Chris Evdemon presented an overview of the Chinese internet market and opportunities for investment. Some key points: - China has over 338 million internet users, growing at 25% annually compared to 3% in the US. - Major opportunities exist in e-commerce, mobile internet, and cloud computing given China's rapid technology adoption. - New entrepreneurs are emerging from China's top internet companies and gaining experience to start their own ventures. - The Innovation Works model combines idea selection, project incubation, funding, and support to help startups succeed. - A $100 million fund is committed to finance portfolio companies emerging from the incubator.

1. Chris
Evdemon
( )!
Investments
&
Business
Development
Manager!
November
2009
1
Innovation Works Confidential and Proprietary

2. Overview of Chinese Internet Users
Millions of Chinese Internet Users
( : )!
338
Data Source: CNNIC, iResearch & Pew Internet

3. Differences in User Demographics
Average age in China: 25 Average age in the U.S.: 42
% of new users each year: China 25% - U.S. 3%

4. Waves in the Chinese Internet
Technology companies
Baidu, Tencent, Shanda
Web portals in late rose from the ashes of
1990’s created the dot-com bust .
first boom.
We anticipate a recovery in 2010,
building base for an explosive third
wave which will be propelled by e-
commerce, Mobile Internet, Cloud
Computing and globalization.
First Wave Second Wave Third Wave Mature Market
Sina $1.81B! Baidu $12.2B!
Sohu $2.39B! Shanda $3.23B!
Valua9on
of
Listed
Companies
NetEase $5.50B! Giant $1.78B!
Tencent $24.1B! Perfect World $1.89B!

5. New “Homegrown” Entrepreneurs
(Binhao Chen) ! (Alan Guo) !
• CEO, kaixin001.com! • CEO, lightinthebox.com!
• SINA 1998 2008! • Google 2005 2008!
(Jianguo Liu) !
(Victor Koo) !
• CEO, aibang.com!
• CEO, youku.com!
• Baidu 2000 2007!
• Sohu 1999 2005!
(Haibing Wang) !
(Diane Wang) !
• CEO, 51mole.com!
• CEO, DHGate.com!
• Tencent 2004 2007!
• Microsoft 1993 1999!
(Nian Chen) ! (Sunny Liu) !
• CEO, Vancl.com! • CEO, 51wan.com!
• Joyo 2000 2005! • Kingsoft 2001 2006!

6. Three Major Future Opportunities
e-Commerce!
Mobile Internet!
Cloud Computing!

7. Great Potential of Chinese e-Commerce
2008 Per-capita
Online
Shopping
Amount
USA! $1,059!
CHN! $63!
Internet
penetra9on
Mone9za9on
of
in
China
is
just
about
Chinese
Internet
is
1/3
that
of
the
US
1/16
that
of
the
US
50x
poten9al
Data Source: CNNIC, iResearch & eMarketer

8. e-Commerce Accelerates Advertising
Data Source: IAB & eMarketer

9. Future of e-Commerce in China

10. Mobile Internet Has Arrived
Millions of Chinese Mobile Internet Users
155
In 2009 3G licenses were issued to:
• CMCC (TDS-CDMA)
• CUTC (WCDMA)
• CT (CDMA2000)
Data Source: CNNIC

11. Powerful, Affordable Devices & Modern UI

12. Evolution of Mobile Internet
News Entertainment & SNS Utilities & e-Commerce

13. An Ecosystem of Mobile Opportunity
OEMs/ODMs
SoQware
&
Services! Devices
&
Hardware
Users
Ads
Users

14. Cloud Computing - A “New Software” Industry
SoQware
installa9on
/
upgrading
shiQing
from
the
user
to
the
cloud.!
Business
model
shiQing
from
expensive
upgrades
to
ads-­‐sponsored.!
IT
management
shiQing
from
end-­‐user
to
cloud-­‐services.!

15. Future of Cloud Computing
Google
App
Engine! Amazon
Cloud! Calendar! ERP
&
CRM!
Online
Gaming! Finance
/
Banking! Blogging
/
IM
/
Email!

16. New Gaming Industry
In
1998,
sales
of
gaming
soQware
were
only
about
$10
million
in
China.!
Online
gaming
is
now
a
$20
billion
industry.!

18. Incubation / Angel Funds in U.S. & China
Angel
Funds
in
U.S.
$28.0
Billion
Avg.
Investment
Size $300K!
$19.2
260K
Ac9ve
Investors!
Billion
Incuba9on
/
Angel
Funds! Venture
Capital! Success
Exit!
?
Angel
Funds
in
China
$7.3
Billion
S9ll
at
an
early
stage

19. What can Angel Investors do?
Mike Markkula:!
• Ex-Intel manager
• Invested $92,000
• Secured a bank loan of $250,000!
• Brought his business expertise
• Brought in Apple's first president
Andy Bechtolsheim:!
• Co-founded Sun Microsystems
• Wrote a cheque ($100,000) to
"Google Inc." prior to the company
even being founded

20. “Innovation Works” Model
Innova9on
Works
“Google 20%” model +
“Idealab” model +
Localization for China
Select the best ideas,
entrepreneurs and
engineers, and combine
Idea Selection them optimally into start-up
“dream teams”.

21. Project Development Lifetime
Official
Project! Independent
En9ty
Project
Ini9a9ve
Project
Ini9a9ve
Successful
Exit!
0 - 6 months 6 - 12 months
Incubator
Incubator Fund
& Fund
• Seed
/
Angel
funding
• Back-­‐office
support
• Entrepreneur
coaching
• Top-­‐engineer
recrui9ng
• Shared
LAMP-­‐based
pladorm
• Follow-­‐up
funding

22. Portfolio Company Financing
Innova9on
Works
has
a
$100m
fund
commieed
to
funding
the
start-­‐ups
that
come
out
of
the
Incubator.
Portfolio Company
Founding /
IW Incubator Founders
Seed Stage
Angel IW Incubator & Fund
Stage
Series A
IW Incubator IW Fund Other VC Founders

23. Project Development Plan
2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4
...….
Formation / Seed Stage Angel Funding Series A Funding

24. Thank You! !
Find this presentation at:
http://www.slideshare.net/evdemon
and connect at:
http://t.sina.com.cn/1648204271