100k pitch contest… bringing the heat!
When we sing national songs loudly it’s scary -James Taylor
I’ve come to my last day in China. I leave for NYC this morning at 10am and arrive 3 hrs later in JFK at 2pm, and I cannot express how excited am to set foot on American soil . China can provide endless surprises and actual buttloads of fun, but there’s something about American that resonates deep with me.
I’ll miss this place, as I’ll miss anywhere that I’ve made lasting connections with humans I respect. I can’t explain it, but China is liberating, a space where no one’s judgement disturbs me and I can count on at least 10 seconds of shock headstart as strangers get used to a Chinese speaking white dude.
I’ll miss this neighborhood, where the local store owners nods wisely at me every time I leave him 1.50rmb for his cheapest popsicle or the Anhui restaurant that knows I just want vegetables, rice and beef before I even walk in the door. I’ll miss the foot masseuse who submit herself to discussions on Chinese philosophy and government media control for a measly 35 rmb an hour… and did it with a consistent giant grin.
I’ll miss the serendipity in which I live my life here, something I hope to bring back with me.
Feels like I just finished strolling back from Beijing. On Monday, after rushing to figure out the airport express, I jabbered my way through security, and managed to negotiate my precious crunchy peanut butter through. I arrived to a leisurely gate area, without delays, just a general disinterest in departing on time… honestly I’ll never cut out the travel uncertainties here in China.
Nexus Beijing held some fascinating discussion. Over the weekend I met a few different FuErDai’s (2nd generation wealthy), and got the opportunity to learn about some of their deep rooted insecurities about how to find fulfillment and their urge to pursue social welfare. These are going to be some of the real drivers of the desperately needed change in China, exactly what’s drawn me to this unwieldy behemoth time and again. One private discussion I had with a Skolkovo professor got me thinking about “institutional entrepreneurship.”
I’ll inform more later. For now I’m off to my flight, but if you’d like to know what I wish I’d wrote over this trip… check it out here… Nice work Bloomberg… beat me to the punch! ;)
If instead you just want look at pretty pictures… check me out:
Just returning from a great trip to Hangzhou after meeting with the head of unipower, a credit rating and loan guaranty organization, and a visit to the lovely Linyin temple. My early morning was graced with the soothing tones of Coldplay… In Chinese. Upon arrival at the train station, I head to the ticket office to change my ticket and see a dozen painfully long lines, but there’s one totally empty, worth a shot?… Yup! I make a quick switch and leave a horde of Chinese lemmings waiting in my dust.
Today I cruise to Shengsi island, time for some R&R!
Happy 4th of July America! I launched some serious fireworks last night in your honor.
Day 2 in Wenzhou, and it seems there’s been an outbreak of CANNIBALISM!!! Apparently a drunk bus driver found a woman driving by so delicious, that he had to have a taste… I’m not seeking out photos, but her nose was supposedly pretty rocked. Unfortunately, that doesn’t seem to be the worst of Wenzhou’s problems…
With an economy built on the backs of traders, Wenzhou has been heavily focused on import/export business, specializing in low-cost manufacturing of shoes, zippers, and other low tech goods. This makes Wenzhou specifically sensitive to international markets, and now with the global economic downturn, Wenzhou has been one of the hardest hit areas of China. They are attempting to refocus production toward domestic markets and sell to the growing urban population of China, but with such high savings rates, the domestic market cannot compare with what was previously found in Europe and the US. Many businesses have failed. In Wenzhou this was particularly disruptive given the nature of the lending market. Most loans are done through relationships, and thus collateral is not provided. Failing on a loan is a social disgrace within both your family and friends, and sometimes comes with the danger of broken knees. This shock the system has torn apart the social fabric of Wenzhou, previously it’s most powerful economic engine. Many people are fleeing from the city. A Wenzhou Chamber of Commerce was just established in Phnom Penh because of the massive numbers that have fled there in search of lower labor costs and a better economic environment.
The private lending market in Wenzhou has collapsed. Reports claim a 30% reduction in underground lending, but locals report it to be even worse. The government announced the private lending scheme to bring transparency and increase access to capital. It seems they’ve merely dipped their toe in the water, or perhaps a thermometer to gauge the temperature. I visited the Lending Registration Center yesterday to find that there are no actual lenders there on site. Instead, the previously legitimate peer to peer lending providers have now been corralled into one building. Thus far, that building has seen relatively little action. During my 4 hours there, I monitored the door- not one entrepreneur entered the building.
China needs to make some grand financial reforms to avoid collapse in the coming years. A fantastic analysis of this comes from Michael Pettis in his most recent post:
It’s a 10 minute read, but the key point is that China need to:
- reform corporate governance so that local officials and SOEs receiving kickbacks have less influence over local lending decisions
- liberalize interest rates so that the general population don’t end up subsidizing the wild overinvestment into infrastructure, real estate and excessive manufacturing
I’m slowly honing in on my target for research as I continue to learn, and I’m currently focusing in on how peer to peer lending is providing higher yield financial vehicles for Chinese savers. I’m also curious about what the existing microcredit companies really are and what they’re doing… they currently just seem like private lenders… with guanxi (connections). Thought that was illegal??
Lastly, for all of you who like to see my ugly mug, I’m posting pics to Picasa. Here’s the latest album:
Wow, what a weekend!?! Lean Startup is useful. I worked on a team called ArtDore, a rent to buy platform for art. With tons of artists holding much of their work in warehouses, and theyre interested in finding a way to mobilize it for profits. The team was all Chinese except me, which really helped to interview potential customers. Once we figured out what key assumptions we needed to address: Chinese value authenticity, renting art holds interest, ppl connect w art online and trust independent websites. We interviewed a bunch of ppl in Moganshan, the Shanghai art district, and got mad love, plus some RMB to subscribe! We killed it in the presentation, which you can catch at:
We’ll see who wins… In 30 min. Either way, I’ve learned an incredibly useful thought process for evaluating potential startups and met a few extremely innovative and effective people. So … Lean Startup Machine- well worth your weekend.
Now it’s time to partay!
A LinkedIn for finding loans and a localized SalesForce for SME lending this locally powered network engages connected dealmakers with a cultural and specifically local understanding of success to identify entrepreneurial talent and personal credibility to help lenders focus on high potential entrepreneurs. On the flipside, it lights the path for keen entrepreneurs to get their foot in the door.
Local deal makers buy in, at which point they’re able to introduce entrepreneurs to the community and vote which ones should be considered for loans. With more successes deal makers get more intros. Local wizzes without funding can build credibility by working with deal makers. With a focus on growth and a passion for local success, we can create a network that flourishes.
Through Local Knowledge entrepreneurs can get their shot, lenders get trusted borrowers, and the dealmakers get to join for the ride.
Other name options:
TIP-ped (This Is Promising-I like using the verb for an intro)
I Know a Lean Start Up
Allow Me To Introduce
Trusted Relations Unearthed
I Know Where You Live
If you’ve got any suggestions, let me know. Otherwise, if you’re free, tune in to the pitches starting at 8am EST:
Came up against some headwinds today. I joined Buzz for an adventure over lunch up to People Squared, a local Chinese incubator for tech companies, where he was presenting about his VC firm as well as Techyizu. It was a very informal setting, so once he finished his pitch, the attention turned to me. What to tell them? Seemed like a good opportunity to look for partners, so I gave them my pitch. Short and sweet, I wrapped up it up in about two minutes, and Yuyu raised her hand with a question. Her uncle had once loaned money to an entrepreneur promising to pay high interest. The entrepreneur took the money and ran. She put me on the run. I responded in Chinese with a smirk “很平常” “That’s common.” Once the roaring laughter quieted down, I explained two points: First, demanding an enormous interest rate could have been so restrictive that the entrepreneur found it impossible to pay the whole sum back and thus ran off without paying any. Second, in a one-off loan, her uncle might not have had experience in selecting promising entrepreneurs. The platform was meant to identify individuals with a deep knowledge of the local economy and specifically the industry they’re picking from. On top of that, this provided a tool to continually evaluate their success rate, highlighting dealmakers with real knowledge.
I got some nods, but one guy had been nodding for the last half hour, so I didn’t count him. My answer was enough to carry me through the Q&A, but I wasn’t getting any requests to partner. After everyone had returned to their work, Wang Yuan asked from across the table if I was trying to create the same thing as RenRenDai, one of the new peer to peer lending sites that’s gotten popular in China. Though private lending has been illegal, somehow peer to peer lending has not, so several sites such as Creditease, RenRenDai, and Sudaibang have emerged to offer crowdsourced loans. Because China’s capital market is so starved that they’ve been able to guarantee over 10% on all of their loans. Unsurprisingly, these guys were first on the scene in Wenzhou when private lending opened. I spoke with one of them last night, and they’re having trouble achieving the same returns they’ve had all around China. They’re trying to adjust the model… sounds like they need some Local Knowledge ;)