Journal of Asia Business Studies
FALL 2008
74
In a public speech on April 21, 2007, Bill Gates acknowledged,
“There was a survey done in the U.S. that asked where the next Bill Gates
will come from. Sixty percent of the United States said that the next stun-
ning success would come from Asia. I think it’s true and amazing that it’s
so well organized that the investment and change here are leading to very
innovative work.”
To learn more about the current status of venture investment in
China, we interviewed Mr. Min Zhu, who co-founded Webex in Sili-
con Valley, and recently moved to China to focus on venture capital
investment. He answered JABS questions on May 12, 2007 in Hang-
zhou, China.
JABS: Why did you choose to go to China and become a venture
capitalist there?
A: In 2003 I was considering to retire from Webex. At the same time,
New Enterprise Associates (NEA) was considering to enter China
and invest directly in startup companies there. Knowing that I had
set up software development teams for Webex in China, Scott San-
dell, an NEA general partner and Webex board member, invited me
to join NEA as a venture partner. I then helped NEA to become the
largest investor in Spreadtrum Communications in Shanghai, even
though NEA participated only in a late round of venture investment.
Spreadtrum is expected to be a near-billion-dollar IPO company later
this year. (It went IPO on the NASDAQ on 6/27/2007, with a valu-
ation around $850 million.) In 2005, I decided to leave Webex and
become a full time venture capitalist in China. I founded Cybernaut in
Hangzhou, Zhejiang Province, which runs a venture investment fund
and operates an incubator.
JABS: What’s the relationship between NEA and Cybernaut?
A: NEA is a sponsor, or strategic investor. NEA essentially invests
money in Cybernaut, and helps us to go through all the processes.
JABS: Do you use the same criteria and follow the same procedure
to evaluate projects in China?
A: In principle, yes. But the types of companies we invest in are much
broader in China. In the U.S., NEA is an early and growth stage in-
vestor. In China, however, NEA also invests in later stage companies.
Moreover, in the U.S., NEA focuses on the technology sector. But in
China, the market is much broader. It may go as far as investing in a
restaurant chain.
JABS: How do you get your name known to attract entrepreneurs to
submit proposals?
A: I do not need to publicize Cybernaut’s name. I receive enough pro-
posals from local entrepreneurs, mostly from Zhejiang province. Most
VCs are in Shanghai and Beijing, competing for good investment op-
portunities. We are much more localized in that sense. Secondly, we
focus on the operational side. Our team members are different from
most of other VCs. They are mostly MBAs and investment banking
type. Our people have more operational background, like me. We
have people from TCL, Founder, and other major local corporations.
JABS: So you take an active role in your portfolio companies?
A: Yes. It’s very critical in China. Most entrepreneurs here lack com-
plete experience in running a fast growing company, or any company
for that matter. We did even go as far as helping them in preparing a
PowerPoint presentation. We may help the company in creating their
business model, designing their marketing, sales, customer service,
etc. The next piece is the technology platform. My son came back
last year, created this InfowareLab technology company. It builds
next generation e-service platform for our portfolio companies to use.
The third part is the whole fund-raising and exit strategy to help this
company grow. The forth part is to reach global resource. We help
an insurance company to get connected with AIG, an e-commerce
company to reach Amazon as a strategy partner, or reach Wal-Mart to
understand their supply chain management.
JABS: How does the exit mechanism work in China?
A: I see major transition is happening right now. Originally, venture
investors focus on the U.S. exit. Now the Chinese stock market pro-
vides a very good exit. At least one of our portfolio companies will go
IPO in China. Similar companies that went IPOs in China now have
a P/E ratio of 80. Another company, a laser instrument company, re-
cently went IPO in China has a P/E ratio of 130. Average P/E in China
is about 40. In comparison, the U.S. P/E ratio is about 15-20.
JABS: How do you compare entrepreneurs in China with entrepre-
neurs in the U.S.?
A: The difference is related to the two countries’ different economic
development stage. U.S. entrepreneurs may have stronger technol-
ogy background, whereas in China there are more business entrepre-
neurs. Because China is not so advanced in technology, many young
people with technical degrees end up doing sales and marketing
work. They then educate themselves to be more business-oriented
or market-oriented. In the U.S., people may work in a technical field
for over 20 years. In China, it is rare. One drawback in China is that
you can not create a deep technology company without people from
Silicon Valley.
JABS: Would that mean venture investment in China enjoy a higher
success rate?
A: The cost to prove a business model is much lower in China, typi-
cally at $500,000 level. However, the investment needed to scale up
is similar. I would say the success usually comes faster, if the business
model works.
JABS: How do you categorize various VCs currently operating in China?
A: There are basically three types of VCs in China. One is pure global
VC. Usually they are not very successful in China. The second type
An Interview with Min Zhu, Webex Founder and Active Venture
Investor in China
Shenzhao Fu
University of San Francisco, U.S.A.