Kalaari in China
June 12 - 20, 2016
Supported by Dhruvin
Compiled by Tara Kola
Aboard the Oriental Express
Travel Log of our first trip to China
Year of Economic Reforms
Year of Economic Reforms
GDP 10.9 trillion GDP 2.1 trillion
Why Visit China
Learn from China’s Venture Capital Success
Reasons behind velocity of Chinese startups
Understand how they have built large ecosystems
Discover what is next for Chinese tech startups
Discover the scope for collaboration
Make new friends
1. India can follow China’s
India can develop like China
1) “Manufacturing is critical for development.”
• 20 years ago, India picked services, China picked manufacturing. Manufacturing
distributes money through all levels of society. In China, it wasn’t broadband
quality/penetration that enabled the profitability of e-commerce companies, but the
rise in income through manufacturing.
• How fast manufacturing can grow in India will affect how much people can spend
2) “Indian consumers behave similarly to Chinese consumers.”
3) “Growth of e-commerce in India similar to early Chinese e-commerce.”
• 80% of users didn’t have credit cards in China when e-commerce started.
• Alibaba created escrow. An India company will need to solve payments.
India can develop like China
4) Trajectory of phone usage is similar
• In China, phones were ﬁrst used for information like
maps, then transactions, and then for services, ﬁnally for
everything else. India seems to be on a similar trajectory
• Mobile payments has huge opportunity in China. Alibaba
and WeChat enable ofﬂine payments by scanning a QR
code. Perhaps a high utility app in India will start offering
the many other online services apps like WeChat do.
“We may take different roads to reach development,
but we will both ultimately reach our destination.”
2. Critical differences between
China and India
1) The Great Firewall
• The Great Firewall was key in enabling the early local tech companies (Baidu,
Tencent, etc.) to grow and flourish. These companies played a crucial role in the
growth of China’s tech industry.
• Indian startups are exposed to US competition, and thus may not have the
incubating effect of the Great Firewall.
• Should Indian companies have some offline, local
component, since purely online companies would
compete with US companies
• Unlike China, India has not seen any large purely
2) Many sectors have consolidated in China. India still dominated by SMEs.
• Alibaba started as a B2B, but realized the far greater B2C opportunity,
transforming their success.
• In China, heavy industry SMEs are largely consolidated. Markets are generally
• B2B in textiles, commodities and a few other sectors seem to have workable
3) 20 years ago China picked manufacturing, India picked services. Now, Chinese
government is pushing services, Indian government is pushing manufacturing.
4) While India is culturally more similar to China than US, still some differences.
3. Chinese companies are
interested in India as a market
India as a Market
1) Chinese companies are looking to expand globally
• Pressure for Chinese companies that have done well to go abroad to expand their
market base. India is a major market they hope to capture.
2) Some Chinese startups are looking to India as a primary market
3) Skepticism about Chinese companies going abroad
• Many felt that most Chinese companies that have tried to expand to India, have
not done so successfully.
• Companies with heavy operations or that require cultural insight can’t easily go
abroad. Standard service companies can go abroad.
• Skepticism about how well Chinese companies will be able to run a company in
India and handle Indian entrepreneurs.
Chinese Investors on India
1) India is at an inflection point for Chinese investors
• Because of the strong belief that India will follow China’s development success,
there is great interest in investing in India.
• Some already have invested: Alibaba - PayTM, Snapdeal, Xiaomi - Hungama,
Ctrip - Makemytrip, Didi - Ola. Many others would like to.
2) Chinese financial investors primarily interested in growth investment
• Growth capital for India is going to come from outside of India.
• Chinese investors are unlikely to start with early stage. China is now a global
financial center, so growth funding can likely come from China.
Chinese Investors on India
3) Chinese investors interested in models that have worked in China
• Systematically transfer business models that are successful in China over some
fixed period of time to India
4) Some large companies have India investment strategy
• Strategic investments help build relationships and land smoothly into India as a
potential market - e.g. Didi in Ola, Ctrip in Makemytrip.
5. Investors in China still
skeptical about India
Skepticism about investing in India
• Skeptical about India’s political structure, and the ability to sustain growth with
people coming in and out of office every few years.
• India is too diverse of a market - it feels like many countries.
• Telecom service in India is too slow/too expensive, making it hard to monetize.
Fragmented and weak mobile networks minimize network effects.
• Category leaders have not emerged. Apart from e-commerce, other sectors in
India are not mature enough yet.
• Lack of financial transparency in Indian businesses is a turnoff for international
6. Chinese investors and companies can
add unique value to Indian startups
Learning from China’s experience
1) Chinese investors can help Indian companies learn from China’s experience
2) Finding Chinese parallels for Indian companies is useful for learning and
3) O2O models targeting young people gaining traction
4) Chinese market more competitive and less fragmented than Indian market
5) India’s current funding chasm as a temporary hurdle similar to China in 2003
6) Startup Velocity-Creating great returns-Wealthy entrepreneurs becoming LPs
or VCs-10B RMB fund raised recently — Virtuous cycle
7) Average P/E 50 on China exchange for internet companies
8) Smart Hardware, Internet Plus, Content, Fintech, Health. Mobile gaming,
Robotics, AI, some of the current trends
7. Chinese companies have
built large ecosystems
Ecosystems enable the core business to expand and develop better monetization
1) Alibaba, a data company. Jack Ma Health and Happiness vision
• Started with B2B, then into B2C, payments, financial services, cloud computing.
• Expands into other businesses aggressively such as Ali Music, Ali Sports, Ali
Health, etc, cross-leveraging the Alibaba businesses. E.g. For Ali Sports, they
sponsor events like World Cup, operate sports stadiums. They can target
customers with tickets based on the information they have from Alipay and
• They allow customers to pay later if their credit history on Alipay is good enough.
Air Purifier • Sell hardware through mi.com; 3rd
largest e-commerce site in China
• Hardware carries low margins but
gives insights in to a user’s daily
• Approximately 1000 SKUs on site
- 95% of sales are mi brand
products, or the products of
Xiaomi portfolio companies
• Difficult to monetize OS, so
monetization is done through ads
• #3 game distributor in China,
produces its own games
• 20 independent apps by Xiaomi;
use these apps to learn about
• Own ad network; push relevant
ads depending on phone usage
8. Future Trends in China:
Content, Local, Innovation
Future Trends in China
1) Investing in unique content
• High quality content was expensive in China previously. Now startups are trying
various strategies for developing content alongside being a platform for user-
• Vine and live-streaming are very popular in China now with good monetization.
• Many companies are going upstream to get exclusive content so that content can
only be streamed on their platform.
• Content companies are starting to do very well in terms of valuation. If a company
can’t create its own content, they need to invest/buy/cooperate with content
companies, whether traditional industries like movies, or online content.
• Many companies making strategic investments in this direction.
Future Trends in China
2) Solving local problems
Examples of Chinese startups solving local problems:
• Logistics - The Uber for long-distance trucking. In China, trucks are generally
owned by the driver, who is responsible for sourcing clients. Generally, drivers
struggle to find jobs once they have reached their destination that will take them
back home, so they often have to drive empty. This app allows shipment companies
looking for trucks to make requests, and for truck drivers to accept jobs as soon as
a job is completed.
• Healthcare - An online platform for doctors. The best doctors work at public
hospitals, where they are rushed and healthcare is cheap, but these doctors often
want a few patients for a more lucrative private practice. Recent legislation has
allowed doctors at public hospitals to take on a private practice on the side. This
platform enables doctors to find and keep in touch with good patients they wish to
include in their private practice.
Future Trends in China
Artificial IntelligenceIoTCutting edge hardware
• Hardware accelerators such
as HAX in Shenzhen have
incubated startups that
compete with high tech
Silicon Valley companies.
• DJI dominates consumer
drone market with 70%
• Engineering talent from the
two top Chinese universities
— Tsinghua and Peking —
and VC money provide boost
to startups which can cater to
a smartphone population of
• There are now more than
100M smart devices in
China. Believe this is the
same inflection point as
smartphones in 2007-08. To
a consumer, the value of data
increases in a non linear
fashion when he/ she owns
multiple smart devices
9. Similarities and Differences between
Chinese and Indian Venture Capital
Differences in Chinese & Indian
1) Funds have successful entrepreneurs as individual LPs
2) VC firms often have RMB and USD funds
• Different LPs and different exit channels - RMB is exited in China, USD is exited in
US or Hong Kong
3) Diversity in investment team size and philosophy
• Some funds had compact investment teams to minimize management overhead.
Others had large teams offering services to portfolio companies.
4) China has ~20% women VCs. India still has only ~5%. Women in top positions
in large companies significantly higher (35% in top tech companies).
5) Angel investing is thriving, and more organized.
Similarities in Chinese & Indian
6) Many local Chinese firms have offices and investments in the US
• China startup ecosystem has historically had strong ties to the US. Initially began
with Chinese abroad returning to set up startups and VC funds.
• Global funds made first foray. Today dominated by local funds many times
breaking away from their original start in global funds
• Employees in the startups that succeeded have continued the cycle of starting
their own companies. Starting with entrepreneurs who had global education and
work experience. Now, the startup industry is almost entirely local, homegrown
with fewer Chinese returnees/expats.
• People from traditional industries are also creating new generation of startups (we
sometimes heard this referred to as InternetPlus) disrupting traditional industries.
• Many senior GPs now spend time in the Valley sourcing Chinese Americans who
have global aspirations for startup ideas that could be built through China.
10. Building relationships in
China takes time
Indian companies can beneﬁt greatly from their Chinese counterparts:
1)Visit China to see for yourself the velocity of Chinese startups, learn about their
culture and their people
2) It is important for Indian companies to start a conversation with their Chinese
equivalent startups. Meet Chinese entrepreneurs, exchange notes on sector and
how to scale
3) Learn from their mistakes and their success. Customise business model for
Visit Meet Learn
1) India can follow China’s development path
2) There are critical differences between China and India
3) Chinese companies are interested in India as a potential market
4) Investors in China are interested in India though some skepticism persists
5) Companies scaling rapidly is the norm, not the exception, unlike in India
6) Chinese investors and companies can add unique value to Indian startups
7) Chinese companies have built large platform ecosystems
8) Future Trends in China: Content, Local, Innovation
9) Indian Venture Capital can learn from Chinese counterparts on exits
10) Building relationships in China takes time
Vegetarian and gained weight!
Many people, including Chinese friends, warned us that it is difficult to be vegetarian in
China. However, with some language skills and knowledge of the food, we found it easy
to eat well and enjoy the food. Here are our tips for vegetarian visitors to China.
Communicate in Chinese
If you cannot speak Chinese, have someone write down your dietary preferences in
Chinese. Don’t bother trying to speak the words - between tones and pronunciation, it
is unlikely anyone will understand you.
I am vegetarian
Does this have meat?
Do you have any vegetarian
Vegetarian and Thriving
Know what food to look for
Here are some of our favorite foods that are good for vegetarians.
Malatang ⿇辣烫 Hotpot ⽕锅 Xiangguo ⾹锅
Baozi 包⼦ Mapo Tofu ⿇婆⾖腐 Eggplant 鱼⾹茄⼦
Vegetarian and Thriving
3. Know how to find vegetarian food
• Places to eat can be found on every street in China. Type the food you are looking
for into Baidu maps, or ask someone nearby where to find a shop (see table
• Malatang, Hotpot, Xiangguo, and Baozi are generally sold in roadside shops
dedicated to these foods. Other dishes are found at sit down restaurants with
I want to eat ___. ___
Where can I eat ___? ___
Many told us Beijing is extremely polluted, and we would need masks. Each day we
were there was beautiful, and no one wore a mask. From the media, one would think
Beijing looks like this everyday:
But this is not the case. Pollution varies day-by-
You can check Beijing’s air quality forecast at http://aqicn.org/forecast/beijing/
• Take a couple days out of your trip to see Beijing, and visit some of these spots.
The Great Wall
Temple of Heaven
• If you are planning to shop in Beijing, here are some of our recommendations:
Nanluoguxiang 南锣⿎巷 Panjiayuan 潘家园 Tianyi Market 天意市场
Street shopping in an old
hutong (alleyway). Gives
you a taste of old Beijing,
alongside unique food
and boutique shops.
Arts, crafts, and
bargaining at 1/10th the
A massive building full
of all sorts of goods.
Bargaining is the norm.
• The quality of service we experienced was extremely high throughout our trip.
• Taxis and many restaurants don’t expect tips.
• Difficult to communicate in English, even with office receptionists, at markets, etc. We
were prepared for the language barrier, and hired a Chinese-speaking intern to help.
• Remember Google, Twitter, Facebook, etc. are blocked in China. Be prepared with a
high-quality, well-rated VPN. Wifi in business hotels is usually already on a VPN.
• The following apps might be helpful for communicating and getting around:
Translation Pleco, Google Translate (download
offline since Google is blocked)
Transportation Baidu Maps, Didi Dache, Uber, Ctrip
Search Bing (since Google is blocked)
India and China: Past, Present, Future
Separated by the Himalayas, China and India have always remained culturally distinct. Yet
the constant trickle of ideas, words, and technology across the shifting borders has deeply
influenced both societies.
• The Silk Road was an informal network of trade routes that passed from China to the
West. Across these networks, technology was periodically transferred between China
and India. India benefitted from Chinese advances in silk production, paper, and to
some extent gunpowder, among other things.
• Buddhism lead to a stream of people coming between China and India. Fa Xian and
Xuanzang, Buddhist travelers from China, were some of the earliest chroniclers of
India. The description in their travel journals helped locate Nalanda during excavation,
among other Indian archeological sites.
• Some say the word China comes from the Sanskrit word Qina (land of the Qin) - the
word Qina is mentioned in the Mahabharata while describing the great kingdoms.
• Chinese has many Sanskrit loan words (e.g. mallika = jasmin = moli )
• The word chai comes from the Chinese word for tea, cha
• Tea cultivation was an imperial secret in China. The British were addicted to tea,
which became an expensive obsession. In 1848, a British botanist named Robert
Fortune was sent by the British East India Company dressed as a Chinese man
(illegal for foreigners to enter China at the time) to steal tea and begin growing it in
• Tea was then planted in Assam and Darjeeling. Low quality tea dust was sold to
the local Indians, who mixed it with milk, sugar, and spices to make it palatable.
• Parsi cemetery was found near Guangzhou where the Parsi opium merchants
lived. Parsi community still leaves in Guagnzhou.
• Chinese tea planters, and other immigrants settled in India. Developed Hakka
noodles, Gobi Manchurian, and our other favorite Indo-Chinese foods.
• Third generation Indian-Chinese Meiyang Chang is a Bollywood actor (acted in
India will have 700 Mn smartphone users by 2020, enabling many business models
- China has 530 Mn smartphone users today. These users first used a smartphone for
information, then for games and entertainment and eventually made transactions
Mobile video traffic in India will grow at 83% CAGR between 2015 and 2020. Video content
will account for 72% of mobile data traffic by 2020
- Vine and other live-streaming services are extremely popular in China
- Original content companies will do well as people spend more time on their smartphones
E-commerce story has just started. Temporary blips occurred even in China 10 years ago
- E-commerce is 15% of retail sales in China because of the inefficiency of offline markets
- India will grow in a similar fashion and can emulate the success of Chinese companies
India has 23 million middle class adults compared to China’s 108 million
- Growth in this segment will propel consumer spending and create opportunities for Indian
A robust, domestic exit market is critical for a sustainable VC ecosystem
- Chinese startups prefer to list on local stock exchange owing to a high PE ratio
- Liquidity through exit gives confidence to local LPs and local funds
- China had the most number of tech IPOs in the world in 2015
Successful entrepreneurs and early employees of large tech companies in India will turn
angels or second time entrepreneurs
- India already seeing signs of it with a very active angel ecosystem
- Mukesh Bansal and Ankit Nagori launched Curefit, a health and wellness company
Large tech companies will provide incubation, talent and capital for the next generation
- Baidu, Alibaba and Tencent (BAT) invested more than $10 billion in on-demand services
from 2014 to July 2015
- Xiaomi invests in hardware startups and sells products under the Mi brand
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