Chinese startups: learners to innovators

SAN FRANCISCO — Chinese entrepreneurs are growing from passive learners into leaders in innovation, according to a leading venture capital investor.

Kai-Fu Lee, chairman and chief executive officer of Sinovation Ventures, a venture capital firm in China, told Xinhua in a recent interview that Chinese entrepreneurs generally have experienced three phases in innovation.

In the first phase, Chinese entrepreneurs mainly follow the footsteps of other tech or market leaders, said Lee, who used to work for top tech companies Apple, Microsoft and Google.

"This is a good way of learning, as long as it risks no disputes on intellectual property rights," said Lee, who founded Sinovation Ventures in 2009 to invest mainly in Chinese startups.

The second phase is a mini-innovation process, in which products and services were made possible through absorbing the best of different great ideas before they evolved and got improved to become more mature commodities or services, Lee said.

In the third stage, Chinese entrepreneurs began to take the lead globally in innovation in certain areas, such as shared bikes, mobile payments and short video application, he noted.

Lee said that when he shared innovation stories with some people in Silicon Valley, they would simply shrug them off, arguing that similar stories have existed in the United States, although they might be not as good as their Chinese peers'.

In general, Chinese startups are more willing to learn from their US counterparts, said the veteran investor.

"Chinese startups had two teachers as they were learning what happened in both China and the US, while most Americans just turned inward and stuck to the US alone, thus having only one teacher," Lee said.

The competition of internet businesses has entered the second half, in which the paces of disruptive innovations have slowed down, and a new trend of online-offline integration is becoming even more popular.

Since the founding of Sinovation Ventures, Lee has invested in more than 300 startups and observed Chinese and US venture capital.

While there is no stark difference in the amount of investment funds, the way they operate varies.

The American venture capital companies, he said, are better at spotting top technologies and helping startups make profits, a strategy that he called "a combination of PhD and MBA".

The Chinese venture capital firms tend to be more pragmatic, using different strategies based on the different potential of the startups, varying from helping them grow into unicorns or offering to buy them out, Lee added.

Lee said that there is much room for China to improve in terms of creativity and innovation, a lack of which hampers the birth of great companies powerful enough to change the world.

Therefore, he said, China needs to further reform its innovation system, especially by solving the problems in the education system.

"Chinese universities focus more on the number of academic papers than cooperation with industries. But if China wants to emerge as a technology powerhouse in the world, it needs to tackle that challenge," Lee said.

XINHUA