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YOUR GUIDE TO WEALTH-CREATING AND KEEPING IT   MONDAY, DECEMBER 10, 2012




MONEY
POST
  The high-risk, high-return
  world of angel investing
  >PAGE 4




  Wing
  and a
  prayer
  WHEELOCK:
  HOT OR NOT?
  >PAGE 7
                                                                    Illustration: Emilio Rivera




  PENNY-PINCHER’S
  GUIDE TO PLEASURE
  >PAGE 12
4 COVER STORY




 Angels on the
 Investors are
 again betting on
 start-ups in the
 mainland, says
 Tiffany Ap


 F
          our squares on a phone
           screen show photos of four
           women. Tap the one you like
           and profiles appear showing
 age, occupation, education, and
 current location: a 27-year-old
 dentist and a 23-year-old garment
 buyer in Beijing; a 24-year-old
 designer in Hong Kong, and a 32-
 year-old sales executive in Taiyuan.
     Tap the application to reveal the
 background of your photo-based
 choice, and a photo of your
 background-based selection. Whom
 should you message? One knows
 Will, your college friend, while the
 other works at the same company as
 your roommate, Peggy.
     This is Qiuqiu, or “cupid”
 in Chinese, a dating app that
 steers users to potential partners. It
 is the vision of former JP Morgan
 Chase New York analyst 27-year-old
 Michael Lewis, who moved
 to the mainland to chase his
 start-up dreams.
     Daters have three categories to       Michael Lewis, co-founder of Qiuqiu (screen shot below), says mainland investors are more conservative than their Western counterparts. Photo: K.Y. Cheng
 assess: appearance, background and
 people they know in common. “It’s
 more in line with how people              won’t look at any opportunity under       estimates the investment is now                                              highly motivated, although they
 naturally meet,” says Liuzhou-born        US$1 million.                             worth HK$25 million.                                                         require some education,” he says.
 Lewis, who emigrated to the US               Because angel investors come in            Most of the start-up activity                                                Top-tier academe like Tsinghua
 aged six. “If you have 10 friends, and
 those 10 friends each have another
                                           early, taking risky bets on firms that
                                           have yet to establish themselves,
                                                                                     involves technology, in general, and
                                                                                     the internet, in particular. Hong
                                                                                                                              I think that a lot                  and Beijing University churn out
                                                                                                                                                                  graduates much as Stanford serves
 10 friends, that’s 100 people you can     they typically get to buy into the        Kong investors are lucky to be sitting   of people invest                    Silicon Valley, creating an ecosystem
 meet. It’s quite exponential.”            company at a low price. The pay-off       on the doorstep of the perhaps the                                           ripe for Chinese entrepreneurs.
 Enormous too: the mainland has the        usually in comes in the form of a         world’s most promising tech start-       because it is a                         Beijing-based Natasia Guo,
 world’s largest singles population,
 estimated at 180 million.
                                           share sell-down at the firm’s initial
                                           public offering or in an acquisition.
                                                                                     up market: the mainland.
                                                                                         The mainland lags behind the
                                                                                                                              good thing for the                  founder of website Nuandao, which
                                                                                                                                                                  specialises in goods with a sharp,
     To some, Qiuqiu is also an               This is high-risk investing. Casey     rest of the world in developing web      community                           original design, speaks of an
 investment opportunity. Rich              Lau, the organiser of Startups HK,        businesses, but the potential is huge,                                       “anything goes” mentality in the
 individuals bought a stake in the         which brings local entrepreneurs          thanks to the population and the         SIMON SQUIBB, CEO, NEST             capital. She likes the mainland’s
 firm at an early stage, acting as so-     together, says he expects just two        growth in consumer spending. The                                             scrappy start-up scene and thinks
 called angel investors. These are         out of 10 start-ups to succeed.           mainland is also cranking out scores                                         Silicon Valley is oversaturated. “I’m
 investors that provide critical capital      But the pay-off can be huge.           of promising new firms, particularly                                         from the Bay area. Everybody is an
 and guidance to a promising firm          AngelVest, which introduces               in Beijing’s Zhongguancun district,                                          entrepreneur there,” she says with
 just as it is getting off the ground.     investors to entrepreneurs, seeks         the country’s main technology hub.                                           reference to San Francisco Bay,
     Such investors are “angels” in        returns of at least 10 times an initial       AngelVest co-founder David                                               which encompasses Silicon Valley.
 that they look over fledgling firms       investment within 10 years.               Chen – who teaches a Beijing                                                     Like many mainland start-ups,
 and nurture them with money and              Simon Squibb, of Nest, an              University entrepreneurship                                                  Nuandao is a Chinese version of a
 guidance in their early years. Angel      incubator which nurtures start-ups,       seminar in his spare time – says a                                           successful Western business. It
 investors fill a crucial niche in that    offers an example of how successful       wave of entrepreneurs is emerging                                            follows a similar business model to
 they provide capital to new firms         angel investing can be. Eighteen          on the mainland, and their ideas                                             Fab, a design-focused online retailer
 before they are big enough to get the     months ago Squibb and partners            need funding.                                                                valued at US$600 million.
 attention of professional investors at    put HK$1 million into a Hong Kong             “There’s interest, especially in                                             The reason for copying a tried-
 venture capital funds, who generally      magazine called Foodie. He                the past two years. The grads are                                            and-tested formula is that it’s an
COVER STORY 5




eir shoulder
 easier sell. Investors have a reference
 point and can also see a way to exit.
     Although Chinese companies
 have come up short on innovation,
 they have excelled at adapting            “There are
 existing business models. “We may         fewer angel
 have copied Fab in terms of business      investors,
 direction, but we’re now pivoting         they don’t
 away from that to solve our users’        take as much
 unique needs,” says Guo. “Weibo           risk, and they
 copied Twitter but they evolved and       invest later. They
 now they’re more fun than Twitter.”       want to see traction
     Crucially, while the start-up         over investing in a
 scene in Silicon Valley is saturated      strong team.”
 with venture capitalists and it can be         This is an opportunity for
 hard to find decent opportunities,        rich Hongkongers looking for a high-
 mainland entrepreneurs are hungry         return investment and who might
 for money. This is partly because         have the stomach for this brand of
 local investors are less experienced      risk. Many wealthy investors from
 and comfortable with angel-style          Hong Kong are entrepreneurs
 investing. Investors from the             themselves, and are therefore in a        wealthy: they must have a net worth
 mainland generally want to see an         position to understand the potential      of US$1 million or income of more
 operating business with a tangible        of a start-up.                            than US$200,000 a year in the last
 product before they commit capital,            Those interested in such             two years, and a reasonable
 and many of the tech start-ups            opportunities might get in touch          expectation to exceed US$200,000 in
 looking for funding are too               with angel clubs such as AngelVest,       the current year.
 conceptual for their tastes.              which offer a good entry point.               AngelVest generally gives
     “In California, there are many        Launched by Chen and a Harvard            between US$100,000 and
 generations of entrepreneurs and          MBA classmate in 2007, it is the          US$500,000 in seed money to
 angel investors, but in [mainland]        mainland’s largest angel investment       start-ups. It plans to launch a
 China the cycle only started five to 10   group with more than 60 members.          Hong Kong chapter early next year        Nest’s Simon Squibb takes a hands-on approach to investing. Photo: May Tse
 years ago,” says AngelVest’s Chen.             It has since invested in 16 mostly   aimed at networking Hong Kong
     Rui Ma, China adviser to              tech-related deals, with ideas            investors with mainland
 California-based 500 Startups,            ranging from a web service that           entrepreneurs, and vice versa.           office space in Sheung Wan and an         didn’t do well were the ones I hadn’t
 believes the lack of experienced          helps users carpool (Wodache), to             Hong Kong investors, of course,      initial investment of HK$500,000.         spent time on. If you do something
 angels – she estimates there are 300      fitness software that lets joggers try    have already had dealings with the           More importantly, it offers plenty    part time, you get part-time results.”
 to 500 active angel investors in          out the world’s best running              mainland tech story, in 1999-2000,       of industry know-how and                       Angel investors can hope for a
 China – often results in deals that are   locations around the world, thanks        when scores of internet firms rushed     guidance. Squibb set up his first         rich pay-off for their work, but many
 highly favourable to investors.           to simulation in high-definition          through IPOs on the Hong Kong            company at the age of 24 and has          find the role of mentor and of being
     “The terms investors offer are not    video (Paofit).                           exchange. The experience did not         two decades of experience building        a part of exciting start-up to be
 always reasonable,” she says.                  The group applies strict rules on    end well for many, as early investors    companies, while his other Nest           rewarding in itself. Angel work has a
 “Instead of a straight equity             its invitation-only membership.           in Tom.com, PCCW, china.com,             partners include a lawyer, a Google       large social enterprise element, says
 instrument, the deal is often more        Would-be angels must be                   hongkong.com, e-kong or                  veteran, and marketing and                Squibb. He notes that rich
 like a debt. Or they will ask for big     recommended by two existing               Asiacontent.com can attest.              branding gurus. For the first three to    Hongkongers have recently become
 chunks of the company. They might         members, and they have to be                  So, before throwing money at the     six months, Squibb says he meets          fascinated with investing in car
 say, ‘If you don’t perform and meet                                                 first computer science major with a      with the entrepreneurs every day.         parking spaces that can be bought
 targets, you have to give me more                                                   bright idea, Chen advises investors      After the company has got off the         for up to HK$1 million apiece. He
 shares. I up my stake from 30 per                                                   to determine whether they have           ground, he meets with them once a         says that car parks might provide
 cent to 50 per cent without putting                                                 experience in, and an understanding      week, usually over coffee or lunch.       reasonable financial returns, but
 in more money.’ ”                                                                   of, the business they are looking to         Although he recognises that           result in nothing exciting. “If you put
     It’s a supply and demand issue,                                                 invest in. “If you’re a doctor and       many angel investors can only             that into an entrepreneur, imagine
 Ma believes. Fewer early investors
 make for greater leverage. “As more
 investors emerge, it will become
 normalised,” she says.
     Lewis says mainland tech start-
                                             300
                                             • The number of angel investors
                                                                                     invest in a gaming company, I’m not
                                                                                     so sure,” says Chen.
                                                                                         Investors also need to be ready to
                                                                                     take on an advisory role. “It’s not a
                                                                                     passive investment like property –
                                                                                                                              commit spare time to a company,
                                                                                                                              being involved is the smartest way to
                                                                                                                              invest, he says. “I learned, by losing
                                                                                                                              money, that I have to be in the
                                                                                                                              businesses a little bit more. I started
                                                                                                                                                                        what they could do,” he says.
                                                                                                                                                                             “People invest to make a return
                                                                                                                                                                        and that’s certainly what we do; I’m
                                                                                                                                                                        not shy about that. But I think a lot
                                                                                                                                                                        of people invest because it’s a good
 ups are starved of capital because            estimated to be active on the         you invest, and then you’re              like everyone else, having a day job      thing for the community. You’re
 many local investors are reluctant to         mainland, where investors             mentoring and connecting,” says          and angel investing on the side. Fast     helping a human be successful, feed
 put money into unproven entities.             prefer more established               Lau of Startups HK.                      forward five or six years, and I had      their family, helping the city. That’s a
     “Investors in China are a lot more        companies                                 The Nest group is nurturing 10       companies that did well and ones          lot more interesting than a car park.”
 cautious than in the West,” he says.                                                young companies, giving them             that didn’t do so well. The ones that     tiffany.ap@scmp.com

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SCMP: Money Post on Startup Funding in Hong Kong & China

  • 1. YOUR GUIDE TO WEALTH-CREATING AND KEEPING IT MONDAY, DECEMBER 10, 2012 MONEY POST The high-risk, high-return world of angel investing >PAGE 4 Wing and a prayer WHEELOCK: HOT OR NOT? >PAGE 7 Illustration: Emilio Rivera PENNY-PINCHER’S GUIDE TO PLEASURE >PAGE 12
  • 2. 4 COVER STORY Angels on the Investors are again betting on start-ups in the mainland, says Tiffany Ap F our squares on a phone screen show photos of four women. Tap the one you like and profiles appear showing age, occupation, education, and current location: a 27-year-old dentist and a 23-year-old garment buyer in Beijing; a 24-year-old designer in Hong Kong, and a 32- year-old sales executive in Taiyuan. Tap the application to reveal the background of your photo-based choice, and a photo of your background-based selection. Whom should you message? One knows Will, your college friend, while the other works at the same company as your roommate, Peggy. This is Qiuqiu, or “cupid” in Chinese, a dating app that steers users to potential partners. It is the vision of former JP Morgan Chase New York analyst 27-year-old Michael Lewis, who moved to the mainland to chase his start-up dreams. Daters have three categories to Michael Lewis, co-founder of Qiuqiu (screen shot below), says mainland investors are more conservative than their Western counterparts. Photo: K.Y. Cheng assess: appearance, background and people they know in common. “It’s more in line with how people won’t look at any opportunity under estimates the investment is now highly motivated, although they naturally meet,” says Liuzhou-born US$1 million. worth HK$25 million. require some education,” he says. Lewis, who emigrated to the US Because angel investors come in Most of the start-up activity Top-tier academe like Tsinghua aged six. “If you have 10 friends, and those 10 friends each have another early, taking risky bets on firms that have yet to establish themselves, involves technology, in general, and the internet, in particular. Hong I think that a lot and Beijing University churn out graduates much as Stanford serves 10 friends, that’s 100 people you can they typically get to buy into the Kong investors are lucky to be sitting of people invest Silicon Valley, creating an ecosystem meet. It’s quite exponential.” company at a low price. The pay-off on the doorstep of the perhaps the ripe for Chinese entrepreneurs. Enormous too: the mainland has the usually in comes in the form of a world’s most promising tech start- because it is a Beijing-based Natasia Guo, world’s largest singles population, estimated at 180 million. share sell-down at the firm’s initial public offering or in an acquisition. up market: the mainland. The mainland lags behind the good thing for the founder of website Nuandao, which specialises in goods with a sharp, To some, Qiuqiu is also an This is high-risk investing. Casey rest of the world in developing web community original design, speaks of an investment opportunity. Rich Lau, the organiser of Startups HK, businesses, but the potential is huge, “anything goes” mentality in the individuals bought a stake in the which brings local entrepreneurs thanks to the population and the SIMON SQUIBB, CEO, NEST capital. She likes the mainland’s firm at an early stage, acting as so- together, says he expects just two growth in consumer spending. The scrappy start-up scene and thinks called angel investors. These are out of 10 start-ups to succeed. mainland is also cranking out scores Silicon Valley is oversaturated. “I’m investors that provide critical capital But the pay-off can be huge. of promising new firms, particularly from the Bay area. Everybody is an and guidance to a promising firm AngelVest, which introduces in Beijing’s Zhongguancun district, entrepreneur there,” she says with just as it is getting off the ground. investors to entrepreneurs, seeks the country’s main technology hub. reference to San Francisco Bay, Such investors are “angels” in returns of at least 10 times an initial AngelVest co-founder David which encompasses Silicon Valley. that they look over fledgling firms investment within 10 years. Chen – who teaches a Beijing Like many mainland start-ups, and nurture them with money and Simon Squibb, of Nest, an University entrepreneurship Nuandao is a Chinese version of a guidance in their early years. Angel incubator which nurtures start-ups, seminar in his spare time – says a successful Western business. It investors fill a crucial niche in that offers an example of how successful wave of entrepreneurs is emerging follows a similar business model to they provide capital to new firms angel investing can be. Eighteen on the mainland, and their ideas Fab, a design-focused online retailer before they are big enough to get the months ago Squibb and partners need funding. valued at US$600 million. attention of professional investors at put HK$1 million into a Hong Kong “There’s interest, especially in The reason for copying a tried- venture capital funds, who generally magazine called Foodie. He the past two years. The grads are and-tested formula is that it’s an
  • 3. COVER STORY 5 eir shoulder easier sell. Investors have a reference point and can also see a way to exit. Although Chinese companies have come up short on innovation, they have excelled at adapting “There are existing business models. “We may fewer angel have copied Fab in terms of business investors, direction, but we’re now pivoting they don’t away from that to solve our users’ take as much unique needs,” says Guo. “Weibo risk, and they copied Twitter but they evolved and invest later. They now they’re more fun than Twitter.” want to see traction Crucially, while the start-up over investing in a scene in Silicon Valley is saturated strong team.” with venture capitalists and it can be This is an opportunity for hard to find decent opportunities, rich Hongkongers looking for a high- mainland entrepreneurs are hungry return investment and who might for money. This is partly because have the stomach for this brand of local investors are less experienced risk. Many wealthy investors from and comfortable with angel-style Hong Kong are entrepreneurs investing. Investors from the themselves, and are therefore in a wealthy: they must have a net worth mainland generally want to see an position to understand the potential of US$1 million or income of more operating business with a tangible of a start-up. than US$200,000 a year in the last product before they commit capital, Those interested in such two years, and a reasonable and many of the tech start-ups opportunities might get in touch expectation to exceed US$200,000 in looking for funding are too with angel clubs such as AngelVest, the current year. conceptual for their tastes. which offer a good entry point. AngelVest generally gives “In California, there are many Launched by Chen and a Harvard between US$100,000 and generations of entrepreneurs and MBA classmate in 2007, it is the US$500,000 in seed money to angel investors, but in [mainland] mainland’s largest angel investment start-ups. It plans to launch a China the cycle only started five to 10 group with more than 60 members. Hong Kong chapter early next year Nest’s Simon Squibb takes a hands-on approach to investing. Photo: May Tse years ago,” says AngelVest’s Chen. It has since invested in 16 mostly aimed at networking Hong Kong Rui Ma, China adviser to tech-related deals, with ideas investors with mainland California-based 500 Startups, ranging from a web service that entrepreneurs, and vice versa. office space in Sheung Wan and an didn’t do well were the ones I hadn’t believes the lack of experienced helps users carpool (Wodache), to Hong Kong investors, of course, initial investment of HK$500,000. spent time on. If you do something angels – she estimates there are 300 fitness software that lets joggers try have already had dealings with the More importantly, it offers plenty part time, you get part-time results.” to 500 active angel investors in out the world’s best running mainland tech story, in 1999-2000, of industry know-how and Angel investors can hope for a China – often results in deals that are locations around the world, thanks when scores of internet firms rushed guidance. Squibb set up his first rich pay-off for their work, but many highly favourable to investors. to simulation in high-definition through IPOs on the Hong Kong company at the age of 24 and has find the role of mentor and of being “The terms investors offer are not video (Paofit). exchange. The experience did not two decades of experience building a part of exciting start-up to be always reasonable,” she says. The group applies strict rules on end well for many, as early investors companies, while his other Nest rewarding in itself. Angel work has a “Instead of a straight equity its invitation-only membership. in Tom.com, PCCW, china.com, partners include a lawyer, a Google large social enterprise element, says instrument, the deal is often more Would-be angels must be hongkong.com, e-kong or veteran, and marketing and Squibb. He notes that rich like a debt. Or they will ask for big recommended by two existing Asiacontent.com can attest. branding gurus. For the first three to Hongkongers have recently become chunks of the company. They might members, and they have to be So, before throwing money at the six months, Squibb says he meets fascinated with investing in car say, ‘If you don’t perform and meet first computer science major with a with the entrepreneurs every day. parking spaces that can be bought targets, you have to give me more bright idea, Chen advises investors After the company has got off the for up to HK$1 million apiece. He shares. I up my stake from 30 per to determine whether they have ground, he meets with them once a says that car parks might provide cent to 50 per cent without putting experience in, and an understanding week, usually over coffee or lunch. reasonable financial returns, but in more money.’ ” of, the business they are looking to Although he recognises that result in nothing exciting. “If you put It’s a supply and demand issue, invest in. “If you’re a doctor and many angel investors can only that into an entrepreneur, imagine Ma believes. Fewer early investors make for greater leverage. “As more investors emerge, it will become normalised,” she says. Lewis says mainland tech start- 300 • The number of angel investors invest in a gaming company, I’m not so sure,” says Chen. Investors also need to be ready to take on an advisory role. “It’s not a passive investment like property – commit spare time to a company, being involved is the smartest way to invest, he says. “I learned, by losing money, that I have to be in the businesses a little bit more. I started what they could do,” he says. “People invest to make a return and that’s certainly what we do; I’m not shy about that. But I think a lot of people invest because it’s a good ups are starved of capital because estimated to be active on the you invest, and then you’re like everyone else, having a day job thing for the community. You’re many local investors are reluctant to mainland, where investors mentoring and connecting,” says and angel investing on the side. Fast helping a human be successful, feed put money into unproven entities. prefer more established Lau of Startups HK. forward five or six years, and I had their family, helping the city. That’s a “Investors in China are a lot more companies The Nest group is nurturing 10 companies that did well and ones lot more interesting than a car park.” cautious than in the West,” he says. young companies, giving them that didn’t do so well. The ones that tiffany.ap@scmp.com