Hot May Prove Hard to Turn a Buck on In the End, Didi Investor Zhu Xiaohu Offers Advice

(Yicai Global) Nov. 1 -- Mr. Zhu Xiaohu, a famous Chinese investor and partner in GSR Ventures recently issued a warning to entrepreneurs that an investment the public regards as hot may prove hard to turn a buck on in the end.

During a recently-hosted entrepreneurship forum, this investor who successfully invested in Didi Chuxing -- a giant in China’s online-hailing cars market -- said that each high-tech industry features an s-curve, meaning it may be quite popular at the start, but may also wither very soon, and will only offer opportunities at the second outward curve. Thus, augmented reality (AR) and virtual reality (VR), which are quite popular now, may need another seven years to become truly entrenched.

Mr. Zhu noted that the criterion for judging the real value of Internet entrepreneurship includes the ‘3Ss’ -- significant, scalable and sustainable. First, this requires adequate market capacity, for an adequate market favors a business. Second, it requires an easy and low-cost expansion in local markets. Third, it requires sustainability, i.e. that the entrepreneur should have adequate access barriers to bar potential competitors.

He notes that the quicker growth of mobile Internet than the PC Internet is mainly user-backed, since mobile users outnumber PC Internet by a factor of ten. Also, during the mobile Internet age, the publicity of social networks is enjoying rapid acceleration. Thus, even advertising becomes unnecessary because word-of-mouth alone is now sufficient, and this enabled the mobile Internet to come of age in only three to six months -- far quicker than the PC’s growth cycle.

For entrepreneurs, Mr. Zhu offered the advice that entrepreneurship never means acting in the abstract, but requires a focus on details and substance. Acting blindly with a first product release is never an option in the mobile Internet age, he cautions, and those only pursuing perfectionism may miss a lot of opportunities. to conduct business in adaptation to users’ feedback is also a good idea. Entrepreneurs are advised to secure A-round financing as soon as possible per their own advantages, and then strive for further business advantages leveraged by financing. Afterwards, they can turn these business strengths into new ones to attract further financing. Only by forming such a virtuous cycle can they stay powerful enough to compete.