Chasing Unicorns in Taiwan

Chasing Unicorns in Taiwan
Photo Credit:AP/ 達志影像
What you need to know

One of the world’s top tech investors has two pieces of advice for Taiwanese startups: chase global consumer markets and work as hard as Kobe Bryant.

Hans Tung, a managing partner at GGV Capital, knows about unicorns – startups valued at more than US$1 billion. He was an early-stage investor in China’s Xiaomi and Alibaba, to name just two firms.

Speaking in Taipei this afternoon, Tung said most of the 84 unicorns produced in the U.S. to date, “especially the bigger ones,” sell consumer-focused products in countries around the world.

“They don’t focus on the U.S. market anymore,” he says. “They tend to be much more global.”

Tung grew up in Taiwan, moved to the U.S. at 13, went on to study at Stanford University and now ranks 21st in the Forbes Midas list for tech investors.

He says Taiwanese startups should hire people “early on” with experience in markets like Japan, China and the U.S. to “build a global business.”

The investor is hopeful the next generation of Taiwanese startups will have offices in those countries to get closer to more consumers. He says several Indian venture capital firms and startups – Tung has invested in two Indian unicorns – were smart in recruiting from the U.S. and going to China to reference Chinese business models.

“I remember hosting Indian teams, as early as 2011 to Beijing and Shanghai,” he says. “I don’t see anybody from Taiwan visiting me in Beijing.”

While Shanghai is viewed as a cosmopolitan city, being located in Beijing is necessary for many companies. Most large startups have Internet-based products, which involves dealing with a state authority that restricts Internet usage. Tung also notes there are “over 100 universities” in Beijing that have produced a significant number of successful startup founders.

Consumer focus vs. business-to-business

Companies need to adapt their products to tap into the massive Chinese market.

He points to Baidu, which started off as “the Google of China,” but has become localized and “very different” in the past 10 years.

Likewise, Alibaba began as “a marketplace like eBay,” but has since evolved to including entertainment and financial services.

“Alibaba today looks nothing like eBay,” Tung says.

While many unicorns are business-to-business (B-to-B) focused, the larger unicorns are not, Tung notes.

He is also an investor in Taiwan mobile shopping app 91Mai, but says he sees “a lot more B-to-B companies” than consumer startups in Taiwan. These B-to-B plays can have a more reliable source of income and be more secure, but possibly limit the global growth potential. Consumer-focused products naturally have a larger potential user base and are easier to scale.

“You do well in business here [but] it doesn’t mean that businesses in the U.S. or China will buy your products or services,” he says.

Patterns of disruption

Tung also encourages Taiwanese startups to take note of technology disruption patterns in society.

He said that in 2007, one year after the release of the iPod, the highest number of unicorn companies was produced in the U.S. – 23.

For companies to become unicorns, they have to “almost coincidentally” be aligned with the next big “paradigm shift.”

Patterns of disruption, he says, happen step-by-step: tech developments have enabled e-commerce, which in turn is now driving the growing changes in travel – think Airbnb and Didi, both of which, of course, Tung has invested in – and fintech (financial technology).

“This is how we invest: we analyze the trends and then think about what are the most interesting companies that we think are going to be disruptive,” he says.

He notes that unicorns are “always controversial” at the time of investment.

“To be a big company, a unicorn, you have to be focusing on a trend that is disruptive.”

Be like Kobe

Tung, a basketball fan, points to Kobe Bryant’s famed work ethic – the retired Los Angeles Lakers superstar who played 20 seasons in the NBA is known for brutally early starts– as a good example for budding entrepreneurs.

“For someone who is [as] successful and rich as Kobe Bryant to do this every single day for 20 years in a row, he’s not doing it for the money – he’s doing it because he wants to win,” says Tung.

Company founders and chief executives must have “a strong desire to be the best there is” and “disrupt everyone.”

“That type of vision and aggressiveness is what we look for in almost all the companies we back,” Tung says.

“I haven’t met any unicorn company that didn’t have founders who had the same kind of desire to win.”