Sequoia's Neil Shen to Entrepreneurs: "Follow Your Heart" | Summary and Q&A

Transcript

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Summary

This video features an interview with Neil Shen, a successful entrepreneur and investor in China. He discusses his personal journey, including leaving banking to start his own business and moving back to China. He also talks about the challenges and opportunities in the Chinese market, as well as his role as a venture capitalist with Sequoia Capital China. Shen shares his insights on how to be a successful investor and entrepreneur in China.

Questions & Answers

Q: Can you tell us more about your decision to leave banking and start your own business in China?

Shen explains that while studying in the U.S., he always felt a desire to do something for or related to China. After working in banking for several years, he found an opportunity to return to China and be part of the emerging capital markets. He saw the potential for entrepreneurship in China, especially with the rise of the internet. With inspiration from successful models in the U.S., he decided to start his own venture, Sea Trip, in 1999. Despite the challenges and uncertainty, he was determined to make it a success.

Q: How were you able to achieve success with your ventures, Sea Trip and Home Inns?

Shen explains that success came from understanding the industry and market trends. With Sea Trip, he identified the opportunity to provide better IT systems and financing for Chinese travel agencies. He also saw the potential in the underdeveloped hotel industry, especially business and economy hotels. By focusing on customer service and building relationships with hotels, Sea Trip became a successful online travel agency. With Home Inns, he addressed the need for a specific type of hotel in China and leveraged the success of the economy hotel model in the U.S. Shen emphasizes the importance of understanding the market size and having a clear business model.

Q: Why did you choose to become a franchise of Sequoia Capital?

Shen explains that becoming a franchise with Sequoia Capital China allowed him to leverage their experience and resources. He wanted to learn from Sequoia's success in the U.S. and apply it to the Chinese market. He also saw the opportunity to have a bigger impact on the new economy in China by investing in and mentoring entrepreneurs. By partnering with Sequoia, Shen was able to build a team of partners and make investments in some of China's biggest unicorns.

Q: What makes you successful as an investor in China?

Shen attributes his success to several factors. He emphasizes the importance of capturing major trends and investing in sectors that have the potential for significant growth. Sequoia China has been successful in investing in sectors like e-commerce and O2O, which were not yet popular in China at the time. Shen also highlights the significance of being able to say no to some trends or sectors that may not have long-term sustainability. He believes that having a good understanding of the market and industry, as well as having a strong team, are crucial for success as an investor in China.

Q: What trends do you find exciting in China today?

Shen identifies big data and artificial intelligence as major trends in China. He believes that China is at a similar stage to the U.S. several years ago in terms of the development of these technologies. He sees an opportunity for returnees from the U.S. with experience in areas like big data and software to have a significant impact in China. Shen also mentions the potential in robotics and artificial intelligence, as well as the opportunity for local Chinese companies to compete with U.S. companies in these areas.

Q: What challenges do entrepreneurs face in China and how can they overcome them?

Shen mentions competition as a major challenge for entrepreneurs in China. With the high number of copycats and local players, it is important for entrepreneurs to constantly innovate and differentiate themselves. He also highlights the difficulty in retaining talent in China, as there is a high demand for skilled professionals in the startup ecosystem. Shen recommends having a strong company culture and offering competitive compensation to retain top talent.

Q: What are some key considerations for American companies entering China?

Shen advises American companies entering China to adapt their business models to the unique market in China. Simply copying what works in the U.S. may not be effective in China. He suggests having a local CEO or team member who understands the Chinese market and can make decisions based on the Chinese business environment. This person should have a direct interest in running the business and should be able to work closely with the head office to leverage resources. Shen also mentions the importance of building strong relationships with local partners and understanding the competition.

Q: How do you evaluate companies in uncertain trends like big data?

Shen looks for several key factors when evaluating startups. He considers the background and experience of the team, as well as the market size and timing. He believes that having a team with relevant industry knowledge and experience is important for success. He also looks for startups that address specific pain points and areas where there is a demand for increased efficiency. Shen emphasizes the need to constantly innovate and differentiate oneself in order to succeed in competitive markets.

Q: How did you find your partners when starting your own ventures?

Shen explains that finding the right partners is important, even if they are not perfect. When starting Sea Trip, he already had a small team of three people, but they needed someone with travel industry experience. They found someone who complemented their skill set and understood the business. Shen advises entrepreneurs to focus on finding team members who address the most critical needs of their startup. It may not be possible to have a complete team from day one, but it is important to gradually build a team that can support the growth of the business.

Q: Which is a bigger bubble, China or Silicon Valley?

Shen does not see a big bubble in either China or Silicon Valley. He believes that as long as startups are creating value and addressing real market demands, valuation fluctuations and hype are not a major concern. He points out that market forces will adjust valuations over time. Shen emphasizes the importance of startups creating value and meeting consumer demands. He does not believe that there is a significant bubble in either China or Silicon Valley.