Sequoia China founding and managing partner Neil Shen has one of the best track records for venture investing in China. Winning picks include: social media ByteDance, the operator of TikTok, e-commerce platform Pinduoduo, and online delivery firm Meituan. Those helped Shen to rank No. 2 on the Forbes Midas List of the world’s best venture investors in 2021. He was previously No. 1 for three consecutive years.
What areas of China investment landscape are Shen optimistic about these days? One is enterprise technology businesses. “I would say the opportunities in China for enterprise technology are enormous,” Shen said in an email exchange, “given the overall size of the economy and high penetration of the digital economy – especially mobile Internet.”
China, the world’s no. 2 economy, had e-commerce sales in 2019 that surpassed the combined total of Europe and the United States, profiting companies such as Pinduoduo and Alibaba. At more than 700 million people, it also has the world’s largest digital buyer population, according to Statista.
And yet the U.S. has been more of a leader than China when it comes to enterprise technology businesses. Companies such as Salesforce, Twilio, Workday and Coupa have generated outsized returns for investors. “Compared with consumer Internet segment which has been developing over the last 10 years, there is a lot to catch up in enterprise tech space in China,” he said. “The good news is that we have large pools of talent here, including many who might work in the consumer technology area before – top engineers are critical in developing user-friendly enterprise products. Many decision makers sitting on the other side of the table trying to purchase such products are also well versed in this space and need little education about how such products work or why they are important in their business setups.”
Cloud services are particularly full of opportunity, Shen believes. “We are still in the early stage for corporates to adopt cloud services – whether to use private cloud or public cloud, and use various PaaS (platform as a service) and SaaS (software as a service) services to increase efficiencies, cut costs as well as expand market opportunities.”
Some of Sequoia China’s early stage investments include Beijing-headquartered Cloudwise, whose products support IT operation and service management. Founded in 2009, Cloudwise is also advancing AI solutions in those areas, Shen said. In addition, Lanhu, founded in 2015 and also headquartered in Beijing, is a product design collaboration platform for corporate customers. “You can benchmark Lanhu against Figma,” Shen noted. Figma is a member of the Forbes Cloud 100 list this year.
On other topics, Shen was upbeat about the outlook for China’s new stock exchange, to be located in Beijing. “Having a new board like this focusing on small and mid-size companies in the technology space makes perfect sense. It also provides another venue for Chinese investors to participate in the growth of the technology companies in addition to STAR Market in Shanghai and Chinext in Shenzhen,” said 53-year-old Shen, himself a former entrepreneur of the Chinese travel site now known as Trip.com.
“The exchange will allow broader base of investor participations and will also likely have lower revenue and profit requirements. These are great news for tech entrepreneurs in China and the Exchange could accelerate the domestic technology developments including in enterprise technology areas which might provide some strong listing candidates,” Shen said.
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