Original title of this article: "To invest in India, we must invest in the differences with China and find Shen Nanpeng and Xiong Xiaoge among Indians."
Original: Zhixiang. com
China Fund wants to find Xiong Xiaoge and Shen Nanpeng among Indians.
//This article is 5259 words in total, and it is expected to be read for 16 minutes//
From 1988 to 1991, Wu Shangzhi worked in India Bureau of the World Bank, mainly engaged in Indian loan projects. At that time, in 1993, Wu tried to raise funds to set up a fund-"the idea was naive", and invested in some projects but it seemed that they all lost.
At the end of last year, Wu Shangzhi went to India again, and after a lapse of 27 years, he caught up with his old Indian friends at the World Bank. At this time, Wu Shangzhi is already the "Lao Wu" among the young people, and his CDH investment has also become the first PE in China.
From China to the West, from Zhongguancun in Beijing to Coleman Galla in Bangalore, and going to sea in India are the new fashions in China’s capital circle. However, Wu Shangzhi’s team realized the potential of overseas markets earlier than their counterparts in China.
In Southeast Asia, when the travel giant Grab was valued at $2 billion, CDH entered the market. Today, the market value of Grab has exceeded $20 billion. In October 2015, Ying Wei, the managing partner of CDH Baifu, began to pay attention to Indian projects. This is even earlier than Alibaba’s investment in overseas flagship project-Indian payment company Paytm.
CDH Baifu is an asset management platform under CDH Investment. After two years of exploration, CDH Baifu began to be active in India again in May last year. At present, an emerging market fund with a scale of US$ 200 million is being raised, which is also the first venture capital fund focusing on India in China.
Different from many China investors interviewed by Zhixiang. com, on June 12th, when he talked about the logic and rationale of investing in India, he said, "See if we can find out that characteristic, and compare it with the characteristics of China." He also thought that "finding the difference between India and us is the most difficult thing", so the funds in China also need to be localized.
The following is an interview record, with slight adjustments as needed.
"We studied it for more than two years and didn’t invest a penny."
Q: When will you start to see the Indian market?
Ying Wei:At the end of 2015, a domestic individual investor invested in a project in India. At that time, we went to see it. In March 2016, we began to invest exclusively in the Indian market. At that time, Morgan formed a group, Tencent and Fosun, and when we went together, we saw seven or eight people in one day.
To sum up, in October 2015, we began to ponder this matter, explore research, then organized a group to go with them, and later formed a team to be responsible for the Indian fund. Zhang Le is a partner of CDH Baifu and a veteran of CDH. He has participated in leading many consumer and Internet projects in CDH, and went out to start a business in the middle. This year, he was recruited by us to take charge of the Indian fund. Zhang Genghua, the core member of the team, is also the first young generation in China to pay attention to the Indian market, and has made a lot of accumulation in the past three years. In the future, we must recruit Indians and be localized.
Q: What stage are you mainly investing in now?
Ying Wei:In fact, it was in the middle and early stages, and there are basically no projects in the middle and late stages of India.
Flipkart was sold to Wal-Mart for 16 billion yuan, which was also in the middle and early stages, because the company had not yet made a profit. Therefore, we are investing in India now, just as we invested in domestic projects many years ago. For example, when CDH invested in Mengniu around 2001, it was also in the middle and early stage, and we invested 30 million dollars with Morgan. Don’t say that the Internet industry is growing fast, and so are traditional industries. It’s normal to double a year when you just started your business in the middle and early stages, and it’s normal to triple a year. When you are small, it belongs to this stage.
Q: Why India? You went in when Grab was valued at $2 billion. Why are emerging market funds focusing on India now?
Ying Wei:At that time, we seized this opportunity. However, the population of Southeast Asia is scattered. When we visited India from Southeast Asia, we felt that the Indian market was earlier. First, if you look at the per capita GDP, you can see that most countries in Southeast Asia have surpassed India. If you look at Indonesia, it is almost $4,000. We first invested in Vietnam. Indonesia invested in France like this, and then slowly transferred to India. The Indian market has several characteristics: first, rapid development; Second, there is a huge market and great potential. We first invested in Grab, and we mainly saw the valuation difference, which increased. Looking back at India, this gap may be bigger, but India is more complicated. So that place needs to be studied. We studied it for more than two years and didn’t invest a penny.
Q: When did you start voting again?
Ying Wei:It started in May last year. We invested in love recycling in China, and they wanted to invest in a Cashify in India, so we followed suit.
Q: In your opinion, what is the difference between China entrepreneurs and Indian entrepreneurs?
Ying Wei:The Indian is very clever. After he walked around China, he learned all the apps, and he learned them better than us. For example, like this Indian Cashify, he set up a place in the shopping mall to sell mobile phone cases and mobile phone accessories. The goods from Yiwu are very cheap. He said that I can earn my rent back by selling mobile phones and recommending these spare parts.
When you go to India to see it, it is exactly the same as ours. If you learn this, you will have an innovation. They are interesting and smart.
We went there to contact a small fund, and at first glance, we used to be the local head of Citibank, which was very high-level, and it was the same in the United States. They became CEOs and we became engineers, starting with that generation. When I went to India to meet them more than two years ago, I asked him a question. You are all heads of investment banks. Why did you all quit your jobs and go back to start businesses? Their answer is that, just like you in Chinese, we gave up the high salary and started our own business.
Q: Yes, and their international vision is better than ours, and they started internationalization very early. 、
Ying Wei:Yes Moreover, the ability of ToB is better than ours. We also watched some of them, but we didn’t dare to vote because it was strong, so we didn’t dare to vote. What we can understand is consumption, so the projects we invest in are all related to the big consumer Internet. We see these things better than he does. So the American fund, I think its advantages are, look at the front end. We also have our experience. Ten years earlier, this piece of toC was developed by us.
Pay attention to consumption, that’s for sure. It’s a very interesting phenomenon that you go to Indian shopping malls to see brands. I just said that it has developed by leaps and bounds, and its brand is different from ours. Now it is said that online and offline are developing at the same time, so in fact, if you catch the online, you will catch the offline, so you basically start to move in this direction. Jumping, I just said to pay credit cards, and his credit cards are basically not available. There is no meeting in Africa. What will happen to it? Will go online.
Investing overseas cannot be simply done by traditional investment logic, so I just said that we have the ability to reduce the dimension and strike, but at the same time we must have Indian characteristics and find out its development stage.
"If all Indian companies copy China’s model, they will not succeed. Isn’t it the same as our copy American company? "
Q: Now a group of investors from China are going to India. Is it a little late?
Ying Wei:Not too late. I think so, that is, it is a little late to know India, but it is not too late to invest now. It took us three years to know each other. Investment, we started to invest in May last year. But it does take a process to get to know India.
Whether that place is ok or not depends on the data. Look at the index of FDI, it is already the tenth, and its growth rate has surpassed that of China, and it surpassed that of China two years ago. China’s reform and opening up really started when FDI surpassed that of the United States. There is also the growth rate of foreign direct investment, which is very important. It means that the whole world wants to vote for him. You see what he said, too. They all said that they wanted your money to come in.
I don’t think it’s too late, it’s not too late at all, it’s time. But it takes time for you to enter a strange country, do research and get to know it.
Q: What is the logic of your investment in India?
Ying Wei:We are now investing in projects ranging from 3 million to 5 million, together with Indian funds, to invest in small enterprises. There have indeed been some changes in the thinking here. Why?
We use China’s model to compare, but what we really want to study is that he is different from China’s, and at which point he is different from China. This difference from China is what we want to vote for.
If it copy China’s model, it will be unsuccessful. Otherwise, it will be the same as our copy American company. How can you copy that all the successes in the United States are improvements and even revolutions in this respect? This mode has just started to use it, and then change the mode. We studied it for a while, and thought it was almost enough. We started to invest in three early projects, all of which were led by us.
Therefore, in the China Fund invested in India, our ecology has been formed. Three years ago, when it came to CDH, Indians didn’t know anyone. In the past three years, we have made a reputation, and many invested enterprises have begun to know our strength through our reception in China.
Q: But China investors who invest in Indian projects now have a feeling that Indian projects are too expensive now.
Ying Wei:In 14 and 15 years, when the valuation was the highest, the Internet just started. But in fact, in 17 years, the valuation began again. Internet companies all rely on burning money, but how long can it last? When the big organization goes in, will it keep burning for you? Some companies whose valuations have been carried up can’t stick to it and come down. Keep the efficient ones and get rid of the ineffective ones. As a result, everyone began to pay more attention to cash flow and start to burn less money. I think most companies have to go this process. We have also seen that some of them have already achieved results, such as Wal-Mart’s acquisition of Flipkart.
Amazon China has failed, and it can’t fail in India. It claims that it will cost 3 billion dollars to burn every year, so most people can’t afford it, right? So the valuation began to go down, which is one aspect.
Second, some new models, such as social e-commerce and Pinduoduo, were not valued at first, so we started to support them. When it comes to round B, we have much more choices. Therefore, in the A round, it is mainly up to us to study.
However, the way we value the Internet in China is effective. What is high and low cost, and how long it takes to burn money, are the basis of our crackdown on dimensionality reduction. This kind of thing has been verified in China, and there is no market for it. I think the investment (opportunity) has passed. If there is an opportunity in China, there are still some opportunities in the industrial Internet.
But our experience in consuming the Internet is very popular in India. Of course, I just said that we must integrate into the characteristics of India and grasp its characteristics and differences.
"China funds have an advantage over American funds in India."
Q: There are other factors, because frankly speaking, this exit is still not perfect, and most of them are still through mergers and acquisitions. How should we always look at this aspect?
Ying Wei:I think there are two aspects, one is what I said at the meeting, that is, Indians don’t know the structure of red chips, which surprised me, but there are many legal problems. CDH’s red-chip structure in China is the earliest, and we are the oldest in the fund. For example, Belle’s listing and Mengniu’s listing are the earliest red-chip structures.
Therefore, the enterprises we invest in now basically need to teach them to make a red-chip structure. For example, if we want to list in Singapore in the future, we will make a Singapore structure. We are also simple and will not lose. In addition, we began to study Indian companies listed in the United States, and the first edition of the report was published. There are many channels for us to quit. To create channels.
In addition, some Indian enterprises have high valuations, and they are as illiquid as in the early days of China, which is exactly the same story. So, some investments are sold by the next round of financing, or I will sell them in the next round and quit, right? Sell it to other investment institutions. The six projects we have invested in will have the next round of financing in the coming year.
Q: You should always talk about the projects you invested in. I think they are quite good enterprises, because there are actually quite a few entrepreneurs going out to sea in China. They go to India and make short videos in various tracks. So I think you have also invested in some entrepreneurs going out to sea. In your opinion, if entrepreneurs going out to sea are compared with local entrepreneurs, how should they look at their own advantages and disadvantages?
It’s only two o’clock on the other side of the sea The biggest advantage of entrepreneurs at sea is the supply chain in China. India now, as I just said, the supply chain is not perfect. Second, when we look at the team, we must have local partners. When you see the sea, I must ask you to have a local partner, a combination of China and India, which is basically everything we have invested.
Therefore, the local market is not as clear as the local people. When you need help, it must be a local partner, and the supply chain must be strong in Chinese, so combine it.
In addition, it is gratifying that many China’s post-80s and post-90s generation are turtles, and the rich second generation have also started their own businesses in India.
Q: Yes, we stayed in Bangalore for about two or three years. In the past, there was basically no Chinese when we went there, but now it is very large. On the other hand, a fund like China is equivalent to going out to sea, right? We used to invest in China, but now we are investing in the world. Compared with other American funds, for example, what are our advantages and disadvantages now?
Ying Wei:At present, funds in China have more advantages than those in the United States. In fact, I already said at the meeting. First, the stage in other places is very similar to that in ours. The development of the Internet in the United States has been transformed now, because the market is different and the population development stage is different. When the Internet was available in the United States, the per capita GDP was already more than 40,000 US dollars, and now it is 50,000 to 60,000 US dollars.
But China is bitter, just like India. Therefore, it makes sense for Indians to learn from us in this market. Look at Paytm. After Ali received it, he sent 200 engineers. They also sent two hundred Indians to Hangzhou to learn from each other. I think this is very different from us and the United States. Everything in India is similar to ours. E-commerce consumption is driven by the demographic dividend, so we look at the Indian market with the development law of China in the past ten years and the development law of the Internet. This is called a dimension reduction blow.
Q: What do you think are the main challenges? Because you just said that some people are biased against the Indian market, but in India, in fact, some media may have some negative reports on China’s investment, which you must have seen.
Ying Wei:All these big institutions, including all local investment banks, are very welcome. All entrepreneurs are very welcome. This is also different from what we originally imagined in China. It is very friendly. Of course, he saw our money. So I think it’s nothing. Therefore, the biggest challenge to us is ourselves.
What I said just now is whether we can realize that we can use China’s ability to reduce the dimension and strike. We have all seen the Internet in the 1980s and 1990s, and they all use the Internet as a tool, so it is easy to understand. The business model can be understood, but whether we can see the difference in India requires insight. We always say that interlacing is like a mountain. Can we find that reason? In fact, the reason is his change and finding the difference in India, so this is the most difficult thing.
Our team requires that I always make a thorough analysis of our industry, export e-commerce industry or social e-commerce industry, and then go to see him, mainly asking him about the difference. The difference is that we are going to (explore), which is the biggest problem we invest.
Every country has different places, and that different place will have an impact on my investment. So this is our biggest problem. We can’t see this difference, or there is no localization. The reason why CDH said (success), you see, few of the foreign investors were successful. Those who went to China to do PE were localized. For example, Sequoia used Shen Nanpeng, and IDG used Xiong Xiaoge because of these people. We are the same. Let’s see if we can find out that feature and compare it with the characteristics of China, and (let’s go) find Indian characteristics.
(Originally published in "Zhixiang. com" WeChat official account: passagegroup)