battles, et cetera.

HANS TUNG: Yeah, if you were invested in Didi, you went through that.

GRANT HORSFIELD: And look at Didi now.

HANS TUNG: They’re fighting with Meituan.

GRANT HORSFIELD: Yeah, it’s another battle. I also had a good connection with Adam. He made a big mistake. He should have taken me out two years ago. He would have saved himself a whole bunch of money.

HANS TUNG: Oh yeah, totally. Went for Uber as well. Most people don’t learn.

GRANT HORSFIELD: We had to get to know each other. I liked where he was going, and honestly WeWork had the same ideas that we did.

HANS TUNG: Yes, you guys are very alike. It’s amazing.

GRANT HORSFIELD: We just didn’t care about the moneymaking on the real estate. We wanted to figure out how to solve a bigger problem.

HANS TUNG: Yes, that’s very clear.

GRANT HORSFIELD: So we had a very, very strong technology team here, design team and hospitality. Those three things WeWork just didn’t have in China. And actually, WeWork didn’t realize the importance of hospitality as much as we did. So we brought that hospitality, we brought some of the tech ideas that we have, and it was a good partnership. I think we did exactly the right thing for the success of both companies.

HANS TUNG: But why do you not stay in the operation? Because clearly with their balance sheet, you can do even more.

GRANT HORSFIELD: Yeah, but I’m not employable. That’s just a fact.

HANS TUNG: You cannot be corporate.

GRANT HORSFIELD: No, I just could not.

HANS TUNG: You’ve got to be alpha male.

GRANT HORSFIELD: I could physically not work for someone. It will end in tears. Everyone will be unhappy. I will either murder or just something. It will just not work out.

HANS TUNG: You know yourself, that’s good.

GRANT HORSFIELD: I knew this many, many, many years ago. That’s why I became an entrepreneur. Go back to school, the teachers hated me. I mean, anyone who had to tell me anything. If you had to just say “Hey, Grant, won’t you please go and do that?” “No!” I just wanted a fight against anyone who wanted to tell me anything. So I was like okay, I’m really bad at being told what to do. So essentially, I know that that won’t work.

But I still have a big role to play in WeWork, and I don’t know what exactly that’s going to be and how that’s going to happen, but I believe in this industry and I really believe in what we’re doing. I will find a way to be.

HANS TUNG: So besides resource and coworking space, what will be a third product that would pique your interest?

GRANT HORSFIELD: I am very passionate about a big, big problem, a huge problem that I want to solve.

HANS TUNG: Which is?

GRANT HORSFIELD: Which is the fact that teachers are the worst-paid people in the world.


GRANT HORSFIELD: And so I’ve been exploring this a lot. I’ve been thinking about this a lot. I spend most of my awake hours thinking about this problem. I tell people sometimes that 150 years ago when you went to university, you didn’t go to university because it the name of the university was Harvard. You went there because there was a professor there that you wanted to study under. When you learned how to go fishing, there was someone who taught you fishing or riding a bicycle or a car, everything was about teachers. And teachers just lost. Today, they are the worst-paid people. The janitors make more money than teachers.

So we have this concept called BULA, which the idea of it is trying to reverse that, and make teachers fundamentally the entrepreneurs. I believe that I can actually reverse this completely and make the university hire the teachers on a consulting basis, not as employment contracts. And if I can find a way to make the good teachers go up to the top, and the bad teachers go down to the bottom and make it a transparent system, I believe we can we make teachers the richest, the most well-paid people in the world again.

HANS TUNG: This is obviously potentially a global business.

GRANT HORSFIELD: Yes, it’s a global business.

HANS TUNG: What would Phase 1 look like.

GRANT HORSFIELD: We’ve already tested Phase 1. We tested it in a very small, narrow area in wellness with yoga teachers. It was an area where I could explore the idea, and it was kind of simple and narrow, and it was amazing.

HANS TUNG: Yeah, and controllable.

GRANT HORSFIELD: We proved that a teacher can make 20 times more money than they can, 20 times.

HANS TUNG: This is in China? Or elsewhere?

GRANT HORSFIELD: In China, in Shanghai in Puxi, in a very small little district of Puxi we just said, that’s the area, a microcosm, built the software, rolled it out, BULA, and the teacher that used to work for Y+ or some studio, on our platform they’d make 20 times more money.

HANS TUNG: How is that possible?

GRANT HORSFIELD: Well it’s simple, because the institutions of today make all the money. So what I mean by the institution is the Harvard, the school.

HANS TUNG: Right, overhang.

GRANT HORSFIELD: Or the Y+ studio is someone who had the money to rent the space, to fit it out, to make it all pretty and then use and abuse the teachers who are actually the heroes. And why the teacher isn’t the hero? No one remembers the teacher’s name.

HANS TUNG: So you want to make it where you can have a coworking space to have that.

GRANT HORSFIELD: So the coworking spaces do help, having that space, but actually space is everywhere, you just don’t realize it. So we’ve found spaces. Let me give you some examples. Hotels. The gyms are empty.

HANS TUNG: Empty, right.


HANS TUNG: So you need a technology platform that allows the booking of those things.

GRANT HORSFIELD: Exactly. But we’ve already done all of that.

HANS TUNG: And you already did all that, so it’s easy.

GRANT HORSFIELD: You know, there’s so much space. Restaurants are all empty.

HANS TUNG: I’d be happy to be an investor in that company, and I will be easy to get along with.

GRANT HORSFIELD: I have about 50 people offer me money.

HANS TUNG: You do, but we’ll be the best partner.

GRANT HORSFIELD: Yeah, okay. Well we can talk, when I get to a round. Right now, I really believe it needs a lot more thinking and I really want to figure out, I actually thought this idea was kind of small at the beginning. Now I think I can really disrupt everything. Like the whole – do you know how deep teaching goes?

HANS TUNG: Okay, the key thing is the space. To have the space, you’ve got to have the technology, you’ve got to have an industry relationship. People have got to trust you. You have that.

GRANT HORSFIELD: I thought that was hard, but that’s the easy part.

HANS TUNG: Yeah, because you have that already, so it’s easy. For everyone else, that’s not the easy part.

GRANT HORSFIELD: Yeah, I have a lot of space around the world.

HANS TUNG: You do.

GRANT HORSFIELD: You know, WeWork is the second-largest tenant in London.

HANS TUNG: And they want to have more and more services, they don’t want to just be renting space.

GRANT HORSFIELD: I know. It’s good that they are my friend.

HANS TUNG: Exactly.

GRANT HORSFIELD: You know, they’re my company.

ZARA ZHANG: So how are you spending your time these days? How do you split your time between this project, naked Hub and naked Group?

GRANT HORSFIELD: So we still have this integration going on between the two companies. No merger is easy, so this is a challenging time where a lot of emotions happen and people feel nervous and stuff. So I’m still playing an active role there. I’m supporting a little bit on WeWork on doing this fundraising round, where I can help. We have quite a new number of new resorts under development, so I spend a fair amount of time on that. I’m still the only person, me and my wife, but on the master planning side, we’re the only people that can do that, so looking at how the resort will actually look like. We are still involved in that.

And then I’m spending a lot of time thinking about BULA and I’m building a global team. So we had a first meeting in L.A. last week, in fact, where I flew in a whole bunch of people to meet.

HANS TUNG: Makes sense.

GRANT HORSFIELD: We’ll be building more software out of Vietnam, so it’s going to be a real global business.

HANS TUNG: Yeah, it makes a lot of sense. Why did you pick L.A. as the place, because that’s where most of the teachers –

GRANT HORSFIELD: There was a really good pool party going on there.

HANS TUNG: That’s Hollywood.

GRANT HORSFIELD: No, I actually went there because one of my great friends, Goodwin Gore, he came. His first project in the world was building the Roosevelt, and that was like his big thing. My big thing was building a hotel too, so I wanted to go see his, because we’ve been friends for a number of years. And so I wanted to stay at the Roosevelt.

I mean, I think L.A., London and Shanghai are important corners of the world.

HANS TUNG: The three epicenters for what you’re doing.

GRANT HORSFIELD: For teaching wellness and stuff like that. Less than New York, obviously.

HANS TUNG: Less than New York, yeah.

GRANT HORSFIELD: I don’t know, that’s kind of like what I’m thinking about. I don’t know how I’m going to do it. But I know that’s what I’m good at. I’m good at navigating the things that other people don’t know how to do.

HANS TUNG: We have four investments in L.A. and actually I grew up in L.A., my mother still lives here. But L.A. we think is good for lifestyle investments, brands, media, digital media, and particularly e-commerce.

GRANT HORSFIELD: We’re going to build a resort in Napa called naked Napa.

HANS TUNG: Yeah, makes sense.

GRANT HORSFIELD: So coming soon, watch this space. We’re trying to pick up some of that cheap land that was burned. That sounds bad, but hopefully I can bring it back.

HANS TUNG: Sounds good.

ZARA ZHANG: I’ve been to the naked Hub headquarters in Shanghai. I felt like it was very different from other coworking spaces I’ve been to. There are a lot of common areas like event spaces where people can get together. There is a food court on the first floor. For our listeners who haven’t been, could you give a visual description of what naked Hubs look like, and how they’re different?

GRANT HORSFIELD: Yes, I think the one area where we had the confidence and the courage was to create that common space or that shared space, essentially a coworking environment should fulfill five functions that you share. One is the kitchen or coffee area. The other one is the living room, we call them meeting rooms or workshop spaces, hot desks and then the wellness spaces.

These we end up using about 30 percent of our GFA, so the total area of the building in putting into shared space. That’s about double what most other companies globally do. But in order to do that, you have to have the belief that you can sell a thing like a hot desk product or we have another product called naked Hub Go where people will be willing to pay increments, small increments money and you’ll be able to get people to use the space. That’s what we proved, and we were very successful at that.

I think the future will look more and more like that with space, because it’s a so much more efficient use of space. People don’t realize that commercial office space is the most inefficient thing in the world. A normal office will use 20 square meters per person, and we will use about five. So we can reduce that by a 75-percent reduction on space. Think of how much less construction you’d have to be doing, and how much less space would be needed, because it’s actually being used. Meeting rooms in traditional offices are just so inefficient; used like 9 percent of the month, the room is being used. That’s not good use of space, that’s not environmentally friendly, it’s not anything.

So I think naked was always trying to figure out these sort of environmental questions, at the core of what we were trying to do, and through that you have to have courage and conviction to make that shared space.

ZARA ZHANG: I’m very interested in your new product that you are offering, naked Hub Go, which are hot desks that can be rented by the hour, so users can see the available locations on a WeChat mini program, just like how they can view available bikes on a bike-sharing app, and they can pay by the hour and then enjoy free coffee. I personally think there’s a lot of demand for flexible spaces like this, because people are always struggling to find suitable places to do a couple of hours of work in between meetings in the city. So how did you come up with this idea?

GRANT HORSFIELD: I’m very much a product person, that’s how I think every day. But it’s by the minute, by the way, not by the hour. The idea, yes, there are people in the world who want that sort of random space. But for me it was more of an enterprise solution. Companies, especially large multinational companies, they all have offices which are inherently in one location in a city, and a city is a big place and commuting around a city can take you an over amount of time.

HANS TUNG: Too much time.

GRANT HORSFIELD: Our hope is that multinationals will be able to reduce the size of the offices by half, and then start to use a platform like this where they have 50 different other offices in one city.

The idea really stems from what we see today in consumerism, where people are buying things on small increments. Just buy what I need, and obviously Mobike and the bike-sharing apps were excellent at that, but so was Airbnb, so was Didi and Uber. What we’ve learned is that the technology, the phone essentially became a new tool for us to be able to do things. Without that, we couldn’t do this.

HANS TUNG: It’s not possible.

GRANT HORSFIELD: The thing is, just no one realized that this was a thing that could be done. So we love it, and it’s become hugely successful. We literally are in the beta-testing area, but it’s going through the roof. I think we’ve signed more naked Hub Go members than we actually have real members, and we did that in a month.

HANS TUNG: I’m not surprised.

GRANT HORSFIELD: It is insanely cool. Obviously WeWork was extremely lucky to have done this deal because if I’d done the deal a little bit later, I could have gotten even more, because naked Hub Go’s success has got real traction. And when we roll that out across the globe on the WeWork platform, it will be massive. It will change everything.

HANS TUNG: And also, this is the basis for other services you want to do. Whether it’s teaching or other things.

GRANT HORSFIELD: Correct. That’s how you get people into the ecosystem, and then you start to derive other revenue streams.

HANS TUNG: Correct.

GRANT HORSFIELD: The real estate is never the future. That is just not it.

HANS TUNG: At best, an entry point.

GRANT HORSFIELD: Exactly. The landlord can make the money on the real estate. Let’s figure out how to make other revenue streams.

HANS TUNG: Because like you said, a lot of the real estate is just not utilized, and there’s so many services that can lay on top if designed well.

GRANT HORSFIELD: Exactly. And we always say this to developers. We don’t want to be in competition with you. You guys are good at what you do. You carry on doing that, we’ll do the other stuff.

It will get there.

HANS TUNG: It will get there.

GRANT HORSFIELD: People are still threatened by WeWork and naked, but these kind of products will make people feel more and more comfortable.

HANS TUNG: Do you see WeWork rolling out naked Hub Go to other places?

GRANT HORSFIELD: Yes, absolutely. Shanghai is going to be a testing ground for a lot of new products that we develop, and then they will roll them out on the WeWork platform. We’ve got 60 to 70 engineers now working here in Shanghai. We are going to scale that up to 1,000 engineers focusing on product development with how we can bring more solutions to the general person on the street.

And by the way, the first 15 minutes are free when you walk in a naked Hub, so you scan and can literally –

HANS TUNG: You can get a taste of it.

GRANT HORSFIELD: You can have a beer and a coffee and walk out and pay nothing.

HANS TUNG: But just get you into the door and develop a habit, you can do so many more things with them afterwards.

GRANT HORSFIELD: And I figured out that if you’re a good beer consumer, you can get drunk really quickly without needing to pay much money. So students are highly recommended.

ZARA ZHANG: What would be your top advice for other non-Chinese entrepreneurs who want to start businesses in China?

GRANT HORSFIELD: I think most of the same things that you tell entrepreneurs anywhere in the world. The best advice for non-Chinese, I would say respect and learn from Chinese. Do not have the arrogance to think that you know more.

HANS TUNG: Think that you know more.

GRANT HORSFIELD: That is just so common for me, I’ve just seen foreigners do that for the last 15 years. And it’s just so dumb, because they just don’t listen. They don’t take the time to actually try and understand what the local guys are trying to tell you. So I think, what’s the right word?

HANS TUNG: Presumptuous.

GRANT HORSFIELD: Being humble in your surroundings. China didn’t happen by accident. It’s kind of a big play.

HANS TUNG: Presume that you know more without being here is kind of ridiculous.

GRANT HORSFIELD: So I always laugh that I think that’s my great advice.

HANS TUNG: Yeah, completely.

GRANT HORSFIELD: I can’t think of better than anyone, so we are at like the lowest run on the low-rung things.

HANS TUNG: It’s honest.

GRANT HORSFIELD: Yeah, come here and learn from China and enjoy it, embrace it. Actually, really localize yourself. So many foreigners cannot do that. If you don’t get it in the first year and you don’t localize, just leave, because you’re never going to.

HANS TUNG: Totally true. As you know, in China new retail is a buzzword that Jack Ma started in January 2017. You also see a lot of unmanned snack shops, convenience stores, a lot of stuff. For someone who is a believer in the sharing economy and the human connection, how do you feel about that trend that’s supposedly happening?

GRANT HORSFIELD: I think it’s the start of another, I don’t think that is exactly the solution that we’re going to see is going to be the solution, but it’s going to be the thing that helps us learn how new retail is going to go. Retail is in a major, major problem right now. I mean the whole of retail. Pure online is not a solution to solve –

HANS TUNG: It needs more.

GRANT HORSFIELD: And this kind of unmanned retail is also not a perfect solution, but we are consumers, human beings are consumers so there needs to be a form of it. We just need to learn what it looks like. Shopping mall are not it, High Street shops are not it. But I think this new sort of retail idea is a stepping stone in the direction. So if you’re an entrepreneur and you like this industry, I think it’s a great place to think more about it, because I think there’s going to be a lot more innovation in that area. Me personally, I’m not a big fan of retail, so I’m not thinking about it.

HANS TUNG: You’re thinking about services, you’re thinking about experiences.

GRANT HORSFIELD: Exactly. Seriously, I’m thinking about solving the teaching problem. It bothers me. For my children, for my children’s children, it’s just wrong. Sorry, I have to just say this.

HANS TUNG: No, go for it.

GRANT HORSFIELD: If they are the worst-paid people in the world, they are going to be the worst teachers. That’s a really bad thing for society.

HANS TUNG: And you can afford to spend time on doing something that’s impactful, that is something that you believe in the cause.

GRANT HORSFIELD: Exactly. And retail, buying stuff, I kind of don’t do that. I’m from Africa. I don’t know how to explain it, but yeah. Shopping ain’t high on my list of things to want to go and do.

HANS TUNG: Makes perfect sense.

ZARA ZHANG: We’re going to end this interview with a round of quick-fire questions, so just tell us the first thing that comes to your mind. The first one is, who is the entrepreneur that you admire the most and why?

GRANT HORSFIELD: Two. Richard Branson and Elon Musk.

HANS TUNG: Really? Wow.

GRANT HORSFIELD: Richard Branson just because I love his mantra. He’s all about the brand, living the brand, actually being the brand.

HANS TUNG: But he’s different from you. He’s all about doing this in a regulated industry, enjoying some kind of monopoly.

GRANT HORSFIELD: But he wasn’t when he was young, he was crazy and wild and I loved that about him.

HANS TUNG: That’s fair.

GRANT HORSFIELD: And remember that there’s a similarity between Virgin and naked, but I’ve always thought if we put those two companies together we could have a real fun company. But you know, that’s a sideline.

HANS TUNG: That’s a sideline. Another topic for another day.

GRANT HORSFIELD: I think Elon Musk, he’s my countryman, he’s a South African. I love the fact that he doesn’t give a shit, and I ascribe to that. I despise when I read media that just writes rubbish. And trust me, I read international media about China. It’s like hello, have you even been to China?

HANS TUNG: Right, obviously not.

GRANT HORSFIELD: Can you just read this stuff? So I have a bit of a thing at the moment, I don’t like media that much. I have that in common with Elon. We both really don’t like media that talks bullshit. Sorry I know talking to the media here.

HANS TUNG: But we’re VCs. You may not like them either, but it’s different.

GRANT HORSFIELD: And I love Elon Musk’s ability and courage to just throw it all in again, like just, let’s throw it all in and more money, well it’s a new idea, we’ll just double down.

HANS TUNG: And he’s always taking on big challenges.


HANS TUNG: That need to be solved.

GRANT HORSFIELD: And I think my teacher problem is a big challenge.

HANS TUNG: Completely.

GRANT HORSFIELD: And I think I’m going to solve it, and it’s going to be a big deal. So those are the two guys. Elon Musk, Richard Branson.

HANS TUNG: What’s something you read recently that touched you a lot? Or heard?

GRANT HORSFIELD: Heard, environmental stuff. Just a couple of days ago a whale came on the beach full of plastic. It’s a big problem. The rhino population being decimated. I read a lot about this, so it hurts me. I just think that human beings are so idiotic the way we keep killing the animals, so our children are not going to have them. Yeah, I read too much of that stuff. And to be honest, I’m stopping reading Western newspapers because they are all just full of such horrible stories, and I’m far too emotional to cope with that.

HANS TUNG: Got it.

ZARA ZHANG: What do you do for fun?

GRANT HORSFIELD: Wakeboard with my daughters, and golf. Golf and wakeboarding and boating, sailing.

HANS TUNG: How do you do that in China? Where do you go?

GRANT HORSFIELD: I don’t do it in China. I do golfing in China. I go so far as I built a golf simulator room in my house. I can play any golf course in my house.

HANS TUNG: You live outside of Shanghai?

GRANT HORSFIELD: No, I live just down the road.


GRANT HORSFIELD: But don’t ask me how and why, I build things. I’m good at that stuff, right? And then we have a yacht. We have a couple of yachts, one in Phuket, one in Hong Kong so yeah when we go to the boat, we wakeboard. My daughters, our eldest is 7 and she’s a rock star at wakeboarding already. We love being on the ocean and we love being in nature, and Phuket is –

HANS TUNG: Beautiful.

GRANT HORSFIELD: We are never actually in Phuket we just land there, get on our boat and sail away. So that’s what we do for fun.

ZARA ZHANG: Grant, thank you so much for your time. We encourage our listeners to visit naked Hub when they can use naked Hub Go. This is a really cool product.

GRANT HORSFIELD: Thanks, guys. Thank you for having me.

HANS TUNG: Thank you. It was a lot of fun.

GRANT HORSFIELD: All right, cheers. Bye-bye.

HANS TUNG: Cheers.

Thanks for listening to this episode of 996. By the way, we also produce a weekly email newsletter in English, also called 996 which has a roundup of the week’s most important happenings in tech in China. Subscribers have told us it is informative and fun to read. The newsletter also features original content and analysis from Zara and me. Subscribe at 996.GGVC.com.

ZARA ZHANG: GGV Capital is a multi-stage venture capital firm based in Silicon Valley, Shanghai and Beijing. We have been partnering with leading technology entrepreneurs for the past 18 years from seed to pre-IPO, with $3.8 billion in capital under management across eight funds. GGV invests in globally-minded entrepreneurs in consumer and new retail, social Internet, enterprise cloud and frontier tech. GGV has invested in over 290 companies with more than 45 companies valued at over $1 billion.

Portfolio companies including Airbnb, Alibaba, Ctrip, Didi, Domo, HashiCorp, Hellobike, Houzz, Keep, Slack, Square, Toutiao, Wish, Xiaohongshu, YY and others. Find out more at GGVC.com.

We also highly recommend joining our listeners WeChat group and Slack channel, where we regularly share insights, events and job opportunities related to tech in China. Join these groups at 996.GGVC.com/community.

HANS TUNG: If you have any feedback on this podcast or would like to recommend a guest, please email us at 996@GGVC.com.

Issue 42 | July 23, 2018

A Big Deal: Didi raises $500M from Booking Holdings; Expands into Japan with SoftBank
Didi Chuxing announced that it has raised $500 million from the US company Booking Holdings, owner of multiple hospitality websites including Booking.com, Priceline.com, Kayak.com, Agoda.com, Rentcars.com, and OpenTable.com.Didi will supply rides to customers of Booking’s apps around the world. In return, Booking will allow Didi users to make hotel reservations on Booking.com and Agoda, the two companies said.Based in Connecticut, Booking operates in more than 220 countries and territories. In 2017, 89% of its bookings were made outside the US. The company has been making strategic investments in key Chinese peers, including Ctrip and Meituan Dianping.

In the same week, Didi announced that it is launching a joint venture with Japanese conglomerate SoftBank Group to take its ride-hailing service to Japan. The new venture, Didi Mobility Japan, will test a taxi-hailing service this fall in Osaka with a plan to expand into other major cities including Kyoto, Fukuoka, and Tokyo. SoftBank is a major backer of Didi, having participated in two rounds of Didi’s fundraising last year.

Japan is one of the most popular destinations for Chinese tourists. More than 7.3 million Chinese tourists visited Japan in 2017, a 15% increase from the previous year. For the 2020 Olympics, Japan expects to welcome 40 million tourists, about half of them from China.

Note: Didi Chuxing and Ctrip are GGV portfolio companies.

An Original: Making Sense of Pinduoduo

Pinduoduo, one of China’s fastest growing e-commerce startups, filed for an IPO on the Nasdaq under the symbol PDD, less than three years after its founding. With over 300 million active buyers and over $20 billion in annual GMV, Pinduoduo has risen to become one of China’s top three shopping apps, leveraging a “team purchase” model for its growth.

We created a detailed deck that explains how Pinduoduo works and factors that led to its rapid growth, complete with a video walk-through of Pinduoduo’s app. GGV is not an investor in Pinduoduo. This deck is for informational purposes only.

Read the deck online here and download the PDF version here.

A Big Deal: Zuoyebang Raises $350M
Leading online tutoring platform Zuoyebang (作业帮, or “homework help”) announced that it completed a new Series D funding round of $350 million from a group of investors led by Coatue Management. GGV Capital participated in the round, co-led the company’s Series B in 2016, and participated in its Series C in 2017.

Founded in 2014, Zuoyebang is an online education platform where K-12 students can upload photos of their homework questions, and the platform will analyze and match to solutions in its database. For questions without answers, students can opt to pay for virtual one-on-one sessions with teachers who partner with Zuoyebang.

Zuoyebang is currently the most popular app in China’s booming online education sector targeting K-12 students, according to iResearch. Zuoyebang says it has more than 70 million active monthly users and more than 5 million paid users, half of whom are from third-tier-or-below Chinese cities where high-quality education is less accessible.

Note: Zuoyebang is a GGV portfolio company. Click here to read an interview (in Chinese) with Zuoyebang founder Hou Jianbing and GGV’s vice president Erica Yu.

Join the 996 Community

And meet 1,000+ like-minded people interested in tech in China. News, insights, events, and jobs shared daily. Offline meetups across the world.

Join us via WeChat/Slack at 996.ggvc.com/community.

A Big Deal: Ofo Downsizes International Operations
The bike-sharing company Ofo said it is scaling back its operations in a number of international markets, including the US. Ofo will shutter its operations in some countries, such as Australia, Austria, Czech Republic, Germany, India, and Israel. Ofo also reportedly laid off the majority of its US workforce and will shut down its operations in several US cities.In early July, the head of Ofo’s US business Chris Taylor, along with two other executives, resigned. Just last month, Taylor had written in a blog post that Ofo was servicing 30 US cities and aimed to be in “at least 100” by the end of the year.The company said it is not vacating the US, but is reorienting to focus on markets that will help it become profitable. As part of the change, Ofo co-founder and CEO Dai Wei will be directly in charge of international markets going forward.

A Product: Google Launches WeChat Mini-Game
Google launched an AI-powered drawing game within WeChat called Cai Hua Xiao Ge (猜画小歌, which roughly translates into “Picture guessing with little Google”). The game, which went viral, is the latest signal of the search giant’s ambition in China.

In the game, users draw an object that Google’s neural network attempts to recognize, and users win points when the machine makes a successful guess. Google AI’s neural network is based upon the world’s biggest sketch database with over 50 million drawings. The game is similar to the web-based Quick Draw that Google launched in 2016.

WeChat is now home to over 1 million mini-programs (lightweight apps that live within WeChat). Games are the most popular genre of mini-programs. In April, WeChat opened its mini-program platform to outside developers for the first time.

Recently, Google has stepped up its involvements in China, where the majority of its services continues to be banned. Last month Google announced a $550 million investment in JD.com, China’s second-largest e-commerce player. It also struck a patent licensing partnership with Tencent, set up an AI lab in Beijing, and invested in game streaming startup Chushou.

Note: Chushou is a GGV portfolio company.

NEW 996 Podcast: Justin Kan of Twitch and Atrium: From Builder to Entrepreneur

We interviewed serial entrepreneur Justin Kan, co-founder of Twitch, the game-streaming platform acquired by Amazon in 2014 for almost $1 billion. More recently, Justin co-founded Atrium LTS, a startup that’s building technology to revolutionize the legal industry. GGV is an investor in Atrium.

Justin recounted the story of how he started to livestream his life before streaming became cool, the pitfalls he has experienced during his startup journey, whether it was the right decision to sell Twitch to Amazon in 2014, and what gets him excited about his new venture Atrium.

Listen to the 996 Podcast on iTunes, Overcast, Spotify, or SoundCloud. We’re on XimalayaFM too! Just search “GGV996.”
Join our 996 Meetup in San Francisco!

Hans and Zara will be hosting a meetup for the 996 community in San Francisco. This event is open to anyone who follows the 996 Podcast or Newsletter. Registration is required and space is limited.

Time: Thursday, July 26, 7-9pm
Location: South Park, San Francisco (specific location will be included in the confirmation email upon registration)
Registration link: 996.ggvc.com/sf

Stay tuned for future meetups in other cities across the world! Details will be announced in the 996 WeChat groups and Slack Channel. To join the community, visit 996.ggvc.com/community.

Hans & Zara from GGV Capital

Issue 41 | July 9, 2018

A Big Deal: Xiaomi Goes Public in Hong Kong
Xiaomi debuted for trade in Hong Kong on Monday in one of the most highly-anticipated public offerings of 2018. The IPO raised $4.7 billion at a valuation of about $54 billion.

“We are more than a hardware company.  We are an innovation-driven Internet company,” wrote Xiaomi’s founder and chairman Lei Jun in an open letter. “Our unique ‘triathlon’ business model, encompasses hardware, new retail, and internet services.

Xiaomi has a large and highly-engaged global user base known as “Mi Fans.” As of March 2018, there were approximately 190 million monthly active MIUI users and over 1.4 million users with more than five connected Xiaomi products (excluding smartphones and laptops). Xiaomi has 38 apps with more than 10 million MAUs and 18 apps with more than 50 million MAUs.

Note: Hans Tung, managing partner at GGV Capital, is an early investor and former board member of Xiaomi.

Listen to our interview with Lin Bin, co-founder and president of Xiaomi, on the 996 Podcast, where Bin discussed what makes Xiaomi unique and Hans explained why he invested in Xiaomi from the beginning. The show is available on iTunesOvercast,SoundCloud, or wherever you listen to podcasts.

A Big Deal: Meituan-Dianping Files for IPO in Hong Kong

Meituan-Dianping, one of the world’s most valuable startups, is reportedly seeking a $60 billion IPO in Hong Kong. Meituan-Dianping is the latest company with a dual-class share structure to file for a Hong Kong listing, under the city’s new rules designed to attract tech companies.

In its application proof, Meituan called itself “China’s leading e-commerce platform for services” and said its platforms generated over 5.8 billion transactions, totaling RMB 357 billion ($54 billion) in gross transaction volume in 2017. The company also disclosed a 19 billion yuan ($2.9 billion) loss for 2017, steeper than in the previous two years.

Currently,  Tencent is the largest shareholder of Meituan with a 20.1% ownership, while CEO Wang Xing and Sequoia Capital each owns 11.4% of the company.

Read our analysis on Why Meituan-Dianping’s Expansion Makes Sense and view ourdeck on Meituan.

Note: Hans Tung, managing partner at GGV Capital, was an investor in Dianping, which merged with Meituan.

A Big Deal: Pinduoduo Files for IPO in the US
Pinduoduo has applied for an IPO in the US, aiming to raise up to $1 billion. Launched in 2016 and most recently valued at $15 billion, Pinduoduo has risen to become one of the top e-commerce players in China in less than three years.

According to its filing, the company currently has $30 billion in annual gross merchandise volume (GMV) and 300 million active buyers. Over 60% of its users live in third-tier cities or below, and the average order value is $6. Pinduoduo heavily leverages WeChat for its viral growth, and counts Tencent as its largest institutional shareholder.

A Big Deal: Mobike Scraps Deposits
Mobike—now part of Meituan-Dianping—has scrapped the need for deposits amid fierce competition to win users. Existing customers will get their deposits back. Mobike is reportedly refunding up to RMB 1 billion ($150 million) of deposits to its users.

The company is also adding electric bikes to its fleet in China and overseas to serve customers with longer travel routes. An e-bike can go up to 70km per charge and has a top speed of 20km per hour.

In March, Mobike’s competitor HelloBike rolled out its deposit-free service for users with a Zhima credit score above a certain threshold. Since then, HelloBike has seen registered users increase by 70% and the number of rides per day double within two months. Ant Financial, which operates the credit score service Zhima Credit, is an investor in HelloBike.

Note: HelloBike is a GGV portfolio company.

A Product: ByteDance Rolls Out Knowledge App
ByteDance (a.k.a. Toutiao) has launched a pay-for-knowledge app called “Hao Hao Xue Xi” (好好学习), which offers online courses for a one-off or subscription fee. The courses are mostly geared towards professional development and self-improvement, such as “how to improve emotional intelligence” and “how to get promoted at work.”

According to iResearch, in 2017, China’s online paid knowledge market size was about RMB 5 billion ($750 million) and is expected to reach RMB 23.5 billion ($3.5 billion) by 2020. The top players in the market are audio platform XimalayaFM, Q&A platform Zhihu, and online courses platform Dedao.

Note: ByteDance is a GGV portfolio company.

996 Podcast: Eric Yuan of Zoom: From Immigrant to Top CEO
We interviewed Eric Yuan, founder and CEO of Zoom, the leading video conferencing solution for enterprise. Zoom is used by a third of Fortune 500 companies and 90% of the top 200 universities in the US. Eric was recently named the Top CEO on Glassdoor, with an approval rating of 99%, and was the first person of color to win the award.

Eric grew up and went to college in China, arrived in Silicon Valley in 1997 and joined WebEx when it was still a small company. In 2007 WebEx was acquired by Cisco and Eric became Cisco’s Corporate VP of engineering in charge of collaboration software. Eric spent 14 years in total at WebEx and grew its engineering team from 10 to 800, and increased its revenue from zero to over $800 million. Eric holds 11 patents, plus 20 pending patents in the pipeline.

In this episode, Eric shared his story of being rejected a US visa for 8 times while in China, how to overcome the “bamboo ceiling” as a Chinese engineer in Silicon Valley, and what makes Zoom different from its competitors.

Listen to the 996 Podcast on iTunesOvercast, or SoundCloud. We’re on XimalayaFM too! Just search “GGV996.”
Join our 996 Meetups in Hong Kong & San Francisco!

【Hong Kong 】
Coming to Hong Kong for RISE? GGV managing partners Hans Tung and Jixun Foo will be hosting a 996 Community Meetup in Hong Kong on the evening of July 11. The event will include remarks by both partners as well as refreshments and networking. Space is limited and registration is required.

Time: Wednesday, July 11, 6-8pm
Location: The Hub—Seminar Room; 1F, Fortune Building, 150-158 Lockhart Rd, Wan Chai, Hong Kong
Registration link: 996hk.splashthat.com

【San Francisco 】
Hans and Zara will be hosting a meetup for the 996 community in San Francisco. This event is open to anyone who follows the 996 Podcast or Newsletter. Registration is required and space is limited.

Time: Thursday, July 26, 7-9pm
Location: South Park, San Francisco (specific location will be included in the confirmation email upon registration)
Registration link: 996.ggvc.com/sf

Stay tuned for future meetups in other cities across the world! Details will be announced in the 996 WeChat groups and Slack Channel. To join the community, visit996.ggvc.com/community.

– Hans & Zara from GGV Capital

Issue 40 | June 25, 2018

A Big Deal: Google Invests $550M in JD.com

Google will invest $550 million in China’s second-largest e-commerce company, JD.com (NASDAQ: JD; market cap $63B) as part of a strategic partnership, the two companies announced.

The partnership could help Google expand its presence in fast-growing Asian markets and battle global rivals like Amazon. The Google-Amazon battle is intensifying, especially in the area of home assistants.

By partnering with JD.com, Google could further tighten its relationship with Walmart, which is an exiting investor and one of the largest shareholders of JD.com. For JD.com, the Google deal helps the Chinese company build global alliances as it seeks to counter Alibaba worldwide. Together, Google and JD.com could challenge the dominance of Amazon and Alibaba in key markets around the world, analysts said.

The deal also signals JD.com’s commitment to integrating cutting-edge technologies such as artificial intelligence and robotics with its retail offerings. According to JD.com’s latest financial report, the company spent $400 million on “technology and content” in Q1 2018—a 87.2% year-on-year increase—as a result of the company’s “continual investment in top R&D talent and technology infrastructure.” JD.com has hired industry experts such as He Xiaodong, former principal researcher at Microsoft Research’s AI unit. Watch a video of JD.com’s fully-automated warehouse in Shanghaihere.

Recently, Google has stepped up its involvements in China, where the majority of its services continues to be banned. It struck a patent licensing partnership with Tencent, set up an AI lab in Beijing, and invested in game streaming startup Chushou.

The announcement of the partnership came on June 18 (“618”), JD.com’s annual shopping festival equivalent of Alibaba’s “singles day” (November 11). 618 was initiated by JD.com in 2010 to celebrate the company’s founding on June 18. For this year’s 618, JD.com reported revenue of nearly 160 billion yuan ($24.9 billion), a 37% increase from last year. In comparison, Alibaba’s Singles Day in 2017 raked in $25.3 billion.

Note: Chushou is a GGV portfolio company. GGV was an early investor in Alibaba in 2003.

A Big Deal: VIPKID Raises $500M at $3B+ Valuation
VIPKID, a startup that connects Chinese students with English teachers outside of China, has raised $500 million in a series D+ round that values it at over $3 billion. The funding was the world’s largest round ever secured in the online education sector. Investors in the round include Coatue Management, Tencent, Sequoia Capital, and Yunfeng Capital.

Founded in 2013, VIPKID provides one-to-one online English classes to Chinese children aged 4 to 12. All teachers are native speakers based outside of China. Last August, the company launched a new product, Lingo Bus, which provides Chinese lessons to children outside of China.

The company has raised a total of $700 million, with over 300,000 paying students and 40,000 English teachers outside of China on its platform. China’s online education market is currently estimated to be worth RMB 300 billion  ($46 billion).

A Video: The Trade War’s Impact on Tech
Hans Tung, managing partner at GGV Capital, discussed the impact of the current trade wars on the technology sector on CNBC. Watch here.

An Original: 8 Lessons from the Rise of Tik Tok
Douyin (Tik Tok), the short video app made by the $30-billion Chinese media startup ByteDance, reached 150 million daily active users in less than two years and was the most-downloaded iOS app in the world in Q1 2018. How did it do this, and what can Western companies learn from it? Read our analysis here (the post also includes multiple popular Douyin videos).

A Take: Making Sense of the “Tou-Teng War”
A buzzword that has dominated China’s tech circles these past few weeks is “Tou Teng War” (头腾大战). “Tou Teng” is short for “Toutiao-Tencent” and also happens to sound like “headache” in Chinese. Indeed, ByteDance has created plenty of headache for Tencent (see our article above on the rise of Douyin), and the two companies are literally going to war by suing each other in court.

In an insightful article that went viral on WeChat, the commentator Qu Kai wrote that Douyin (Tik Tok) will post a real threat to Tencent if it becomes a more social product and evolve into a real community. He notes that communication and community are two different concepts. Communication is about consuming content as a result of your relationships with people; community is about forming relationships with people because you consumed their content. Tencent—which has WeChat and QQ—now owns communication, but ByteDance has the potential to own community.

Note: ByteDance is a GGV portfolio company.

A Product: WeChat Changes its Subscription Interface
WeChat launched a major update of its app and redesigned its Subscription Accounts feature, which changed from a list of subscriptions to a feed of articles—similar to Facebook’s News Feed or Toutiao’s app. Users will also be able to see how many of their WeChat friends have read each article.

The update has sent shock waves across China’s media and content community, as the 25 million WeChat Subscription Accounts have become the primary source of news for many Chinese smartphone users.

One potential impact is that long-tail content creators will be able to win more traffic from the largest accounts which have largely dominated the vast majority of readership. Readers will also be more choosy about what to read and what to ignore, and content creators will need to make the most of the title and banner for each article to catch user’s attention.

The update is currently available on iOS and will be coming soon for Android.

Thank you for coming out to our 996 Beijing Meetup!
This week, we held the first meetup for the 996 Community in Beijing. Our followers met like-minded people and discussed issues related to tech in China with Hans and Zara.

Stay tuned for future meetups in other cities across US and China! Details will be announced in the 996 WeChat groups and Slack Channel. To join the community, visit996.ggvc.com/community.

– Hans & Zara from GGV Capital

Issue 39 | June 11, 2018

A Big Deal: Ant Financial Raises $14B in World’s Largest-Ever Fundraising

Ant Financial has raised $14 billion in a series C, the world’s largest private funding round ever, at a reported valuation of $150 billion. Ant, which was spun out from Alibaba in 2011, owns and operates Alipay, China’s largest online and mobile payments network, and has been instrumental in transforming China into a largely cashless society.

The financing included a US dollar tranche backed by Singapore’s sovereign wealth fund GIC, Warburg Pincus, Canada Pension Plan Investment Board, Silver Lake, and Temasek Holdings. A RMB component of the funding was supported mainly by existing shareholders. The funding makes Ant the world’s most valuable fintech company.

Here is a great read from Bloomberg on “why China’s payment apps give US bankers nightmares.” In large part due to Alipay, the vast majority of Chinese consumer purchases happen on mobile cheaply and easily without bank involvement. US financial firms could lose up to $90 billions a year in payment processing fees if American consumers embrace third-party apps en masse the way Chinese consumers have adopted Alipay and WeChat Pay.

Note: GGV Capital was an early investor in Alibaba in 2003.
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A Big Deal: Xiaohongshu Raises $300M Round Led By Alibaba
Chinese social e-commerce startup Xiaohongshu (“Little Red Book” in Chinese, a.k.a. RED) has raised a $300 million series D round led by Alibaba at an estimated $3 billion valuation.

This makes Xiaohongshu one of the few companies to have received significant funding from both Tencent and Alibaba (another example is Didi Chuxing, also a GGV portfolio company). Xiaohongshu is a pioneer in integrating content, commerce, and community—the “3 Cs” that today’s e-commerce platforms must possess in order to stand out in the age of Alibaba and Amazon.

For more on Xiaohongshu, listen to our interview with Co-Founder Miranda Qu on the 996 Podcast, available on Apple Podcasts, Overcast, Spotify, SoundCloud, XimalayaFM, or wherever else you listen to podcasts.

For more on how Chinese startups should think about managing their relationships with the tech giants, read our blog post Chinese Startups Should Consider Tencent and Alibaba Their Allies, Not Enemies.

Note: Xiaohongshu is a GGV portfolio company; Hans Tung, managing partner of GGV Capital, is on the company’s board.
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A Big Deal: JollyChic Raises Series C, Becomes Unicorn
Chinese e-commerce platform JollyChic has raised an undisclosed amount rumored to be in the hundreds of million in a series C round from Sequoia Capital and Legend Capital at a valuation of $1 billion.

Founded in 2012, Hangzhou-based JollyChic specializes in selling Chinese goods to Middle Eastern countries. It is the top-ranking shopping app in many countries in the region, including UAE and Saudi Arabia (where it is ranked No. 1 among all Android apps).

JollyChic has over 35 million registered users and says its gross merchandise volume has tripled for five consecutive years. The company sells to 34 countries and has has over 2,500 employees spread across offices in Shenzhen, Guangzhou, Hong Kong, Silicon Valley, Saudia Arabia, Dubai, UAE and Jordan.
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A Big Deal: Kuaishou Acquires Acfun
Kuaishou, the company behind one of the most popular short video apps in China, has acquired the online video platform Acfun. Launched in 2007, Acfun—nicknamed “A-site” (A站)—was one of China’s top animation and video-streaming sites, targeting Gen-Z users born after 1990.

Kuaishou, which is backed by Tencent, said Acfun’s brand, operations and management will remain independent after the takeover, while Kuaishou will provide support in capital, technology, and resources.

While its archrival Bilibili (NASDAQ: BILI), nicknamed “B-site” (B站) in China, launched a $400 million IPO in New York in March, Acfun has struggled over the past year and saw its daily active users plummet to 100,000 in January from around 700,000 in mid-2017. There have been rumors that the company was financially strained and was forced to lay off employees. In February, the Acfun website went down for 10 days.

By acquiring Acfun, Kuaishou could diversify its content, expand its user base, and fend off its rival Douyin, a short video app operated by the media giant ByteDance.

Note: ByteDance is a GGV portfolio company.
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A Chart: Foxconn and Apple’s Growth
Foxconn Industrial Internet, a unit of the manufacturing giant Foxconn, has become China’s most valuable domestically-listed tech company after its shares surged 44% in a trading debut in Shanghai on Friday. FII raised RMB 27.1 billion in mainland China’s largest IPO since 2015.

Its parent company, Taiwan-based Foxconn, rose to prominence as as a contract manufacturer of Apple iPhones. However, as the global smartphone market slows, Foxconn is making a push into industrial technology, such as automating other manufacturers’ processes. Foxconn recently bought 20,000 textbooks about AI for all of its employees to study, including line workers and office secretaries.

Source: Bloomberg
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996 Podcast: Jenny Lee of GGV Capital on Being a VC in China
We interviewed Jenny Lee, a managing partner at GGV Capital based in Shanghai. Jenny joined GGV in 2005 and was instrumental in setting up GGV’s presence in China. Forbes recently ranked Jenny as the world’s 16th most powerful woman in tech.

A self-professed geek who loves new technologies and products, Jenny has backed consumer Internet, SaaS, and frontier technology companies at GGV, and has helped many go public. Since 2011, Jenny has been named to the Forbes Global 100 VC Midas List of top venture capitalists, ranking as the #1 woman and #10 overall in 2015.

Jenny grew up in Singapore and was educated in the US, where she attended Cornell and Northwestern University. In this episode, we discussed how Jenny rose from a newcomer to one of the most respected VCs in China, how she set up the China presence of a US venture capital firm, how venture deals are done in China, and how US companies can better understand Chinese government interests.

Issue 38 | May 28, 2018

Issue 38 | May 28, 2018
An Original: Advice from Fu Sheng on Being a Startup Founder
We compiled and translated articles by Fu Sheng, CEO and founder of Cheetah Mobile, into this post in English. Cheetah Mobile is listed on the NYSE with a $2 billion market cap and is one of the first Chinese companies to go global. Fu is also the founder of a venture fund and his tips are invaluable to anyone interested in starting their own business. “A good entrepreneur is able to turn a highly open problem into a highly specific goal. Working hard is an attitude, not a goal,” he says. Read the full piece here.
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A Big Deal: Tencent Under Fire for Investing in Media Startup Accused of Plagiarism
Tencent has drawn plenty of negative reviews after investing in a media startup, Cha Ping (差评), whose name literally means “negative reviews” in Chinese. Cha Ping, which publishes tech news, has been accused of plagiarism by several prominent independent media professionals and multiple media outlets.

Cha Ping was supposed to receive $4.7 millions in funding from one of Tencent’s investment units. But the backlash caused by the announcement of the deal has made Tencent think twice. Tencent announced it will apply a more rigorous due diligence process and may withdraw its investment in Cha Ping.

Specifically, Cha Ping is accused of “Xi Gao” (洗稿, literally “text laundering”), which means republishing other people’s content after rearranging paragraphs and minor editing. Cha Ping’s case has rekindled a debate in China’s media industry about what exactly constitutes plagiarism, and what is the boundary between borrowing and stealing others’ content.

“90% of the news in the world is second-hand news, but even second-hand news has its ethics. You need to cite the sources properly and link to them,” read a commentary on Chinese tech media outlet PingWest, which counts itself as a victim of Cha Ping’s plagiarism.

At the very least, the debate is an indication that, in a country where the attitude towards intellectual property used to be more cavalier, awareness about copyright issues is at an all-time high.

A Number:
105% – The increase in Bilibili’s Q1 2018 net revenue compared to the same period last year. In the online video company’s first quarter as a public company, Bilibili reported strong growth driven by revenues from mobile games (which account for close to 80% of total revenue), live broadcasting, and advertising.
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Tencent Blocks ByteDance’s Douyin; Doubles Down in Short Video
Tencent has blocked links to videos on Douyin (抖音, whose overseas version is called Tik Tok)—one of China’s most popular short video apps owned by ByteDance (a.k.a Toutiao) on WeChat Moments, intensifying the rivalry between a tech giant and its up-and-coming challenger. Now, users who want to share a Douyin video must download the video first and then post it on WeChat Moments as an original video (see screenshot below).

Douyin’s meteoric rise in the past year has threatened the dominance of Tencent’s apps. According to QuestMobile, Douyin’s daily active user base grew from 10 million in August 2017 to 40 million in January 2018. Following the incident, ByteDance published a statement through its official WeChat account denouncing Tencent’s unfair treatment.

Tencent has its own ambitions in short videos, a format that is increasingly replacing live streaming to be the national favorite for entertaining content. In 2013, Tencent launched its own short video app Wei Shi (微视) which never took off and was closed down in April 2017. Around the same time, Tencent led a $350 million investment round in Kuaishou, China’s most popular short video app and Douyin’s biggest competitor. Last month, Tencent relaunched Wei Shi with new features in hopes of challenging Bytedance’s apps.

Note: ByteDance is a GGV portfolio company.
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A Video: How Alibaba is Transforming Restaurants in China
Alibaba’s Koubei, a local-services platform, has transformed a traditional restaurant to keep up with modern consumers. Watch here.

996 Podcast: Yasheng Huang of MIT on the Future of US-China Trade Relations
In the first joint live session of GGV Capital’s 996 Podcast and The Sinica Podcast, we interviewed Yasheng Huang, a renowned economist and Professor of Global Economics and Management at the MIT Sloan School of Management. We were joined by Kaiser Kuo, host of the Sinica Podcast and producer of the 996 Podcast.

Professor Yasheng Huang founded and runs the China Lab and the India Lab at MIT, which aim to help entrepreneurs in those countries improve their management skills. He is an expert source on international business, political economy, and international management. In collaboration with other scholars, Huang is conducting research on human capital formation in China and India, entrepreneurship, and ethnic and labor-intensive foreign direct investment.

In this episode, we discussed the recent trade tensions between the US and China, how geopolitical factors are impacting the global tech industry, and how China’s growth story compares to that of India and other developing countries.