Former Google China President Kai-Fu Lee on his new company
Those familiar with the hi-tech industry in China will be hard-pressed to find anyone who has had a greater impact on the modern Chinese Internet scene than Kai-Fu Lee.
In his late forties, Mr Lee is currently the CEO of Innovation Works, which he formed in September 2009 after leaving his previous position as the President of Google China. A month later, he also agreed to serve as Chairman of the Advisory Board for the WI Harper Group; prior to Google he has also held executive management positions at Microsoft in Beijing and Apple Computer, Inc. in California.
The son of a government official in Taiwan, Lee immigrated to the United States when he was 11 years old in order to pursue his education. He ended up earning a doctorate degree in computer science from Carnegie Mellon University, where he also served as an assistant professor from 1988 to 1990.
Despite many years spent in traditional corporate executive roles, Lee has not lost touch with his entrepreneurial side. Having developed many of the world’s most innovative software programmes himself, Lee is constantly on the lookout for up-and-coming entrepreneurs who have the talent and drive to found the next major technological brand.
This is the ultimate goal of Innovation Works, the company that Lee recently started from scratch with a few colleagues. A cross between an angel fund and an incubator, Lee’s new company aims to invest in the creation and early development of promising new start-up enterprises.
In an interview with Swiss Style, Lee elaborates on the nature of Innovation Works and its potential impact on the Chinese hi-tech industry.
The importance of the early stage
When asked how he became interested in starting a seed fund for technical companies, Lee stressed the importance of the oft-overlooked early stage when it comes to building a hi-tech brand.
“I’ve noticed in China that investors are pouring money into pre-IPO businesses, but only in the later stages of the company’s development,” he says. “The early stage is actually the most important and lucrative, but investors tend to avoid this stage because it takes longer and requires more patience and domain expertise.”
He adds that, “The early stage also demands an entirely different set of skills than the later stage does. The former calls for people who understand
technology, products and business strategy, rather than just the financial engineering necessary to make a company go IPO. I felt I had the right skill set to meet this need. I am also eager to coach the next generation of bright young Chinese entrepreneurs and help them build companies that last.”
As the head of Innovation Works, Lee will first identify the people and ideas with the greatest potential and then provide the funding and business know-how needed to launch fledgling companies based on these ideas. Once these new companies have become substantial entities, Lee will continue to invest in their early stage development from a fund jointly managed by Innovation Works and WI Harper.
Lee commented on his company’s prospects and the very high expectations of the Chinese public for his latest business venture. “Innovation Works is in a unique situation where there is a lot of public interest and expectation for us and for what we are doing,” he says. “This can be a two-sided coin, “ he adds. “The positive side is that we can leverage this interest to attract investors and talented employees. We received 7,000 resumes on our first day in business and a total of 40,000 job applications so far.
We have already brought 80 new entrepreneurs and engineers on board to work in our various portfolio companies and expect to attract about 100 more people by the end of the year. On the other side of the coin, however, we are under enormous pressure to deliver goods that will meet the public’s expectations. We are working very hard and hope to have some great products to show by the end of this year.”
Capitalizing on new trends
In many ways, a company like Innovation Works could not have been founded at a more opportune time. The Chinese Internet scene has evolved dramatically over the past few years and Internet usage in China is far more commonplace now than it was just a decade ago. In particular, the rise of new trends such as mobile Internet, cloud computing systems and e-commerce in China has revolutionized the way the Chinese people use the Internet and, at the same time, created countless new business opportunities that had not existed in the past.
“The mobile Internet and e-commerce industries have really taken off in China these past few years, so Innovation Works is now focusing on building lasting brands in these particular sectors,” says Lee. “Mobile Internet is especially popular in China because it is such a phone-centric culture. There are currently 800 million mobile phone subscribers in China. Consequently, the potential market for mobile Internet is tremendous. We are currently focusing our efforts on companies that develop software solutions that would make the mobile phone a richer Internet device and at the same time a better phone.”
Lee also commented on the rise of cloud computing in China and the implications of this recent phenomenon for software companies. “The main aspect of cloud computing is that it moves software from the PC to the Internet,” he explains. “This makes computing more convenient for users, but it also presents a golden business opportunity for software companies. China has never had much of a software business on the PC, due to a variety of problems such as piracy. But with the cloud computing system, people have to log on to the Internet in order to view software. This gives companies a chance to charge them for using the software, something they have not been able to do in the past.”
Dealing with cultural misperceptions
Although Lee plans to focus his investments on Chinese companies for the time being, he believes that Western countries could play a vital role in the technical development and financing of these companies. Lee – who was invited to give a presentation at a business luncheon in Zurich in March – is looking to Switzerland in particular for potential investors and partners to help get Innovation Works off the ground.
“Switzerland is an important resource for our company in many ways,” Lee explains. “First off, it’s really a think tank with many talented people doing research and development in a variety of areas, including Internet technology and business strategy. This is the kind of talent Innovation Works will need to operate on. Secondly, it is a major financial centre with countless companies and individuals who are willing to invest in our fund.”
Lee has already received offers following his presentation in Zurich to meet one-on-one with individual Swiss investors about the possibility of their contributing to his seed fund. He adds, however, that his visit to Switzerland also served an equally important diplomatic purpose.
“One of the goals of Innovation Works is to create a cultural bridge for people outside of China to better understand the Chinese Internet market and the business opportunities that lie in the Chinese hi-tech industry,” he comments. “In particular, we would like to correct certain misperceptions and false assumptions in the Western world regarding Chinese Internet usage. For example, people in the United States and Europe assume that going online involves using search engines, checking email and purchasing items online. This is not the case in China.”
On the contrary, Chinese Internet users tend to go online primarily for playing Internet-based games, social networking and reading electronic books. They send instant messages far more frequently than they do e-mails and download music and videos in large quantities. There is also a fundamental difference in the way Chinese and Western users view information contained in search results. Whereas studies have shown that Western Internet users tend to concentrate their gaze on the top few results, Chinese users tend to look everywhere on the page at once. While American users tend to be more goal-oriented, Chinese users are just more curious to absorb all kinds of knowledge. As a result, Chinese websites often present more content in a seemingly more chaotic, less organized way.
“In order to develop successful Internet products for the Chinese market, we must be aware of these cultural differences,” says Lee. “There is a general false assumption that the whole world uses the Internet in the same way. Hopefully, Innovation Works will help clarify this misperception.”
Article by Karin Sun