Ace venture capitalist says there is no dearth of investment opportunities in China

Hugo Shong, often called the godfather of Chinese venture capital, has a word of advice for young Chinese entrepreneurs: Work for a US company for at least two years before striking out on their own.

"High-tech professionals need to practice what they have learned in school," Shong says in an interview with China Daily at the 7th China Venture Capital Private Equity Forum held in Palo Alto, California, on May 3.

"They must understand the market and learn levels of management skills before they take off with their own startups."

Shong speaks with the authority of an investor with 60 of more than 100 companies he has invested in going public over the last 20 years. Being president of Asian-Pacific operations for the International Data Group (IDG), Shong also currently oversees a $3.8 billion venture capital fund. Successes such as Sohu.com, Baidu.com and Tencent.com, all household names in China, have made Shong a legend in the world of venture capital.

The 56-year-old Shong was born in Xiangtan, Hunan province. After working at a steel mill for four years, in 1977, Shong was part of the first batch of college students after the "cultural revolution" (1966-76).

After getting a master's degree in journalism from the Chinese Academy of Social Sciences, Shong worked at the Xinhua News Agency for about two years.

He then studied in Boston University in communication in 1986 and Fletcher School of Law Diplomacy the next year.

In 1993, he helped the US media and technology guru Patrick McGovern in setting up IDG Capital in China and has been a pioneer in doing venture capital in the country.

For young people hoping to match his career, Shong passes along three goals that have guided his approach to life: Find something you are passionate about, work toward it in ways that will benefit yourself and others and pick good partners to do it together.

"My personal passion has always been innovation," Shong says.

"I remember my childhood of being a kid fascinated by physics and playing with electronics all day long. My happiest memory, however, was in college, when I could take classes and learn new things every day. I always thought, isn't that the most wonderful thing in the world? That's probably why I enjoy being a VC (venture capitalist), which is in one way or another innovating for new things, interesting things, and learning along the road," says Shong, who negotiated the first joint venture newspaper in China and sits on boards of some leading technology companies in China.

He says the venture capital industry has changed much since he started.

"I remember nobody wanted to come to our first venture capital forum back in 1992 since no one had heard or understood venture capital at that time. Now 20 years later we are facing highly educated and sophisticated incubators and entrepreneurs, a huge venture capital boom in the past two decades, and an ongoing active market in both the US and China today," Shong says.

Although many complain of a slowing venture capital market in the United States and China and the lack of opportunities in the current US market, Shong still exudes optimism on both markets.

"My personal enjoyment is to look for opportunities in China, be it products or technology, funding or investment in talented people," Shong says.

"How does one identify a good investment opportunity," is the question that is often put to him at most meetings.

Shong says the answer to that is very simple. "Anything that is related to improving the quality of life for people would be the crux of the matter, be it better clothes, better food, better living environment, better medical service, better financial services, better education, and finally, better entertainment programs.

"For instance, weekends in China are not as 'colorful' compared to those in the US since everywhere you go is crowded and there just aren't many activities like in the US. So most people just head for cinema theaters," Shong says.

According to a recent market report, China's box office hit an all-time high in 2011, with total revenues reaching $2.08 billion, up 28.93 percent over that of 2010. Seeking this moment of opportunity in the flourishing Chinese entertainment market, Shong set up the $150 million IDG China Media Fund and invested in movies such as Sunshine in the Alley and Snow Flower and the Secret Fan, which was produced by Wendi Murdoch, wife of the media tycoon Rupert Murdoch, and Florence Sloan.

"I believe in investing in things that make people happier," Shong says.

Arriving at Boston University from China in 1986 with just $38 in his pocket, Shong made ends meet while studying journalism and international relations on a full scholarship. Seemingly having to prove how he likes to learn things, Shong swept through his US education with a master's degree from Boston University's College of Communication, as well as degress from the Fletcher School of Law and Diplomacy and Harvard Business School's Advanced Management Program in 1996.

Opportunity knocked when he met Patrick McGovern, founder and chairman of IDG in 1991. Shong obtained his "first barrel of gold" assisting McGovern in raising $50 million for the IDG Capital Venture Fund in Beijing, Shanghai and Guangdong in 1993. The wheel just rolled on and on afterward along with the economic development and boom in China. Shong is now in charge of venture capital investment not only in China but also 15 other Asian countries.

After over two decades of portfolio investment, when asked what is his favorite investment, Shong says, "I feel that all the companies that we have invested in are like my children. I enjoy every one of them, I treasure each and every moment of their growth, even as I share their successes and failures, their happiness and sorrows. Believe me, every moment is precious."

A survivor with triumph in the venture capital world, Shong believes the most important factor for success is to do things and live a life with a grateful heart, and have direct communication with the team. "If you do not communicate properly, do not keep things transparent, and do not have trust among your team, everything will eventually go wrong."

As to investment opportunities, Shong thinks it's never too late to invest now, and comparatively China is still a good market with ample options. While the US still holds its advantage of talent and technology, combining the two would make the magic work.

kellyzhang@chinadailyusa.com

(China Daily 05/11/2012 page16)