Insights Into How To Raise Capital
At Online Retailer Sydney this year we have the privilege of having our first ever venture capitalist talking and sharing insights into the Chinese market, future trends and into the do’s and the dont’s of raising capital.
Robin Li is the Vice President at GGV Capital, one of the first investors in Alibaba, AirBnB and Square and current investors of one the first mobile-only businesses, Wish.
We have spent a few minutes with Robin, and asked her a few questions before her keynote at Online Retailer.
OR: Tell us a bit about you and your background?
R: I am currently a vice president on the investment team at GGV Capital in our Menlo Park, California office and have spent the last four years in venture capital. I started at GGV as an intern in 2013. Prior to GGV, I worked on the corporate venture team at Flextronics – the second largest contract manufacturer in the world behind Foxconn. I also had the chance to work in Beijing for a period of time during the beginning of Wechat when it was just a messaging app.
I got my start in venture capital investing while attending The University of Chicago Booth School of Business, where I had a chance to work with many startups in the Chicago ecosystem. Prior to that, I spent 3 years in Teach For America as a teacher and administrator.
OR: What are the commons mistakes retailers do when trying to raise capital?
R: There are many forms of financial capital and venture is only one of them. One surprising mistake we often see are founders that cannot answer the questions – why venture capital, and why venture capital now. Even in the very earliest stages, founders should be able to discuss the financial model and organizational hiring plan for the company with and without venture capital. Another typical misunderstanding is that not all businesses are a good match for venture capital, even when the founders and the ideas are great. There has to be a large addressable market and high upside potential within a certain timeframe for venture capitalists to invest.
OR: How do you think technology is changing society?
R: Technology has enabled the free flow of information and communication, and in many ways democratized knowledge and access to information. With computers in our pockets, we can purchase items from across borders with a click of a button or live stream our lives from one country to another. Technology also continues to escalate the pace of change around us, for better or for worse. Self driving cars or pizza-delivering robots, once cartoons, are now a reality. Many of us are now constantly connected, from the moment we wake up to the time we sleep. Because of this, new companies use big data, artificial intelligence and more to help our everyday lives be more connected, more automated and more convenient. At the same time, it’s important to note that there can also be unintended consequences from these same technologies, ranging from loss of privacy to traffic jams to lost jobs.
One area that GGV is excited about is Urban Technology, which focuses on the fast growing number of megacities around the world and will directly address the intersection of technology and society. As society moves towards global urbanization, we believe new opportunities ranging from mobility to food systems will emerge as well as solutions to existing problems like pollution and always-on connectivity.
OR: How do VC anticipate customers behaviours?
R: An important lesson in anticipating customer behavior is to first understand that as a VC, we are often not the customer. This forces us to rely on data to maintain a pulse on consumer behavior. We dig into micro- and macro-economic data, published consumer surveys from Nielsen or McKinsey and develop our own research to validate our hypotheses. We also gain signficant insights from our portfolio companies and keep an internal benchmarking survey that we calibrate regularly.
OR: Everyone is talking about Millennials, AI, mobile-only business models and the integration of digital in stores. What do you think is next?
R: It’s true. Everyone is focused on millennials because they are the largest population group with increasing ready-to-spend income and so represent a huge group of new consumers. In the US, there are 75M millennials, much larger than generations before them. In China, there are 4x that many. What’s interesting is that millennials behave similarly across global boundaries and less similar to generations, say Boomers, before them.
In the consumer internet sector, GGV focuses on several areas: ecommerce, social, and travel. In looking at each of these segments separately, distinct trends have emerged.
For travel-related portfolio companies such as AirBnB, HotelTonight and Ctrip, the big shift is torward experiences. Millennial travel has gone beyond just getting from point A to point B, but wanting to have unique access or immersion into the places and communities they are visiting.
With ecommerce companies, particularly brands, there will be a rise of click & mortar – meaning ecommerce first companies that have an offline experience. A key behavioral shift that we see is the demand for personalization. One of our recent investments – Function of Beauty – creates indiviualized hair care formulations for each user. They have a total of 12 billion possible combinations. What excites us about this is that technology has enabled them to not only be able to make custom products at scale, but to be able to make it an affordable luxury for any consumer.
OR: Let’s move to the China topic. GGV was one of the first investors in Alibaba. What did they see in it? And most of all, why is CHINA so attractive?
R: GGV was lucky enough to see the potential of the Chinese Internet scene before most of its peers. We invested in Alibaba in 2003, when the company was four years old and had about $20 million in revenue, and before Yahoo acquired a stake in the company in 2005.
Today, China is the world’s largest and fastest growing e-commerce market. China has a population of 1.3B, about 4x the size of the US. They are a mobile-first nation, meaning that the smartphone is the primary device for Chinese consumers to access the internet. This completely shaped the nation’s consumer habits, from communication to entertainment to commerce. In many ways, the mobile ecosystem has evolved much faster than the US. Because the US came online through desktop, consumers were conditioned differently, impacting the speed in which mobile commerce is adopted. Because GGV invests across both US and China, we are able to glean insights from both sides, from business models to user engagement.
OR: I know you have also recently invested in Wish. Can you tell us more about that business and why you invested in it?
GGV invested in Wish and led their Series B in 2013. Wish is a mobile shopping platform that offers low-cost products shipped directly to consumers from their global supply chain of direct suppliers. By avoiding physical retail, they can provide access to tens of millions of affordable goods to anyone in more than 70 countries around the world. And by leveraging big data, they have created a personalized experience for each individual consumer resulting in a massive following of US and European shoppers who are looking for a bargain. Today Wish is the #2 most popular shopping app in the AppStore and sells ~2 million items per day.
GGV invested in Wish because the founders had a global vision to serve the world’s middle class – and we share that vision. Many fast-growing consumer companies in the US often cater to a small, affluent, urban population – the 1%. Wish serves the rest of America – the mass market and the middle class.
OR: What is next for GGV Capital?
We believe the only way to win in tech today is to be thinking globally from day one, and we invest in companies with the same DNA. Even at the earliest stages, our founders are thinking beyond their home markets.
For retail and ecommerce, the ‘perfect storm’ of billions of smartphone-connect consumers, China’s growing “consumption upgrade” market, and the interconnectedness of social media have created new models and sectors to serve the mass market globally. We are excited about continuing to work with founders that share this vision.
The future of work – or the nature of work – is changing at a blinding clip. Innovations in the global workplace such as messaging, customer service, cloud services, talent acquisition, and cyber security are creating entrepreneurs in- and out of the office.
The convergence of the real and virtual worlds is here. Whether you rely on Amazon’s Alexa, ride to work in a self-driving shuttle or wear a smartwatch, all rely on a combination of artificial intelligence, sensors and power – and all represent the next step for FrontierTech investing.
OR: Can you share your number one actionable eCommerce tip for success in the future?
R: Don’t just focus on acquiring new users, retaining repeat users is the key.
Robin will speak at Online Retailer in the morning of July 27. You don’t want to miss out! Go get your tickets now!