Next 2013: Conference on Innovation and The Future

We are hosting a pretty kickass conference on June 14th in Seoul exploring technology, innovation and future trends. The lineup of speakers is awesome with Ray Ozzie, Richard Florida, Catherine Mohr and others. These slides provide details on this event that I've been working on.

Next 2013: Conference on Innovation and The Future from Bernard Moon

"Lessons from Asia for Tech Sector" by Benjamin Joffe

HatTip to Patrick P. Didn't know that Benjamin Joffe, who co-organizes the Open Web Asia Conference with me, put up these slides. Pretty cool, Benjamin.

Lessons from Asia for Tech Sector -

Mark Suster, who blogs at Both Sides of the Table, has his take aways here:

1. Wacky, weird and low cost: Before diving into what I learned in the deck I want to share something crazy. Motorola gave us in the US the RAZR (before they stopped innovating). But China literally gave us the Cell Razor. Benjamin brought in a cell phone where the bottom pulls out and you have an electric razor. No joke.

2. Film innovation – If Benjamin’s analysis is right – even many of our most successful films have been adaptations from Asian films. I knew some were but the scope was surprising. Especially Star Wars & The Matrix.

3. Internet users in US – 225 million, mobile 260MM. China Internet: 340MM, Mobile a staggering 650MM. Don’t bet that China won’t innovate in mobile. (slide 29)

4. 70% of Korean population has Internet speeds > 5mbps (and avg = 15 mbps) – don’t bet that the Koreans won’t innovate on online content (slide 30). Larger online game market ($1 billion) than Japan despite 1/3 population and 1/2 GDP per capital (slide 99). Way ahead of the US on mobile gifting.

5. More than 90% of Japanese mobile subscribers are on 3G networks (vs. 20% in the US) (slide 30), More than 50% have mobile TV & NFC chipsets (slide 87). Mobile ARPU = a staggering $110 / month for content and commerce alone (slide 88). Massive fall-off in ringtone and massive uptick in full songs (slide 89) —> still think we shouldn’t be watching what’s happening in Asia? Sales of avatars in social games nearly 50% of total revenue eclipsing revenue from affiliate transaction, ads or paid games (slide 97). Mobile game content revenue > PC game revenue (slide 98)

6. China’s leading social network (Tencent, who’s product is QQ) already does more than $1 billion in revenue. That’s 2x Facebook estimates. Tencent market cap on public market is $21 billion, Facebook’s is a theoretical $3-15bn (slide 52). China is innovating in many of the categories that the US is trying to solve now including mobile couponing, vertical social networks, Internet TV, etc.

7. Free-to-play gaming with micro transactions has become huge in Asia with very nice profit margins. EA and others in the US are copying this success (slide 71)

Asia's Very Smart Cities: Songdo, Korea and Meixi Lake, China

This month's Forbes magazine has an article entitled "Asia's Smart Metropolis: South Korea's Songdo and China's Meixi Lake are spending billions on intelligent networks with an eco-vibe" where companies such as Cisco and 3M are highlighted.

What's missing in this discussion is smaller technology company I'm an advisor to called Innotive. It's led by my two close friends, Jimmy and Peter, who I did my first two startups with. Innotive is an integrated platform that allows for the convergence of rich media content through an interactive, zooming interface. It powers interactive displays at retail stores, such as BMW and Nike, and provides a control room solution to manage CCTV camera monitoring efficiently through one workstation. The latter product is called InnoWatch which will be integrated into the Songdo City project with over 1,000 touch-screen displays installed.


Songdo is a huge development project that spans over 1,500 acres, 150 buildings and will cost over $35 billion. It is not only a "smart" city but a green city that will be the largest private LEED development in the world since the whole city will be based on LEED building standards.

Below is an example of Innotive's InnoWatch solution:

A longer, detailed version of the Forbes' article was published online, "Very Smart Cities," which you can read here.

Geeks on a Plane East Asia Tour!

George Godula, who I worked with on the Open Web Asia conference, is putting together a tour of Tokyo, Beijing, and Shanghai with Dave McClure and The Founders Fund. More from their site:

Geeks On A Plane Overview

View more presentations from Christine Lu.

Geeks on a Plane is inviting international investors and tech entrepreneurs on a 10 day orientation tour of Tokyo, Beijing and Shanghai's Internet, Mobile & Gaming sector.

For more details please visit http://www.geeksonaplane.com and follow us on Twitter @geeksonaplane

Itinerary:
· Tokyo, June 8th - 10th 2009
· Beijing, June 11th - 12th 2009
· Shanghai, June 13th - 16th 2009

Objectives:
· Gain insight into tech & innovation trends coming out of East Asia.
· Meet the startup & tech community in Tokyo, Beijing & Shanghai.
· Understand the current investment climate in each respective city.
· Participate in a pro-entrepreneur and pro-investment initiative
during a tough global economy.

Each tour stop in Japan and China will offer the opportunity for our tour attendees to connect with the hottest local tech companies, start ups, entrepreneurs and investors via the following formats:

· Tokyo 2.0
· Startonomics conference
· Startup2Startup dinners
· Geeks On A Wall (Great Wall of China Hike, Beijing)
· Barcamp Shanghai
· TEDxShanghai
· VIP dinners and cocktail receptions
· Break out sessions & individual appointments
· Geeks & Glamour After Party - Geeks On A Plane, TEDx Shanghai and the Shanghai International Film Festival. By Invitation Only.

This tour is supported and co-organized by plus8star, KDDI Web Communications, the Tokyo 2.0 Team, Tudou, cilantromedia, Chinameme and many others.

Local startups, entrepreneurs and investors in Tokyo, Beijing and Shanghai: Please do also contact George at george@web2asia.com if you would like to get involved in this tour as speaker, moderator, supporter or sponsor. This tour is all about you and will be a unique platform for you to show case your services or portfolio companies.

For sponsorship opportunities please visit here or send an email to george@web2asia.com for further details & pricing.

Tech Trends for 2009 — This Time Global

Last year, I limited my predictions to the U.S. market. But the global economic meltdown has made the world flatter — and landed our nation flat broke. So to keep things interesting, I’ll extend my prognostication across borders.

I was playing with the idea of titling this column “Top Ten Tech Bailouts for 2009″ or “DeathCrunch: 2009,” but thought it best to keep our VentureBeat readers in high spirits (what with the holiday cheer and all). So without further ado, here are my top global trends to watch for the new year:

PC and online gaming continue healthy growth

There is no better indicator of this than World of Warcraft’s Wrath of the Lich King’s first-day sale of 2.8 million copies in mid-November. At $40 each, this accounts for $112 million, an astounding figure. I imagine the folks at Blizzard Entertainment had a pretty nice holiday party — drinking eggnog and munching on gingerbread cookies, macaroons and Turkish Delight to their hearts’ content…

And it’s not just the geeks keeping this segment of the market afloat either. Remember Swingers? Solid proof that cool, hip, unemployed men (and there will be many more of them) tend to play a lot of games.

But does this mean that all video game companies are recession-proof? Will that many more people opt for lazy, relatively inexpensive entertainment over going out? Not really. The NPD Group, a leading consumer market research firm, recently issued a report showing a dip in the overall video game market. October saw an 18 percent increase over sales from last year, but November’s sales were only up 10 percent. So the downturn is in fact taking a toll.

Console sales — which made up $9.4 billion of the $18.9 billion gaming industry in 2007 (according to the Entertainment Software Association) — will take a major hit. How many people will be willing to drop a few hundred bucks on a console? Plus $50 more for a game easily finished in a few days or weeks? That’s a lot to ask in the current environment. Even perennial favorites like Rock Band and Wii Fit will probably trend down due to expensive accessories.

PC and online gaming account for only 9.5 percent of total gaming sales ($9.5 billion). But the segment has the strongest prospects for growth. MMORPGs (massively-multiplayer online role-playing games) and others with multi-dimensional interaction options provide continuous character development, storylines and gameplay that bring you into contact with likeminded others. This gives them longevity and makes them worthier of that initial investment.

Video game makers should take note: Titles that deliver more value over a longer period of time will bring in more money during tough times — and that’s exactly what PC and online games do.

Surface computing slowly breaks into the mainstream

Traditional mouse and keyboard setups will start to be replaced by touch-sensitive screens that allow users to control functions with their fingertips. Hewlett-Packard’s TouchSmart PC is just the beginning.

I’m far from becoming a Microsoft fan, but Microsoft Surface is an important step forward for this technology, which will only become more pervasive in the next year. And Microsoft isn’t the only player in the game. As a TEDster, I have to plug Jeff Han’s multi-touch interface (see video below). All the while, Innotive, a company I advised, offers very cool interactive display technology.

The novelty of surface computing has led Microsoft into partnerships with Sheraton Hotels, Disney and Harrah’s Casino Hotels. These resorts have installed touch screens in their lobbies to provide local information and media tailored to their customers’ needs. The technology may only be mindly entertaining for now, but it provides substantial practical value. With the ubiquity of the iPhone, multi-touch screens are becoming increasingly intuitive, and already feel more natural than typing on a keypad in some settings. Say, for example, you are presented with a multi-touch screen as a menu in a restaurant — one click with your finger orders your meal.

But there’s even more potential in the boardroom with smart white boards becoming a reality. Imagine all the graphic facilitation geeks in your office suddenly gaining the ability to map out their ideas with just their hands? Joyous pandemonium! Dry-erase marker bonfires amid hearty rounds of Kumbaya! (At least that’s how I picture it.)



Shift from offline to online ad spend picks up speed

Advertising goliath GroupM projects that global ad spend will decrease by 0.2 percent to $458 billion in 2009 — dropping 3.2 percent to $157 billion in the U.S. alone. But I think online ad spend is a different story, and should see slow but steady growth. After all, eMarketer forecasts an 8.8 percent increase in online ad spend from $23.6 to $25.7 billion in 2009, and a 10.8 percent increase in 2010.

What will drive this growth? In short, more advertisers waking up to smell the recession. Newspapers make up only 5 percent of Americans’ media diet, yet they consume 30 percent of ad dollars. A report from Morgan Stanley last month revealed that, last year, advertisers spent $288 per home on internet advertising and $818 per home on newspaper ads. There’s something wrong with that picture when “death spiral” is the phrase usually ascribed to the state of print journalism. And more brands are starting to realize it — newspaper advertising has dropped 18 percent (about $2 billion) from this quarter last year.

Innovation increasingly imported from Asia

I appreciate Fareed Zakaria’s vision of a post-American world, but if we’re talking about 2009, I’d narrow it down to just Asia. Already, China and India produce five times as many engineers as the U.S., and it’s predicted that 90 percent of all engineers will hail from Asia by 2011. Yes, as in two years from now.

For the time being, the U.S. leads in R&D worldwide with 35 percent of the total output. China comes in second with 16 percent, and Japan in third with 13 percent — but both are catching up fast. The money is there, no doubt. It’s the culture of creativity and entrepreneurship that will really give these countries the boost they need. Innovation and idea generation are fairly strong in Japan and Korea, and have been picking up in China and India due to improving education and a reverse diaspora. Taking these factors into account, Asia is clearly poised to overtake the west in technological achievement in the coming decade.

As a student of Czech economist Joseph Schumpeter and Columbia University’s Richard Nelson, I believe that this type of achievement is the primary driver for long-term economic growth. With its workforce dominating engineering, its growing entrepreneurial spirit and its hunger for knowledge, Asia is positioning itself as the world’s primary economic engine — with the potential to reign indefinitely.

Regardless, the U.S. will maintain its leadership in innovation through the end of next year, but perhaps not long after that. Will Asia’s brute strength in the tech arena outweigh cultural, legal and policy limitations?

This is a question not just for 2009, but the next five or even ten years. For now, these are my predictions for the year ahead. Do you agree? What global trends do you taking hold in 2009 and beyond?


Originally posted at VentureBeat.

Cool.Asia... Finding and Reviewing What's Cool in Asia

Randomly got emailed about Cool.Asia, which seems to be gunning to become the "Yelp of Asia." It's a review site that needs some UI work and a better design, but it definitely fills a gap needed in the market.

I'm a fan of Yelp and have been hoping they would expand to cities outside of the U.S. sooner than later. TripAdvisor's review feature is the primary destination for such reviews and it's decent but an alternative would be nice.

Review of Open Web Asia '08

Open Web Asia '08 has come and gone. Congratulations to the whole team! Look forward to next year. Here are some reviews:

"OpenWebAsia’08 summary" by PostLinearity's Gregory Lent

"Open Web Asia: Some thoughts on China" CNET Asia's Rick Martin

"Internet Heading East: Impressions from Open Web Asia, Pan-Asian Internet Conference" Profy

China's tech.163.com interviewed many of our speakers during the conference.

Open Web Asia '08!

Unfortunately I could not join my co-organizers and attendees of Open Web Asia '08. You can follow the Tweets at the official Twitter page here or the #owa08 stamps here.

Howie has a post and some pics here.

Chor Pharn Lee's "Rise of the Rest"

My colleague, Dan Wooldridge, wrote a great post that I linked below.

The current economic crisis is one dramatic earthquake that signals fundamental and massive shifts in the world’s “tectonic plates.” Globalization, technology, and innovation have outpaced systems created in the last century. One of these shifting “plates” is the rise of Asia.

He links to Ms. Chor Pharn Lee's take on the "Rise of the Rest" by using Karl Fisch's "Did You Know 2.0" format, which I thought deserved it's own blog post here. She is a strategist with the Ministry of Trade and Industry in Singapore. Her description of the presentation:

"We created a short video to stretch our thinking for an internal brainstorming session. There are more details at futuresgroup.wordpress.com

Rise of the Rest is a term coined by Fareed Zakaria on the post-American world. It is not a world marked by American decline, but the rise of everybody else. The rise of China and India are the most obvious signs, but the Gulf countries are also remaking themselves beyond hydrocarbons and so on. China and India are big but they are not the whole story."

Jason Calacanis Interviews... Open Web Asia '08

Christine Lu, Chairman of The China Business Network, did a great interview of Jason Calacanis as he discusses Mahalo, speaking at Open Web Asia '08, and the Asia web industry. Thanks for pluggin our conference, Christine!

Jason Calacanis, Founder and CEO, Mahalo - Intro


Jason Calacanis, Founder and CEO, Mahalo - Open Web Asia '08


Jason Calacanis, Founder and CEO, Mahalo - Asia Market

"Opening Asia's Web: Inaugural Event in October"

A post is up at ReadWriteWeb about our upcoming conference. Of course I have to plug it again :)

If you're interested in examining the latest trends and news in technology and online innovations in Asia, considering attending Open Web Asia '08.

Open Web Asia!

Gang Lu created an aggregation page for Asia's top English language tech blogs called Open Web.Asia Workgroup. Here's a description:

The OpenWeb.Asia Workgroup is a network of premium blogs focus on Asian Web industry. These sites build efficient channels between Asia web and global industry, and also enhance the inter-communication of local Internet markets.

More from ReadWriteWeb's Marshall Kirkpatrick:

Everyone working on the web around the world would like to connect with people in Asia, but it's not easy to do. That dynamic and populous region is often focused inward and it's made inaccessible to outsiders because there is so little information about what goes on there available in the web's dominant language, English.

OpenWeb Asia is a new project that aims to change those trends.

This is a good initiative by Gang, who I'm working with for the first pan-Asia web tech conference called Open Web Asia '08. If you're interested in what going on in Asia's tech space, check it out!

Upcoming Asia Web Conference

Chang Kim, CEO of TNC (leading blog software company in Korea) and blogger of Web 2.0 Asia, initiated an effort to have a conference in Asia on the Internet/Web 2.0. He was nice enough to invite me to be part of the organizing committee even though I'm no longer living in Asia.

Anyway, if you have any speaker suggestions or interested in sponsoring, just contact me. More from Chang's post, "Progress update on the Asia Web Conference plan"

Where Technology Is Ubiquitous, Opportunity Abounds

My second column is up at AlwaysOn. Check it out!

Where Technology Is Ubiquitous, Opportunity Abounds
What the United States and others can learn from Korea's ubiquitous broadband environment.
Back in 2001, during the second year I was living in Korea, I encountered Hangame.com just as it was launching paid services for its online casual games (for example, Tetris, blackjack, chess, and pool). The world's leading casual online gaming company was about to begin charging users a fee of less than a dollar to do things like extend playing time and host private group games.

"Only in Korea or Asia could this happen," I said to myself. Americans would never pay 50 cents for such a service. If the price were that low, Americans would expect it to be free; they wouldn't recognize the value that Korean online gamers have accepted.

Or so I thought in my American arrogance. Within months, Hangame's revenues hit $30,000 per day on micropayments of 50 cents on average. Within a year, that number had risen to $80,000, and by 2004 revenues per day exceeded $254,000 and accounted for more than $93 million for the year.

Two years ago, when camera phone sales exploded in Korea, I said once again -- though with a tad less arrogance -- "Only in Asia." I simply couldn't imagine Americans taking to camera phones in the same way that the Koreans and Japanese had. Once again, American consumers proved me wrong: When I came back to the United States last May, I found that the camera phone market had exploded here as well -- and so I ate my words again.

As I passed my second year in Asia, I came to realize that while I'd once deemed cultural factors to be a driving force behind the use of technology and the Internet, the real driver was the ubiquity and power of technology itself. The Korean government's build-it-and-they-shall-come approach spurred a broadband revolution in that country that the U.S. cable industry could learn from. With 75 percent of Korean households having broadband access (compared with 20 percent of U.S. households) and almost 80 percent having wireless phones, the ubiquity of broadband and wireless services has created a development environment that's completely different than that which exists here in terms of services, products, and human behavior.

Camera phones provide one example. Blogs provide another. With 98 percent of Korean Internet users having broadband access -- and their average pipes providing speeds of 20 megabits per second (vs. 2 megabits per second in the United States) -- the blogging phenomenon in Korea has evolved quite differently than the blogging phenomenon here.

Blogs, in fact, were relatively late coming to South Korea, with Korea Telecom's portal service Hitel representing the first major launch (in April 2003) and NHN (Korea's leading portal by revenues and the parent company of Hangame) the second (in October 2003). But here's the interesting part: While in the United States text blogging led to photo blogging, which led to podcasting and finally video blogging, Korea's immersed broadband world allowed its providers and users to skip all of those stages: All blogs were text, photo, audio, and video blogs from the start -- without any distinctions.

Says Doug Yeum, CEO of Xfiniti (the company that developed Korea Telecom's blog service), "We wanted to make [blogging] multimedia from the beginning. Since our target base was the younger generation, having multimedia was essential. In the United States, developers are too conscious about speed -- and they probably have to be -- so most blogging services utilize static HTML, while in Korea we use dynamic page formats."

If you visit any Korean blogs, you'll soon discover that they're all like MySpace on steroids ... lots of steroids. One hybrid service to develop out of Korea's broadband incubator is CyWorld (HatTip to Pip Coburn, who mentioned this site in a prior post). Think of a blog, social network, and Flickr (a social network that lets users manage and share their photos online) rolled into one, and you begin to get an idea of what CyWorld is all about. In about 18 months, CyWorld went from nothing to being Korea's leading Web site in terms of page views and visit durations, and 19th in the world in terms of traffic (after AOL.com and Amazon.com), according to Alexa Traffic Rankings. (And we thought Friendster -- the hot social network that gained millions of users -- was viral and sticky.) It also makes money.

CyWorld's 10 million users -- who represent approximately one-fifth of South Korea's population -- make free "mini-hompies" (blog, social network, and Flickr combinations) and typically select who can access their personal sites. These sites typically include photos (for which there's unlimited space), background music, and customized avatar products. (For an example of one such customized avatar, check out my friend's mini-hompy: His avatar shares his hairstyle!) CyWorld charges approximately $1 to $2 a month to maintain background music or to purchase a virtual couch-micropayments that amounted to more than $114 million in 2004 for SK Communication, owner of the NATE portal that provides Cyworld.

As broadband becomes ubiquitous throughout the world, we can expect certain behaviors and protocols to evolve that transcend culture. And as the pipes grow fatter for everyone in this country, I believe we'll witness the following trends here:

Rapid growth of micropayments. Although micropayments have met with skepticism in the past, much of that criticism was directed at paying for content, not services. Even in Korea, efforts to sell content haven't met with much success: It's services and products (even if only virtual) that people are willing to spend their hard-earned dimes on. A recent survey by Peppercoin and Ipsos-Insight revealed that from October 2003 to September 2004, the number of Americans who bought something online for $2 or less grew from 4 million to 14 million-figures that indicate Americans are growing more comfortable with micropayments. Expect this slice of the U.S. online market to explode well beyond iTunes.

Increased presence of avatars (and avatar-related services). In Korea, avatars-which are targeted primarily at teens and 20-somethings-represent a significant portion of online revenue. Expect avatar services and sales to grow in the United States (and elsewhere) as well -- but to spread well beyond the under -- 30 demographic. I believe the U.S. market will see older users innovate and adopt such virtual representations as well -- though the cartoonish representations that dot Asian Internet services will probably be replaced by icons and information slides that follow the user around the site (and possibly other sites). In fact, I believe AlwaysOn creator and editor-in-chief Tony Perkins has a similar vision for AlwaysOn, so perhaps we'll see them on this site within the year.

Significant growth of the video game industry. Although the $11 billion video game industry already surpassed the movie industry's annual box office receipts a couple years ago, get ready for it to overtake the overall movie industry within the decade: As broadband grows, so too will the gaming market, driven by casual online gaming, wireless gaming, and advertising within video games (which the Yankee Group predicts will increase from $79 million in 2003 to $260 million by 2008).

A move to the PC as entertainment epicenter. More than 70 percent of South Koreans chose the PC over the TV as their preferred source of entertainment in a recent survey, making Korea the only member nation in the Organization for Economic Cooperation and Development (OECD) in which a majority of its population preferred the PC to the TV. While a lack of content and quality programming from the network and cable industries has something to do with this preference, it's also driven by the presence of high-speed access on every street corner along with abundant libraries of music, movies, and entertainment. When an always-on environment truly comes to fruition in the United States, look for a significant portion of the population to shift to the PC as their entertainment epicenter.

Total blog integration. According to a recent Pew Internet & American Life Project study, 27 percent of Internet users read blogs-a tremendous jump from the 11 percent who were doing so in spring 2003. Still, 38 percent of Internet users don't know what a blog is. Expect this to change within the next five years as broadband enables more functionality on blogs, increasing their viewership to more than 60 percent of the online population.

Korea's broadband environment allowed a nation of just 48 million to create the first MMORPG (massive multiplayer online role playing game), the first paid online casual gaming services, the first avatar services, and the first mini-hompies. Just imagine, then, what America -- with all of its resources and people -- will be able to do once broadband is finally ubiquitous here. You can't learn to swim until you get in the water, but once that pool is full, expect a flood of innovation on these shores!


UPDATE: OhmyNews International, the site that launched "citizen journalism," is reprinting my article in their English/tech section. I posted on them earlier here. Thanks to the OMNI editor, Todd!

UPDATE (04/07): Since AlwaysOn's old pages were deleted and I don't think they will restore it for a while so you can just read it here or at OhmyNews. Thanks!

Korea Venture Capital Firms Suck

Assinine is Better Than Clueless

A few days ago I had a meeting with one of the major domestic venture capital firms in Korea. For the software company I'm helping out, we started the process of seeking a second round of venture capital financing. A local firm expressed interest so they visited on Tuesday to hear our presentation and see our software demostration. The end result was the same frustration on my end and cluelessness on their end I encountered when we were raising capital for my first two startups.

I waited a couple days to write this entry because I wanted to put down my thoughts in a calm state of mind. I wrote about the immature venture capital industry in Asia before, especially Korea, but this is a more blunt assessment. Vast majority of the professionals are simply morons. They are clueless. Especially with many of these domestic funds, they don't hire the best people since these people don't get carry (percentage of the earnings) in the fund. They are just managers hired to find and decide on investments, but incentivized to avoid risk. Many are not even the best and the brightest from their schools or professional backgrounds, but even if they are they all function in a similar manner... being clueless.

So during my meeting, I was reminded of my prior efforts in pitching for HeyAnita Korea. We met with many of the domestic venture capital funds in Korea and didn't expect much after the first few meetings. Same reaction, same hand-holding, same cluelessness. It was frustration to a painful degree for our team. When we met with U.S. venture capital firms, we were challenged with probing and insightful questions, feedback that made our business model better, and we always felt like we came out better from our meeting whether they were interested in us or not. I was hoping for just half of this from Asian venture capital firms, but this dream never solidified.

So on Tuesday, these two professionals didn't know how to ask questions or really challenge our thinking. Their two main comments I remember were, "I don't see the market for it." and "I don't see many potential applications." Typical Korean venture capitalists. This is after we explained how potential customers we spoke with saw so many applications and we gave several examples. Encountering cluelessness is frustrating for anyone pitching for financing.

Afterwards, I spoke with my friend, Jimmy, and talked about the meeting. He started to laugh because he knew the firm and said, "Of course they're like that... they're a typical Korean firm and the most conservative fund."

I replied, "I would rather that they be extreme assholes but friggin' brilliant, so that they could tear our business model and company apart, and give us a hundred reasons why we won't succeed or what we should change to improve the company. "I don't get it" just doesn't do it for me. At least ask me one good question..."

Immature Venture Capital Industry in Asia

My Experience as an Entrepreneur in Asia

During the time of my first startup with Jimmy and Peter, we envisioned starting an early-stage venture capital fund 7-10 years down the road. Especially because we already enjoyed helping friends and other entrepreneurs in their startup efforts while we were involved with our own. By the time of our second startup, the desire became a little more focused towards helping entrepreneurs in Asia because our experiences on both sides of the Pacific showed us the differences in being an entrepreneur in Asia versus the U.S. We realized we were serial entrepreneurs and enjoyed working on the early stages of company growth. We also knew Asia didn't have the best elements or culture to start a new company, so we eventually wanted to be in a position to help new entrepreneurs in Asia achieve their goals and vision.

We thought about doing another startup and then raising a fund several years down the road, but an opportunity came up last year to try to start a fund so we went forward with it. Everyone didn't need to take the risk, so I volunteered to start the process and if it succeeded the other four would quit and join. If it didn't succeed, which was almost expected, we would just try again five or more years down the road. Failure was expected because we went through the process of fundraising in the U.S. and Asia. 1% of all startups receive venture capital funding in the U.S., and this was during the booms times when money was supposedly being thrown around. I'm guessing this figure is higher in Asia, but still a difficult road. Even though we were successful in raising capital for two companies, the road for raising a fund was more difficult and the odds were worse, so we were confident but realistic in our expectations.

The economic conditions were horrible in trying to raise capital, especially for a new fund, but we thought the other factors were good... lower company valuations, continuing innovation coming out of Korea and China, and a shortage of early-stage capital. We tried for a year, but it didn't work out so we'll just regroup a few years down the road and try again. The following are excerpts from our PPM, or prospectus, explaining the landscape of the venture capital industry in Asia:


"Members of our team were former entrepreneurs in Asia and much of our company’s vision was cultivated from numerous meetings with almost every venture capital and private equity firm in the Pacific Rim. From our encounters, we noticed that the majority of the professionals in Asia were former bankers versus experienced entrepreneurs or managers from corporations as in the U.S. We noticed the distinction from U.S. firms, especially in our meetings since firms in Asia would focus more on the financial projections, which were crafted from part research and part dreams. Also the outcome, whether good or bad for our fundraising goals, infrequently provided benefits in terms of business insights or advancement of our business model. While our discussions with U.S. firms tended to challenge our thinking and assisted in us improving our business model. In the end, we successfully raised capital from some of the top firms in Asia, but the seeds had been planted to change the processes that we experienced.

One explanation for this difference is the venture capital industry’s brief history in Asia. The cycles of entrepreneurship and high-tech innovation have been relatively short resulting in a lack of infrastructure ideal for entrepreneurs, whether legal, financial, or cultural. Additionally, this has resulted in a smaller pool of experienced entrepreneurs and managers from larger corporations entering the venture capital industry creating a distinction with U.S. firms. Whether from the venture capital industry or entrepreneurs working on their second or third venture, fledging entrepreneurs in Asia do not have easily accessible role models or guidance in creating new businesses due to the small pool they can draw from.

Another resource that is not readily available to all entrepreneurs is a strong personal network. In Asia, family, educational, and other personal relationships are essential for doing business. In the past, some great entrepreneurs did not succeed due to the lack of these types of relationships needed to create partnerships with larger entities, fund-raise, or deal with bureaucratic issues. Additionally, bad ideas received funding due to a founder’s status within the social ladder.

.....

In Asia, there is little distinction between private equity and venture capital firms. While in the U.S., the former traditionally tends to be more conservative, diversified in old and new economy, maintains investments that range in both public and private entities, and commonly evaluates a company on the financial data and potential returns. Generally, venture capital firms are less risk adverse, more focused on private technology companies, and strongly weighs softer issues towards a company’s potential, such as the management team and strength of technology.

The composition of their teams also greatly differs. Private equity professionals generally come from the financial service industry since many funds are related to an investment bank and this prior experience matches the nature of their typical investment. Venture capital firms differ since they are composed of former entrepreneurs, experienced managers from larger corporations, and some professionals from a financial service company. One reason for this difference is that technology has been a cornerstone for the venture capital industry and disregards conventional financial analysis. The short and long-term marketability of a technology can be difficult to predict and derivative ideas and products are challenging to discover at any stage, whether it is an older existing technology like telephony or cutting-edge nanotechnology. For practical purposes, a mixed team is needed for a firm to better assess investment opportunities in technology-related, early growth industries, or really any industry. Additionally, these types of companies undeniably need assistance beyond financial support. Only 25% of startups successfully achieve the second stage of growth and financing. The success rate increases to 80% when the venture capitalists supporting the company has prior experience from running a startup and working at a larger firm.

In Asia, most venture capital firms are primarily composed of individuals from the financial service industry. This has limited the ability for these firms to effectively evaluate an investment opportunity and the scope of impact it can have towards the company’s success. We believe this homongenous grouping of financial professionals is a contributing factor to the overall lack of success in Asia for venture capital firms."