Connie Chan loves Pinterest.
“I bought something the first day I used it,” she said after testing the product, “I thought that other people would, too. I really love it, my friends love it.”
What makes Chan different than most Pinterest users is that she’s a partner at Andreessen Horowitz, one the tech world’s best well-known venture capital firms. They famously funded Twitter. Now, they can add Pinterest to that successful list.
Getting an investor and VC funding is all part of the startup game. But there’s more than one way to fund.
Wednesday afternoon on the main stage of GMIC 2013, Connie Chan, Partner at Andresssen Horowitz and Deng Feng, Founder of Northern Light Venture Capital, sat down with Leo Wang, Founder Partner of PreAngel Partners, to discuss innovation in entrepreneurship and investment.
But what works in the USA doesn’t always work in China.
“It’s quite unruly. There are standards but people don’t comply all the time,” said Feng about China’s investment scene.
However, he said despite quite agressive entrepreneurs annoying investors with their constant pursuit, the old adage stays true: The squeaky wheel gets the oil.
“I think the timid ones won’t get anything. Aggressive will be more successful.”
However, success in China can sometimes lead to your own downfall. Copycats or competitors fragment your user base before you have a chance to gain significant ground.
“Pinterest can succeed in USA but not China. In China, a big company will want to buy you out, and say, ‘if you don’t sell we’ll develop something as a competitor,'” explained Feng. “US entrepreneurs don’t do this. A lot of people will copy, anything that seems promising will have a lot of copycats. Only less visible companies can succed in the long run. If you get too visible there will be one million copycats, and you won’t succeed in China.”
How do startups get funding?
How do startups woo investors into investing time, money, and special services?
Confidence and embodiment of the product, says Chan, as well as the data to back it up. Her support of Pinterest came through a love of the product, strong data, and a CEO who knew where he wanted to go.
“They only had seven people working at the time. But I saw the data, not just California users, or Boston or big cities, but many users in the central USA. Not as many young people who often switch products, but loyal users, who use it very day,” said Chan. She liked Pinterest’s “good user engagement,” and saw more engagement than other social networks.
“User engagement was very high. Not necessarily because of good features, but because of the good community,” she said. “They have offline pinterest parties! And they tell each other to use Pinterest. Those kinds of communities are really difficult to generate.”
The team knew what they wanted; their CEO “embodied” his product. So they invested.
Money isn’t the only valuable thing a startup takes away from an invested partner–services like head hunting, marketing, and mentorship are often part of the package.
Talent requiring is notoriously hard. That’s why Andresseen Horowitz sends fulltime scouts to help. They also provide marketing and media management servies crucial to a startup’s success. And so they can focus on what they really love–their product.
Feng remarked there were significant China-US differences here, too. Of course any CEO is going to be reluctant to give up power; however, in China this investing process is often tricky because of the relationship ties. Friends and family often get invested in. But they don’t always have the skill sets it takes to lead and manage in China.
“We can’t replace the CEOs, but where to find better CEOs,” said Feng. “China’s CEOs need to be well-versed in governmental and legal matters.”
“You have to invest in people, not just their business,” said Feng.