S2 Episode 3: Manu of Xiaomi: The Making of India’s Favorite Smartphone Brand

On this episode, we have Manu Kumar Jain, the global vice president at Xiaomi and the managing director of Xiaomi India. Xiaomi is currently the world’s fourth-largest smartphone brand. Besides smartphones, the company also makes other smart devices connected to its IoT platform. It is the youngest company on the Fortune Global 500 List for 2019.

In the wide-ranging conversation, we discussed the biggest success factor of Xiaomiin India, how he goes about hiring, working with Xiaomi’s founder Lei Jun, and his advice for foreign brands who want to make inroads into India.

Manu joined Xiaomi in 2014 as the first employee and managing director of XiaomiIndia, where he has grown Xiaomi to India’s NO.1 smartphone brand for 6th consecutive quarter. Before joining Xiaomi, Manu co-founded the fashion eCommerce company Jabong and worked as a consultant at McKinsey. He holds a bachelor’s degree in mechanical engineering from Indian Institute of Technology in Delhi and a post-graduate diploma in management from Indian Institute of Management, Calcutta.


Hans Tung: Today on the show we have Manu Kumar Jain, the Global Vice President of Xiaomi and the Managing Director of Xiaomi India. Xiaomi is currently the world’s fourth largest smartphone brand and besides smartphones, they’ve come now to make other smart devices connected through its IoT platform. It is the youngest company on the Fortune Global 500 list for 2019.

Rita Yang: Manu joined Xiaomi in 2014 as the first employee and Managing Director of Xiaomi India where he has grown Xiaomi to India’s number one smartphone brand for six consecutive quarters. Before joining Xiaomi, Manu co-founded the fashion e-commerce company, Jabong, and worked as a consultant at McKinsey. He holds a bachelor’s degree in mechanic engineering from Indian Institute of Technology in Delhi and a post-graduate diploma in management from Indian Institute of Management, Calcutta. Welcome to the show, Manu.

Manu Kumar Jain: Thank you so much. Thanks for inviting me.

Rita Yang: Manu, what about Xiaomi that made you join the firm in the first place? India had a lot of fast-growing startups back when you started at Xiaomi, and why Xiaomi?

Manu Kumar Jain: Okay, it’s an interesting story. This goes back to 2011 and ’12. We were about to start my previous company, which is Jabong.com, and at that point in time I thought it was a horrible idea because we were supposed to sell clothes online and I thought, I spoke to my co-founders, why are we setting up this business? Nobody would ever come and buy shoes and clothes online. They said, no, it’s a great idea. We will figure this out. A few months down the line, we were doing tens of thousands of transactions every single day, but that was not surprising for me. The most surprising thing was majority of people, more than 60% of them, were coming and buying using a mobile phone and mobile phone they were using was small, two-inch, three-inch, which we call widget phones. That got me excited about mobile phones and I started searching and I read a blog from one of the US bloggers that said the company to watch out for in the mobile handheld space is Xiaomi. It’s a company, they’re disrupting the space, it’s a small startup from China, nobody heard of it. That got me excited and I got introduced to Xiaomi founders through some common friends. We were in touch for more than a year, through the time I was running Jabong, and when I exited Jabong, Ben, who was one of the co-founders and president of the company, he approached me. He said, “Hey, do you want to do something in mobile? We want to start a Xiaomi business. Would you like to start it for us?”. I thought it was an incredible opportunity, so that’s how this whole journey started.

Rita Yang: Hans, you’re an early investor in Xiaomi. How does that fit into your side of the story with Xiaomi, with them coming into India?

Hans Tung: I knew that- I’d run a model on Xiaomi back in 2010, even before I had the phone, and did a forecast on how this could be as big outcome as they wanted it to be. Through that calculation, it’s very obvious that if Xiaomi stayed as a China-only business, you’ll never reach the lofty goal that Beijing had for Xiaomi, so you had to be a global player. They’d look around the world, where the next billion users are going to come from, India is definitely on the top of that list. Based on that, it has to work, but in reality, no Chinese brand had ever done well in India, so thus it appeared as a mission impossible. When Manu was hired, I was very thrilled to see how it was going to turn out. I don’t think anybody back in 2014 had ever imagined that Xiaomi would be number one in India today and the number of phones being sold in India is comparable to China, so kudos goes to Manu and his team.

Manu Kumar Jain: Thank you.

Rita Yang: Manu, for people who are not aware of just how successful Xiaomi is in India, can you give us a few descriptions on how would an Indian consumer, how crazy they are about the Xiaomi phones?

Manu Kumar Jain: Sure. I would say today Xiaomi’s probably the most loved technology brand in the country.

Rita Yang: Wow.

Manu Kumar Jain: Why do I say this? In just three years, from 2014, May to 2017, May, we became the largest brand in the country, smartphone brand, and since then, for the last eight quarters, last two years, we’ve been the number one smartphone brand. We introduced many more categories. We introduced smart TV’s last year. Soon we became the number one smart TV brand. Now, we have been the large smart TV brand for five consecutive quarters. We are also the number one wearable brand, fitness wearable brand, with more than 40% market share. We are the number one power bank brand in the country with more than 35% market share. We are just building many more IoT products and categories and consumers, even though we don’t do any advertisement, consumers just love it and they continue to buy multiple Xiaomi devices.

Rita Yang: How do they get to know the brand in the first place?

Manu Kumar Jain: It’s a tough question because most of the users can’t even pronounce the name. They can’t pronounce Xiaomi. If you ask many users, they will call it as Zyo-mi, Zio-mi, Gio-mi, Gao-mi, but all of them know one thing, which is Mi. That’s what they recognize as us. That’s our brand identity. Most of the people come to know us from three different sources. The first and the biggest one is word of mouth. People who buy our devices, they become big fans and they told other friends and family, this is the product that you should buy. Second is PR articles and a lot of videos that people do on Xiaomi products. Third is just social media. We actively put everything on social media. All our employees encourage everybody to do it. People just see good reviews, good comments on social media and hence decide to buy Xiaomi products.

Hans Tung: When I open my LinkedIn app, the first thing is the post from Manu, and you come with it. It’s impressive how active Manu and his team are on social media.

Manu Kumar Jain: Thank you.

Hans Tung: Yeah. It’s an amazing job.

Rita Yang: I just have to ask this, is this something Lei Jun told you to do? He himself has enjoyed a huge success on the Chinese Weibo. He’s a big influencer there. Is this something he specifically said to you, “Manu, you should be very active on social.”?

Manu Kumar Jain: Definitely yes.

Rita Yang: Okay.

Manu Kumar Jain: I remember when I first met Lei Jun during my interview process. He asked me how much money we were spending on marketing at my previous company, Jabong. I gave him the number, whatever that number was, as a percentage of revenue. Then, he asked me guess how much money we are spending at Xiaomi. My guess was five percent. He said, “No, no, no, think again.” I said maybe three percent. He said, “No, think again.” I said maybe one percent. Then he stood up, he went to the board, and then he drew a big zero.

Hans Tung: A big, fat zero.

Manu Kumar Jain: And he said, “That’s what we spend because we use social media.”

Hans Tung: Yes.

Manu Kumar Jain: Then he actively encouraged me from day one to use social media.

Rita Yang: Interesting.

Hans Tung: Yeah. I remember the test he did to the head of marketing in China back in 2011. It was also a big, fat zero. The first campaign that Xiaomi ran was Shoujikong or a campaign about people who love phones, who are phone freaks, who are just very ardent users to talk about their experience with phones in their history of life. Lei Jun had pictures of the 50 phones he ever owned. He posted on Weibo on the website of Xiaomi to talk about the phones that he had, why he liked them, why he did not like them. Within the first week, 460,000 people shared the phones that they had and why they didn’t like it in anticipation of what the Xiaomi first phone would look like. By going through that campaign, he made it a lot easier to sell phones later. About 2,000 people showed up and about 340,000 phones were purchased after the launch. Without going to the heart of the users and the most active user, get them to share your thoughts, there’s no way Xiaomi can to that kind of social following by spending such little money.

Manu Kumar Jain: In fact, in the beginning of this year, a particular team within Harvard Business Uni, Harvard Business School, they approached us and they asked me to come down to US to give a lecture only on this topic, how we became the largest brand in the country without spending a single marketing dollar.

Rita Yang: Wow.

Hans Tung: I remember when Lei Jun talked to me in 2010, he said he has so many ideas on how to improve smartphones, but no matter how many emails he sends to iPhone or Nokia, no one’s going to respond, so he said you want to build a company where the most active users have a voice.

Manu Kumar Jain: Yes.

Rita Yang: If you were to rank the three success of Xiaomi phones, the price point, the distribution channel, and the fan-based community you just described, how would you rank it? Which factor would be the number one reason?

Manu Kumar Jain: In India?

Rita Yang: Mm-hmm.

Manu Kumar Jain: Okay. I would say the first one is definitely product. If the product is not great, we cannot succeed no matter what we do. Second…

Hans Tung: What makes Xiaomi product so attractive in the eyes of Indian consumers?

Manu Kumar Jain: Every time we launch a product, there are three key things that we keep in mind. It needs to have the latest and the best specs of innovation. Second, it needs to have the highest possible quality standards. Third, of course from a pricing perspective it has to be probably one of the-

Hans Tung: Extremely affordable, Yeah.

Manu Kumar Jain: We coined a term called honest price, which means it may not be the lowest price, but we’ll keep less than five percent profit margin for ourselves. We cut down on the cost and then keep very little margin and then pass it on to user, and that’s what we call this honest price. If you look at many of the historic brands, they were great at innovation and great at quality, but extremely bad on pricing.

Hans Tung: Yes.

Manu Kumar Jain: Some of the brands which came about six, seven, eight years ago, they had good price, good specs, but horrible quality. I believe today we are the only brand across different product categories which can take the box on all three: product, quality and price. That’s what makes our value offering so unique. I would say that’s the first thing. If you don’t have a great product with great quality and pricing, you cannot win. That’s a given, and there are products centered company. I would say second thing which makes us very different is our people. Look at Xiaomi India. It is the place you know majority of people do not come from smartphone background. They come from internet background. They come from companies such as Google, Facebook, eBay, Flipkart’s, Snapdeal, from Flipkart, from e-commerce background, from internet background. Many of them, because they have never done anything like this before, they are willing to take risk. They’re willing to try out new things that have never been tried before. For example, we just launched a new IoT device, a smart water purifier, in India two days ago. The guy who’s leading it and who’s built it, he does not come from water purifying history, he comes from e-commerce background.

Hans Tung: Yeah.

Manu Kumar Jain: He just brings a very different thought process from what a traditional water purifier person would bring on the table. That’s second. The average age of the company’s around 30. Most of the leaders are in early 30’s. I’m one of the oldies in the company.

Hans Tung: You’re doing well. 

Manu Kumar Jain: That’s the second one. Third, I would say the reason why we’re successful is because we haven’t done anything similar to what other companies did. You spoke about distribution. Five years ago, 94% of the market was offline. Only six percent was online. When we were launching, I went to large number of tech CEO’s, my mentors, people who had run mobile companies before, tech companies before. They said, “Manu, this is the wrong strategy.”

Hans Tung: Right.

Manu Kumar Jain: “You are going after a small six percent market. Ninety-four percent market is offline. The way to sell a smartphone is spend a lot of money on marketing and sell offline. You are doing none”.

Hans Tung: Right.

Manu Kumar Jain: I was worried. I said maybe we were doing something wrong, but we have never done what others did. When at the time the market was going offline, we went online. We now have close to 50% market share within the online segment. We grew that. When everybody was going after feature TV’s, we went after smart TV’s. Almost an entire growth of smart TV’s, we have captured 85% of that growth. A lot of things that we have done differently, but it is our channel, whether it is distribution or it is marketing using social media, and that has helped us to differentiate from any other brand which has been traditionally here in India.

Hans Tung: I remember with the product design, Lei Jun specifically wanted to make sure that if he doesn’t spend money on marketing, which for Apple is about 20% of the sales, he doesn’t spend money on distribution to sell in offline stores, not initially anyway, and not go through the carrier offline stores. He said no 100%. This is why the phone’s going to be a lot more affordable, because he doesn’t have these costs, and that’s why he can keep the operating expense at only five percent of the sales. One or two percent on R&D, three percent on operations, that’s it, so extremely lean and almost didn’t even pass through the hand of the consumer, yet can still be a profitable business.

Rita Yang: Xiaomi is probably one of the first direct to consumer brand out there.

Hans Tung: Right. This happened after Google failed with the initial launch of Nexus to sell phones online and this happened right when Motorola was acquired by Google, so nobody believed that Xiaomi could’ve worked.

Manu Kumar Jain: In fact, to point on direct selling, we have our own e-commerce platform, Mi.com, M-I .com.  You’d be surprised to know it has become the third largest e-commerce platform in the country when it comes to electronic and smartphone sales.

Rita Yang: Wow.

Manu Kumar Jain: After Flipkart and Amazon.

Hans Tung: Right. Because people come, they share comments on how the phones could be better, give advice and so forth, and I’ll share tips, and I’m supposed to buy products.

Manu Kumar Jain: Yes.

Hans Tung: Yeah.

Rita Yang: Can you tell us what is the whole market strategy Xiaomi has for India? That’s a term that has come up again and again for the Indians as a market. Can you share with us on that?

Manu Kumar Jain: We at Xiaomi believe that India is almost like a second home for us. Everything that we do in China, we are replicating here. We are designing phones, we have R&D, we have product team. We have manufacturing. We have end to end all operations that we do in China, we are doing it in India. A lot of products we are designing for India in India. I’ll give two examples. One is some of the phones are completely redesigned for India. For example, in China we launched a phone called Redmi Note 7, but we launch a different one in India, which was meant for Indian consumers with a much higher pixels and a different camera, different specifications as Redmi Note 7 Pro. This year we launched something called a beard trimmer, which was a product which does not exist anywhere else in the world within the Xiaomi ecosystem and that’s because a lot of people are clean-shaven when it comes to the rest of the world and China, but in India, thanks to the latest fashion of some of the cricketers having beard, life and one of youth have beards, so we designed and launch a beard trimmer in India for India. The product that I was speaking about, water purifier, we have something in China, but it’s very different because in China there’s no power because of Watercart. We had to re-develop the entire product in India for India because in India there are a lot of power shortage and water shortage, so you need a big tank to hold the water in this power kind. A lot of these products are being completely redesigned for Indian market, and that’s why we think this is a second home for us.

Hans Tung: Right.

Rita Yang: For the beard trimmer you just mentioned, I think it’s absolutely fascinating. Does Xiaomi in India also goes the same way how it builds different products in China by investing in them instead of doing everything themselves?

Manu Kumar Jain: True. When you buy products that we design ourselves, which are phones, TV’s, laptops, routers, and OS.

Rita Yang: Okay.

Manu Kumar Jain: Everything else is designed by one of our ecosystem companies. The way that we did Mi Beard Trimmer, we enter our product specification in India, then we found the right ecosystem company. We have 200 such companies where Xiaomi is invested in, more than 200. We found the right partner who could then work our product design into a reality and then we work with them to launch this product in India.

Hans Tung: What are these other products you guys were thinking of that will be launched soon or that you think are quite unique to India as well?

Manu Kumar Jain: Some of the products which we did in China do not make sense for India. For example, we have drone. Now, drone is not illegal in India. Or you have 9 bots scooters, the self-driving scooters. Indian road conditions would not allow that. I’ve tried it myself. There is nowhere you can drive it on Bangalore roads. I would say there are three broad categories of products. One, which are there in China, and we can just launch them in India by small modification.

Hans Tung: Some examples include?

Manu Kumar Jain: Such as TV. On hardware, we had to make some modifications. For example, add more number of connecting points, sockets, because Indians have far more things. They have cable TV, they have dish TV, and many other things.

Hans Tung: Sure.

Manu Kumar Jain:  We do change brightness and sound level because watch TV during daytime unlike China where most of the people watch TV in nighttime.

Hans Tung: At night.

Manu Kumar Jain: The brightness levels have to be different.

Hans Tung: Sure.

Manu Kumar Jain: We can broadly use the same product 80%, 90%, but it’s a small change-

Hans Tung: One piece.

Manu Kumar Jain: and then launch it in India.

Hans Tung: Yeah.

Manu Kumar Jain: The second category which is there in China but does not make any sense in India, which is the example that I gave, drone or standing scooter or, say, rice cooker. It’s a small rice cooker and people in China love it. Most Indians really don’t care for it. There’s a third category, which has to be completely redesigned or developed only for India. The two example that I gave.

Hans Tung: Water purifier.

Manu Kumar Jain: Water purifier and the beard trimmers are the ones which are completely designed for India. We are working on many more such things, for example laptops. Laptop exist in China, but the average price point of laptop in China is 5,000 RMB, which is too high for Indian market. We are thinking of doing laptops in India, but whatever we do it has to be completely redesigned for India, as for user needs and/or Indian price points.

Hans Tung: Right. How much of those products you guys sell in India that’s manufactured locally versus imported from China?

Manu Kumar Jain: We started by importing five years ago and then we slowly started assembling in India, and then we started manufacturing a large number of components locally. If you look at our phones, which is our biggest business in India, almost 100% of our phones that we sell in India are made in India. Not just that, a large number of components, including PCP, camera module, battery pack, touch panel-

Hans Tung: Are local now.

Manu Kumar Jain: Are either localized, being sourced from local vendors, or are being manufactured here locally from our international partners with company here. Our smart TV’s, 80% are all made in India, 20% are still imported. Power banks are 100% manufactured in India. They will be imported sometime, only if there’s a big sale. Other categories are still imported, but slowly we are trying to figure out a way to start locally manufacturing each one of them.

Hans Tung: Right. Has your popularity here made it easier for the Taiwanese and Chinese hardware partners to expand to here as well?

Manu Kumar Jain: Yes. Five years ago, there was always a problem because when you would you go to partners, manufacturing partners, to set up a shop here in India, they were not comfortable because there was no big anchor point, plus there were no competent suppliers. When you would go to competent suppliers, there were no manufacturers. It was all the chicken and egg problem.

Hans Tung: Correct.

Manu Kumar Jain: Four years ago, we convinced Foxconn to set up a first plant in India and that really helped because we started growing our volume and all of them were made by Foxconn at that point of time. Now we work with Flextronics, we work with many other partners, because of which there was a huge incentive for competent suppliers to start coming here. Plus, they had big clients such as Foxconn in this, and Foxconn only felt comfortable because they had a big anchor client such as us.

Hans Tung: Yes.

Manu Kumar Jain: I believe because of which, in last four years in that ecosystem of electronics manufacturing has developed significantly as compared to where it was, but we still have a long way to go.

Hans Tung: Sure.

Rita Yang: What about the software side of things Xiaomi’s doing in India or content, for example?

Manu Kumar Jain: That’s an interesting question because that’s our core business. Most of the people just talk about smart phone and the way Lei Jun explains it is of course we’re a smart phone company, but we are much more than a smart phone company. We are an IoT company, we are an internet company. On the internet side, we have been building a large number of internet products for India in India. For example, we have Mi Music, Mi Video, Mi Pay, Mi Browser, many more internet services.

Rita Yang: And they came with the phone, I would imagine.

Manu Kumar Jain: Yes. Of course, phone has to distribute these services.

Hans Tung: Sure.

Manu Kumar Jain: It’s a very easy distribution. Mi Music comes with a very large library of music content and it’s free for users, and that has been done in India. Mi Video comes with more than 700,000 hours of content, which we showcase both on our Mi TV’s as well as on Mi phones. Again, that has been completely done in India because we take content from, 12, 15 different content providers and then show it in one seamless line. A lot of these internet products we are now beginning to design in India for India. We have our team here working on this.

Rita Yang: Now, let’s come to you working in a company that has its heritage in China. What does that feel- From a day to day perspective, how much time do you need to spend with the China team or the headquarters, quote/unquote? How does that reflect in the whole market strategy?

Manu Kumar Jain: Before I joined Xiaomi, a lot of people told me never to join a Chinese company.

Hans Tung: Just like a lot of Chinese people told that never join an Indian company.  

Manu Kumar Jain: True. People were way off. Some people heard horror stories saying how a company beginning in China will never empower you, will never give you decision-making power. For everything you’ll have to go back to headquarters and check with them. Lucky for me, I’ve never personally faced any of these issues. I’m extremely happy with the way things have progressed over last five years. I talk to Lei Jun almost on a daily basis through chat.

Rita Yang: WeChat or WhatsApp?

Manu Kumar Jain: No, we have a Mi Chat.

Rita Yang: Oh.

Manu Kumar Jain: MiTalk.

Hans Tung: Yup, MiTalk. I still have it.

Manu Kumar Jain: Lei Jun and I talk almost on a daily basis on MiTalk and we discuss about anything and everything, about what is happening with Xiaomi globally, what is happening in India, the political situation in India.

Hans Tung: You type in English and he types in Chinese?

Manu Kumar Jain: No, I also type in Chinese. I have a team member who will do translation for me. I don’t miss any places. I send it to the team and then they will translate into Chinese and then I will send it to Lei Jun and vice versa. Lei Jun can read and understand English.

Hans Tung: He’ll read English no problem.

Manu Kumar Jain: Sometimes if I’m sending something urgent, I will just send him in English, and he will read it and he will reply in Chinese and I will use Google Translate to quickly translate it back.

Hans Tung: Right.

Manu Kumar Jain: It’s very seamless. We have never faced a problem. Because Lei Jun and I speak so frequently and then I present our business case, quarterly business plan to our board and to Lei Jun every quarter, so we align on milestones on a yearly basis and on a quarterly basis, mainly on our business plan. As far as we are not significantly changing the strategy or not changing our business plans drastically, it’s openly fine for us to take decisions locally here. I’ve never seen him come or interfere, or anybody else to interfere, so that way I would say the involvement is extremely high.

Hans Tung: It’s unusual.

Manu Kumar Jain: I don’t know, actually, whether it is unusual or not because it’s what I’ve heard, but I’ve never experienced this myself.

Hans Tung: Sure, yeah. It’s very impressive that both of you guys can do that.

Rita Yang: You actually have said in an interview back in 2014 that Lei Jun was the most visionary guy you have ever met, and four years, actually five years after that, what are some of the unexpected things you have learned by working with him?

Manu Kumar Jain: I would say two things. One, almost all the leaders that I have worked with, they would either know product very well or business very well. For example, operations. How to run business, e-commerce, customer care, etc., a lot of these things. That’s what it is I know. I’m not saying he’s the only one. I’m sure there are other people, but among the people that I have worked with, I can’t think of anybody else who’s a great tech and product guy who’s also a great business and operations guy.

Hans Tung: Right.

Manu Kumar Jain: It’s amazing at how he could have a conversation about building business, building operations, building billions of dollars of business at one hand, and other hand he can go very microscopic, talking about the camera features of a popular phone and just go in depth and spend next few hours discussing that and everything.

Hans Tung: Amazing.

Manu Kumar Jain: Yup. His ability to discuss both product and business is incredible, and he spends equal amount of time on both of them. I’m yet to meet anybody else who can do this as efficiently as Lei Jun. Second, I would say, is the ability to connect with a large number of people despite him not being very comfortable speaking English. When it comes to him, he makes it a point to meet all the key leaders, team members in India, one on one. He will spend a lot of time with me, sometimes our one on ones would last six, eight hours.

Hans Tung: Right. He can talk.

Manu Kumar Jain: He can talk, he can discuss, he can debate, and it’s not easy to convince him. Sometimes our debates have lasted four hours and then one of us had to convince other person for our debate on one single topic. The thing that he really connects well with everybody and he’s very responsive. He won’t miss any messages, maybe one o’clock at our time, which is 3:30 in the morning his time.

Hans Tung: No problem.

Manu Kumar Jain: I will get a response immediately.

Rita Yang: Hans, he is like you in that sense.

Hans Tung: Even more so than I do.  Yeah.

Manu Kumar Jain: He’s amazing.

Hans Tung: He’s amazing.

Manu Kumar Jain: Yeah.

Rita Yang:  What is one of the things you guys disagree about or debate about?

Manu Kumar Jain: Anything to everything. The first thing that we ever disagreed about, the first big debate that we had almost five years ago was where should we have headquarters in India. He said it should be in Delhi, I said it should be in Bangalore.

Hans Tung: Thank God.

Manu Kumar Jain: We debated for weeks and weeks and maybe months. Somehow I convinced him to say that it should be Bangalore because-

Hans Tung: His experience is with Beijing, it’s the capital. He has to deal with the government, so he’s not there, you cannot just go past the government policy changes and influence of them.

Manu Kumar Jain: Yeah. But Bangalore is a tech capital and all the partners, Flipkart, Amazon, everybody’s here. It’s easy to hire tech talent. We were thinking of hiring and building a R&D center, so it made sense. We debate a lot about product, product strategy, what is right for India versus China because not everything that gets launched in China is launched in India. About nomenclature. This year, in the middle of this, he came to India only once this year in May, and we had a debate for almost four hours on the naming, the marketing name of a particular product.

Hans Tung: You’re kidding.

Manu Kumar Jain: Four hours we debated just the two of us.

Rita Yang: That’s why you don’t spend money on marketing.

Manu Kumar Jain: Finally, he convinced me. Then, there was a recent product that we launched a few months ago where again we debated for weeks and finally I was able to convince him. I think we have this great relationship where we respect each other’s point of view and we know if you are disagreeing with each other and we’re debating, that’s not because we don’t value each other’s point of view, but because we have the best interest of the company in our mind. He respects that and that’s why he’s willing to debate and discuss with me at length. Either he convinces me, or he gets convinced.

Hans Tung: Right.

Rita Yang: Amazing. What are the challenging part of running Xiaomi India? We’ve talked about all the good things and amazing things.

Manu Kumar Jain: A lot of them. I think the first challenging part five years ago was that nobody knew Xiaomi.

Hans Tung: Right.

Manu Kumar Jain: At first the office was a small café and every time I would go to a partner and say, hey, we should be doing something together, people would ask me how big is our team. I would say one person. I am the head, I am everybody in the team. We didn’t even have an official office. It was just a coffee shop. People would think that I was a fraud. I would just take their money or do a business contract and I would run away because it was unimaginable for them that we would talk about these, at that point millions of dollars, $10 million, $15 million dollars. There’s no office, there’s no team, there’s no legal entities for our business. Hiring was very tough, extremely tough in the beginning because nobody knew Xiaomi and a lot of people who would agree to run Xiaomi would, on the last day, on the day they would join, they would not turn up, but they would say their family’s not in India, their family’s in this company. Are you joining? What is Xiaomi? They have never heard of them. Why would you even risk it? Building up our business was really challenging because traditionally online is what our strength is and two years ago we started bringing it offline. We struggled a lot in the beginning, for almost a year, going through the process of going offline brand, and it’s taken largest offline brand in the country. Online we are number one, offline we are number two. Some of the products haven’t done well. Let me be honest. I would say 80%, 90% of the products have done exceedingly well, but there are also then 20% products which have not done well. How do you course correct? How do you solve the inventory problem? In our business, inventory is something which can really take down the company, so how do you immediately solve for it and course correct and move forward? From the time we have faced a large number of problems. Of course, from outside it looks like everything is hunky-dory, everything is going right.

Hans Tung: Everything, from outside, that’s exactly how we feel.

Manu Kumar Jain: Internally, a lot of problems that we have faced, but I would say two things: One, we have been able to course correct quickly and move forward. Second, there’s a confidence that our board has shown in me and the one that I would like to show in our team, that it’s okay to make mistakes as long as you don’t repeat mistakes.

Hans Tung: Right.

Manu Kumar Jain: We learn from them and never, ever repeat the same mistake again. Just make a new mistake.

Hans Tung: What other new apps do you think that you need to launch in India to leverage the distribution channel you have in India, but yet the app itself has to be appealing to end user, to want to spend a lot of time in engagement with your app?

Manu Kumar Jain: One of the ones that we are piloting right now is our lending platform. We believe lending app is a huge opportunity in India, just like anywhere else in the world, especially mostly in India because a large number of Indian users do not have access to organized lending or credit cards or any kind of-

Hans Tung: It’s hard to have credit.

Manu Kumar Jain: So, we believe that there’s a huge opportunity which is laying over there. There are many startups which are doing bits and pieces of this, but there could be many forms in which doing consumer lending, product lending, supply chain lending, many, many different forms of lending. We believe we are in a very good position where we can do lending across all different areas. It’s something that we’re still working on a beta phase, so it’s open to a very select number of users for testing, but if everything goes right, maybe next 6 to 12 months we should be able to launch it in a much bigger way.

Hans Tung: And then users’ behavior and what they do on the phone will help them to earn credit and build up credit over time?

Manu Kumar Jain: Yes, if they opt in.

Hans Tung: Right. Very often. That’s right. Yeah. I can see that could be a huge game-changer for this market for sure.

Manu Kumar Jain: Yes.

Hans Tung: In China you have Alipay, WeChat Pay, it’s much harder to build a new business against that, but here it’s wide open.

Manu Kumar Jain: Exactly.

Hans Tung: Yeah. Very smart.

Rita Yang: So, you have built an e-commerce fashion company before. How has that experience helped you in building Xiaomi in India?

Manu Kumar Jain: To be honest, I was very nervous in the beginning because I didn’t come from any smart phone background. I also asked Lei Jun, hey, why do you want to even hire me? I come from an internet background, not from a smart phone background. His answer was, I’m not even looking for a new smart phone guy, because we are not a smart phone company. In fact, if you look at most of the people that I said that we have hired, that I have hired at Xiaomi, are also from all internet background. Now, the reason, the way it helped me, it helped me really understand the whole e-commerce landscape because for the first years we were only selling through e-commerce in India. It helped me understand the importance of e-commerce and how we can really scale up our operations using the internet as a platform. If you look at Indian users, a large number of Indian users still do not have access to physical shops because they’re living in small towns and villages, and there’s no branded shops in their town or village, so they will have to travel three hours, four hours. For example, my aunt lives in a city called Salanpur, which is a small town, and she’ll have to travel to Delhi for four hours to buy any kind of product. Through e-commerce, we can deliver it to her home without her necessarily traveling to Delhi. I liked the importance and we were able to move very fast on e-commerce for the first few years and build a big business over there.  And because I don’t come from smart phone background, maybe we haven’t done what others have done.

Rita Yang: What are some common pitfalls for foreign brands that are trying to make inroads into the Indian market?

Manu Kumar Jain: I would say two things. One, when people come here, foreign brands, it’s very difficult to identify talent. Most of the time people go for long experience, relevant experience rather than being more experimentative. If a FMCG company is coming, they will try and hire the person with 20 years of FMCG experience, saying he or she is the right person to bring to business. Point number one. Point number two, a lot of brands don’t realize that India is not one country. India is a combination of 30 countries in a way, because we have 30 provinces or states. Every state, every province has a different language, different core, different religion, different food, different clothes, different language, everything different. When you’re building product, when you’re building your business, you have to keep in mind that it’s almost like building a business for Africa or for Europe, which has so many different countries, so many different culture.

Hans Tung: Right.

Manu Kumar Jain: You have to keep that in mind and if you cannot build it the way you would build it for US or even for China, because it’s not one homogenous thing. When you start building phones, from the day one we had it always available in 12 different languages. Now we cover almost all key Indian languages. People will want to consume content in their local, native language. My solution to anybody who comes is thinking about this very up front on how will you hire people, what kind of people will you hire, and how will you build products which can last for 30 different markets and not just one market.

Hans Tung: When you’re comparing notes with other friends who are at Google and Facebook or other big Silicon Valley firms in India, how is their relationship with their quote/unquote headquarter the same or different than how you work with Lei Jun?

Manu Kumar Jain: Very different. A lot of companies that you mentioned, their India head, or even the APAC head, would very rarely talk to the formal CEO or Chairman on a daily basis. They will typically meet once in a year for an annual review.

Hans Tung: Right.

Manu Kumar Jain: They will not have the direct access to the entire board in case of any problem or issue. In my case, I talk, as I mentioned earlier, I talk to Lei Jun almost on a daily basis. Every time I go, I meet many of our board members and even co-founders and we in depth discuss about how or what are we doing in India, how do we build up even a much more robust business.

Hans Tung: Right.

Manu Kumar Jain: Second way it is different is because many other multi-national companies, India is part of APAC, which has been part of some other organization, and then which is then part of [crosstalk].

Hans Tung: Layer by layer.

Manu Kumar Jain: Since four or five years ago, the way Xiaomi structured is horizontally. It’s China and the rest of the world. Probably the only multi-national company that I know of where there is China and the rest of the world. This also was important in getting that ecosystem, because of which the dynamics are very different. Unlike many other not just Silicon Valley company, but many other multi-national companies, where India is just a recipient. Whatever products are built for other countries. We just bring it to India and just figure out a way to sell it. Here, we’re bringing products for India, in India, and that is a huge, huge difference.

Hans Tung: How many product design folks and Indian folks do you have on your team here in India?

Manu Kumar Jain: We have four different product teams. Phones, TV’s, IoT, and OS. Each of the things will have anywhere between 10, 15 to 40, 50 people working in India right now.

Hans Tung: Okay, got it.

Rita Yang: I wanted to ask, the access you have, either to daily conversations with Lei Jun or your board, does that come after you have shown really positive results?

Manu Kumar Jain: I would say this started in the first year. Lei Jun and I, we of course interacted, but not so frequently. I would meet him similarly, maybe on a quarterly review meeting. This was in maybe May of 2015, our third quarter of 2015 when Lei Jun called me for a meeting to China and then he started discussing and I was ordered dinner, I remember, in some hotel or restaurant which I don’t remember. I don’t remember the name of the place, but I remember it was a dinner. We ended up discussing for many, many hours on Indian market, problems that we were facing in India, issues in India, and how they were very different from China. I believe that was one of the first few turning points when he realized that Indian market is, even though there are a lot of similarities between India and China, but they’re also very different. Then he realized that he should probably spend a lot more time on India to understand India. That was a moment when we somehow made it a pact that we will a lot more frequently so that he gets live a bit on what’s happening in India, what is going on so that he can also give live feedback, which is very important, I believe. It has played a big role in our success because anytime I wanted to change our plans or change a product, I had access to the entire team, and they were running behind me in making this happen. 

Hans Tung: Right.

Rita Yang: How did you solve the hiring problem? When Xiaomi first started nobody has heard about the company and the families who would be like, why don’t you join Google or Flipkart or Amazon? Why this company? We can’t even pronounce the name.

Manu Kumar Jain: Yes. It was very tough. It took me almost three months to hire the first person.

Rita Yang: Three months?

Hans Tung: Wow.

Manu Kumar Jain: Three months. We had a small office with six seats, maybe a 10 feet by 6 feet kind of office, the first official office. I used to serve the coffee myself, I used to open the door myself, I used to do everything myself.

Rita Yang: You were the janitor and the managing director.  

Manu Kumar Jain: Everything was like one single bad thing. I still remember the day when the person joined. I was very happy, not because somebody joined, but because I had somebody to speak to. Those first three months were so lonely. Every time I had to speak to, I could only pick up the phone and talk to either Hugo or Ben. I used to sometimes just feel I had this huge urge to talk to somebody to say, am I doing the right thing? I don’t know. I’m here for the first time. Maybe I did something wrong. I just want to bounce my ideas on somebody. The person joined, he was my junior at McKinsey, he joined, and I was so happy. Then, we slowly hired one person who was a HR member, our first HR member. Then, we hired the head- There used to be a Mi fan club in India, even before Xiaomi was there.

Rita Yang: There are fans of Xiaomi before?

Manu Kumar Jain: Thousands of fans of Xiaomi even before Xiaomi existed.

Hans Tung: That’s right.

Manu Kumar Jain: There was a person who started this Mi fan club in India, and he was the President and the Founder of the Mi fan club. We hired him, so he was employee number four.

Rita Yang: Wow.

Manu Kumar Jain: And then we slowly, gradually started building team. In the first six months we had doubled the team. First three months, we doubled the team from one to two, and another two months from double two to four, and then next six months we doubled from four to eight. The first few months were very slow. Until the time we reached about 30, 40 people it was a rule that everybody who has been interviewed had to be interviewed by everybody else. Sometimes it was tough because you had to be interviewed by 15, 20 people. Everybody interviewed everybody. Then, we relaxed this condition and for the longest period of time I was the person interviewing every single person, including an intern who wants to join Xiaomi.

Hans Tung: I see.

Manu Kumar Jain: Until the time we were about 200 people, 300 people. Then, I relaxed that rule because I said it’s humanly not possible for me to interview every single person. Initially, hiring was tough, but as our  business started getting built, we started getting a lot of reputation in India. I would say first one and a half years, two years, were extremely tough. Last years have been very easy. Today, we are hiring large amount of people, including managing directors of some of the largest internet companies in India, directors from different e-commerce companies and others. They’re willing to come, even on a lower cash salary, but of course we give them stock options, because they just believe in the whole vision of Xiaomi and what Xiaomi’s been able to achieve.

Hans Tung: Right.

Rita Yang: What are some of the principles you have in hiring?

Manu Kumar Jain: I look for two things when I look to hire a person. One, I always look for passion and intelligence over experience. A large number of leaders who are very intelligent, very passionate, and have zero relevant experience, and that does not matter. In fact, I strongly recommend people to move different roles within the company and move roles radically. For example, the person who is sitting on Mi Finance business, he was a business analyst and was leading our Mi.com business, and now he’s leading our Mi Finance business and he has never built financial products. The person who was still recently leading our brand marketing, he joined us as an executive for, which is the junior-most post, for events team, and then within two years he became the head of events and then two years after that we made him head of brand marketing. He just moved from being the junior-most person to head of brand marketing in four years. So a lot of people, they are encouraged to make very different trajectory because we believe if the person is intelligent, relevant experience does not matter.

Hans Tung: Right.

Manu Kumar Jain: That’s one. Second, personally, for people that work with me and people that I interview, the second thing that I look for is will I admire this person, and do I think he has a quality of being my boss? If I respect that person, if I think I admire that person, I believe he or she’s a good person to hire.

Rita Yang: Now, let’s go to the final part of the podcast, which is a round of quick-fire questions. Just say whatever comes to your mind.

Manu Kumar Jain: Sure.

Rita Yang: What is one thing about you that is surprising to people who don’t know you very well?

Manu Kumar Jain: That I used to run a comic strip before Xiaomi and before Jabong about relationships, about husband and wife and how they tend to fight each other on everything they think.

Rita Yang: Wow. Okay.

Hans Tung: That helps you develop a strong team. I like that.

Rita Yang: What are some routines in your life that keep you grounded?

Manu Kumar Jain: I would say my wife. She’s my biggest supporter and biggest critic. Whenever she sees me doing something wrong, she’s the first one to bring me down and say, hey, you’re doing something wrong.

Rita Yang: Do you have enough time for her?

Manu Kumar Jain: I try to very consciously. I stay three minutes from office so that I cut down on commute time and then I try and spend at least an hour in the morning and an hour in the evening with my family, which is my wife and my kid.

Rita Yang: If you could have dinner with anyone in the world, live or dead, who would it be?

Manu Kumar Jain: Elon Musk. I would die to have a dinner with him.

Rita Yang: Why?

Manu Kumar Jain: The kind of thing that he is doing is amazing. Unbelievable. He’s thinking of going to Mars. He’s thinking of changing the world. Amazing. Huge respect for him.

Rita Yang: What was one thing that you used to be skeptical of and then changed your mind later?

Manu Kumar Jain: I used to be very skeptical of just Xiaomi success in the beginning because I met so many tech CEO’s who said, Manu, I am telling you, Xiaomi can never succeed in India. Manu, this is the biggest mistake that you are making in your life by joining Xiaomi. You will regret this. Since the first time you have joined, you have not announced publicly that you have joined. It’s my turn to lead. Yeah.

Hans Tung: I’ve heard that when I made my first, second, and third investment in Xiaomi, so I really appreciate that.

Rita Yang: Oh, that was before Xiaomi go public. Right. Last question. What does success mean to you?

Manu Kumar Jain: For me, all the measurable terms, such as market share, profit, or the wealth or the money that I make, these are all things important, but more than that I’m extremely proud of the team that we have built and the respect that we have earned here in India. A lot of people, they walk up to us and they tell us how their lives have completely changed thanks to Xiaomi. That is something which can never be quantified. For example, I was traveling from Delhi to Bangalore two weeks ago and met a security lady who will do frisking and who will check if everything is right at the airport. She recognized me and then she started talking about Xiaomi and then she told me she bought a Xiaomi phone, Redmi Note 4. Then, she convinced her husband, who’s a soldier in Kashmir Region, to buy a Redmi Note 7 Pro and her entire family is now on Xiaomi phones. For me, that is 100 times more valuable than anything else.

Hans Tung: Right.

Rita Yang: Thank you.

Hans Tung: Thank you.

Manu Kumar Jain: Thank you so much. Thank you for hosting me.

Rita Yang: Fantastic. Thank you.

Hans Tung: Love it.

S2 Episode 2: Kunal and Rohit of Snapdeal: from Surviving to Thriving in India’s eCommerce Battleground

On this episode, we have Kunal Bahl and Rohit Bansal, co-founders of Snapdeal. Snapdeal is India’s leading online marketplace. The company started out as a flash deal website in 2010, soon evolved into a leader of India’s e-Commerce sectors. In early 2017, it was on the verge of being merged to its biggest rival Flipkart, then upgraded itself to Snapdeal 2.0, with a focus on the value-conscious buyers in India. Over the last couple of years, with this focus, the company has seen a significant and positive transformation. As of July 2019, the month this interview is conducted, the company has increased its annual revenue by 70% and cut its loss by 70% comparing to last year.

The two co-founders of Snapdeal are high school friends bonded over food and math. Kunal graduated from the University of Pennsylvania with two bachelor’s degrees in Business and Engineering. While studying in the United States, he also started a detergent company and worked to sell his product at Walmart stores. Rohit graduated from the Indian Institute of Technology New Delhi with a bachelor and a master’s degree in computer science, India’s top engineering school.

On this episode, we covered the behind the scene story of their decision in saying No to Flipkart, focusing on the 400 million value-conscious buyers in India, navigating substantial change in high transaction velocity business, building a culture of acute intellectual honesty, and going through the best and worst of doing business alongside of your best friends in high school.


HANS:  Hi guys.  First of all, since I’ve known you guys for almost seven years now, since 2012, I’ve seen you guys go through quite a bit of up and down.  So, how is Snapdeal doing these days?

KUNAL:  Thanks Hans and obviously you’ve been a great partner for all these seven, eight years and have seen the company go through various twists and turns along the way.  You know, after going through a bit of a challenging phase a couple of years ago, I think our company found a great opportunity in refocusing ourselves and in a way going back to our roots of building a marketplace that serves the needs of the next 400 million e-commerce buyers in India.  Where what has changed structurally in India over the last three years is with the 4G revolution that Reliance Jio brought and other telcos followed suit.  The buyers and sellers of very value-focused goods have only come online significantly in the last three years.  So, we found ourselves to be in sort of the right place right time where we had a big brand because we had invested a lot in building it over the years.  We had a lot of traffic.  We had an existing technology platform.  We had all the supply chain built out and a very, very good team.  We said if we focus our energy on categories that are more suitable for this audience where they’re very aspirational but want affordable goods, I think that focus and discipline has really helped us as a company.  And as you said, over the last couple of years we’ve seen our order volumes grow almost three times.  Last June we actually became profitable at a company level and post, which we decided to reinvest all our margins back into growth.  And over the last one year we’ve been adding nearly a couple million new buyers every month now.

RITA:  So, Hans as you said, you have known Snapdeal for a really long time.  And can you help understand how throat-cutting the e-commerce business is India now and why is India such a competitive place for e-commerce giants to play?  Like Amazon or Flipkart who was bought by Walmart?

HANS:  I think a lot of people look at India e-commerce space as what a second version of what has happened in China e-commerce space.  So, back then in the 90s and then 2000s you have eBay buying EachNet in China and fighting against Alibaba launched Taobao.  And over the 10-year period you see Taobao, Tmall, JD, Pinduoduo, all grow up in China and valuation of Alibaba grew from, which did invested $180 million in 2003 to now $0.5 trillion plus $150 billion on Ant Financial.  So, a lot of people look at what happened in China as what could happen in India.  And therefore a lot of money got poured into India on e-commerce companies.  In Amazon in particular because kind of lost China to JD and Alibaba doubled down on not missing out on India.  Yet GDP per capita in India is a lot lower than China in 2000s so it ends up having a lot of subsidy, a lot of money poured in, and everybody focused on growing GMV at negative gross margins.  So, that made the battle over e-commerce in India extremely bloody.

RITA:  How does Snapdeal fit into the picture then, if Amazon and Flipkart is pouring so much resources and money into the market?

HANS:   I’ll let Kunal and Rohit answer that question.  I think that what they have done from when they were sort of an inspiration inspired by Groupon to what is now going through a Tmall and Taobao version of India, it’s very localized, is quite interesting.

ROHIT:  What we see happening in the market in India is that the businesses that are being built by other companies are very inspired by what happened in the U.S. or in the Western markets where the audience is much more homogenous, it’s much more richer, and as it is buys a certain type of product.  As Hans just mentioned that the GDP per capita in India is much lower.  And a large number of Indian users who are coming online now, they do not have that kind of income.  And they do not want, or they don’t find the platforms that exist very relatable for themselves because what they buy is not available online.  The pricing in which they buy things is very different from what is being sold.  And the overall experience that they expect is very different.  So, Snapdeal fills the gap for these consumers by bringing online what they buy otherwise offline, which is value for money, high-quality selection, not necessarily branded, and also delivered to them in a very engaging way because unlike the rest, again, a lot of Indian users are not trying to save time.  They’re trying to save money.  And as a result they are actually even willing to spend a little more time, enjoy spending more time on shopping apps if it helps them save a little more money.  And Snapdeal is a platform does things in which not only do we bring that selection, which is relevant for this audience, also in a manner which is very engaging, very seamless.  Even if you don’t know what you’re looking to buy you can just come to the app, start browsing, very seamlessly start showing you certain products.  While you’re at it you can play some games to win some coupons, which will help you save money and consumers are completely okay with that. 

RITA:  But you have made a conscious decision to not be merged with Flipkart.  Instead you actually launched Snapdeal 2.0 focusing on that particular group.  Can you walk us through how you make that decision? 

KUNAL:  Yeah, I think it was an interesting period for our company where we had many discordant– typically when there’s M&A there will always be voices that say it’s a good idea and then voices that say it’s a bad idea.  But you would think that there would be a resolution in the end.  I think in the end where we as entrepreneurs and as a team felt that given a resolution was not being reached, it was important for us to step up and take a decision about what should be the path forward for the company.  And we believe that given Indian e-commerce is still very early; in a country with over a billion people no more than 100 million people have bought a product online.  So, why fold our cards right now?  We require a little bit of refocusing the business but we saw back in 2017 what everyone probably is seeing now in 2019, that there was going to be a flood of new users, hundreds of millions of e-commerce buyers are coming online, and there is no platform that serves the needs that Rohit mentioned right now for them.  And it seemed like a dream then.  It seemed like something on paper and not many people believed it could be done given the irrational competition that we see in India.  But despite that I think we just worked with a lot of focus and discipline serving the needs of these particular customers with this type of selection, with the type of service and experience that they wanted.  And it seems to be showing quite promising results.

ROHIT:  I think the other thing that worked really well for us, which has made all this happen is to set up our entire organization with a clear focus of serving the needs of these consumers, which also means that we set up our supply chain fulfillment and logistics capabilities in a manner that we can sell products which are $5, $7, $10 and fulfill them while still making money at the time of selling these products.  Whereas all the other companies that have been set up in India, they’ve set up their logistics in a manner that they just can’t profitably sell a $7 item and as a result, as a consumer, even if I want to buy a $7 item, the only choice for a company to sell it is to make losses while doing that.  Whereas we as an organization, once we are very clear of who are target audiences and the kind of selection we want to sell, focused on making sure that we are profitably able to sell that selection and bring their selection on board. 

HANS:  As you tried different models from Groupon and to sort of a shopping mall, Tmall model, and then now more to a C2C marketplace, Taobao model, how do you decide which model to use over time?  And how do you think this compares to the Amazon, Flipkart B2C model?  And how do you think consumers decide where to go and shop what kind of goods?

KUNAL:  Yeah, it’s a good question.  I think I would give you credit for us moving from the Groupon model to the marketplace model because I think if our meeting in Beijing in December of 2011, we might still be running a Groupon business or not running a business at all.  So, I think credit goes to you for that answer as you know.  But I think over a period of time, at least one thing which is there, which is a good aspect of our company’s culture is we’re quite intellectually honest where if we see that something’s not working, we are open to changing.  But not like every day.  It’s not like we make changes on whims and fancies.  But after spending a decent amount of time and looking at a lot of data, if you think some aspect of our business, big or small, needs to change we change it.  You point it out to two big changes of Groupon to marketplace and then within marketplace from being focused on brands to the long tail.  But even within these changes there are a lot of smaller changes that probably are never known out a company.  But the big team is just constantly looking at what our customers are saying, what our seller partners are saying, what our team is saying, how the competitive landscape is evolving and whether we need to change something or not.  The key is we keep an open mind to change and we don’t become too stubborn about that it is our way or the highway.  I think that seems to be the theme in our culture from day one.

HANS:  You’re very kind.  I think that a lot of ECs like to think that their ideas matter a lot, but as we all know execution is much, much, much more important.  How did you guys figure out how to evolve the company and what are some of the lessons or takeaways that you can share with other founders and wannabe founders?  How to navigate a company through those kinds of dramatic changes?

KUNAL:  Yeah, I think navigating our type of high-transaction velocity, B2C, or consumer businesses, consumer Internet business is very challenging.  It’s like this bullet train that’s just going in a particular direction and how do you take a quick hard right or hard left?  It is very, very challenging and given we’ve done it a few times, I guess the main learning I would say there is around having very, very high amount of clarity on the goal and then making sure you communicate that very, very abundantly and repeatedly to the team.  So, like in our company if you are to wake up any of our team members at 3AM at night from their sleep and ask them, “What are the goals of Snapdeal?”  They wouldn’t even need to think for two seconds and they will tell you what are the top three goals of Snapdeal from quantitative goals.  And those cascade down from Rohit and me down to everyone in the company.  It’s the same sheet of goals for the most part.  So, I think clarity of goals, doing very few things, being very focused and disciplined on a few high -impact outcomes, and then constant communication with the team in different shapes and formats.  Communicating what is working, communicating what is not working in an acutely, intellectually honest manner.  Those are very critical.  But then all said and done there is a big element of luck also where fortunately for us that whenever we’ve had to take a hard left or a hard right the overall ecosystem in the market is also headed in that direction.  We just ended up taking a hard right or hard left in a direction that the market was anyways going to go.  I don’t want us to take all the credit for it.  I think luck also does a play a bit of a role.

RITA:  When you were rebooting Snapdeal by selling its logistic and payment arm of the company, what are some tradeoffs you guys have to make?

KUNAL:  You know the learning we have is that whenever you are in trouble, everyone will try and squeeze the last drop out of blood out of you, especially when you’re selling assets and people think that the overall company is in a bit of a distress situation.  I think the tradeoff we made in selling those assets was we couldn’t optimize for value.  But at that point in time it was more important to sell them and harvest them for cash then to optimize how much cash we could get into the company.  Those businesses were worth more than what we had to sell them for.  But in hindsight it was the right thing to do.  The certainty and speed of doing those transactions were more important than optimizing for the last dollar of value.  That said, in hindsight those are also good decisions to sell those businesses because we realize that our business, we as a company are far more successful at focusing on one deep problem and solving that, rather than trying to solve multiple deep problems of payments, logistics, which are in the end very different businesses.  Everything looks similar or everything is transactions and commerce, but each business has its own deep nuances and they can be very distracting away from your core business. And fortunately in India over the last few years, at least on the logistics side, there’s a very vibrant ecosystem of third parties, third-party logistics companies, which are run by entrepreneurs like us who are tech savvy and have built good technology, good processes.  So, we are now one of the largest customers, if not the largest customer, of most of the third-party logistics companies that serve e-commerce businesses because 100% of our volume goes to third parties.  We don’t do any captive logistics of our own.  Similarly on payments, there’s been an explosion of number of payment companies that have come into India.  All the global multinationals from Google and Facebook to Walmart, Amazon.  Everyone’s running payment companies in India.  So, it seems to be a business which nobody wants to make money in.  And everyone is willing to give away a lot of subsidies and coupons and cashbacks to consumers.  So, we are more than happy integrating all of them as long as they’re willing to give promotional dollars to our consumers and their expense.

ROHIT:  The other tradeoff which we had to make inside the organization, I would say, which again in hindsight was the right tradeoff to make was forcing ourselves to discipline and pick our priorities right.  I think the way the Indian startup industry grew up is that everyone started looking at China and the U.S. and started seeing that all the successful technology companies in these countries are in a lot of businesses.  What they didn’t see is that those companies became successful at one business first and then after starting to generate cash or money or profits in one business, they started reinvesting that to build other businesses.  In India I think there was a sense that if you’re at technology company you should start doing many, many things together and that’s how everyone in the organization also starts thinking, forcing ourselves to pick priorities and saying, “Hey we’re going to do only one thing.”  Or within that as well, just picking priorities, which are not more than two to three at any point of time, no matter how lucrative the other opportunities sound, was an important tradeoff for us to make and which we still make on an ongoing basis.  Which in hindsight is absolutely the right thing to do because as Kunal has well mentioned rightly, what seems like a great opportunity and should be doable, the moment you get into the details and stared doing that, to do it better than anybody else is incredibly harder than just doing it for the sake of doing.  And I think we learned that through experience as well that it’s very critical to force ourselves to pick two or three bets so that we can spend the time and energy and the cycles required to make those things work.

HANS:  You guys made the most dramatic improvements in the business when you guys were running out of cash.  Most funders tend to believe that in order to make dramatic changes they need capital to help to do that.  How are you able to achieve what you did specifically?  What are sort of the two or three things that happened that you did to make this transformation possible?

KUNAL:  Yeah, I think a few things we did.  One, we looked very dispassionately at our business and given we are essentially a marketplace that has thousands of categories and 200 million plus listings, we very dispassionately looked at the unit economics of each category, each product, each subcategory, and unit economics post-fulfillment, post-marketing like fully loaded costs of selling, servicing, and order.  And we tried to make an assessment that if something is negative unit economics, is it because we are inefficient or structurally those products or categories can’t be sold with positive unit economics at this point in the Indian market?  Could be for a variety of reasons.  So, if we felt something had the opportunity to be made more efficient, to more efficiency can be made positive unit economics, we did that.  And wherever we think that with all our energy, all our efforts, we can still not turn a category or a line of products into positive unit economics, we just cut them out.  And it seemed like a very unpopular decision back then that for instance, smartphones is the largest category by GMV in the Indian market.  Where for some platforms it may be 60%-70% of their GMV potentially in some months.  And we said, “Look there is no way to make money in this category post all fully loaded expenses of marketing, fulfillment, customer service, etc. Let’s get out of it.”  And we will come back into that category when the market cools down or there are some new brands that want to work with us on commercial terms that work for us.  So, I think it seemed unpopular then that, oh, like a lot of people said that then people will stop coming to you because you don’t have this head category.  Actually none of that happened.  What happened was consumers started building a much more sharper profile of what Snapdeal is and what Snapdeal is not.  Like consumers don’t look at Snapdeal as a place which will launch the latest, jazziest smartphone and give you cash backs if you buy it on the flash sale.  There’s nothing wrong w that.  It’s just that they don’t see Snapdeal as that.  They see Snapdeal as a place, it’s like a dollar store.  You come, you don’t know what you want to buy, we’ll help you discover some interesting products, and you’ll most likely check out with something in your hands.  And it takes a little bit of time for that positioning to sink into consumers but if you are sharply focused on what you will do and what you will not do, it does eventually solidify in the consumer’s mind.  So what that did, Hans to your question, is like in high-transaction velocity businesses, the most amount of money that companies lose is on unit economics because it compounds with your high velocity of orders.  So, the number one thing we focused on was just making sure at a company level, at a category level, at a product level, we are generating positive economics post all expenses.  The second thing we did was, as we discussed earlier, we sold off assets where we didn’t think we could ever make money and decided to work with third parties and build deep partnerships with third parties where maybe they’re able to manage their businesses, their logistics or payment business more efficiently than we could, or they don’t need to because they have a lot of capital to run those businesses.  Third thing we did was just made sure that we don’t bloat the team, that we work in a very, very lean structure.  Our whole company, for the scale of business we operate is very lean.  There’s 750 people in the whole company fully loaded, which is by Internet company standards very, very, very lean.  The whole company is on one and a half floors in one building and it’s quite incredible.  And we have not seen an increase in headcount over the last couple of years.  It’s stayed in the same zip code despite the fact that the orders have grown.  So, that operating leverage kicks in where your revenues keep going up, but your fixed operating costs don’t go up.  And as a result your bond goes down materially.  So, I think these are two, three things specifically that we would have done.  There are some others also.

HANS:  What are the others?

KUNAL:  I think there’s a lot of optimization that we would have done on things like what we pay for collecting payments as an example.  Our philosophy is that this type of business, you build by conquering one basis point at a time.  There are generally no broad brush strokes that will suddenly improve your unit economics, suddenly grow your business, suddenly make you profitable.  We are very, very focused on small basis point improvements also and I think those, over a period of time, compound into large numbers.

ROHIT:  I think also, some of the other things that we did was once we decided that this is the kind of business we want to be in, which is positive unit economics serving a certain type of consumers, serving a certain type of selection, then our business was not built this way for t he longest period of time.  Slowly and steadily we started moving everything in our entire business in that direction, which means that while we started focusing on selling value-for-money products, our apps still looked like it was built for selling branded products.  And then one piece at a time we started changing the navigation of our app whereas earlier there was a lot more focus on showing categories, brands, banners, merchandise, etc.  We wanted to focus incrementally towards showing a more continuous feed of products because this is what our consumers were telling us.  A lot more traffic and a lot more purchases were happening through Browse than through Search, which means that from a consumer behavior standpoint we were seeing that these are consumers who don’t necessarily have an exact idea of what they want to buy but they know they want to buy something and they want to browse around.  Which means that making the navigation easier for them to start seeing products, almost like a social platform, became very important.  The entire way we do fulfillment and logistics, we went through a complete change because earlier we used to obsess a lot more about speed of getting a product to a consumer, whether we can get it in one day or two days.  As you started conducting experiments, we realize that consumers are okay to wait for four days as long as the product is 50 rupees cheaper.  And in fact they would prefer that because they think, “I don’t need the product tomorrow, but I can definitely use the 50 rupees I saved by waiting for a day or two more.”   So, we changed our fulfillment mix in the way we get products to end consumers to make sure all of that saving we’re able to pass back to consumers and then help them buy more from our platform.  So, I think there’s, as Kunal mentioned, it’s not one thing, I think the major thing that we decided as a company is that, which we still very strongly believe, is that for commerce businesses the product market for definition is incomplete without economic fit.  We feel if the economics are not right then any product can be made to fit into any market.  The true test of the product market fit for a commerce business is when you’re a product market as well as economic fit, which means that while you’re selling products to consumers you are able to sell them in a way that you make money.  Unless you can do that, at least at a unit economics level, we just felt that there’s no point in being in that category or in that line of business.

HANS:  Great leaders can make decisive and efficient adjustments on a battlefield based on what’s happening.  So, based on the things that you guys have done in the last few years, what does that tell our listeners about the state of e-commerce market in India?  You guys started off doing the more branded goods, fast delivery, one-day, two-day guarantee, and a lot of Western companies going to India, they focus on the top of the pyramid that they think are the most valuable, maybe 50 million people or so.  Yet you, over time, choose to go after the more mass market and with unbranded goods.  That’s more like dollar shop, almost like Wish and Taobao model.  How big is that segment market in India and do you consciously decide to change based on what you see on the marketplace?

KUNAL:  Sure.  Actually you’re right Hans.  I think when folks who have more exposure to the developed world, which is far more homogenous or wealthier, they tend to believe that most of what is sold in every country is reflective of what they see in the developed world, which is mostly branded goods.  That branded goods, people would feel intuitively contribute to the largest part of the non-grocery retail buying in any country.  In India it’s exactly the opposite where out of about $220 billion of non-grocery food, FMCG-type categories, there’s about $220 billion of sales that happen every year in those categories in India, overall not just e-commerce, in offline, online.  Of that, no more than $5 billion is branded.  And about $160-, $170 billion is actually unbranded.  And a greater share of branded is already online, like for smartphones, most estimates would put it at almost 50% of all smartphones are sold online because it’s a highly price-elastic purchase.  So, if you get a discount, small discount, why would you not move your purchase online?  It’s the same product.  But for unbranded, this $160 billion market is barely online, maybe not even 1% is online.  And the reason for that is the buyers and sellers of that merchandise have only started coming online in the last couple of years after the JIA-led 4G revolution in India.  So, the market size we see as being theoretically infinite for now and this pie is getting bigger by the day, not smaller because the overall retail pie is growing because the overall GDP is growing in India right now.  So, we see tremendous headroom from here on and given, as Rohit mentioned, our platform, our brand, our positioning is set up to serve this type of selection and buyers of this type of selection, we feel pretty optimistic about the runway in terms of growth ahead of the business.

HANS:  People who look at India, it’s 1.3 billion people and GDP per capita is just under $2,000 per capita.  Yet you focus on the 400 million user base.  What is roughly the GDP per capita of your target audience?

KUNAL:  Yeah, I think 40% of our users are– 80% of our users would be below $15,000 and 40% of the users would be probably below $5,000-$6,0009 for a family, for a household, not at an individual level.  And so, that’s broadly the distribution we see.  But the average is generally not a great determinant for how the distribution actually works.  But anecdotally we see enough users who on our platform were making maybe as little as $200-$300 a month.  So, in the $3,000-$4,000 a year type of income bracket.  So, we feel that as the income levels go through the $3,000-$4,000 mark and as, Hans you’ve also said before, that the inflection point in most geographies happens at $4,000, we are quite optimistic that the next $1,000 that gets added to the $2,000 of GDP per capita is going to be spent on a lot more discretionary items rather than utility items.  I think that’s where we fit in nicely for this audience.

ROHIT:  And also one of the other things as you mentioned Hans, we believe that while working in a market which has low GDP per capita, it becomes extremely critical to build your model in a very low-cost manner because we can’t influence the income that people have today; that will take its own time for it to grow.  But what we can influence is what products are we selling to them and how are we able to get those products to the hands of end consumers.  And those will get determined by their income levels today and as a result, making the call that this is the income level of people, this is the price at which they like to buy products, and those are fixed data points for us.  It’s our job as a company to work backwards from there and figure out how do we profitably sell these products to these end consumers and get them into their hands, which is where we choose to spend most of our time and energy.

HANS:  I think sitting in Upper East Side in New York or Park Heights in San Francisco or in the bay area, when you design products it’s easy to design for people like yourself or your friends.  But time and time again, not to pick on those cities, those cities are all great, but time and time again it’s designing for the mass market on the global basis and in designing for even users that use “low-end” android phones, that has only 1GB in ram, that’s actually the much bigger market and that’s the market that’s readily available and underserved that allows you to build the multi-billion dollar outcomes.

RITA:  So, starting up a company is never easy, not to mention transforming one constantly.  What was the hardest thing along your journey?  Is it the pushing investors or is it the skeptical media or is it your staff, your team?  What was the hardest one?

KUNAL:  When you’re building a company, especially sort of a prominent consumer brand which touches lives of millions of people every day, every month about 75 million unique visitors on Snapdeal.  So, it’s a very large number.  So, almost everything you do, if you sneeze, people are watching.  And it does become challenging at times because you don’t want the constant external tracking to influence your day-to-day decisions and not allow you to do what you need to do, even if it is tough or unpopular.  I think for us, we’ve been running a business for long enough that we’ve known how to cope, we’ve learned how to cope with the external pressures and all the scrutiny that comes with running a prominent consumer brand in India, especially in the tech space.  That we have gotten better at I would say. I don’t think we are great, but we are a little more inert to it now.  I think the part, which is always hard when you’re going through a transformation is how do you instill the sense of belief in the team that you have but you also have at the same time a lot of insecurities of your own because we don’t know all the answers, it’s like we can’t look in a crystal ball.  We can have a hypothesis, but we know there’s a lot of– the Pacific Ocean can fit between the hypothesis and the actual result, there’s so much in the middle.  But to the team you have to instill the belief that we can actually make it happen if we are very focused.  And I think that can be a very grueling journey.  It can be a very demanding journey emotionally and physically because to each person who has a doubt on your team, you can’t make them feel that they are the hundredth person who has brought that doubt to you.  Like you can’t come across as being tired or fatigued or insecure in front of them because to them they are looking into your eyes and seeing, “Is my leader confident that we can pull it off or not.”  That’s all they want to see.  So, to them you have to come across as being confident, secure.  Not overconfident but also transparent that here are all the things we think we can do but here are the things we don’t know how we can do, but we’ll solve it together.  And I think that probably is the most challenging and also the most demanding part of going through a transformation.

RITA:  Does it help that both of you are high school friends?

ROHIT:  I was actually going to say that as you were asking the question, I was thinking about what my answer would be.  And one of the things of being co-founders for 12 years and spending 14 hours a day sitting like three feet from each other does to you is we can complete each other’s sentences.  I don’t think I would have given a different answer even by a word as compared to what Kunal said about what is the hardest thing to do.

KUNAL:  Even the easiest periods are hard without a co-founder.  So, you can imagine the hard periods are impossible to cope with if you don’t have a co-founder you trust, you believe in, you depend on.  Like I remember in 2017 there were days when I would be on the low and Rohit would step in and say, “Don’t worry.  We’ll make it through,” and maybe vice versa.  And I think sort of being there for each other is so critical especially in the tough phases, especially when everyone around the world, everyone outside of the company is out for your blood, you feel like that, and just sticking by each other and giving each other the support implicitly also, not just explicitly is super critical.

ROHIT:  I think it applies both and we’ve seen that as well between the two of us.  It’s incredibly helpful, both in the good times as well as the bad times, to have the support of co-founder along because, as Kunal mentioned in bad times as well, given the position you are in, you can never be seen as insecure.  And there are so few people in the world you can share your insecurity with because at the end of the day you have a plan and you have a certain hypothesis.  You have a strong belief it will work.  But only time will tell will it really work.  And there is always, always, always that doubt in your mind as well whether this will really work, what happens if it doesn’t, how should you make it work, etc.  And I think having a person to, without being judged, exchange those talks with and have an open conversation with is so incredibly helpful.  Even in good times because as we go through good times, it starts becoming easier to believe that everything we do will work out.  And having one person to just bounce those thoughts off where you know the person has no other agenda but the exact same agenda as mine is so enriching to a conversation and a decision-making process.  I think that just, it’s almost unimaginable how one would do without it.

RITA:  Many people say that one shouldn’t go into business with their friends, otherwise they wouldn’t be friends anymore.  And I bet you guys have differences, too.  But how do you resolve the differences between the two of you?

KUNAL:  Yeah.  I think if we didn’t have differences the company would need only one of us.  So, I don’t think the company should have two of us then.  I think both of us bring different perspectives.  Doesn’t matter what’s right, who’s right, who’s wrong.  Obviously, we have, I wouldn’t say differences but differences of opinion on particular topics.  But not as obviously holistically or comprehensively on the direction of the company.  But on particular topics we may have differences of opinion.  What we generally do is we’ll get in a room, in a meeting room, and discuss in great detail what our respective perspectives are.  But at the end of the meeting we would always have decided whether it is my perspective, Rohit’s perspective, or some hybrid of the two, then and when we leave the meeting room that is our collective perspective and it doesn’t matter whether we enter the meeting room whether it was mine or Rohit’s.  It doesn’t matter.  Then anyone else in the company, if they walk up to me or Rohit about that particular topic, they’ll hear exactly the same thing.  Sometimes you see people try. 

HANS:  Right, for sure people do try. 

KUNAL:  But I think over a period of time people work with us long enough and most of our team has, like the average tenure of a team member in Snapdeal is 4.5 years.  At some point people may have tried and they realize it doesn’t matter.  You can talk to whichever of them, they’re going to say the same thing.  They’re always fully aligned. 

ROHIT:  I think one of the other things that is so critical, and I think you learn the importance of it more and more over a period of time is just, having completely unshakeable trust in each other’s intent.  Our judgments may have errors.  We may have a certain point of view, Kunal may have a certain different point of view, and even our collective judgment tomorrow may turn out to be the wrong judgment, which happens all the time.  But just having incredible ability to trust each other’s intent and making sure that that is never questioned while you’re discussing sometimes very intense topics of very high importance as well is so critical.  And I think one of the other things that we’ve seen happen is because of the way we make decisions with this very high degree of trust and very consistent decisions after they’re taken, we’ve seen that there has started, over a period of time that has flown to our larger team as well.  I mean actually they see this as the right model to work, not only for two co-founders but also as a management team.  Where we’ve seen that within our management and leadership team as well, there is an incredible degree of trust in each other’s intent and while people respectively have different areas of responsibility, they’re core focus is on something else.  All of us by and large trust each other with doing their part of the job really well and doing something, which is great for the business.

HANS:  This amazing journey would not have happened if Kunal had stayed in the U.S. and worked for Microsoft and get the green card to be able to stay.  President Trump even used you as an example.  Yet you see so many incredible Indian executives do so well in the Bay Area in tech, and not only in tech and also in academia, in many other industries in the U.S. rising to the very top.  How do you see sort of the flow of talent from elsewhere back to India these days and how is that impacting development of internet sector in India?

KUNAL:  I think we obviously continue to see the inflow of talent.  The interesting thing is a lot of the entrepreneurs are turning, a lot of people are returning post either business school or having worked for a large company or a startup in the U.S. but most of them are coming back not to work at a company but to start a company in India.  And I think that trend is quite visible in recent times.  Rohit and I get pinged all the time by folks who are returning or planning to return to the U.S. through common connections, not with the intent of joining us or interviewing with us or getting a perspective on where to look for a job, which company to join, but a very, very focused approach to starting a company and, “Here is my idea,” or “Here are three ideas I’m assessing, what do you think?”  Which I think is a great trend because obviously folks who’ve spent time in the U.S. working with, especially with tech companies in the U.S. have very unique perspectives.  They’ve seen how methodically, sensibly companies are built at least in the Valley with deep focus on product.  And we are seeing that have a very positive impact on our overall ecosystem.  And I think that trend will continue.  As the Indian internet ecosystem becomes larger, more mature, more success stories come out, you’re going to see more and more people give up the opportunity cost of a great lifestyle with high income in the U.S. to come back to India, work for zero salary and start a company with the dream of building something big. 

HANS:  Rohit, do you see the same thing?

ROHIT:  Yep.  I think one of the other things that’s going to happen is that even till maybe a couple of years back the size of the Internet industry in India was relatively smaller because the number of Internet users online was smaller.  I think in the last two years we’ve seen a true explosion of Internet users in India.  And as a result, one of the other things we are seeing which is happening now is that companies that start, because they have access to a very large number of users have started scaling much faster than they used to scale as recently as five years back.  And as a result I think we’ve seen a lot more people getting excited about coming back to India.  I agree with Kunal that many of them choose– I think we still see a lot more people coming back to India right after they graduate versus working for a few years in the U.S. and then coming back.  I think as the industry matures and becomes bigger in size and more success stories happen, I think it’s going to become more and more lucrative for people who have even worked for a few years in the West to come back to India.

HANS:  We have a hypothesis that whether Chinese companies have grown up a lot over the last decade.  Some of them, like Xiaomior ByteDance are expanding beyond Chinese borders.  However if you look at something like Oyo out of India is expanding rapidly globally even when Indian Internet market is a lot smaller than China’s.  Given the language ability and more international exposure it seems like more Indian startups can expand beyond India sooner than Chinese companies do.  How do you guys think about that and feel about that hypothesis?

KUNAL:  Yeah, I think so.  We’ve started seeing two or three examples, you mentioned Oyo, I think Ola has done some international expansion.  UrbanClap has done some international expansion.  It is still early days and I think these companies and some others are obviously pioneering the international expansion.  What would really turbo charge the confidence in Indian entrepreneurs to globalize their businesses is as we see more incontrovertible or undeniable success stories of Indian companies, Indian startups that have gone global.  Like for instance I would say Amazon or eBay were the pioneers amongst the U.S. tech companies to go global and did it extremely successfully.  That then charted the course for so many companies like Uber and others to also do rapid global expansion.  I think we are in the early stages of that in India and depending on how well and I hope and wish all these companies, Indian companies that are trying to go global do extremely well.  I think as we see more successes, we will see more companies out of India do that.  We obviously are talking more about consumer companies, a trend that is already significantly underway is on the B2B SAS companies where the product is being built in India but being sold to a global market.  That ship sailed a while back and I think we are going to see a lot of fairly large B2B SAS companies get created, product companies get created out of India selling to a global audience.  In many cases we may not even know that they are an Indian company, just by virtue of the fact that most of their revenues come from global customers. 

HANS:  We’re much more globalist at heart than nationalist, so we love seeing companies that can spring up all over the world and build globalized businesses.  I think we would be honored to have the two of you as GGV scouts to help us to invest in those companies and groom the founders into leaders and build global business. 

KUNAL:  Absolutely.  Anything for you Hans. 

HANS:  Thanks.

RITA:  So, we’re going to go to the final round of quickfire questions.  Both of you just say the first thing came to your mind.  Who are your source of inspiration these days?

KUNAL:  So, it would be more traditional, traditional business entrepreneurs like Uday Kotak who runs Kotak Bank in India or Sunil Mittal who started and runs Airtel.  I think they would be my sources of inspiration today.

ROHIT:  For me I think it would be still a lot, thematically the Chinese e-commerce companies, which think very differently, and which build a lot more engaging experience for users as compared to what we see the Western e-commerce companies doing.

RITA:  What is a habit that you have that changed your life?

KUNAL:  I think maybe not the habit, but I would say having kids changed my life, for the better.  Definitely for the better.  I think especially when you go through a tough period in your professional life, being able to come home to a family and kids who are just so happy to see you and don’t really care about what’s going on in your work life, I think it’s so refreshing and it completely reenergizes you. 

ROHIT:  For me it’s actually I get up before 5:00AM and it’s that couple of hours in the morning when I’m up before anyone else and I spend time either reading or thinking.  I think that just centers me for the rest of the day and the week and that habit has been pretty good for me.

RITA:  What is the most frequent advice you have given to young entrepreneurs?

KUNAL:  Focus.

ROHIT:  I knew the answer was going to be the same before he answered it.  I think every single person we meet just tell that there are so many things that you can do, don’t get carried away by them.  Just pick one, do it really well.  If it doesn’t work out, leave it and pick another one.  But at any point of time just pick one.

RITA:  What do you do when you are stressed?

KUNAL:  I mean I don’t think there is anything specific one would do but yeah, maybe spend time with the kids or watch something on Netflix.  Usual stuff.  I mean there’s nothing–

RITA:  Spacing out.

KUNAL:  -nothing particularly different that I would do. 

ROHIT:  In my case well I either read books to my kids or I read books for myself. 

HANS:  I ask one more question.  What does 9 and 6 mean to you?

KUNAL:  Nonstop work. 

HANS:  What’s your schedule like?

KUNAL:  Look, most entrepreneurs are 24/7.  So, in respect of whether we are in the office or not or in traveling for work or not, we’re always on.  And we’re always on not because we need to but because we like to.  We like to stay connected to what’s going on in our business.  We like to stay connected what’s going on in the ecosystem.  It doesn’t fatigue us, it doesn’t tire us out, because we are mature enough now to know when to take downtime when we need to. But outside of that we’re sort of always on but mostly because we enjoy it.

ROHIT:  I think the definition of what are the working hours has also evolved.  All of us use media as well.  I think now is the time as Kunal mentioned, we are always on but at the same time it’s not like we have no downtime at all.  I think the downtime has also become similar to the uses of mobile Internet downtime snacks, rather than like two weeks of downtime when you’re completely disconnected.  I just think we’ve lost the ability to do that at all.  And we don’t feel stressed out because of that as well, because we just enjoy what we do.  We are not doing what we are doing because we have to, we are doing what we’re doing for the amount of time we are doing because we like to. 

HANS:  So, as you guys build a culture at work, how do you encourage employees or staff to feel the same way and not be “forced” to work 9:00-6:00?

KUNAL:  Yeah, I think our culture is absolutely not one of face time.  We have no prescribed working hours.  People get in, in and around the same time, they start leaving whenever they think their work is done.  We don’t prescribe any timings.  Our office is open five days a week, but I think our entire team is also always on, and again by choice, I would like to believe.

ROHIT:  I think also we’ve seen that companies and cultures can do lip service to flexible timings or they can truly embrace it. We like to believe that we truly embrace it.  And we’ve seen in our office as well, people just perform very differently at different times of day.  There are certain people in our company who are exceptional performers who like to come in quite late and they stay up till late.  There are other people who are equally well-performing who like to get started as early as 7:00AM.  So, I think just being comfortable with the fact that everyone is different in how they perform and being accommodating as a culture and trying to enable that culture within the organization is quite important.

KUNAL:  Rohit and I, also, by that example.  Rohit’s an early sleeper, early rise.  I’m a late sleeper, late riser.  And so, our team jokes that as a result they get emails from both of us 24 hours a day. 

ROHIT:  So, after Kunal goes to sleep my emails start coming in. 

KUNAL:  We make shifts so that we have the entire 24 hours covered.  Yeah, but jokes apart, I think given we ourselves, we are both similar in many ways but so different in so many ways and yet are sort of high-octane, high-performance professionals.  It’s no different.  We recognize and appreciate and empathize that similar differences would be exhibited across our team also and we leave the room for them to do that. 

HANS:  Right.  Well what you guys have is a very special and more rare than what has happened with Amazon and Microsoft and Facebook, Apple, is more in the norm.  What you have at Google is much harder to have co-founders who can stick together.  So, thank you for your time today.  It’s been a pleasure and honor to have known you guys for seven to eight years. 

KUNAL:  Thank you Hans.  Thank you so much for having us.  This was really fun.

ROHIT:  Yep.  Absolutely.   Thanks a lot for having us. 

HANS:  Thank you.

RITA:  Thank you. 

S2 Episode1: Vaibhav Gupta of Udaan: on Building India’s fastest Unicorn in B2B

For the first episode of the Evolving for the Next Billion podcast, we have Vaibhav Gupta, co-founder of Udaan, India’s top B2B eCommerce. The company connects manufacturers, wholesalers with retailers online, often referred to as India’s fastest unicorn, having achieved over $1 billion valuations in a short period of 26months. Udaanis a GGV portfolio.

Prior to starting Udaan, VG was the senior vice president in Business Finance and Analytics at Flipkart, one of the most successful e-commerce platforms out of India, sold to Walmart in a $16 billion deal last year. His other two co-founders for Udaan were the former president of operations and CTO at Flipkart. VG holds a bachelor’s degree in Computer Science and Engineer from the Indian Institute of Technology and an MBA from the University of Virginia. Welcome to the show, VG.

On the show, VG shared how his time at Flipkart, the eCommerce giant of India sold to Walmart in a 16-billion-dollar deal, helped him launching Udaan, why distribution is a much bigger business in India than retail, India’s second generation of founders, and the most frequent item he buys online.


HANS:  On the show today we have Vaibhav Gupta, or VG for short.  Co-founder of Udaan, which is India’s top B2B e-commerce company that connects manufacturers, wholesalers, with retailers and do in online.  The company is often referred to as India’s fastest unicorn having achieved over $1 billion valuation in a short period of only 26 months. Udaan is a GGV portfolio.

RITA:  Prior to starting Udaan, VG was the Senior Vice President in Business Finance and Analytics at Flipkart, one of the most successful e-commerce platforms out of India sold to Walmart in a $16 billion deal last year.  His other two co-founders for Udaan were the Former President of Operation and CTO at Flipkart. VG holds a bachelor’s degree in computer science and engineer from the Indian Institute of Technology and an MBA from the University of Virginia.  Welcome to the show VG.

VG:  Thanks guys.

HANS:  First of all, you have a successful run at Flipkart, so do your co-founders.  Can you tell us what were the lessons you learned from Flipkart and what gave you guys the idea to do Udaan?

VG:  Sure.  I think one of the big things we learned at Flipkart was how India was changing very, very fast.  Across the country you see mobile and Internet penetration in consumers and in businesses growing very fast.  People have started using mobile to not just buy and sell things but just to run their lives and run their businesses.  The second thing we saw that a lot of the India market, and we’ll probably talk more about it as we go, India market is very unique like China is very different than U.S., India is actually inherently very different than China and U.S.  Although the digitization is going very, very fast but the purchasing power of the consumers in the country is still actually very, very low.  Country is heavily unbranded.  A lot of old ways of trade and buying and selling still persist in the country.  We considered one of the big learnings we have had from Flipkart is that India has power, has an opportunity to build largescale platforms but they have to be thought natively.  Like people have to think about India as India’s problems and figure out solutions and products, actually, more than solutions, products which actually are targeted at Indian society, Indian economy, Indian ways of doing things, and then you can actually build a largescale sustainable platform. 

HANS:  Right.  And remember GGV is an earlier investor in Alibaba.  There were many other e-commerce companies that started before Alibaba in China, many of them try to copy either eBay or try to copy Amazon and neither model worked.  When Alibaba did Taobao it was uniquely solving problems the Chinese way.  So, can you explain in more detail why you choose to do Udaan?  What it is, what kind of problems Udaan’s trying to solve that’s uniquely Indian?

VG:  Sure.  I think when three of us started Udaan, one of the big things we were focusing on, finding big markets in India where mobile and Internet can create a huge disruption or a huge change, change the way of doing things.  If you look at how Indian economy is structured it’s still a very, very strong domestic trade economy.  Large part of economy in terms of value, as well as people involved in economy, like buyers and sellers or producers and manufacturers are small businesses.  And it’s a domestic trade economy.  You have 100 million plus manufacturers, farmers, producing things in the economy.  You have 25-30 million retailer endpoints consuming goods and then you have a million plus traders, channel players who are actually solving for the trade.  What we saw was that as we saw that mobile adoption was making all of them available online and for us, we saw that as an opportunity to actually think about a marketplace which can actually create value from bringing, solving for the fragmentation on supply and demand side.  It can create value from pricing.  It can create value from selection discovery, price discovery, quality discovery, and I think that’s one of the reasons we were attracted for the market because it was large, and the timing was right. 

HANS:  So, it sounds like there were many manufacturers and sellers on one end.  On the other side there are many, many small shops, the kirana stores, in the middle there are multiple layers of distribution and the wholesaler right in the middle make the most amount of money. 

VG:  Yes.  If you would look across the country, you’d be surprised that one of the most profitable businesses is distribution and wholesale.  Most of these guys will typically have 40%-50% return on their capital.

HANS:  Wow.  That is very high.

VG:  If you look at the most successfully-run U.S. distributors like, let’s say, Sysco Food, they would have a return on capital of like 40%-50%.  These guys are actually very, very subscale but still are able to generate that much money.  And the biggest reason is because they’re sitting in the middle and you have fragmentation on both end and you also have the problem of India.  One of the big problems within the trade is that the credit, which is renewed to run the trade, runs on informal credit histories.  Most small merchants don’t have formal credit histories and thus these distributors, wholesalers come in the middle and actually start providing, start solving for the credit problem, which manufacturers, who are again small, are willing to pay a lot of margin for because manufacturers cannot take the payment risk.  And thus it increases the margin for the channel and returns for them.  And thus it is one of the very profitable industry in the country unlike retail in India, which actually is a relatively low-margin industry.  Distribution tends to be a highly capital-efficient, highly profitable industry.

HANS:  So, what you’re saying is that on the both ends the massive amount of sellers and the massive amount of small stores can only do trades with a few partners because those are people they trust based on past history of credit?  That limits their amount of growth they can do because they don’t have enough credit with more people to do business with.

VG:  Exactly.  You’re right Hans.  And it’s just, trust is also part of the Indian society like as much as it is, I think, in China.  People don’t trust a new person easily.  And they tend to stick with the existing people and in the context of trade, credit is definitely one that’s also the trust with respect to quality of product, reliability of supply.  And it’s for these reasons people tend to just stay in their existing supplier relationships.  But one of the big things I remember when we were starting and almost everybody used to ask us that small businesses in the country have long-term supply relationships, they would not want to move away from that.  What pleasantly surprise was that every single person we went to was willing to try.  It’s not like they will say that I’m going to replace all of my suppliers tomorrow, but yeah, it is okay.  You give me the app; I’ll place two orders and I will see what happens.  And that willingness to try was something you could say was a bit surprising for us because we’re expecting people to come back and for us to do a lot of arguments in our sales to actually convince them to try.  But almost everybody was willing to try.  And we just had to make it super easy for them to try.  And that was one of the big learnings we had.  We made it super easy for people to try.  We gave them products, we delivered them on their shop, we gave them cash on delivery.  So, for them it was just an easy way to download app and start trying.  And the more people who tried, we saw the next power of this use case, which was that it’s inherently a repeat use case.  If the person buys today, he’ll get up tomorrow and will buy again.  It’s not like he’s not going to buy the same product later on.  So, what we saw was people tried, they got a good experience, they started buying regularly.  And that continues to be a huge value to our platform that even if you look at today, despite we are adding a lot of new buyers every month, 80%-90% of the business on the platform is repeat business.  And that continues to add the lots of sort of power to the platform as it scales because you have so much stickiness and repeat built into the system. 

HANS:  So, in your mind, when you started with doing Udaan, what is the biggest attraction that Udaan is offering to these sellers as well as the merchant buyers?

VG:  I think the biggest value for sellers was growth.  I think what we saw that when we started talking to some of these manufacturers, I remember talking to these typically will be a small-sized manufacturer, will have a factory unit, it will have probably about 50-100 employees.  When I started talking to them everybody was wanting to ask the question of how do I go on Internet?  What has happened was in India, Flipkart and Amazon had grown very well.  And almost every single manufacturer was thinking, how can I become Flipkart because they saw that Internet can scale so much and there’s so much people buying online, and I have products I want to sell.  And they were trying different ways.  They were hiring people to build apps for them.  They were hiring, going onto websites and signing for the listings, they were building their websites.  And the biggest underlying factor or intent was growth.  I think from Udaan’s point of view for sellers, I think that’s the biggest value that we create for our manufacturers and brand.  Udaan is one of the fastest growth channels now of trade in this country.  And for them that’s very, very meaningful.  I think for buyers, actually it is what you would see in an e-commerce platform like one of the things we saw that the small merchants in India actually behave very much like consumers when they think about buying products.  They want access to variety.  They want good pricing.  They want convenience.  They want reliable delivery.  They want an ability to order and forget about it and get it delivered and they want that habit of every time I order; this is the same experience I get.  That actually drives them.  One of the other things we didn’t talk about earlier is that we have built into platform early on the ability for buyers and sellers to negotiate with each other because that’s something which we were in going collective view of the world was that buyers tend to negotiate or buyers, sellers try to negotiate in trade.  As the platform started scaling, we quickly realized that small merchants don’t want to negotiate.  They just want to place the order and get done.  They don’t want to spend a lot of time on negotiating.  The bigger wholesalers negotiate.

HANS:  Because it makes a difference.

VG:  Bigger contractors, bigger distributors they negotiate but the smaller merchants don’t.  They’re just looking for selection.  Their job is, I am rotating my shop inventory once a week.  I just need to stuff it with one week worth of selection, get it sold, and make my fee.  I don’t want to negotiate that another 10% or 15%.  That was again was a learning from ground, that they want convenience.  They want just habit.  They want convenience.  They want selection pricing convenience and they don’t want anything to do after that.

HANS:  The sellers, you were saying earlier that they want to make sure they get paid. 

VG:  Yes.  I think one of the big things for India, as you can imagine with the fragmented channel and unorganized channel, payment reliability, like on-time in-full payments to seller is one of the biggest problems in the country.  Despite people having distributors and wholesalers, they don’t know when they will get their payments.  And typically they will have to keep working with their channel, keep collecting in small amounts over a period of time, which is generally a norm in the country now.  And it’s not like defaults happen in trade.  Default does not happen in the trade in India.  It is mostly delayed payments and uncertain timings of the payment.  And that’s what Udaan did for them.  Udaan created a very, very reliable on-time every single time payment system for them.  And our sellers loved us for that.  I remember one of our sellers telling us a story that every morning I go to temple at 8:30 and at 9:00 I get payment from Udaan and I know my day has started well.  This keeps happening every day, so I know that in the morning I get payment.  Everything is fine.  And that’s a habit now he has built in.  Like every morning he’ll get that payment at 9:00 and he knows that everything is well.  Like he’s now wired like that and I think that’s the implicit trust on Udaan.  And I think in early, first two or three years we have focused a lot on ensuring that people can trust Udaan to do their business.  Obviously, we’ll make mistakes and we’ve been open about going back to them and telling them about that, but they understand that we are working on fixing it and we are transparent, and we maintain that view with them.  So, I think that is another big value for sellers, which is sort of payment security, on-time, in-full payments.

RITA:  Can you share a bit more in terms of the operation that is needed to ensure that payment security that delivers the trust you have with your customers?

VG:  Yes.  The two types of payment today are available on Udaan.  One is cash payment and the second is credit payments.  Cash payments are typically done by a cash-on-delivery service.  India has actually seen over the last year good evolution of e-commerce cash-on-delivery services.  We have third-party providers who provide cash on delivery.  We have our own Udaan express service, which provides cash on delivery.  It obviously is a fairly disciplined tightly-run operation because what we have promised to the sellers is one of the fastest payment times in the industry.  Like no platform actually gives to the seller delivery plus two.  Everybody has sort of payment terms with sellers.  We don’t.  we want Udaan to be the fastest and cheapest way of doing trading in the country.  And on credit, I think it’s a completely different problem.  We’ve been working with the NBFcs, which are called as non-banking finance companies in the country who has an ability to create lending products for merchants and consumers.  So, we work with them.  We have our own NBFC and together we look at the transactional and the usage behavior of our merchants on the platform and we link them to their credit performance.  We have basically an algorithm, which is self-evolving and self-improving every time we do this.  We start by giving people very small credit lines and see their behavior, and over time just keep increasing the credit line based on the behavior displayed on the platform.  And what this ensures is that in absence of formal credit histories or formal credit scores, which typically would exist in, let’s say, a developed economy like U.S., they don’t exist in India.  Most of our merchants don’t have CIBIL scores.  And we have also seen from our data that credit performance does not correlate to the CIBIL score at all of the merchant in the country.  So, you actually have to look at the data of the trade to be able to estimate the economic strength of a business, both in terms of its ability as well as intent to pay.  And thus we are looking at uses data, transaction data of the buyer, as well as the repayment behavior to actually start giving them small credit lines and algorithm keeps increasing those credit lines slowly, slowly based on the behavior.  This ensures us an ability to actually keep payment security to our sellers while ensuring the credit needs of our buyers is sorted out. 

HANS:  In the Bay Area or China the full-stack companies tend to be either very product focused, or operational intensive, or they focus on business model innovations.  You’re building something that needs lots of expertise in logistics in credit management and also tech as well as a use acquisition.  How do you balance this mix at Udaan and be able to grow so fast, so quickly in the last few years? 

VG:  I think this is the one where you could say we benefit a lot from our Flipkart experience.  I think I can share that in Flipkart over the five years, there’ll be enough times we would have had discussion around are we a tech company or are we a retail company.  And like starts questioning and we have spent a lot of energies on that, we have done a lot of right things, good decisions, bad mistakes, but we spent a lot of that energy.  And I think e-commerce is fundamentally, and you know this Hans more than I do, it is actually a reasonably complex business.  It has a lot of elements into it.  Because we saw that at Flipkart and we saw pros and cons of that, what we’ve been able to do at Udaan is actually maintain a lot of focus on problem.  Then actually whether or not we’re a tech or a business, we’ve been more focused on what is the big problem we are solving for our buyers, what is a big problem we are solving for sellers, what does the big problem actually at a system level available.  And we bring all of the things together to that like be it technology, be it online, be it offline, be it delivery, be it operations, we look at for that problem, how do we create a solution.  And I think that has enabled us a lot better because I think it’s not just at a philosophy level.  Day-to-day when you are faced with such a problem, how do behaviors of the people sitting in that room when you’re talking what problem and like ensuring that the focus goes back to the problem instead of developing power centers in the company with respect to one single organization.  And I think that has helped us and I think you could say it’s more of the maturity we saw, we’ve gotten from the Flipkart, which has helped us maintain focus on problems rather than a particular type of the company we are. 

RITA:  I’m a bit curious about how the three co-founders of Udaan actually come together and have this idea of starting the company.

VG:  I think three of us spent enough time at Flipkart together.  Sujeet, I actually know Sujeet from also 20 years now.

HANS:  From your college days?

VG:  From my college days.  He was a year junior with me at college.  Actually I knew Sujeet as well, like Sujeet was also a junior of mine from the college.  So, Amod, spent enough time with him at Flipkart.  I think, when we guys were talking about it, I would say there are a few instinctive clarities.  Three of us have seen enough of each other in action and Flipkart was, as you can imagine Flipkart was not an easy time.  It was fairly stressful and was fairly spiky.  And when you see people in both good and bad times you are able to see the true fit or true character of the person.  And I think three of us have seen that.  Three of us have also backgrounds where, we were talking earlier, that we all grew up in small towns in the country, grew up in middle class, have those core Indian middle class value.  So, we saw that there is a chemistry, there is a value system match, and we had the ability to push each other.  But also know that we’ll always be, like as a relationship, we’ll always be tight.  So, I think we maintained, we had that ongoing strong trust with us.  We also did one thing.  Very quickly we started Udaan and we got about eight or 10 core people.  These were the people who are some of the best people in the country in the context of technology.  Like if we look at folks who joined us early, these are some of the best tech, consumer tech, Internet tech folks in the country.  Best operations people, best business and category management people.  And what that does, the whole team is now a team about 15-20 people who have a lot of trust with each other and who have the ability to ensure focus on the problems and answers and not worrying about each other at all.  And I think what that has done, that has taken that one of the things we saw in Flipkart was culture of how founders and how early teams operate is how the company starts behaving over time, like that starts setting the tone.  And I think that has helped us, like having a team which could trust each other.  Like people are not afraid about their weaknesses because everybody knows that, and they have sort of seen that.  So, it’s not people are trying to hide anything.  So, that early team of 15-20 people would focus on problems and solving them, and they were like right answer with the answer and everything else was not really relevant.  And the rest of the company developed that culture because they saw that.  And I think that has helped us at Udaan.  Most of the times it’s not like three of us do have the areas where we spend energies.  I spend a lot of energy on business growth.  I spend a lot of energy on category management.  I spend a lot of energy on finance side.  Sujeet, coming from his background, spends a lot of time on operations and Amod spends a lot of time on product and technology.  But three of us together spend a lot of energy crossed as well because we have that next layer of the team, which enables us to take our bandwidth away from and enable us to have cross focus.  We also get together every week, we talk about core decisions, we ensure that speed of decision making is not ever delayed.  And I think there’s a lot of ownership in the company, like people can go ahead and make their decisions and I think that’s beginning to work for us. 

HANS:  When I invest early from day one in Xiaomi, I see there’s a lot of ex Kingsoft people that know how to work with each other from before.  And when they go to Xiaomi they know how to get to work and make magic happen.  Hear you recounting how your Flipkart experience binds your team, so you guys know what to do with a new situation, new idea, is very, very similar.  That’s why we always encourage a lot of young entrepreneurs, don’t be a founder yourself.  You join a startup that’s fast-growing, so you see and hear and experience and learn all the things so by the time you want to do your startup you’re ready, you have a common set of experiences to draw from.

VG:  No, you’re absolutely right.  And I think what you are seeing right now in India is actually the second generation of startup ecosystem.

HANS:  That’s exactly right.

VG:   And what you see is that, and it’s actually I would say startup and VC ecosystem.  Everybody is now behaving more deeply. They’re more mature. They’re thinking more deeper. They’re more aggressive.  It’s not like they’re not aggressive or ambitious but-

HANS:  They’re more educated and more learned.

VG:  More learned.  Questions are more deeper.  Larger investments are being taken.  But I think startup ecosystem is also evolving.  It’s learning by itself and you’re absolutely right.  I think for us and for our team a large amount of learning came from Flipkart and I think that we are disproportionately advantaged to any other group of people who are starting because we just have so much of learning together in the team.

HANS:  And what people don’t realize is that in any innovation-type system is the iteration of generation of founders that learn from the previous ones that become better when they do other things.  India, I remember meeting the VCs and meeting the first-time founders in 2005, 2006, 2007. Some of them were still doing offline non-internet stuff.  Some of them was trying to do Internet stuff but it was still on PC desktop Internet.  And now you have, like you said, two generations of founders already. In China we see three or four or five generation founders, and the quality of founders inevitably get better in the next generation.  And this is why we’re hopeful on India producing very interesting companies now.  Can you explain how Jio, GST and UPI has made you guys building Udaan much easier than six, seven, years ago with Flipkart? 

VG:  Absolutely.  I think three of them were very big timing.  I think you could say that our timing couldn’t have been better.  We started in 2016 and right around that time, mid-2016 Reliance was aggressively pushing Jio adoption, Jio mobile, so we saw adoption.  And of our early users 8 out of 10 were Jio subscribers.  And Jio brought a lot of the Middle India onto the Internet and with almost high speed of adoption because the cost of data was so low.  And we didn’t ever have to solve, like we remember talking in 2000 early, before we started like how will we solve for people to get the smartphones?  And we never had to solve that now.  We never had to solve that problem of people not having smartphones.  There are certain categories we still do, but I think at a system level we didn’t have to solve that problem at all. 

HANS:  Do a lot of them use Redmi Xiaomi phones? 

VG:  I think people use a lot of Xiaomi phones. Like Xiaomi has grown quite a bit. 

HANS: Together with 4G.

VG:  The second thing was GST.  GST is basically good state tax. Goods and service tax.  India traditionally has had two hierarchy taxation system, government tax and estate tax. Basically at a summary level is, all of the supply chain in India were largely designed around taxation. 

HANS:  State focused.

VG:  The state focus.  So, if the goods have to move from one state to another state, they’ll be taxed.  So, manufacturers will ensure that they will create their distribution warehouses in two states, even though it doesn’t make sense in most cases. You would see that there is a state border between Karnataka and Tamil Nadu, the same company will have one warehouse on one side of the border, another warehouse on the other side of the border. 

HANS:  So it can trade within the warehouse.

VG:  So, the whole system wasn’t designed and also what we saw was most of the earlier wholesale and distribution structure was all city areas, as you would imagine.  Like if you go to Delhi, some of the older areas of the Delhi city is where you would see these big wholesale markets.  And these are narrow streets all aging go-downs.  If you go to a fresh wholesale market, there will be like fresh fruits and vegetables.  In underground go-downs, which are not hygienic to be stored for. So, you have this aging infrastructure and you have this GST now coming and then government actually came back with GST reform and abolished the state tax pretty much. 

HANS:  Right, one national market. 

VG:  One national market and goods can flow all over India without seeing interstate issues.  It did two things.  It obviously reduced the cost of the business so a lot of the supply, which was earlier north of India at cheaper prices was not meeting the demand of the south started meeting demand of the south.  So, you’re seeing that value.  And second is it reduced the time, it reduced the time and the cost of delivery.  Earlier a truck from Delhi to the south will take probably six to seven days because you have to stop at every state, go through the state process.  Now the trucks don’t stop, they just go.  So, it increased the speed of delivery, it reduced the cost of delivery, and reduced the cost of taxation.  So, basically at a system level, we have benefited a lot because we got a lot of supply nationally and goods were flowing fast and cost weren’t that high.  So, we got benefited from that and I think that’ll be a push for a long-term tailwind for us will continue to push our business forward.  And I think the third thing was demonetization.  India historically has had what you call as both a white economy and black economy.  Black economy is where people tend to evade taxes.  Now it’s reasonably prevalent in trade in India, depending upon categories.  And there was another thing at back of our mind as to how will an online platform, people will think about online platform because online platforms typically make trade transparent.  But we said that there is enough. When we did our research, what we figured out there’s about 60%-65% of the market was white.  So, we said there’s enough market which is white so let’s work with that.  What happened was Indian government came with demonetization, which was rightly aimed at actually black money in the country. Now what that did was, I would say, more than changing the structure of the cash was white, like that obviously has changed.  It changed the psyches of the people.  What most manufacturers and traders realized that a forward-looking viewpoint of black in the country started going down.  And people started finding ways of how we can actually convert or do a part of our business in white.  Or over time move large amount of our business on white and Udaan there was one of the best channels.  Most convenient, most easy, with high payment security to actually drive a lot of growth in the white business.  So, all three of them, Jio, GST, monetization, they came roughly at the same time when we were early seeding the platform and we got a lot of good tailwind.  And we also didn’t have to solve certain problems we would have earlier, otherwise would have had to solve.  So, I think these were very beneficial to Udaan. 

HANS:  How has UPI impact your business?  Unified payment interface?

VG:  I think it’s early days.  If you think about still a lot of the merchant sales are in cash.  It’s still not a move to electronic payments.

RITA:  What would be the percentage of that?

VG:  I would say for most merchants at least 90% is still cash.  It is moving but I think as of today, large amount of sales a merchant does is in cash and obviously they pay back in cash.  However, UPI is definitely, in terms of its adoption going fast.  I think what we also, forward-looking view for us is also that UPI is going to be a large part of the payment, so in the context of e-commerce.  So, we’re investing heavily with our merchants enabling them to pay via UPI directly and also enabling products for them to be able to collect payment from their consumers via UPI.  So, I think we are pushing alongside the trend.  However the current composition is still heavy cash.

RITA:  Hans I wanted to ask you, if you think about Alibaba back then, when they scaled, digital payment was a big player in their success.  Looking at those 90% of the trade is still on cash and it looks like Udaan is doing really well, can you explain that a little bit to us from your perspective as an investor?

HANS:  I think back when Taobao got started by Alibaba, GDP per capita in China was at around $3,000-$4,000 per person.  And in that range, it was easier to see consumer aspire, buy something, goods on Taobao from a manufacturer seller who’s far away.  When you’re dealing with two participants who are far away from a distance standpoint then cash is not going to be useful, will not be as good.  So, what Alibaba ended up doing was coming up with Alipay to get the seller and buyer to work with each other more efficiently.  So, if I’m a seller and VG is a buyer and I sell him something and I ship the goods to him, I need to be sure that he has money to pay for it.  So, if he leaves money in his Alipay account, Alipay let me know in my Alipay account that the money is already in Alipay and I feel secure to ship my goods to him.  And when he gets the goods, he wants to make sure that my goods to him is as good as advertised.  So, he’s not going to release money to me until he’s sure the thing is good.  So, in seven days he doesn’t complain, that’s how the money in his escrow account at Alipay will get released to my Alipay account.  This way Alipay becomes an escrow service to make sure the transaction is good.  And that’s how Alipay grew very quickly with the expansion and growth of Taobao.  And what VG was saying earlier is that GDP per capita in India is still low enough that B2C commerce takes so much time, C2C commerce takes so much time to grow the business over time that he’s better off focusing on B2B first.  And a lot of B2B business today are local so cash is still a big component.  But over time as B2C business, more of them move online, B2C commerce go online then I’m sure there will be more business done between buyer and seller across different regions.  And that’s when UPI mobile payment will become useful.

RITA:  This question has been on my mind from the beginning of this podcast. So what does Udaan mean from a language perspective?  How did you come up with that name?

VG:  Yeah.  So, Udaan is actually a Hindi word and in India, Udaan as a Hindi word is typically associated with somebody who is small who is actually achieving big things. 

HANS:  Perfect name.

VG:  Udaan has that connotation of hope, positive, achievement, ambition, for small guys.  Literal meaning of Udaan is taking flight.  Udaan means taking flight.  But typically associated with small guys.  When we were starting the platform, we had this thing in our head that we wanted our platform to be able to connect with our core market.  And we said, let’s have a word which is Hindi and let’s have a word which connects with them.  And we are actually lucky to find the domain name available because as like we purchased it.  But it is a reasonably popular word in the context of the country.

HANS:  Yeah.  Alibaba obviously got started because the fiction, the folklore around Alibaba and you open sesame.  And Jack wanted a term that a lot of people automatically can recall and remember.  And Rokurotan is a very Japanese term that also means hope, that tomorrow will be better, that Japan was modernizing so they use that to connote confidence of consumers into their platform as well.  Can you tell us a bit more about Udaan credit system and how that plays in your value add for the seller and buyer as well?

VG:  Yes.  I think the two points to the current system, which are important to understand the trade credit in India, which are important.  One is that most of the merchants in the country do not have, as we were talking earlier, do not have formal credit histories.  They don’t’ have a lot of recorded bank statements of their sales.  They don’t have a lot of strong set of financial documents for their business.  And they’re also small.  So, if you add all of these three, it’s typically very difficult for them to actually get a loan or a working capital line from a financial institution like a bank.  What that does is, suppliers or wholesalers or family and friends are the people who finance that person as they’re running their business.  And the second thing, which is interrelated is that because of this opaqueness in the credit system, suppliers have a huge advantage.  What they tend to do is they will tend to inflate the pricing at which they’re selling the products to the buyers because those buyers don’t have a lot of options of the people who are going to give them credit.  So, what credit does, it artificially increases the price consumers are buying, small merchants are buying for.  Now what Udaan does is actually trying to address both of these things together.  One is that we are coming onto the platform and making credit very transparent.  We are creating credit lines for our buyers based on their transaction and usage behavior on the platform.  We look at a buyer, they start buying on the platform, we start looking at them for a few weeks and see how frequently that person is buying, how many selection he is buying, how many different sellers he is buying from, what time of the day that person is browsing.  And we have started creating a correlation.  [inaudible 00:39:16] correlation with creating a model, which enables us to start seeing with a certain behavior on the platform.  If you give certain people smaller credit lines how do they behave?  And we start giving the very, very small credit lines like 5,000 rupees, 10,000 rupees and starting the repayment behavior.  And what that does is it enables us to create a credit product, which is based on economic data and which is transparent to buyers and sellers.  And the second thing is it also decouples the pricing of the product from the credit.  So the manufacturers are very, very competitive on pricing the products on the platform because the payment risk has been solved for them.  They get their payments on time, so they are very aggressive in competing on the platform because they want to grow their business on Udaan because their growth channel with high payment security.  So, what that does is it increases the demand on the platform, which helps us keep creating a better credit product because the more buyers are transacting on the platform, we get more data on which we can keep improving our credit model.  So, I think these two notion of decoupling credit from the pricing of the product and using the transactional and the real economic data to assess the credit capabilities of buyers and sellers enables us to really add the value in the system, both from a marketplace point of view as well as for us to create products, which are important.  The SME lending market in this country is actually one of the largest markets, about $400-, $500 billions of unmet credit demand in this market is there with high cost of credit.  If you can create lending products, which we are now, we’re creating lending products for our buyers, we’re creating lending products for our sellers, and we’ll continue to keep increasing that side of the business because by itself it helps a lot on the trade on the platform, and also by itself is a great business opportunity.

HANS:  So, over time you may create your own FICO score on your seller and buyer as well?

VG:  Yes. You would say that if you go at some of the ways the current trade does, they have their own proxies of that.  Like they have things like caution list, like there will be the names of the buyers, they will circulate them on WhatsApp groups between traders and saying like, “Block this guy if he’s in the market,” because nothing exists and now Udaan has an ability to create a transparent.  And we have seen that power.  There are manufacturers.  Let’s say a merchant goes to a manufacturer offline into a market.  That manufacturer asks him, “Okay do you have credit from Udaan?”

RITA:  Do people already asking that?

VG:  If they say no, then say, “Why should I give you a credit?  Udaan has not.”  So, what that does is like Udaan is becoming a system.  If you have not been vetted by Udaan, I’m not going to give you credit.  So, and I think we’re still early in the title but I think that’s where we’re taking, we want us to make it very transparent.

HANS:  We just had an investor in Square, my partner Glenn Solomon, our investor in Square in, obviously, post-IPO Square capital is probably the biggest reason why the stock price and value has gone up.  It’s so useful.  So, speaking of which, as you do more for your sellers and manufacturers, what other services beyond credit, beyond the marketplace that you would want to provide, whether it’s a POS solutions or recordkeeping, whatever it is.  What else are you thinking of?

VG:  Definitely.  I think there’s a bunch of them right because we envision Udaan as an SME platform, as an SME Internet platform. 

HANS:  What we call SMB tech in Silicon Valley. 

VG:  One area of services we have started focusing on products and services is, what you call as small business SAS, which will be services, products like invoicing, point of sale solutions, billing, accounting, inventory forecasting, demand planning, so that is one set of products, we have started work on that.  Second set of products is helping our manufacturers and brands with creating brand analytics.  Helping them provide analytics on their data, what kind of products, what kind of price point are selling in what parts of the country.  There are older research firms like Nielsen, which provide this data and Udaan is now a huge repository of data in terms of what products, what price points are going.  So, we are working on creating analytical products for our manufacturers and our brands.  We’ve also started work on helping our small merchants with local area marketing for them to be able to leverage, as most of their consumers are becoming digital, we have ability to actually have merchants market their product to consumers digitally, and we’re doing some pilot. I think the more if you see the future of the system or the commerce in the country, you will see these plays like B2B2C plays because now the merchant is digital, consumer is digital, product is available.  If you can market the product to the consumer at the right time, then the gratification can happen very, very quickly for the consumer at the right cost of delivery, which is supported by the system.  So, I think that’s another line, sort of area we’re going to experimenting in.  So, I think these are some of the ones which come to light.

HANS:  Have you ever heard of a company called Payfazz in Indonesia? 

VG:  I’ve not but would love to hear that.

HANS:  They’re providing payments, they’re providing inventory management, different kind of solutions to the convenience stores as well in Indonesia.  We’re seeing something similar in Columbia, Bogota, Columbia for Latin American market.  So, it is a common problem.  We have so many mom and pop conveniences that dominate local retail and it’s completely fragmented.  They all need similar solutions.

RITA:  So, let’s go into the last part of the podcast recording.  It’s going to be a quick round of five questions.  So, just say what’s first come to your mind.  Don’t think too much about it.  What are your most regular purchases online for yourself?

VG:  Shoes. 

HANS:  How many shoes do you buy?  How many shoes do you need?

VG:  I buy once every six months.  I’m not like—

HANS:  Oh okay. 

VG:  That’s the only thing I buy typically online.

HANS:  Interesting.  What kind of shoes?

VG:  Typically sports shoes.

HANS:  Sneakers?

VG:  Yeah sneakers or sometimes casual shoes. 

HANS:  Oh, okay.  Have you ever shopped on StockX or Goat before?

VG:  No, I haven’t.

RITA:  Who’s the entrepreneur you admire the most and why?

VG:  I think for me, I would say definitely I admire Jack Ma a lot.  I think what he has been able to do, at least my outside view of what he has been able to do with Alibaba and what Alibaba did to China, I think it’s a completely different thing about the country.  I think that’s somebody I admire most.

HANS:  And you probably want to do something similar in India as well. 

VG:  Yeah, I think India has potential.  It has that potential, where it is in its life cycle as a country.  I think it has potential for large, big transforming businesses for economy in society. 

HANS:  Yeah, that changes lives. 

RITA:  What’s something that you’ve read or heard recently that you would recommend to other people?

VG:  I’ve read, recently on LinkedIn, there are people who keep forwarding things.  There have been some of those clippings, which come by what Jeff Bezos has done with respect to his style of management and I think some of them are fairly neat.  The other one I tend to read a lot is there’s a guy named Ray Dalio for Bridgewater and I think his principles on managing and building a culture, I think they are very, very powerful.  A sort of group of people who are very ambitious, I think it’s very powerful. 

RITA:  What’s something on your desk that has been with you all of these years?  Or specifically when you were at Flipkart it’s there and now it’s on your desk at Udaan?

VG:  I think it’s my laptop bag.  I’ve had that laptop bag for a long time now. 

RITA:  Is that the one you carry today?

VG:  Yeah, I do.  I think that is something that has not changed for a while now. 

RITA:  What do you do when you’re really stressed?

VG:  Actually one of the things which I’ve realized is, we didn’t talk about it, I have two kids.  One is two-years-old, and one is six-years-old.  And I think it’s amazing to just spend time with your kids because no matter, you spend time with them and then you start feeling okay.  Everything is going to be fine. 

RITA:  It makes you optimistic. 

VG: Okay as long as both of them are fine.

HANS:  Life is okay.

VG:  Life is okay.  Everything else can be figured out.  All other problems can be solved.  So, I started thinking about that and I think that helps me go easy a bit.

HANS:  Great.  Thank you so much.

VG:  Thanks guys.  Appreciate.

HANS:  This will be a fantastic podcast.

Episode 42: AMA: Hans and Zara on the Origin of This Podcast and Other Questions from Listeners

GGV Fellows is accepting applicants for its 2020 cohort. The program, which is a week-long intensive learning experience in Beijing, provides a fast track for aspiring entrepreneurs who want to become part of China’s startup ecosystem. On top of hearing from some of the biggest names in China’s tech industry, fellows will be equipped with essential skill sets to survive and thrive in their entrepreneurial endeavor and get plugged into the supportive network GGV provides. The deadline for applications is Sept 30th. The program will be in Beijing from Jan.2nd to the 6th, 2020.

*Note that the program will be conducted in Mandarin, so the applicants need to be fully proficient in the language. 

Apply at http://ggvcommunity.mikecrm.com/cEkWZYw.
Read on why we organized GGV Fellows here https://hans.vc/why-we-organized-ggv-fellows/

After 20 months and 42 episodes, we are taking a moment to reflect and celebrate on this podcast. You will hear from Hans and Zara on the behind the scene story of how this podcast was started, why an English podcast about tech in China and what people can expect for the next season. You will also hear from our listeners’ community asking Hans and Zara a wide spectrum of questions. Special thanks to Kenny Chan, Jacky Shen, Jun Zhang, Huang Zexin, Jenny Niu, Jonas Wolf and Barbara dos Santos, who recorded their questions for us.


Rita Yang: Today on the show, we have two people who started this very podcast you’re listening, Hans and Zara. After 20 months and 42 episodes, we’re taking a moment to reflect and celebrate. We’re concluding this season of the 996 podcast with questions from our listeners community. Welcome to the show, Hans.

Hans Tung: Thank you.

Rita Yang: Welcome back, Zara.

Zara Zhang: Thanks.

Rita Yang: Where have you been?

Zara Zhang: So for those who have forgotten about me, my name is Zara Zhang. I was the co-host and producer of the 996 podcast. I was an investment analyst at GGV Capital from August 2017 to May this year. And in May, I joined ByteDance in Beijing, and Rita joined GGV as my replacement. And I’m very happy that Rita is now continuing this show and making it even greater.

Rita Yang: Thank you. I’m going to start with some of the most frequently asked questions for this podcast. I even asked them during the interview process. So how did you guys started this podcast in the first place?

Hans Tung: Zara, do you want to start first?

Zara Zhang: Sure. So when I joined GGV in 2017, I think it was probably in my first couple weeks I told Hans that we should start some sort of content that tells the China tech story in English. And at that point I was exploring a couple of different formats like podcasting, maybe videos, or blog posts, or newsletters. And then I settled on the podcast idea because one, I was a huge fan of podcasts myself. I started listen to Serial really early on when the medium took off. And then I’ve always been looking for a good English podcast on tech in China, which is a topic that I’m most interested in, but I couldn’t find one. And secondly, I felt like podcasting as a format really attracts the kind of audience we want to attract.

So, for example, why not make videos, short videos, it’s so popular now. But for me, I feel like videos are for people who have a lot of time to kill. People who watch videos tend to have a lot of time, whereas people who listen to podcasts are multitaskers who commute, who listen to it when they’re working out, in the car, and they want to make the best use of their time. And these are the highly efficient people that we want to attract as audience for our show. And I decided that I think the long form audio format where we interview prominent guests would be the best format. Hans, do you want to add on?

Hans Tung: Yeah, when Zara first asked me – taking a step back a little bit – we went on and recruited Zara, because we felt that there’s a lack of content in English regarding what was happening in China. And so, how to tell a story well? we thought originally, we need to start writing articles about that, and that’s easier for a lot of people to read. I wasn’t sure whether a podcast would be differentiated since there are so many podcasts about startups and venture in the U.S. already. Granted there wasn’t as much on China, I just wasn’t sure if enough people would bother to listen to two of us talk. I’m glad Zara convinced me to do it, and I think that’s part of GGV’s culture of willing to take chances, and that talent, the younger people, to try new things. In terms of asking for interviews from the guests, we know a lot of them already from our past dealings with them, or investments we made in them. So getting the guests wasn’t as hard for a more established firm like GGV. But the ingenuity of this idea definitely come from the millennial Zara, and without her efforts and the care, the thought that she put into it, this podcast and this community would never be what it is today.

Zara Zhang: Thank you, Hans. I also wanted to add on that a lot of people have asked why certain English podcasts on tech in China, why not start a Chinese podcast tech in Silicon Valley? If we want to be a cross-border farm, there are two ways you could approach this, so why do we pick the first one? I think for me, I’ve realized there is vast information asymmetry between China and the outside world. Actually, people in China already know a lot about what’s going on in the Silicon Valley, or outside of China in general, and they’re extremely hungry for knowledge of how different companies do things. And a lot of Chinese people are pretty good at English, so they can access a lot of the English materials or media sources, whereas people in the U.S. actually have very little understanding of what is going on in China.

And part of it is because there’s huge language barrier. Because most material, most stories on China are in Chinese, it’s a very impenetrable market for them. So we wanted to be the fresh voice that tells the China story in English, in a way that audiences who don’t speak Chinese and who haven’t lived in China can relate to, and appreciate and learn from. And for me, that was a missing voice on the market, because the China story was pretty much always told by people who have not lived in China – I mean, the China story in English. Because most reporters in Western media have not – many of them have not lived in China for a prolonged period of time. So it’s really hard for the English stories to be authentic. Whereas both Hans and I have lived in China for very long period of time and we know what it’s like to be on the ground, and we know the language, we can relate to the people, to the way of living, so I really wanted to kind of bring forth that voice through this podcast.

Hans Tung: I think the early seed of this project came through in 2011, when some of the smartest Indian VCs and founders came to China. And the question they asked were extremely thoughtful. They clearly studied the portfolio of leading Chinese VCs, and they understood that some of the big problems relate to urbanization that they’re seeing in India – somebody in China is or has been trying to solve it is. So they felt that there’s a lot of learning they can take. And they also ask a lot of question about China and there’s just not enough content in English, like Zara said, about China, to make it easy for them to pick up. So it became incredibly obvious that producing content in English about China, whether it’s voice, video or text could be quite useful to the $6 billion people who live outside of China. And the challenge is always when you take an idea that seems obvious, how to make that into a reality that has a lot of care and insight into it, and that’s where Zara came in.

Rita Yang: So Hans, you were pretty already established when this podcast was published. Why did you decide that you are willing to make time to host this podcast from episode to episode?

Hans Tung: I think GGV and myself were evolving, and we know that, over time, the next billion users will come outside of the U.S. and China. So at some point in the future, that will be important for other founders interested in what China is doing to learn from it. Like I said, the early idea came from watching these smart Indian VCs and founders come in China and asking amazing questions. So for us, we thought both good for sharing our knowledge and helping the community to learn, and also, selfishly, it helps us to build a brand, and to let more founders all over the world willing to pick GGV as a value-added investor. And what I didn’t expect is that the content, whether it is in PowerPoint text or podcast voice that we produced together, is just so well-consumed by people, whether it’s our episode, our write-up on Pinduoduo, on Meituan, on ByteDance, it was just amazingly well-received.

Some of you from different places have come up to me and said, “That was really insightful and really helped me to think through the issues.” At the human level, beyond just making investments in VC, when you see someone else who’s intelligent and smart, that generally felt that they benefited from the knowledge and experience that we have had, and that we were fortunate to be able to share, it is incredibly satisfying to see that knowledge is power and you’re making a difference in people’s lives. And I think that fundamentally that human connection is what keep us up to keep on doing episode after episode.

Zara Zhang: I want to give Hans a lot of credit, because I think you are a person who really likes sharing and is really generous with your ideas. And that can’t be said of every investor we’ve met. And I also think you’re a really eloquent person in general. So for our listeners’ information, all of our podcasts are unscripted. We don’t write out everything we say. But everything that comes out of Hans’s mouth is like perfect. And there are even times when I feel like, “Oh, my God, he just said that. That’s so well said.” So I just feel like the podcasting format lends really well to someone like you who is good at speaking in general, and asking good questions, and bringing people’s ideas forward and asking them about – bringing out how they really feel about things.

Hans Tung: Thank you. I can say the same thing for you as well.

Rita Yang: Share with us some moments where you felt like, “Wow, this is really making a difference in people’s lives.” I know Zara you have some stories on that.

Zara Zhang: Sure. I guess there are a lot of these moments. Every time we host an offline event, we see sometimes over 100 people show up and they’re all fans of what we do. They’ve listened to multiple podcasts. They know some of the content better than myself. I’ve met, for example, Stanford students, an American student in Palo Alto, who came to one of our events, and he said, “Because of the show, it has piqued my interest in tech in China and has changed my perception that China is just copycat and has no innovation.” So now, this summer, I ran to him in Beijing because he’s spending the summer interning in Beijing in tech, and a lot of that decision was driven by what we talked about on the show. So I think, especially for younger people, their ideas about the work, about the world, are still being shaped, and I’m really glad that we’re able to tell stories that inform their perspective and make them more open-minded.

Rita Yang: And much more informative about the world. So how did you come up with the name 996?

Hans Tung: When Zara asked me what to call it, we played with different names. I think 996 was the name I came up with because that’s how I have been working myself.

Rita Yang: No, you work 0-0-7, I think.

Hans Tung: Even to this day, when you’re in – when I visited Bangalore or New Delhi, when you go to these other cities around the world, and you see that people are just extremely driven, not just for themselves, but they want to build something that change and make their society better, that drive, and that passion is very infectious. And when GGV first invested in Alibaba in 2003 and had the fortune to see how that company evolved, sure, you get a share of negative press, especially in Western media, and sometimes even in Chinese media too, but still it is a company that made e-commerce possible in China and become a model for many companies, and inspiration for many founders all over the world.

So it’s, for us, we understand that 996 may have some negative connotations, we’re not disputing that. But at the same time, it’ll always have a special place in my heart because that’s the founders I spent time with, and you see them really trying hard to make an impact, to make a difference. That to me, more than anything else, make me feel that a lot of people from outside looking at China, it’s easy for people to assume that Chinese founders are successful because the market is big, there are a lot of users, and the government protects domestic businesses, etc. But as people who listen to this podcast over the last 20 months, you know that it is a lot more than that. And when you can take away all the outside perception and narrative, and talk to that person face to face, work with that kind of founders together and solve issues together, the camaraderie and the connection you build from one human to the other is impressive. And that’s why we use 996 as a way to describe and capture that spirit.

Zara Zhang: I also think from a naming perspective, it’s a great name, because it doesn’t explicitly mention tech, or China, or entrepreneurship, but all of that is kind of captured in the three numbers or digits. And I don’t see 996 as a set of hours, I kind of see it as a spirit. It’s kind of the feeling of hustle and just being extremely motivated to achieve something and being really committed. And I think that extends beyond Chinese tech. We see that in a lot of founders around the world. And also, I like the name because it’s almost like a inside joke. Like if you listen to the podcast, you know what it is. If you ask me what 996 is, it means you’re not a listener. A lot of people ask me, “What is 996?” I’m like, “Go listen to the show and you’ll find out.”

Rita Yang: What are some of the practical tips you would give for people who are thinking about starting their podcast as well?

Zara Zhang: Sure. When I thought about starting a podcast, I had zero experience in podcasting. I have never hosted or produced any audio form before. So I give a lot of credit to Kaiser Kuo, who is the host of the Sinica podcast. He taught me literally everything I know about podcasting. I knew Kaiser back then. I just I went to him in and asked how to actually start a podcast. So he taught me things like what kind of mic you should use, and how do you actually script it, how do you put your guest at ease, ask a question, do research, etc. I think that’s a huge part of the reason why our show sounds really good from an acoustic perspective.


You’ll notice that we actually have a very high sound quality, because we are using very good equipment. So in reality, actually all of our mics fit into a carry-on suitcase, and that’s the amount of equipment we need for each recording. I don’t think there is a lot of entry barriers to starting a podcast, because the equipment is so available on the market right now. Anyone can buy it. But I think the real barrier is really getting access to really good guests and then having a really good value proposition, like who should listen to your show and why should they do it. Because a lot of podcasts want to be everything to everyone, but I don’t think that creates enough differentiation in this world when there’s so much content out there.

For us, it was very clear that we just wanted to be the best English podcast on tech in China, and that was a very clear value proposition to people who were interested in tech in China. And I think we put a lot of thought into the kind of questions we asked our guests and who can appear on this show. So we kind of got out of our way to invite guests who we think meet our standard. And then we think a lot about how to best tell their stories. And we listen to what they’ve said before so that they don’t repeat themselves, things like that – to make them say things that are really original. So that’s a lot of the mechanics. And then a lot of people have asked me, do you and Hans, and the guests need to be all in the same room physically to do this, and how can you make that happen when Hans is traveling like crazy all the time?

So my answer is you don’t need to do that. Right now, we’re actually recording this remotely. Hans is in the U.S. and we’re in Beijing, and it still sounds like we’re together. Because in the post-production we lay the tracks over each other, because we record each person separately with a separate track. So it is actually better for acoustics if we’re all in different places. If the three of us are in three different cities. So actually most podcasts do that. The hosts are not in one place. So that’s kind of a misunderstanding that a lot of people have is you have to be physically in the same place to be on the podcast together.

Hans Tung: I definitely want to add a special thanks to Kaiser. Kaiser has been an amazing friend to both Zara and myself, and a mentor to us on podcast making. He also connected us to other people in his world, some of them are in D.C. and New York, that let us see what we’re doing in China tech from a different perspective. So all that is in a spirit of sharing and building a community of people willing to make the world better. So for that, we highly appreciate what Kaiser has done for us.

Zara Zhang: And another question that we get frequently is, since the podcast gets released on a biweekly basis, do you record an episode every two weeks? The answer is also no, because there is no way we can get Hans to record something every two weeks. The way we do it is by batching. So we might record, I don’t know, five episodes in one week, and then we release them gradually, over the next couple of months. And that’s how most podcasts do it as well. So when you’re hearing an interview it might actually have been recorded a few weeks ago. So that’s just how podcasting works.

Rita Yang: So what should people expect for the new season of the podcast, Hans?

Hans Tung: I think that with you on board, and also, we are seeing that there’s a lot of interest in our content beyond just U.S. and China, I think next season will be much more about the next billion users and how that’s evolving, and what we can evolve – lessons we learn from U.S. and China for that market, those users and those founders. I saw a question earlier, what are our top cities or listeners. And right now it’s Beijing, San Francisco, Shanghai and New York. But we do see that there is growing interest in what we’re doing from LatAm, Southeast Asia and India. So it is has been very rewarding to see how this podcast evolves, and then we are getting more and more interest in sharing lessons beyond what we originally set out to do. And for that, I am grateful for the feedback and the interest from the community that Zara and I have started to build.

Rita Yang: So now we’re going to hear questions from our listeners’ community. It is an incredible community of people who submitted incredible questions. The first question is from Kenny Chan. He works at Grab in Singapore. This question is for Hans.

Kenny Chan: Hi, this is Kenny from Grab in Singapore. Thanks for taking the question. As the global economy faces a potential recession and fundraising may become more challenging over the next few years, how do you think this will affect companies that are currently venture funded? And what sort of new market opportunities are there for new startups that might not necessarily have come up if the economy continued to be strong?

Hans Tung: I think for GGV, we’ve been through four crises, ups and downs in our career. Whether it’s the currency crisis of 1997, ’98, ’99, or in the first bubble bursting in 2000, 2001, then the financial crisis in the U.S. in 2007, 2008, 2009, and then some of the slowdown that we saw in China in 2015-2016 timeframe. So every time we see correction like this, we end up investing in the better companies who have what it takes to get through this period. Usually there’s less funding. It also means that there’s less bubble, there’s less companies that shouldn’t be able to raise money. They won’t be able to raise money, and therefore the cost of talent, the cost of user acquisition, the cost of everything goes down, because there’s less bubble and there’s froth.

And the good founders who are focused on building the business for the long-haul, focused on biz fundamentals, end up being able to do more with less cost, and end up building the stronger companies. For example, I invested in Xiaomi in 2010. It was right after the financial crisis in the U.S., when the world was less positive on mobile internet on Web 2.0. And Xiaomi ends up building a company from scratch with social networking, and mobile services and hardware all combined into one. So we consistently feel that whenever there is a downturn, the best companies will end up doing better in the process.

Rita Yang: Second question is from Jackie Shen from Hong Kong.

Jacky Shen : My question is, what is the level of skepticism should you maintain when you make investments into startups? The reason why I am asking this is that early stage startups tend to have very limited information, and some might not even have answers to all questions.

Hans Tung: That’s a very fair question. I think the best investors I’ve observed tend to have an inkling, or some kind of thesis, or when they meet an amazing founder, they’re able to pick up what a founder is saying what’s the underlying societal trend that is causing that disruption very clearly. Whether it’s investing in Uber, in Airbnb, in DiDi, in Xiaomi in any of these companies that have become a disruptor. The investor need to have some kind of ability to see what the future would be like, to see what’s around the corner, and be able to get that, “This is something that’s going to be massive.” I’ve been in situations where I have more conviction than even the founder of what is going on, because you see that the world will just be different, and what is being done makes a lot of sense. So when you have that kind of conviction on certain thesis, then you can rank them as which one will make the most impact.

And if you have the discipline to follow that kind of thesis and ideas, then it becomes easier to judge which deal to do, and which deal to pass. Having said that it’s still not easy, because it is tempting. Either you’re a more pessimistic person to be very careful on your bets, or you’re an extremely aggressive person who just can’t say no. So how to manage your own desire, and fear, and want, and so you can try to be as objective as possible, I think requires 10,000 hours of training and iteration.

Rita Yang: Third question is from Sumit Jasoria. What is your plan for investing in startups in Southeast Asia and how do you plan to create a platform to mentor your invested startups over the region?

Hans Tung: Right. I think led by investments from my partners, Jixun and Jenny. Jixun led our investment in Grab in series B, back in 2013-2014 in Southeast Asia. Obviously has done extremely well. Jenny has made a few fintech bets in Southeast Asia, too. I’m spending time looking at it along with my partner Eric Xu as well. It is a region that some of us grew up in. Jenny and Jixun were born in Singapore. I lived there and got a PR for a period for about four years. And so traveling around the region, we know that Southeast Asia is not one country. There’s eight, ten different markets. And so we see what’s happening in Indonesia, what’s happening in Vietnam, or Singapore, Thailand, Malaysia, Philippines it’s all sometimes different. So being able to decide which markets to focus on, which trends, which thesis to bet on becomes important in order to focus, and prioritize, and use the time wisely. At the same time, we have built up talent programs in both the U.S. and China, what we call Founders + Leaders. They helped our founders to learn from those who have scale businesses.

So we feel that by sharing what has been built in U.S. and China in selected areas, it is a great way for founders from those regions and other new regions to learn from it. And we will over time probably have events that will invite founders from LatAm, from Southeast Asia and India to join us, either in the U.S. or China, or take our program to them and be able to build a community that can allow founders to share lessons and be able to learn from each other, and learn from experts who have built it and done that before. I think that what’s interesting about the VC job, is the ability to help to form communities, foster communities that allow people to share their life experiences and lessons. And it is incredibly satisfying to see other people benefiting from that and build that connection between people, that kind of human kindred spirit is what makes this job extremely satisfying and rewarding.

Rita Yang: The fourth question is from Jun Zhang.

Jun Zhang: Hello, this is Jun Zhang. My first question is what kind of personal attributes do you identify from a successful CEO and that will make you seem invested to them? And my second question is for GGV capital —what is the investment strategy you’re looking to invest in India and Southeast Asia in terms of sectors? You focus on stages, check size you would like to write?

Hans Tung: Sure. I think the CEOs, the ones we back, tend to be the ones that are incredibly thoughtful about what is the problem that needs to be solved and what are the exact pain points. The better ones — the best ones even have experience solving it or know or tried it with different methods before but learned that some innovation into structure needs to happen to make it work.

Secondly, the second characteristic we see in strong founders are the ones who learn and adjust extremely quickly. They’re incredibly inquisitive, keep on asking questions. If something is not well-working, they keep on asking why. So they don’t take just what they see for granted. So they always tend to understand what’s the underlying thesis, underlying dynamics, what’s happened to society that makes this possible, and what are the other technology innovations happening around the peripheral that they can take advantage to solve this problem better than the last time.

And thirdly is that CEOs who has incredible leadership can gather a team of people to be willing to work on their mission together to solve a problem and feel that they’re making a huge difference. Therefore this mission is worth doing if we’re going to stick together and solve these problems. A startup is not easy; it’s extremely hard and sometimes a very lonely job. The CEOs or the C-level officers sometimes stay up late at night and they have problems and there are not many people they can talk to. So having that ability to build a support network for yourself so you can get advice from others, bounce ideas off of each other to help you to make best decisions is incredibly, incredibly important.

So founders who are impressively very knowledgeable what they are trying to do and are very inquisitive at figuring out how to do things better and take advantage of what’s happening around them. Then thirdly, have that amazing leadership charisma, that quality, to get people to want to work with them and work together. Those are three things that jump out as a common successful cases of criteria or factors for successful CEOs.

Now what are some common problems that we saw? It’s very easy to get confident when you raise a lot of money. Sometimes disasters happen right after a company or team brings a lot of money because to them, seemed like an immediate success, overwhelmed them. It’d end up being they’d be more wasteful or not use the money as efficiently as possible — ends up throwing money at a problem and not try to look for the root cause of the problem.

Sometimes not having enough money forces you to be a lot more disciplined and try to solve the problem much more elegantly, and therefore much more effectively.

The second problem we see is sometimes a big things happen and it happened too fast too soon and you simply were not ready for it. Ends up that a bigger player was someone else and are taking advantage of that. So you miss out at taking advantage yourself.

Thirdly is some of the problems are internally inflicted. Founders who initially when there’s not much going on can stick together, get stuff done. But when there is success, there is credit to go around, there’s fame, people start becoming harder to put up with each other and not be able to figure out — each one have their own sense of what the future, the direction should be and not be able to just pick one and stick to it. So a lot of the problems we see are self-inflicted. At the same time, the ones who are not as ready, ends up missing on the turn they’ve been waiting for.

All those I think are unfortunate and actually solvable. So the better founders learn over time from the previous iteration and mistakes, and become much better the second or the third time around.

Rita Yang: This question, from Huang Zexin.

Huang Zexin: This is Huang Zexin from Nanyang Technological University. First of all, I would like to thank you guys for creating the 996 Podcast. I’ve learned so much from it. I heard you guys giving tips to listeners in the U.S. and China, and I would like to ask — is there any tips for a Chinese undergrad based in Singapore that wants to break into the VC field after graduation? And in particular, what kind of exposure and experience would be the most beneficial? Thank you so much.

Hans Tung: I would say most people shouldn’t try to be a VC or you should not be a founder straight out of school. I think that it is important to pick up the right experiences, life lessons along the way. That will prepare you to be a much more effective founder or VC. So I would encourage people that have come out of college, you want to be a VC, get a job initially that will allow you to think critically.

Whether it’s a consulting job, or investment banking job, or even a product manager job at one of the leading Internet companies that teach you how to identify problem and try to solve problem and make recommendations to get things done. So those are all — those kinds of business analysis, critical thinking skills are very good when you have key studies and you have deals you are working on to get a chance to sharpen them.

And learn how to present that to your teammates, your colleagues, present to the clients or internally try to come up with the idea, product you are building to solve a specific problem that your older colleagues at a company will think that is worth solving. So having these kind of critical thinking issues skill sets and be able to prioritize and work within groups to solve a problem, make a recommendation are all incredibly useful toolsets to have.

And then once you do that, if we can also pick up some kind of startup experience to understand how a founder — what kind of issues he or she needs to try to solve, how to put a team together, and how to figure out a way to work together, identify a problem, and come up with the right way to solve it. And try it through trial and error to always use iteration to perfect the way of solving it until you get better at making that work.

Both having the business analysis recommendation experience from a professional job plus a startup experience, trying to make it work with no brand and on your own. Try to make your work with any resource you’ve got, try to be extremely creative and efficient. Having both such experiences, I think, makes it possible to build a successful VC career.

I think VC’s a job that can last a long time because you continue to build a brand over the years. You have better acumen, you’ve learned from your track record. It’s not something you should rush into. I think the most successful VCs tend to be the ones who have prepared themselves well early on. So by the time they start doing it, they are more ready for it.

If I look at my own career, the first 9–10 years were in investment banking, tech research, and startups. If I didn’t have that first 9–10 years of doing that, I don’t think my my second 10 years as a VC would have been as successful.

Rita Yang: Well, Zara got her first job with GGV as a fresh undergraduate, right? Zara, do you want to share your experience from that perspective?

Zara Zhang: Sure. I didn’t really imagine going into VC as a first job and I’m very curious why Hans hired me. Because I think VCs don’t traditionally hire fresh graduates so do you want to answer that?

Hans Tung: Well I think everything you did afterwards, the fact that you helped to build the 996 podcast, newsletter, and community justify why we hired and recruit to hire you in the first place. I think Zara’s ability to think critically, understanding of both U.S. and Chinese environment, and ability, right — to articulate thinking, and quickly process a lot of information in a short period of time makes her an ideal analyst candidate.

I’m very glad that Zara is working at ByteDance now, because now she is picking up good operation experience and exposure to Internet sector. And ByteDance’s one of the best in the company’s inner world. So for Zara, if she eventually wants to be VC, which I’m not sure she does, having this kind of experience will help her whether she wants to be a VC or be a founder at some point in the future. So having these right experiences along the way, I think it’s incredibly important for you to build a successful career almost at anything you do.

Zara Zhang: Yeah. Thank you so much for giving me the opportunity. And I think for me, I didn’t really know what I was getting into going into VC and it was very different from what most people outside perceive it to be. And I actually think a lot of the skill sets are very transferable between all the different industries. I don’t think it’s necessarily a good thing for new graduates to go into VC. I think it’s probably better as a last job than a first job.

Hans Tung: I would definitely agree with that.

Rita Yang: So the sixth question is from Jenny Niu.

Jenny Niu: Hi, my name is Jenny. I’m a Chinese MIT alumna based in Singapore and is looking to relocate to China within the next year. One common theme from the podcast is that entrepreneurs in emerging markets are increasingly learning from China and looking to Chinese business models for inspiration.

This is because whatever pinpoints that the emerging markets are trying to solve, China has probably faced that same problem before in one or more tiers of the cities — and someone has found a solution to it. The question is, what about  developed markets like Singapore, Japan, Korea — does China have anything to offer to these developed markets? If so, what are they? What can developed markets learn from the Chinese entrepreneurs and Chinese tech companies? Thank you.

Hans Tung: I think if we look at the case of Grab, it is — start off in Singapore, yet Anthony is someone who was educated in the West and understood that there are models that he can learn from, but at the same time innovate on his own in Southeast Asia. So teaching helped to bridge an investment from BD into Grab.

So I think Grab benefited from working with BD as well. And Grab also innovated by setting up an engineering development center in India to tap resources in both China and India to help itself grow in multiple countries in Southeast Asia. So I think that there are things that even developed markets can learn from China.

We look at the Lime in the U.S. that we are fortunate to be an investor in, the two co-founders are Americans but also same time, with roots from China. They saw what was happening in China with Mobike, with Ofo, and then later on with Hello. They learned all the right lessons and innovated and come up with the scooter sharing in the U.S. and now in Europe. So Lime is a great example of a company that knows east and west, and can leverage a supply chain benefits of being in China and the understanding of America, American market and have a global mindset to be willing to go to Europe.

So seeing Lime scooters everywhere in the top cities in the U.S. and Europe, have been incredibly satisfying to see that yes, these are models and ideas that are very global in nature. You look at what Facebook has been trying to do with Facebook Messenger, what Instagram has been trying to do with shopping — a lot of that were inspirations from China with WeChat and social commerce in China.

So it is now incredibly interesting to see the things that are innovating in far more countries, like China, that historically people think is a copycat nation. At the same time, I don’t think that innovation will only happen in the U.S. or China or even in Israel or Europe. The innovation will come from everywhere.

You look at what Oyo has been able to do out of India, expanding globally with their hotel room reservation app. It’s been incredibly interesting and fascinating to see a company coming out of India be able to do that well. And so I think that countries like Southeast Asia and India or LATAM, who knows? in the next five years may produce global champion in their own sector as well. So that makes the world much more flat and fair a place.

Rita Yang: Seventh question is for Zara.

Jonas Wolf: Hello. This is Jonas from AngelHack. I would like to ask how did you pick the podcast theme, content, and also the marketing strategy for it? Thank you so much. Love the content and all you’re sharing . Keep it up.

Zara Zhang: I’ll touch a bit on the marketing side. The short answer is we didn’t do much marketing. I remember when I first started the podcast, I asked Kaiser — how do we make people actually listen to this? How do we attract a lot of listeners? And his answer was simply just consistently produce high-quality content and the people will come.

So I think that has always been the philosophy for this show. We don’t do Facebook ads, we don’t kind of growth hack our way into virality. I don’t think we need to go viral as a VC firm because our goal is not to attract a million clicks. Our goal is to attract really high-quality entrepreneurs and talents that we can invest in and partner with.

And a lot of that has more to do with the depth of our connection with our listeners rather than on the quantity of listeners. So we’re really focused on having the absolutely best guests on the show and getting them to talk about things that our listeners really care about. And we didn’t do much marketing beyond like tweeting out each episode. And I think the community, it just spread organically and most people hear about it through word of mouth.

Hans Tung: Yeah. I think that by picking the — identify the product market fit or the opportunity, having a deficient product, helps to get users to talk about it. And we are quite fortunate in that respect, that by focusing on building the right — having the right content makes it a lot easier to build the right community. So it’s been fun working with Zara on this.

Rita Yang: The eighth question is from Barbara dos Santos.

Barbara dos Santos: Hi 996. This is Barbara dos Santos. I am originally from Brazil, but I am a PhD student in Washington DC. My question is how can founders and VCs in Brazil build strong bridges with Chinese investors and entrepreneurs? Is there something that makes Brazil different than other emerging markets in this sense?

Hans Tung: I think that — we see a number of Brazilian founders and VCs come to China. It’s great to see that happen. GGV loves to host them when they are in China, and share what we know, and introduce them to our portfolio companies in China as well.

And it’s also quite interesting to talk to founders in different emerging markets. I had a conversation with a founder of Loggi in Brazil which is a big portfolio company and the founder of Shadowfax in India. And it’s funny that both have told me that they are almost mirror image of each other — do something very similar in the logistics, warehousing, automation space. And they feel that when they read each other’s PowerPoint, they’re looking at exactly their own company. It’s how eerily similar they are coming with the ideas independently of each other for solving similar problems.


And when that happens, it just further validates our thesis that this world’s a lot more global than people think. The problems, opportunities caused by urbanisation, a rising middle-class are pretty similar and comparable. Maybe the specific implementation may differ, because different conditions in the local countries are different. But still, there’s a lot of similarities and just fun that the people in the same field — be able to exchange ideas with each other.

Rita Yang: The next question is actually from me. I’m also one of the original 996 listeners. How do you guys assess the quality of your decisions. Hans, you want to start?

Hans Tung: Quality of decisions in what context?

Rita Yang: Just in life or investment — do you have a principle in general?

Hans Tung: There is no what-ifs. You live your life. The decisions you make has incredible impact and it affects what you do next. So you can’t just go back and take a do-over like you can do with podcasts, obviously. So for me, I spent quite a bit of time thinking about what will happen in the next 5–10 years, and I constantly use that to guide the way I make decisions.

As Zara and Rita also know, I’ve lived in nine different cities in my life and most of the cities, I lived there, working as an adult. So also means my career has changed a lot, evolved a lot over the years. So it is very easy for people to —especially smart people — come out of school, to compare themselves against other peers — their peers from the same school, same classroom.

And I had encouraged people not to do that, even though it’s very hard. Because if you approach life thinking about what could happen in the next 5–10 years, and therefore go where the opportunities are — and try to do the right thing, try to help people, try to share what you know, try to learn from others by being good and by being helpful, good things will happen to you because you are going to be what the future is. So the pie will get bigger. There’s more to share and it just ends up being much better.

When I went to China in 2005, a lot of my friends from Taiwan, where I was born, and the U.S. where I grew up — both in California and in New York — told me not to. They said that’s a tough place, you’re not a mainlander, when you fo there you’re going to get eaten alive. This is not going to work. It is a very tough market. It is highly regulated. It’s especially not friendly to people from the outside.

So it is very easy to hear other people’s popular wisdom and follow the crowd and do what’s “easier.” But if you have a sense of where the future could be, how the world could be different, you want to be out there helping people and sharing ideas and learn from them. I think good things end up happening to those who are willing to take that kind of calculated risk.

Rita Yang: Ok. So the next question is for Zara. Hans has always suggested Chinese returnees to work in fast growing startup first and then start their own business. You have apparently followed that advice by leaving GGV and joining ByteDance. Now you have worked in ByteDance for a couple of months, what advice would you give to young Chinese people who have studied or lived extensively outside of China like yourself?

Zara Zhang: I think the most important thing I learned from Hans was probably the most exciting opportunity of our age today, for people like myself, is the trend of Chinese Internet companies expanding globally and becoming real global companies. And I heard that message over and over again. Every time I went to Stanford and Berkeley and Harvard — I’ve learned that the world needs a lot of people who can bridge China and the outside world especially in the tax-base.

And for me, I’ve always loved the Internet industry and how it has changed my life and the society I live in, especially in China and growing up with WeChat and all that. So I think my advice is always, no matter what you do, do something that’s China related. Make use of the fact that you’re from China. I can’t believe the number of my classmates from college who, when they are trying to decide what to do for their career, their cultural background is not even in their consideration.

They pick a job where they think to be the standard path or a less risky or seems to make a lot of money, but they don’t think about the fact that what really differentiates us from our American or other classmates is the fact that we’re Chinese. We can speak the world’s hardest language and we have cultural affinity with 1.4 billion people. I think that really should be everyone’s decision making process.

We’re really lucky to be able to kind of service this bridge. And there are a lot of opportunities in the space even though it may not be obvious in the beginning. I wanted to go into tech, but as someone in the humanities, I had no easy path. I couldn’t code or take up technical jobs but I went around about and went in — I did journalism internships, I wrote about tech in China, and then Hans saw my writing. So I joined VC and now I’m in tech, finally.

So I think if you look hard enough, there are actually a lot of opportunities for this space and especially now that Chinese tech companies are going global. They all need talent who have experience living, studying outside of China, who are fluent in English, who can empathize with users outside of China, to take these companies global. So I would really recommend everyone to kind of take advantage of your background.

Also, at ByteDance we’re hiring a lot of these people so if you are looking to join a high-growth company anywhere in the world, because we have offices all over the world — not just China, U.S., Singapore — but like almost every country you can imagine. You can talk to me. I’m sure we can find something for you. You can either reach out to me on LinkedIn or on WeChat. I’m in the 996 groups.

Hans Tung: Is easy for some of us to see the talent in Zara, because not everyone was born an engineer at heart, a technologist, but at the same time we can analyze and appreciate the impact of technology in society. What Zara had was kind of a sociologist kind of a background. Looking at the world, looking at societies, analyze a system, and then be able to write extremely well to articulate that kind of contrast.

And so part of the job of being a good VC, is to spot talent — not just in the form of founders, but also talent in other areas. And when you can, in life, constantly think of ways to help other people, no matter the age, and put them in the best position where they succeed, in the long-run, you benefit as well. Because when have win-win relationships, it sounds trite, but when you actually do that and do that consistently, the good thing happens to you as well as the people around you.

And so if you have that ethos and constantly try to do what’s right and good, over time it’s like investing. The ones that do well, the relationships that work, really come back and make all the other past failures or mistakes much less insignificant. So in life, you will need to approach that not thinking always about yourself, but to think of how to make the pie bigger and make the world better in a business savvy way. Not just about saving the world and from a purely a deal sense, you can actually build stronger companies, industries, if not societies. So if you have that ethos, I think that it will serve you well and guide you well when you make decisions in life.

Rita Yang: Next question for Zara. Did you ever imagine that you would be able to do what you do now and having the career track you have?

Zara Zhang: No. In college, I didn’t even know what VC stood for. So I think the lesson of me growing up is I should never try to predict where exactly I will be or what I will be doing, because there is no point. Growing up, I had never imagined I would attend Harvard in the U.S. as someone growing up in Changchun in China. I never thought I would be going to high school in Singapore or go into journalism.

I never imagined my first job would be in VC and that I would be at a tech company now or I would be doing a podcast or any of that. I think I kind of just go with my gut and let serendipity guide my journey. So I think I met Hans because he read one of my articles on the information, so that really taught me if you do good work, someone will find you and give you a life-changing opportunity. And for me, the most I can do is whatever I’m doing, give it absolutely my best. And when the opportunity approaches me, just make sure to grab it and don’t let loose and good things will happen in the end.

So now I’ve learned try not to over-plan and kind of just be open-minded and just let things flow, because the world is changing so fast. In 10 years there might be a whole new industry, or concepts, or jobs that we’ve never heard of today that might pop up. And so I don’t think there is use in kind of planning where exactly I will be or what I’ll be doing. But I think having overarching principles for how do you make decisions will be enough.

Rita Yang: What’s your overarching principles for making decisions?

Zara Zhang: It’s constantly changing, but for now I want to do things that are interesting and challenging and kind of different. Yeah.

Hans Tung: Let me add a couple of points. I think Zara probably does not know this. I’ve been looking for someone like Zara for four years, during my first four years at GGV. It was not easy to find someone who can articulate, has that voice — that has understanding of U.S. and at the same time can explain things from a China angle and be able to tell a story that’s more “fair” to China’s experiences — yet, have a key understanding how the U.S. audience or global audience may interpret it.

So I think over time, there will be more talent who can do that. But it’s been incredibly hard to find it. So as soon as when Christine Hinton, my colleague in PR, and I read Zara’s article, it was very obvious to us that she is likely going to be the one.

So I think this is also when we see spot investment opportunities. If you have a prepared mind — that you thought through the issues and you know the pain points — when you see someone or meet someone who potentially can have a solution, that click, that willingness take a chance is almost automatic. We just know that it’s such a hard problem to solve, other people have not solved it. This person clearly has the best chance of solving it, so it’s worth the bat. When you can do that consistently, good things end up happening more often than not.

Zara Zhang: Thank you, Hans. And I want to add on how happy I am that Rita is here. When I thought about leaving, my biggest misgiving was I really wanted this to be continued and I wonder if we could find someone to continue the work we’ve been doing. And I think we’re really, really lucky to have found you, too — was a really good fit for this and I’m really glad it’s taking this to new heights.

Rita Yang: This is a podcast of three people speaking good things about each other by the way. Okay, so that’s a wrap. Thank you for being on the show, Hans and Zara.

Hans Tung: Thank you. Thank you, Rita, for doing this.

Zara Zhang: Thank you.

Hans Tung: Thanks for listening to this episode of 996.

Episode 41: Josh Luber of StockX: on Buying Sneakers the Same Way We Buy Stocks

On this episode we have Josh Luber, the co-founder of StockX. StockX is the world’s first online stock market for high-demand consumer goods, namely sneakers, handbags, streetwear, and watches. On the platform, buyers place bids, sellers place asks and when a bid and ask meet, the transaction happens automatically. The Detroit-based startup was launched in 2016 and has expanded to Europe by launching its first authentication center in London. StockX is a GGV portfolio.

Before launching StockX, Josh has built 3 other companies and worked at IBM as a strategy consultant for almost 5 years. He holds a dual degree in law and MBA from Emory University. None of this is as impressive as the fact that he started collecting sneakers from 10 years old and has more than 350 pairs of sneakers in his home. 

On the show, Josh shared with us how his online price guide for sneakers became a stock market for things, why the obsession for streetwear and sneakers is a global phenomenon, his definition of global company being a collection of local companies, having celebrities like Eminem as investors and how he found StockX’s new CEO Scott Cutler, who used to be the CEO of StubHub, eBay’s online ticket exchange platform. We also asked about StockX’s plan for entering China and some pro tip for buying sneakers on StockX. 


RITA YANG: First question I wanted to ask is actually for Hans, cause I know you’re a big basketball fan, so you’re not really a sneaker head yourself, so can you tell us the story – how did you meet Josh and what about StockX kind of excites you?

HANS TUNG: Sure. Our colleague Robin was tracking consumer spending and this trend of people buying street wear shot up on our radar, and obviously there were two companies in this space in the US that’s doing stuff. When we met through – it was Battery Ventures who put us in touch. Roger Battery who is an old friend of mine put us in tough with Greg and Josh. It was very obvious that there was just a lot of stuff that we could do together. And in the process of getting to know Greg and Josh, another friend of GGV – Scott ended up showing up on our radar and we caught up and he has recently joined StockX as the CEO. So it just all came together and it fit extremely well.

RITA YANG: Do you remember the first time you have met Josh? Are there any interesting anecdotes you can share?

HANS TUNG: Yes, I first met Greg and then Greg connected a meeting with Josh. So we met at the Menlo Park office of GGV and they were on the way to China or just back from China, so there was a lot of stuff to talk about, about China and its extremely refreshing to see a company from US that were so interested in what’s happening in China and recognizing that what China can do – that you can have the best supply in the world by being in the US. You have all the relationships with the brands by being in the US. You have the US pop culture that’s leading the world in what’s fashionable, yet there’s just a huge, huge market in china that’s number one in the world where you can somehow marry the two – you can build an unbelievable global business.

JOSH LUBER: Hans was helping us in China before – in fact actually before he and I ever met. Roger who was on our board had connected us to Hans when Greg Schwartz was our COO and third co-founder. Where Greg and I were coming to China and Hans had helped set up that trip before he and I had ever actually met and it wasn’t until we got back, it was after that trip that we actually got to meet for the first time in person and then those relationships stuck. But almost all of the investors that we have, VC’s – strategic and otherwise, they were all people that were actually helping us before those investments took place anyway.

RITA YANG: So why were you interested in China or coming into China in the first place?

JOSH LUBER: This is one of those most obvious questions in a lot of categories, but certainly for us – we sell and we’ve super fortunate to be able to sell the most highly coveted products in the world. Its Nike, Lois Vuitton, Rolex, Supreme – the products really sell themselves. We’ve built a marketplace. We’ve build a model that has been able to grow very rapidly and build a lot of supply and then the demand has been here and China has become 15% of our business almost without us doing anything yet, to really localize and really grow that market. For us right now it’s the highest part of our business.

HANS TUNG: Tell us a bit more about what you were doing before StockX?

JOSH LUBER: I have started and run three other startups before this. None of them had anything to do with sneakers, almost intentionally, so almost like intentionally separating business and pleasure in my life but the business that would have actually become StockX was a company that was called Campless and Campless was a price guide for sneakers. This is 2012 – 2013 – 2014. we were analyzing eBay data to figure out what are shoes actually worth, to create some idea of a true market value for sneakers and we were just fortunate I guess to be the only people doing real analytics around the secondary market for sneakers at the time and that as the core data layer, the core understanding of market value would eventually become the foundation of StockX as the marketplace which is a marketplace built on market value. On how stock market mechanics work, but understanding the true market value of any asset. Of any consumer good – that’s the real unique part of this.

HANS TUNG: Right. You money ball.

JOSH LUBER: You’ve got to understand the numbers first. You’ve got to understand the numbers, doesn’t really matter what you do on the field.

HANS TUNG: Josh, for people who actually don’t get sneakers, can you actually –

JOSH LUBER: Or sports.

RITA YANG: Or sports yes. Can you help us understand why sneakers? And I know you have a question about – is sneakers closer to drugs or to stocks? I find that question fascinating.

JOSH LUBER: At the core here – I mean this is supply and demand, this is econ 101 – at its very, very most basic and most pure. Even perhaps more pure than the stock market itself. In the stock market itself the market price of a share or a stock is ultimately actually a function of what people think that company is going to do. What their performance is going to be. Sneakers is just supply and demand. You have these products that the brands, in particular – Nike and Adidas and Jordan – really leverage scarcity in order to put out less product than there is demand for those products, and just based on economics, if there is less of something that’s available than people who want it, then that price will go up. And that’s what’s happening here.

Nike has been doing this for 34 years, dating back to 1985 in the first year of Jordan’s but it was always a very local, underground sort of thing and then in the last five to six years, really on the back of social media, Instagram, the sneaker market became a lot more mainstream, as more people wanted access to this market. And that’s really, really, really what StockX is about, which is access. And creating access for products that have really high demand, that’s hard to get, that’s hard to understand, where to get it? What’s real? What’s the fair price for it? And that’s really the core of it.

The question around stocks or drugs was one of the probably most popular articles that we wrote back in the day when we were just a price guide, at Campless, and it was this idea of actually looking at the data around sneakers to see that the mechanics of essentially the supply and demand and how people were buying and selling sneakers, looks frankly a lot like the way that people buy and sell both stocks and drugs, but the marketplace is fortunately much more legal for sneakers.

RITA YANG: You are a sneaker head yourself? Also a data nerd as well as a serial entrepreneur. Among all of these three things, which role do you think is actually the foundation of StockX?

JOSH LUBER: Well it’s definitely data, there is no question about that. We are super fortunate that we have been able to grow and become one of the maybe the largest sneaker market place in the world, but it’s almost a red herring. Sneakers are – it’s called StockX and not SneakerX – it really is about the motto, it really is about the economics and the data of creating a marketplace that’s built on those stock market mechanics and sneakers is really just the first category.

Now if all that 14 year old kid knows is that we sell sneakers and they buy the next pair of sneakers from us, we appreciate that and we appreciate that business, but it really is about the bigger idea, which is why I get to come here and honk horn at Speak at Rise and go speak around the world and explain to people that this is about a new form of commerce that is – for lack of a less cliché way of saying it – truly revolutionary. This genuinely doesn’t exist outside the actual stock market and that’s the business here.

HANS TUNG: Right, so back to the question that you tried to answer. In your Ted Talk is sneakers more like stock or drugs?

JOSH LUBER: The interactions of the participants in the market is a lot more like drugs. When you see people that are buying three pairs in order to fund their collection and pay for one. If I can get a hold of three and sell two, I can afford one. The data and the supply and demand and understanding why a shoe sells for a certain price, is actually a lot more like stocks. Where you have this pure supply and demand and we then have built the marketplace around that, but that idea that is really just about how many people want it versus how many pairs exist. So it’s both. The data is more like stocks, the participant behavior is more like drugs.

HANS TUNG: A lot of people focus just on the sneakers part of what you guys do, but what intrigued me upon meeting you and Greg that it was very obvious that there’s many other things you could do beyond sneakers. Explain that logic.

JOSH LUBER: We didn’t make any of this stuff. All right. The stock market has been the most efficient form of commerce for 150 years and understanding supply and demand has been – everybody would have loved to understand supply and demand for any product they sell, but demand has always been a really hard thing to understand. Supply is easy. We know how many widgets the brand creates, but demand has been a forecast. A projection of off last year’s sales. A hope or wish or a percentage of marketing spend. Whatever it is. But in the stock market, demand is real. You know exactly how many people are willing to buy Nike stock at X price in Y time. And so by applying that same model to any consumer good, but understanding demand for any consumer good, you can just create a more efficient marketplace. So any product, any consumer good that you would ask the question – what is it worth? What should I pay for this?

That is a question that is best answered by supply and demand. And so some of the other categories that we sell today, watches, handbags, street wear, collectibles – these are products that are inherently worth more than they are often released for and they become more valuable because they’re a collectors because they’re scarce, because brands put it into the market – but it also works on the downside. It also works on discounting. We’re hearing in Hong Kong and its quite hot – we’ve talked about this quite a lot. So all winter jackets are 40% off on Nike.com or whatever they are. There is some discount because we’re off season, but why is it 40% off? If we understood demand for winter jackets here in Hong Kong in July, well some people might bid 10% off and some people might bid 20% off. You could have true variable pricing if you understood demand around those – that is just a more efficient way to be able to price those particular products in this particular environment. And that’s what it’s about. This is variable pricing.

RITA YANG: So the market it actually creates – I am thinking are there professional sneaker speculators now? Do people just do this to make a living?

JOSH LUBER: Professional speculators implies that it’s about necessarily buying and selling. When we say that StockX is a stock market of things, immediately people think about investments. That’s not necessarily the case. At the core we’re a consumer goods marketplace. We’re an evolution of eBay. All we do is connect buyers and sellers for the purpose of buying and selling a consumer good. And so there are absolutely professional sellers in the same way that there are professional sellers on eBay and some of those are – like one guy in a basement or it’s a big company.

Now the concept of buying and selling in order to speculate and make money, that’s the evolution of the business. The evolution of the business is not only allowing people to essentially day trade sneakers, to buy and sell sneakers the same way that we buy and sell oil futures. If you trade oil futures, those barrels of oil really do sit in a warehouse somewhere right. No one ships them to your house and you ship them back. That is the logical extension of what we’re doing here.

HANS TUNG: So besides Greg your other co-founder, you have a third co-founder Dan Gilbert of Cleveland Cavaliers, how did the three of you guys meet, and how did it go from an idea to what it is today?

JOSH LUBER: Greg Schwartz is the COO and co-founder who runs the business with me day to day and has been doing this for the last three years, Greg and I both started to run three other startups before. We never had a billionaire as a co-founder. We never had this big of an idea and this much traction this quickly, but the short version of what was a long story of how Dan and I got together was that – essentially Dan and I had the exact same idea independently. And I had never met him and I had never been to Detroit, I had never been to Cavs game but we both had this idea about a stock market for sneakers and for me it was very ground up. I’ve collected sneakers all my life and I had this company Campless that was around the value of sneakers. Dan was coming at it from the opposite end which was the stock market side of it. And you know with Dan it’s been over four years and I can’t get him to sneakers, but that’s okay. Dan had seen this idea from the stock market side and had been a fan of the efficiencies of markets and said well why can’t we buy consumer goods the same way that we buy and sell stocks. And then he saw his 15 year old son buying and selling sneakers on eBay. In 2015 like every other 15 year old kid, he took a closer look at that and said – well that’s a pretty crappy market leader, that would be a perfect place to start a stock market.

Greg was running another startup with Indane ecosystem in Detroit and Dan and Greg had known each other and Dan approached Greg and said – hey listen, I have this idea, let’s create a stock market for sneakers and Greg and his team – those guys didn’t know anything about sneakers but if Dan Gilbert says hey let’s build a business together then you at least take that call.

Those guys stared that business, they get a week into it and realize well man, we need a sneaker guy. Who’s the sneaker guy that’s going to help us run the sneaker stock market. So they go out, they do some research, they found Campless, they found my work around sneaker data, we got together and then we realized that the sneaker guy is also trying to build a sneaker stock market, has also started three other companies and worked for IBM and wasn’t a random guy. So it was a pretty crazy and serendipitous way that we got together but it’s been a pretty great situation for Greg and I to just sit there and have somebody that really understood the bigger idea and to have the resources on day one to just run the business and not worry about the rest of it.

HANS TUNG: Then how does Scott Cutler you new CEO fit into the picture?

JOSH LUBER: We launched the business on February 8th 2016. We started working on it the summer before. February 8th 2016 StockX goes live. On February 10th 2016 I got an email through LinkedIn from a guy names Scott Cutler who at the time was the CEO of StubHub.

EBay owned StubHub and at the time eBay was our largest competitor. At the time eBay was the largest marketplace for sneakers. So Greg and I were like man! EBay is coming after us this quickly! What is going on? But the reality was that before Scott was at StubHub, he was one of the leaders of the stock exchange. So Scott’s email basically said – hey listen, I’m at StubHub, I understand marketplaces, I was at the New York stock exchange, I understand – he was like – I get what you’re doing. I understand why a stock marketer thinks is a better model, I would love to help, I would love to be involved.

Well we vetted Scott to no end, cause we were like man is this guy a corporate spy?  But the reality was he just understood the model and honestly has the exact – his background is exactly what we are and then he ended up going and working at eBay but marketplace, ticketing, that whole world and then the stock market. Scott became an investor in the very first round, and became for Greg and I one of our closest advisors over the past couple of years in just helping think through the business and we never – frankly we never really thought that we could be this big this quickly that we could get someone like Scott. And when Scott was thinking about leaving eBay a couple of months ago, I said –hold on! Don’t go do anything else, let’s talk about this and figure this out. It was a very – not unlike meeting Dan, a very serendipitous opportunity came out. We weren’t looking for a new CEO, but it was the perfect marriage and we announced everything a couple of weeks ago and it’s been pretty awesome to have his here moving forward.

Frankly I’d take nine other CEO’s, nine other people like Scott, we are at 820 some people, and it’s still dazier. Everybody is still doing seven jobs. It’s still like when we were three guys in a garage and that’s the fun part of it all. It’s all just about great people so it’s exciting to have Scott here to move forward.

HANS TUNG: Right now I assume everyone is based in Detroit and now you just started operations in Europe. What’s it like to build a global business from Detroit and how was that first experience with Europe? What was that experience like?

JOSH LUBER: As you know as well as anyone, to be a global company, particularly a global marketplace in 2019 you need to be a collection of local marketplaces and a collection of local businesses. So when we turned on the website in February 2016 everyone in the world – most places in the world could buy or sell from StockX, but we weren’t local anywhere. We didn’t have local operations. Local teams. Local marketing. Local customer service, local shipping – and so we put our first team on the ground in London in Q4 of 2018 and have been slowly building that team. There’s close to 30 people now in London including both a business team but also an operations facility where we authenticate all the products. Local payment methods. Local marketing. Local operations. Local shipping. We just rolled out Italian, our first local language about two weeks about and we’ll start to roll out other European languages and then we get to do more local payment methods and then behind the localized site, then its localized marketing, localized customer service and everything else.

Again, we’re fortunate to be able to sell the product to everybody once, but we need to be able to create that very easy local experience so that everyone can buy it how they want to buy products and get products delivered faster and more efficiently and more economically.

RITA YANG: So in other words you have a very global customer base I would assume?

JOSH LUBER: One of the really interesting things is we have been traveling the world and we have a team now in Tokyo and we have been super fortunate we get to do a lot of press. One of the first questions that almost every reporter asks me in any local market is – what are the differences in taste here? What are the differences in products? The answer is – at the top, nothing! It’s all the same. Its Nike, Louis Vuitton, Yeezy, Supreme, Rolex, Off-white at the top. You have a long tail of different tastes and different markets, but for what we sell and those products, it is all the same globally. We get to be the ones to figure out how do you take that global supply and make it available locally, efficiently and everything else.

RITA YANG: Why is that? Who are the tastemakers?

JOSH LUBER: Its Michael Jordan, its Kanye, its Virgil Abloh you know what I mean? We get to draft on the back of the most iconic brands in the world and that’s just really a function of the products we sell and the brands that have created scarcity around these products and again, if there is one word for StockX, it’s about access. It’s about creating access for consumers who either didn’t know where to but this product or knew where to buy it but weren’t going to sleep outside a sneaker store for three days or didn’t know how to wade through eBay, or knew how to use eBay but didn’t know what was real. Or know what was real but didn’t know what a fair price was. All these things which made buying these products inherently difficult and a lot of friction, we remove all that and just create access for the products that people want. It’s great, I love the fact that Louis Vuitton and Nike do our marketing for us.

RITA YANG: StockX started with only sneakers and is now entering into handbags, street wear and watches. It comes with a layer of protection and validity by its verification model which is necessary today given the prevalence of knock offs. How do you balance scaling up the volume of goods in your platform and at the same time provide the verification process for all of that?

JOSH LUBER: I love that we didn’t start with authentication because we get a lot of value out of authentication. There is no question about it. Every single product that we sell passes through one of our now five authentication centers. We have one in Detroit, Tempe, Arizona, New York, London and now Eindhoven in the Netherlands. I’m sure we’ll have at least one or two in Asia very soon and probably have another one in the US and there’s a massive amount of value in that because there are a lot of fake products out there and if you’re a 14 year old kid you could care less what a bid or an ask is or what this means or you know you’re never going to get a fake pair of Yeezy’s – there’s massive value there. But you’re not unlike sneakers being somewhat of a red herring because we’re about a lot more than sneakers. Authentication really just facilities a larger model. It’s almost just the ante to play at this point and for us it’s about the stock market model. It’s about this model built on how the stock market works and if someone isn’t a 100% certain that what they’re going to get is real, it changes their perception of value. It changes how much they’re going to bid for something. If you’re a seller, you think you’re going to get a scam charge back that someone said you sold a fake – it changes how much you’re willing to sell something for. You buy a share of Nike stock on the New York stock exchange, you never worry. If you thought you were going to get a fake share of stock it would change everything. So for us, it’s just part of the larger model and even when Nike and Adidas have a chip in every shoe and every kid with an app can authenticate every product, we will still stand and mill that transaction and we will still run that same process because it’s about the larger model. It will just be easier and quicker for us to do that.

HANS TUNG: Speaking of a few big names, you now have Eminem, you have Robert and others being part of the company as shareholders. What’s it like to get them involved and how has that helped your business?

JOSH LUBER: Not unlike how you and I first met, we created a venue for some of those folks to invest because they were already helping us. We never – never started this business thinking we were going to go out and get the most famous people in the world involved in this business, but it happened super organically.

The first one was Mark Wahlberg. We were in a meeting really early on with Dan and it somehow just randomly came up that Mark Wahlberg wears a lot of Air Jordan’s and Dan says – oh I know Mark. An hour later I’m on an email chain with Dan and Mark, two days later I’m in California at Marks house going through his sneaker closet and he’s like oh we should put this on StockX and I was like – okay! And then a couple of weeks later something very similar happened with Eminem and Eminem’s manager Paul Rosenberg, they are both from Detroit and Paul was in the office working with people on Detroit things and it was also a very organic thing that we came in contact and they were helping us.

So we created that first round primarily to get those guys involved. The greatest value we could give was to let them invest. Me writing a $10,000 cheque to Eminem doesn’t really move the needle. That was the beginning of it and then it was organic growth around – as we came into contact with other people and we’ve been super fortunate. We get a lot of people that are interested in being involved because of the products, because of Dan, because of the NBA, but we get to choose those people that are genuinely in it for the right reason and who can add real value.

HANS TUNG: Speaking about Eminem, how many people have told you that you look like Eminem?

JOSH LUBER: Do you know the first person that ever told me that – the first person that ever told me that I look like Eminem was Eminem! Which was really funny. There’s a scene in this video that we shot where I say – I’m here with Eminem to pick up shoes for the charity auction and Eminem goes – I’m here with Eminem also. And I was like – yeah All right!

HANS TUNG: The first time I actually met Josh, that was the first thing that came into my mind and I never said anything because that was the first time I ever met him, but that was exactly what I was thinking.

RITA YANG: That he looks like Eminem!

I actually would think street wear is something that is less global and more local because of the influencers. If you think about the influencers who are in the US, influencing what people are chasing after versus the influencers in China, it’s quite individualized. So what do you say about that?

JOSH LUBER: Street wear just gets the long tail a lot quicker, but the top – Supreme. Supreme is the Nike of street wear. At the top everybody wants supreme. Underneath that there’s a couple of other brands that aren’t nearly as big but have – BAPE which is a Bathing Ape from Japan and then there’s a few other brands – Palace and then it just gets the long tail a lot, lot quicker. But at the very top, its Supreme. That is the clear leader, I forget at the top of my head the exact number but it is overall majority of our street wear business in terms of dollars and units and its Supreme!

HANS TUNG: Yes in China it was pretty obvious that Du (毒) and Nice, and several others are always trying to be in this space and you can tell, it is a growing fan base for sports, for sneakers at the consumer level and its much bigger than people thought.

JOSH LUBER: It’s so much bigger than what people thought because the end result of this is actually a convergence of the primary and secondary markets together to just be one market. People always ask – what’s the resell market? How big is it? US we think it’s about 2 billion, globally maybe its 7 – 8 billion and growing, but the global retail market is a 100 billion and that’s a fact! That’s ultimately the real market here. It’s the whole thing and for us and for our growth it is about that next customer, that retail customer that bought their last pair of shoes at Footlocker or Nike.com, that never would have tried to wade through eBay three years ago, because you go walk into Footlocker and there’s 300 – 400 pairs of shoes on the wall. There’s 26,000 different shoes on StockX and its not just $1000 Yeezy’s it could just be a $100 shoe that’s a different color than what’s on the wall at Footlocker and its selling on StockX for 110 or 95. 25% of our business is actually less than retail price, and it’s that. It’s that long tail of the product that’s out there and that’s why it’s a convergence of all of this. This is just sneakers – it’s a 100 billion. It’s not 2 billion.

HANS TUNG: Correct, and for sneakers, the brands – most of them are based in the US, designed and started in the US – what kind of relationship do you foresee with them over time?

JOSH LUBER: The sneaker brands and even the street wear brands and luxury and everywhere else, it’s all converging in the same place which is to ultimately work together. The best example of where this all goes is what happened with ticketing. 10 – 15 years ago, teams and leagues were arresting ticket scalpers, they kind of shutdown ticket websites. Today StubHub is the official resell marketplace of major league baseball and other teams and other leagues and other ticketing websites started to pair up and now StubHub has primary ticket deals, of the Sixers, the Yankees and few other teams. What they’ve done is they’ve basically created one marketplace. There’s no longer retail and resell, it’s just one market. And that’s what that stock market is. So for us, that’s the evolution of this. To work with Nike, to work with Adidas, to work with the Street wear brands to release products directly into the market. To literally IPO products into existence.

HANS TUNG: Initial offerings of new products.

JOSH LUBER: Exactly and so we’ve done some of these and stay tuned – in the next 3 to 4 months we’ll probably have another half a dozen IPO’s coming with brands, including some really big sneaker brands and that’s really the evolution of this – where you get to a point where you just disappear this line between retail and resell. There’s just one market and it’s about those brands engaging with us and with the secondary market to say – hey listen, you guys have more website traffic than footlocker. We have more customers than any sneaker boutique or sneaker retailer, so it’s an evolution and an inevitable evolution that we all end up working together.

HANS TUNG: Right and these IPOs could be global and launched globally for consumers everywhere.

JOSH LUBER: Exactly. Yes.

HANS TUNG: The other side of the equation is obviously offline retail. You mentioned Footlocker. So over time how would online commerce interact with offline stores?

JOSH LUBER: We just opened our first brick and mortar location in Soho, in New York, actually about two blocks South of Supreme on Lafayette and I was careful to say brick and mortar and not retail because we don’t sell anything. We are a marketplace. The primary purpose of that location is for seller drop offs. For sellers who have already sold something on StockX. To come in and drop it off. We authenticate in the back of the store, so someone can get paid out much quicker and then we can have that product and get it to the buyer much quicker but the evolution of that location and then we’ve done pop up locations in London, LA, Chicago, Atlanta and we’ll continue to do more and continue to get more permanent. The evolution – it’s about the brand. It’s about having a brand experience on the ground, in these locations where sneaker culture and street wear culture and our customers are and it’s a really favorable situation to be where I don’t have to rely on brick and mortar sales in order to pay the bills and once you do that and think about it from a brand standpoint, you can be more creative. You can take risks. You can have a lot more fun in doing that, knowing that the core business is online. This is how you just amplify it.

HANS TUNG: I have seen in Japan and in Korea, Taiwan and now in China, that you can go to offline stores, use the QR code, scan it, buy something, you don’t have to take it with you because they will ship it to your house later. So you don’t have to touch anything, just scan, pay with mobile wallet and go. Extremely easy and frictionless.

JOSH LUBER: Well so it’s a phenomenal example of consumer behavior because for us what happens is – when we opened the first pop up, we only had people that were working at the pop up, authenticators, intake, and then we very quickly realized that the most valuable people to have on site were customer service and to have people there that could answer those questions that used to come in via email or chat and then we would explain it. So they could buy something and they could – and that was massively powerful, cause it leads to exactly what you just said, because then people are happy to sit there, shop on their phone who otherwise had questions and had friction around using the product and now they can do that and the product will show up at their house in a couple of days.

HANS TUNG: Exactly.

RITA YANG: Why is eBay not doing this?

HANS TUNG: That’s a question we get asked for many of our portfolio companies.

JOSH LUBER: EBay is great and will always be great for that long tail product. You want to find some unique one of a kind item, eBay has a scale ready for that, but the eBay model is antiquated. There’s no catalogue basis, there’s no structured data and to implement this for even just that quarter reason – if you would look for the shoes I’m wearing right now on eBay, you will get 500 listings a 1000 listings and then you as a consumer have to figure out should I buy from this person or that person? Why is this for 600? Why is he selling it for 800? How many reviews does this person have? Why is there a cat in the picture? All that stuff is nonsense, it’s just confusing. You go on StockX, there is one product page of that product. You want to buy a share of Nike stock, there is one ticker symbol for Nike stock and everything happens at that one place. That’s the starting point.

The standardization to be able to have a single product page and a catalogue based experience that eBay would literally have to create an entire new – they would have to rebuild their entire site to be able to do that. We’re not as concerned about someone like eBay coming in and replicating what we’re doing as much as – we would be more concerned about someone building something from scratch and competing with us somewhere that we’re not, whether that’s geographically or different products. Every single thing that we have done is in facilitation of that model and how we handle payments and how we handle shipping and that customer experience and what’s great is, it’s taken a while, but every one of those things builds mote around the business because you have to be fully committed to that model in every way that you build the product to be able to actually do that. To Hans’s gut reaction to that question – eBay is probably the last person that can replicate that.

HANS TUNG: For someone who has seen NBA just took off from ground zero in China, the big power house today, drawing so many fans. It is not hard for us to see StockX doing well in China. Over time. What are your plans regarding China and what do you think about building the presence there. You already have 15% of your buyers coming from China without doing anything. Its already indicating that something big could be happening. Yet there are also local competitors, players that are very sizeable already. What do you think about the Chinese market?

JOSH LUBER: This is probably the most important question for us right now, in terms of our short and medium term strategy, China is maybe the only thing that we don’t know exactly what we’re doing and we’re still exploring a lot of different options because there are very formidable marketplaces on the ground in China for sneakers. But we have the supply, and there’s a really unique distinction between what has happened in the past with marketplaces and US companies coming into China versus this scenario that we have the supply – because most of it comes in the market through the US and that’s where our sellers are. We have some big decisions to make very quickly around who we partner with? Who do we try to compete with? And where do we set up those teams and those operations? I mentioned earlier – 100% of bottlenecks in every part of the business is just people and that’s no different here as well.

We still need to hire a great leader for not only China but also for all of Asia pacific and build a local team. And whether that local team sits in Hong Kong or Singapore or mainland China and then where does the operations team sit when we authenticate products? Does that sit in either of those three places or somewhere else? Those are the key questions and then it’s a function of who do you work with here? Do you work with one of the existing sneaker marketplaces and partner with them? Do you compete with them? Do you work with one of the big players? The Alibaba’s or JD’s? Those are all the different decision points that we’re in the middle of discerning right now.

Like I said, everywhere else we have a really clear vision of how to execute this in the short – medium term and man! There are just so many different options for how we can do this, knowing that 15% of our business is already here. A couple of weeks ago, Chris Woo wore a shoe and all of a sudden it was the biggest shoe on StockX for a week. The impact is so, so clear. Over the Chinese new year, there was a shoe – this is the best story – there was a shoe it’s called the Jordan One Mid – this is a shoe that is a discount shoe, nobody in the US wears it, but there was a black and gold color wave that Jordan One made that during Chinese New year it became the number one selling shoe on StockX for two weeks. It was because it was black and gold, it was because it was during Chinese new year and some celebrity had worn it and all of a sudden – and all the US sellers figured out – they were all going to finish line and buying it on sale and then reselling – I mean, it is so clear the impact in China so it is important for us to figure out the right way to do it.

RITA YANG: I was on YouTube last night and there is actually a tutorial on how to buy sneakers from StockX on YouTube – for Chinese consumers and it has 150,000 views.

JOSH LUBER: Well because we don’t have local languages yet, we just rolled out Italian and we’ll continue to roll out European languages, but obviously it’s a bit more complicated. Rolling out local languages here, local payment methods, WeChat, AliPay there are some parts of this we know for sure we have to do and we’re in the process of doing it, and then the bigger strategic questions around who do you partner with is figure out –

RITA YANG: What do you say to sneaker heads who says to you – having a stock market for something that we love, is kind of ruining the fun?

JOSH LUBER: The fun doesn’t exist.

HANS TUNG: It’s a notion.

JOSH LUBER: Yes it so is. This idea that you can go find great sneakers for a deal or discover them – it just doesn’t exist anymore. In the mid 90’s there was a guy, his name was Bobbito Garcia and he wrote a book that become the sneaker head bible in the mid 90’s and the title of the book was – Where do you get those? That used to be the seminal question. Nobody asks that question anymore. We have the internet, we know where to get everything. We know when everything is coming out and where its being released. Now, can we get it? Can we physically be able to get it? No, because we’re not willing to sleep outside of a sneaker store for three days or we don’t know the manager of the store. But it’s all a game, that idea of – oh! There’s a community where we can all – no! That doesn’t exist anymore. What we have done is we’ve created access and transparency around what has become a very fragmented and messy game that it is hard for anyone to be able to play unless they really, really have that sort of inside baseball opportunity. It’s an old notion that just doesn’t exist.

RITA YANG: So in other words, sneaker heads nowadays actually really appreciate what you’re doing?

JOSH LUBER: Yes they certainly have voted with their wallets right.

HANS TUNG: What’s your MPS score again?

JOSH LUBER: Not only between MPS score but just the massive growth. For us it’s about awareness. It’s just an easier way to be able to buy any product and that’s ultimately at the end of the day what consumers want. I had a really interesting conversation last night at dinner with a woman who said – listen, a lot of people want to talk about sustainability, but for consumer good’s people don’t necessarily vote with their wallets on sustainability. They vote on access, price, ease of purchase and that’s what the stock market model creates for StockX.

RITA YANG: As a serial entrepreneur, do you have one piece of advice that you want to pass on to other people who are thinking about doing it?

JOSH LUBER: I have two related piece of advice that I always use in here and they’re the most basic things ever but they’re so important.

So the first is talk to everybody about everything. Don’t think that someone’s going to steal your idea or show up with an NDA to talk to someone like – the refinement of those ideas and finding those people to work with, it’s just important to get out there and talk to everybody about everything and then secondly, just do something. The idea that you have to have this perfect idea and perfect plan, it’s just completely illogical. I could never in a million years have predicted or planned to meet one of the most successful business people in the world, Dan Gilbert and that he would have the exact same idea as me, I didn’t know that when I was creating Campless. When I was going through millions of  rows of excel spreadsheet to clean all this eBay data and build a price guide, but there was something there and we had to just be doing something to push that forward and those things ultimately put me in a position to meet Dan and to be able to do that. Talk to everybody about everything and just do something.

HANS TUNG: Great advice.

RITA YANG: Thank you. We’re going into the last part of the podcast which is a round of quick fire questions. Just say the first thing that comes to your mind.


RITA YANG: Can you give us some pro-tip for shopping on StockX?

JOSH LUBER: Have bids. Bids are by far the most valuable part of the whole system. Almost everything I buy on StockX is – I have a bid out there that’s a beacon to the world and let someone know that I’m willing to buy this product, and so by understanding how to use bids, there’s so much data, there are so many different parts of the product of the business, but the holy grail of all of it is bids.

RITA YANG: Who is the entrepreneur you admire the most?

HANS TUNG: Besides Dan. That wouldn’t be fair.

JOSH LUBER: I’m not going to answer it, I don’t want to put a spotlight on this person but I’ve me multiple people. Different people at different times have really inspired me and helped me along the way and I’ve never had one mentor, but different people at different times have helped where I was in that and its almost always been some entrepreneur that has been 2 – 3 – 4 steps ahead in my journey. It’s not me to Steve Jobs, it’s who is the guy that’s built the company that had three times as much traction as my company. Those are the people that have been most helpful to me.

RITA YANG: What’s something that you’ve read recently that you would recommend?

JOSH LUBER: I joke that the only thing I read anymore is my email, but I’m in the process of actually listening an audio book, Bobby Hundreds book called This is not a T-shirt and Bobby Hundreds was one of the founders of the street wear brand The Hundreds and one of these really OG originals street wear brands. It started back in the early 2000’s – 2003 I think. So to be around 16 years in that game and is a really good story of the evolution of the culture of our customers and the culture of supply and demand and street wear and how it’s all grown. That’s what I’m currently listening to and its awesome. It’s just a really, really great story of not only an entrepreneur but someone who has built a really successful business that was never a billion dollar business but it’s been going on for 16 years in the industry that it did – I’m a big fan of what he wrote.

RITA YANG: What’s a habit that you have that you think changed your life?

JOSH LUBER: You didn’t necessarily say changed your life in a good way right? I’ll tell you what it really is and it cuts both ways which is – I don’t really sleep much anymore. I sleep usually about 4 hours a night, I usually go to bed between –

HANS TUNG: So you work 996 – out of enthusiasm.

JOSH LUBER: Man! When I heard about that for the first time -! What happened is, the bigger the company became, the more that was going on, the less time you have to do any real work during the day and so I’d come home, I’d put my kids to bed, my wife would go to bed, and from 10 pm to 2am, from 10 pm to 3 am, from 10 pm to 4am that was the time to do work and have time and all of a sudden – my sleep schedule is pretty horrible, its changed my life positively in the business, it’s certainly not necessarily healthy and at some point I will have to figure out how to get more sleep, but you never plan that. You just stay up five minutes later every night and then all of a sudden you’re going to bed at 4 am, but it’s because there’s just so much amazing stuff to do and it’s just so much fun.

HANS TUNG: Now you’re running a more global business, makes it even tougher to find time to sleep.

JOSH LUBER: Being on this side of the world is so much harder. By the time I’m trying to go to bed, emails are flooding in and everything else, but yes, that too.

RITA YANG: Hans can tell you how to sleep on the plane, he knows all about that.

JOSH LUBER: I’m really good at  – I steal sleep. That’s the other part.

HANS TUNG: Yes you have to.

JOSH LUBER: I sleep on a plane, in an Uber or whatever, I’m sitting here with Katie who runs PR for StockX and she is often very embarrassed for the different places that I can steal sleep but you have to do what you have to do.

HANS TUNG: That is exactly that. I don’t really care, you don’t have to fixed schedule about this.

RITA YANG: So what do you do when you’re stressed?

JOSH LUBER: I don’t know. I don’t really feel stress as much as frustration. Its more about frustration with inability to be able to control certain thing. I’m just not worried about failure, I’m not worried about that. My stress, my frustration really comes around not being at home for my kids and that sort of stuff. You deal with that in different ways. Whether its facetime or whether its canceling a trip to be home, those are the sort of things. That’s the flipside of all of this. My daughter is almost seven, my son is four and it’s amazing to be able to have these opportunities to travel around the world and do this, but the flipside is just managing that part of it.

HANS TUNG: What was it like to meet LeBron James for the first time?

JOSH LUBER: LeBron and Dan don’t really have the best relationship.

HANS TUNG: That’s why I asked.

JOSH LUBER: Yes, so it took a minute for LeBron to see through that I wasn’t just like Dan’s guy in StockX cause he knew about that, but we had done this project where after the Cavs won the championship we did a really swift Nike – where Nike gave us LeBron James first retro sneaker and we created a sneaker box out of wood from the cavaliers championship court. So the Cavs cut up the court and then we included actual Cavs championship ring in the box. The first time I ever met LeBron was after that had already happened and it was funny cause his initial reaction was not very positive but then he was like – Oh! You did that with the – he said – Oh! That was great and we talked about the project for a while and he was super complimentary of the project and it was really nice.

RITA YANG: What’s your favorite pair of sneakers?

JOSH LUBER: It changes every day but the shoe that I have the most of is the shoe called the Air Jordan 1 Lansmountain White, it is collaboration between the skateboard at Lansmountain and Air Jordan and I have seven pairs. I buy that just by the math of it I think that’s my favorite shoe.

HANS TUNG: Have you ever met Michael Jordan? What was that like?

JOSH LUBER: I have never met Michael Jordan in person, but I have been now on three conference calls with him, all three of which have been me pitching StockX to him as the leader of Jordan brand and I know both of his sons really well. I think it helped that it was on a conference call and not in person. He was super professional, knowledgeable of what we were doing and all that, but they still haven’t said yes to release with them.

HANS TUNG: So keep on working.

JOSH LUBER: Yes, we’re still working on them.

RITA YANG: Thanks for being on the show Josh, we really enjoyed it.

JOSH LUBER: Thanks for having me, it was awesome.

Episode 40: Renee Wang of CastBox: on Building America’s Top-Rated Podcast Listening App

In this episode, we interviewed Renee Wang (王小雨), the founder and CEO of CastBox, a global podcast platform often referred to as the “Netflix for podcasting”. It uses natural language processing and machine learning to power unique features like personalized recommendations and in-audio search. According to a report from Sensor tower in April 2019, Castbox is now the biggest 3rd-party pure-play podcast app. 

Before launching CastBox in 2016, Renee worked for Google in China, Japan, and Ireland. She holds a bachelor’s degree in Peking University in psychology and mathematical statistics. While in college, she taught herself coding and became one of the earliest Android developers in China. 

On the show, Renee discussed user acquisition in international markets with a cross-cultural team, integrating Chinese social app features into its global podcasting platform, the landscape of consumer-facing audio apps in China and her strategic decision for not entering the Chinese market. She also shared her journey of landing a job at Google without speaking a word of English, selling her apartment in Beijing to fund her startup and leading a diverse team spread across the US and China.


RITA YANG: On the show today, we have Renee Wang, or Wang Xiaoyu in Chinese. She is the Founder and CEO of Castbox and as a self-taught programmer. Castbox is a global podcast platform that is often referred to as the Netflix for podcasting. It uses natural language processing and machine learning to power unique features like personal life recommendations and in audio search. According to a report from Sensor Tower in April 2019, Castbox is now the biggest third-party pure play podcast app. Welcome to the show.

HANS TUNG: Before launching Castbox in 2016, Renee worked for Google in China, Japan and Ireland. She holds a Bachelor’s Degree in Peking University in Psychology, in Mathematical Statistics. While in college, she taught herself coding, and became one of the earliest Android developers in China. Welcome to the show, Renee.

RENEE: Thank you.

RITA YANG: First of all, can you tell us the story behind your English name, Renee? We heard it has something to do with Google. 

RENEE: Yes, it was a long time ago. At the very beginning even, I began teaching myself how to code. Google was my dream company and a dream offer. I wanted to apply to Google. But, I think, five years ago, I just graduated from Peking University with a Psychology Degree. I did not have any internet genes in my background, in my resume. But, I tried my best to apply to work there, at Google. I prepared for about eight months. Until the eighth month, I continuously applied to Google. It was really funny, because at that time, Google had the following rule. If you apply for one job and you get rejected, you cannot apply again during the next six months, because they feel that you cannot improve that much during half a year. I remember I applied for the Engineer Team, the UI Team, because I did learn a little bit about Photoshop and coding. I did also apply for the Ad Words team as well as the Google Maps team. It was really fun, because at that time, I had already quit my job. I stayed with a friend of mine, who was a computer science student. Every day, I was hiding in the building, because computer science students had friends performing internships, internships in Google. I wanted to ask them to do a referral. I didn’t want only one referral, because I didn’t want my resume to arrive only through one channel. I changed my English name. I changed my email, and I changed my phone number for different resumes and applied for different roles. Because the whole building knows that I’m applying for Google, so they also tried their best to find…

HANS TUNG: The right opportunity for you.

RENEE: Yes, the right approaches. Finally, I got the opportunity. It was not an interview at all. It was kind of like Edison having an event, a saloon. I was using my friend’s master email to apply and tried to join this event. The event was on the seventh floor. When I was in the elevator going up from the first to the seventh floor, I continued to perceive who looked like the kindest person. I tried to befriend him and asked whether there was any role in his team. He said, oh, we do have a role. Finally, after I jumped out of the elevator, I tried to find a common friend between me and that guy, because I didn’t know that guy at that time. I tried to find a common friend.

HANS TUNG: On which app?

RENEE: I just asked.

HANS TUNG: I thought you checked out their WeChat or something.

RENEE: I just asked whether or not we have a conference. Then I went out of the elevator to go to the female restrooms. I called my friend out. You have to apply again. Help me to apply to Google. Edison said that people delivered my resume to that team, because I already know the team during Edison’s online/offline events. He said that you can get an interview. Edison, I think I had six onsite interviews. It all got positive feedback. 

HANS TUNG: No technical questions.

RENEE: No, not at all. It was Edison’s Team. But at the final interview, they felt that I’m too junior, because I applied for a senior role. They felt that my internet background was not strong. I failed again. I felt as if this was the end of the world. Anyway, I was still applying for some other roles. After, I think, one month, Edison’s team called me. They said that the role you applied for previously requires a more senior professional, but there is a junior role open. Do you want to apply again? I said, of course. At that time, I was already getting an offer from Oracle. I was almost under the training process. But, then I quit my job. The HR said, no, you should not quit, because it is only an opportunity, because you have already been rejected by Google. This one has a record.

HANS TUNG: Which name did you use for that?

RENEE: Renee.

HANS TUNG: It is Renee.

RENEE: He said, you are Renee. You have a record proving that you are not suitable. There is a lot of risk even if we gave you another opportunity. I said, I don’t care. That’s why I quit my previous training process on Oracle. Then I prepared all the essays and all the reference letters. After another two weeks, I finally got an offer. The reason I used Renee as my name was that at that resume I delivered to Edison’s Team, I also used Renee.

HANS TUNG: How many English names have you had during the Google process?

RENEE: I think at least ten. But there were all similar to Renee, like Ren. That’s why all my friends know this history, because at that time, I tried to approach all my contacts to try to get any potential opportunity in Google. That’s why when I quit Google about four years ago, when I said I want to do my own start-up, they felt that I am insane. 

HANS TUNG: You worked so hard to get here. What are you doing leaving?

RENEE: Yes, that’s true. Before Google, when I was applying to Google, the most difficult part for me is not only the interview but also my English. Before the application, I could speak zero English, almost zero. That’s why at that time, I bought an interview book. Literally, I repeated every single word in that book. Also, I think I wrote down my experience in Chinese into the A4-paper in 17 pages. Then I asked my friend in the US to translate that into English. When I interviewed for Google, besides the 17 pages and that book, I could speak zero English. It’s true. The funny part of that is, as I mentioned during Edison’s interview, the people who interviewed me said you are great. But your only disadvantage is your English. In my mind I thought, you don’t know my real English level.

HANS TUNG: It’s a lot worse.

RENEE: It’s much worse. That’s why for every resume, it was not me who made the changes. I had to continuously ask my friend to change the resume. Every time I had to change a little bit of those 17 pages, because the role I was asking for was different. At that time, I tried to remember the top values of Google. What is left for Edison? What does Edison mean? Basically, I could remember the definition of the Google Edison webpage. I knew the team members. But they didn’t know that, but I knew that.

RITA YANG: Obviously, you’ve always had this all-in mentality in you. In fact, when you started Castbox, you sold your house in Beijing. I’m just a little bit curious. Was that a difficult decision for you at all? Where does your conviction come from?

RENEE: First, how I got the house. I want to share this for a bit. I began to develop Android since 2008, about eleven years ago. At that time, people always said, there were about 100,000 apps on iOS. At that time, there were only about 100,000 apps on Apple Store. There were only 20,000 apps on Android. My friend said, you should learn Android. There are a lot of opportunities there. That’s why I began to learn coding. At Edison, I developed a lot of apps and a lot of games. There are some apps I developed that are really complicated. I felt like people may like it. But as a result, people didn’t care about the app that I felt might become popular. But, there are some stupid apps. Even when I code, I never do the test, because the apps are too stupid. I didn’t want to try and do the QA. But those games get a lot of users. There is one app we called Bomb Bomb. People just doing nothing, just clicking on the screen. Then all that fruit, if they’re similar to each other, they become a bomb. They disappear. That stupid app was in the top three on Thailand’s market after the launch on Google Play, two weeks after we launched it on Google Play. We got a lot of advertising revenue from that app.

RITA YANG: You built that app yourself.

RENEE: Yes. As I mentioned, it’s a really silly app. I do not recommend you to download it. But the users like it. As I mentioned, it went to the top three and got a lot of organic downloads. At that time, every upload you upgrade the app. It will show up on the top apps, or top new apps. That’s why I continually upgrade. I continually get this app exported to the users. The promotion is free. But the advertisement is real money, a little money from this part. Also, I get a little money from YouTube channels. You cannot find that anymore. At that time, I felt that there’s a lot of engineers asking questions on Stack Overflow. They’re asking, for example, how to use the Android, or how to use the Android studio, and how to integrate AdMob SDK. The answers are all not very good. That’s why I searched all the top questions on Stack Overflow, asking about Android, because it is my only ability concerning coding. I then do a YouTube. Then I tried to answer the questions. Then I copy and paste back the link to the Stack Overflow questions. Also, the most important thing, I noticed that time on YouTube, there were a lot of people searching for Asian girls. But they were not searching for a photo. That’s why I changed the name of my YouTube channel to “Asian girls are teaching Android”. That’s why I got a lot of traffic. But I didn’t show my real picture. But now, you cannot find that anymore, because it’s gotten down by Google. I got a lot of traffic, and people want to learn how to code Android, maybe. That’s why I got a lot of advertisement revenue as well from YouTube, and using the money I got it from those. But also, I got some extra money from the previous savings when I worked for Google. I bought a house before I went to Dublin. Then from Dublin, I moved to Japan. Then in Japan, when I had the idea I wanted to quit my job. I thought I should find some investors. But at that time, I didn’t know anyone.

HANS TUNG: No one, no VC.

RENEE: That’s true because I’d already been out of China for almost two years. I had no connections. I really wanted to create the startup though.  I then made a really quick decision in one minute. How to sell the house? That’s why I found this previous agency who helped me to buy the house and asked it to sell the house again.


RENEE: It was a quick decision. But I got the money later, because there was a loan. I had to follow the process and the decision was really quick. I just feel that even I failed to establish the start-up, I could still find a place to sleep. I could still go back to my friends.

HANS TUNG: At her apartment.

RENEE: Yes, at her apartment. 

RITA YANG: Using her credit card.

RENEE: I can go through that again. 

HANS TUNG: How did you decide that you want to do a podcasting app?

RENEE: At the very beginning, the first app I did was a yoga app. Also, I tried horoscope apps. I made them all happen. At the very beginning, I developed until 1 or 2 am every day because it was only me at that time as a full-time employee. I had some friends for part-time help. But none of them succeed, because all of them failed. I continued to develop. You can see that we tried more than 20 different kinds of directions, not only ideas. I made them happen. I went to the Github to find an open-source to secure the MVPs as fast as possible. For the podcast, I already had the idea. At the end of 2015, I met a friend, who is now still working for Google. He said that internally they had good feedback for this podcast app. iTunes has its own podcast app, and Google, at that time, did not have one. The guy who works for Google Play said that I have told my developers to try this direction, but none of them are ready to take it up. I said, maybe I can do it. That’s why I took his advice at the end of 2015, which was on December 31st because there was a concert.

RITA YANG: New Year’s Eve concert.

RENEE: Then on January 1st, 2nd and 3rd, I made it happen. On the 4th, I put it on Google Play. The way we made it happen was that, first, I went to GitHub to find if there was any open-source commercially, a friendly open source. I found a podcast, which is MIT lessons, which means that it’s commercial friendly. What we did during the first three days was I changed three things. Since that app was developed by a real developer, all its rankings were similar to Linux development, and TED Talk about the tech part. I changed the ranking from this kind of thing to Joe Rogan to target more general users.

HANS TUNG: General public.

RENEE: Yes, I changed it first to Joe Rogan. I changed the second one to The Daily, or something like that. This is one thing I changed and then was changing the ranking. The second thing I changed was adding languages. They only had that one in English. I added about seventy languages.

HANS TUNG: Seventy!

RENEE: That is true. But I used Google Translate to do the translation. This was the second thing I made. The third thing I made was making the UI beautiful and better by changing the logo. During the first three days, I did all that stuff, and then put it on Google Play as a first version. Also, it was very buggy, but I found that people if they already found this app they spent half an hour a day to listen to all the content. Then I said, maybe this is something worth risking. That’s why I spent all the money I got from selling my house to begin promotion from day two i.e. since I noticed that people were spending those thirty minutes on it. I thought, there is a real value in this. There’s a real need. In just the first month, we got $1 million.

HANS TUNG: In the first month?


HANS TUNG: Just from two key changes: the language and the new logo. That’s it.  

RENEE: That’s true. 

HANS TUNG: The friend who gave you the idea is still at Google.


HANS TUNG: Did he ever consider joining you?

RENEE: No, he’s happy there. There’s free food. 

HANS TUNG: He’s the most suitable for a multinational job to come up with ideas. You’re much more entrepreneurial, so you started to pursue it.

RENEE: Yes. Even though at the time, there were a lot of other podcast apps. What we were trying to do different at least for the first year was that we tried to run as fast as we could. I remember in the first year, we upgraded the app about three times a week for every version. At that time, we didn’t have PRD, any kind of product road map or document. We only had one A4 page. Every morning, we talked about what it is we want to do and they wrote it down with a pencil on one A4 page in the back and front. If we did not finish, he would not leave – every day. As I mentioned the first version was buggy. It wasn’t that functional. The function is not that satisfactory. I just looked like competitor-apps and got the whole list.

HANS TUNG: Of what features they have.

RENEE: Of all the features and see what they have done within one month. We said this is what we are going to do in one week. As I mentioned, for every week, we have three minimal versions. If you see on the App Annie or some other third party moderators app, you can see every two days, there’s…

HANS TUNG: A new version.

RENEE: A new version. The whole update is at least ten. That’s why in the very first year, we only tried to catch up and tried to see that, if there is something already proven to us by another platform, we try to make sure we have at least the core functions. That’s why in the first year we got the highest rating and we got a lot of “editors-choice” as we are the most user-friendly.

HANS TUNG: Comprehensive.

RENEE: That’s true. There are several extreme examples. One example is that there is one person, a Russian girl. She’s blind. She said I’m using your app, but you do not have the voice-over feature. I cannot know what all your pictures are about. We received her feedback, and within one day, the whole team tried to add the labels to all the single pictures, and then develop an update.

HANS TUNG: Another version.

RENEE: Then we gave it to her, and she was so happy. She shared the app. There’s a kind of community. She shared the app with all of her community. There’s another example. There was one US user. In her mornings, she’s using our app. She gave her feedback. She said I like the app, but there is a really important feature but you guys don’t have it. We received her feedback. It was evening already in China. We believed that this is important and decided to finish it. The engineering team didn’t leave home until we developed that feature, and upgraded the version on Google Play, because Google Play is quicker. You can upgrade after a few hours. Then in the user’s evening, when she’s back from work to her home, she apologized and changed her comment because in Google Play you can edit your previous comment. She changed her comment and said: I didn’t notice that they do offer this feature. I am recalling my comment.  

HANS TUNG: You just changed it very quickly.

RENEE: That’s true. She didn’t see that we didn’t have the feature that morning. All competitors that have been in the industry like Pocket Casts, it’s true, that they are really great. We respect them very much. But after one year, in terms of functionality, total downloads, or ratings on Google Play, we were number one. If you see a lot of third parties, like App Annie or Sensor Tower, are all ranked from in terms of downloads and the number of daily active users. I think we were also number one among all the competitors. But branding-wise, we are still lacking because branding needs actual time. We need at least three, or four, even ten years to build the brand. But user-wise, the data-wise, we did try to be more competitive. This was during the first year. But during the second year, it was getting harder, because we had to be innovative. 

HANS TUNG: That’s right. You were copying. Now you are the leader. You have to come up with new features on your own then. 

RENEE: That’s true. That’s why I think, from a user’s perspective, we were getting slower since the second year. But that’s why we try by all means to be innovative.

HANS TUNG: Do users give you new comments, new feedback, new ideas?

RENEE: That’s true. We have two telegram groups. One is called Castbox Ambassadors. The other one is called Castbox Users. They give us a lot of feedback. We tried to find all this feedback to filter on whether or not, we can make it happen. In the second year, we tried to be innovative. We tried to be more creative. For example, to be honest, we tried a lot of things. In the community, you search for comments. Also, we tried to have loud cast i.e. adding timestamps for every single audio clip as well as episode labels recommendations. We tried all the things. I mean, some of them didn’t work at all. For example, we tried episode label recommendations. We spent a lot of time doing a recommendation based on the episode. For example, we’ve tried to understand whether they are similar episodes talking about the same thing, but data-wise this is not that good. We just try to drop that idea, and we try some new stuff. Also, financially-wise, we tried premium content. We tried everything. We tried to make sure that we have podcasts of many types. If it works, we make sure it continues to improve. If it didn’t work, we just drop it. That’s why during the recent two years, all that we’re trying to do is try to learn whether there’s anything we can do to be different. We can be a little crazier in this industry. For example, the most recent thing we are doing and trying out is called Live Cast. It’s a sort of loud interaction for live videos. But compared to traditional videos, people can do the real in-app call in. People can leave a message. They can even send you a virtual gift. At the very beginning, we didn’t have high expectations, because we had so many failures during the past two years. 

HANS TUNG: This one is the one that we discussed. Live Cast, right?

RENEE: That’s true. But now it’s totally beyond our expectations. If you see inside the app, people say that it is the real thing. People comment that if you can continue to make this happen, you can compete with Netflix within three years, or this is the next version of a real social network. Also, people began to follow each other. People began to send you virtual gifts.

HANS TUNG: When did you launch this feature?

RENEE: About three months ago.

HANS TUNG: Right. You and I talked about this idea about five months ago. You moved so fast. I was shocked. I just had an idea and you moved immediately.

RENEE: Yes. Also, if you see, every day, we have a different version. For example, recently what we just launched for the desktop version, we added audio clips. We did an on-cloud recording, which we all didn’t have at that time. We did that for the desktop version. They can easily set the mean or set block users. It offers greater control. Also, we already have a lot of big names that will appear in Live Cast next month like Gary Vee.

HANS TUNG: Of course. He’s a good guy.

RENEE: They already agreed to come soon. We are preparing to get him onboard. This is something we finally see a lot of social elements, and we see a lot of people beginning to create. It’s a sort of a little lower threshold for people to create content. That’s why we get a lot of feedback. That’s really funny. 

HANS TUNG: Your app definitely is becoming more social because of that.

RENEE: That’s true. The funny part is that we have a team member called Tina. You also met her.

HANS TUNG: I remember.

RENEE: Last time when we went back to the office from GGV, Tina said that she really likes this feature, because it made her want to do something. Tina said that finally, after so many trials, we finally found something that…

HANS TUNG: What a good idea.

RENEE: Yes, I said Tina, I’m sorry. We gave you constantly all the bad experiences. Because innovation is really hard. You never know. That’s why I continued to try to empower the team, and remain always very positive. Whenever we have a new feature, that’s what I say.

HANS TUNG: Your enthusiasm is very impressive. 

RENEE: But the funny part is every time there was a new feature, I said to the team, this is the future.

RITA YANG: That’s somebody making her speech.

RENEE: Finally, Tina said, that you repeat that sentence so many times – every time there is new feature like the comment-thing, the premium-thing, the analytics or the claimer. Anyway, this was a startup. It was really hard. Whenever I go home, I think what I should tell the team tomorrow. It was really hard from cross-cultural aspect across Castbox team members.  

HANS TUNG: Between US and China.

RENEE: That’s true. I totally understand that for our US team members. They kind of get disconnected with the engineering team.

HANS TUNG: Because they are all in China.

RENEE: That’s true. They feel lonely. That’s why I have to empower them using future stories. Back to the topic, talking about the future, I can totally understand that our US team feels frustrated, because there was a lot of generation for our US Team. At the very beginning, I never worked in the US before. As I mentioned, I used to work in Dublin and in Japan, but never in the US. Even today, my English is not good.

HANS TUNG: No, it’s amazing now compared to your Google interview.

 RENEE: Before, I’ve never officially came to the US, before I opened an office here. It was officially my first time I went to the US.

HANS TUNG: You opened the office on your first trip.

RENEE: That’s true. The first team members I have for the US branch were good people, but they are not suitable for…

HANS TUNG: For doing Chinese work.

RENEE: That’s true. It was terrible. A lot of drama at the same time. It’s not their fault. It’s my fault. I don’t know how to find the real users. That’s why I really appreciate Tina as the first team member of the group. She is still there. I owe her a lot. I continue to show her the greater future. At the very beginning, there was a lot of drama. There were a lot of conflicts and a lot of disconnection between China and the US. This was the first group of people. But we didn’t have a lot of connections. We just caught whatever we could catch. But there were many conflicts between the US and China.

HANS TUNG: What was an example of a conflict? The famous, the dramatic.

RENEE: There’s a lot of huge ones. There are too many, so I cannot remember one in particular. There was a really big fight. In the China team, because we are disconnected from the market, we try to make all our decisions based on data. But the US people are not operation-driven. In their decision making, they are trying to understand the market. There was a lot of disagreement on certain decisions. For example, in China, because we believe in data, we did spend a lot of money on user acquisition, since data-wise, ours is the highest, if we calculate the retention, and calculate the annual star rate. But the US people feel organic growth is the most important metric they want to purchase. That’s what they want to pursue. That’s why they said, you guys should not spend any acquisition money. You should spend all the money on paying for the creators to do the shout out. They did prefer this kind of organic growth from word-of-mouth, from branding awareness. But for that part, it’s really hard to marry. Even for the user acquisition part, there are many conflicts. US people feel that you’re doing the Google, Facebook. It feels like stupid money. Why not to collaborate also with influencers? But the Chinese people do not understand this. Influencers are really hard to track especially, for this kind of audio content, which the network effect is not that big. Methodologically, they are different. There are a lot of big discussions. There is also a difference in lifestyle.

For example, we hired a really professional guy. He’s really nice. He’s very professional, very smart. But during the first week he was at the office, he spent several hours talking with our HR regarding why his phone bill should be paid by the company. But the Chinese Team feels that he should just get things done. Stop spending time on discussing, whether or not the company should pay the phone bills. But as the US people said, oh, this is very crucial. This should have been done at the first day, talking about whether or not this belongs to the company or to the…

HANS TUNG: Individual.

RENEE: Yes, to the individual. The Chinese team feels that this is just wasting time. Why are we not spending every single minute developing?

HANS TUNG: Improving the product and getting users.

RENEE: That’s true. But US people believe that these are the rules that we should talk about first before we jump into work. This is a work-style difference. There are other differences regarding our communication style. The China team is a bit shyer. They just keep doing, doing, without too much communication. But the US team members, they always want to engage in a critical discussion or a strategic discussion. Before they do anything, they want to… 

HANS TUNG: Talk about it.

RENEE: That’s true. We spend time talking and talking. But the Chinese team, they’re really quiet. They’re just getting things done. Even if they don’t work, they don’t change. That’s why the US team members wonder why do the Chinese engineers never talk? We didn’t even know that this thing changed. But the Chinese wonder why are we still talking about it? 

HANS TUNG: Do your job.

RENEE: That’s true. I can understand both.

HANS TUNG: Now you can.

RENEE: I’m in between. But it’s really hard to try to balance their mindset or try to balance and face the conflict. Nowadays, we still try to make sure that they are communicating with each other very well. But there are still many conflicts. I don’t think this will get fixed at the end of the day. But now, we are trying to leverage both advantages. That’s why by doing this, we try to save cost, by hiring more engineers or operational team members in China. But we try to be more professional and more local by hiring BD people.

HANS TUNG: Marketing BD people in the US.

RENEE: That’s why nowadays, I feel much better, because they do not cooperate with each other.

HANS TUNG: They don’t talk to each other that much.

RENEE: But still, we try to have some people in between to try to serve as a bridge. But anyway, we do respect both team members.

HANS TUNG: They all have strengths.

RENEE: That’s true.

RITA YANG: Regarding your users, are they mostly based in the US or where are they based?

RENEE: Half of all the users are from the US. Another thirty percent are from some other European countries, including the UK and Germany and Northern European countries.

HANS TUNG: Initially you had 70 languages, and English immediately became the most popular one?

RENEE: That’s true. Because about 70 percent of our users are English speaking users, because Canada, the UK and Australia also speak English.

HANS TUNG: But you also have a Chinese version initially. But it never really took off in China.

RENEE: We have zero Chinese users. If the Chinese want to use our app, first, they have to buy a phone that has Google Play.

HANS TUNG: It’s not on any of the Chinese Android platforms.

RENEE: No, because if the phone didn’t have Google Play service, even if they download the app, they cannot open it. But for Apple Store, you have to have an account outside of China.

HANS TUNG: You could have made a Chinese version and have it be on mobile Xiaomi, on Tencent app stores and so forth. But you chose not to.

RENEE: That’s true, because firstly, we do not have the ICP license, which we have to get if we want to.

HANS TUNG: You can get that. It’s not hard.

RENEE: That’s true. Also, secondly, we have only 70 people in the team. But if you want to do content, then you have to do a lot of reviews, which is out of our organizational capability.

HANS TUNG: Sure, but after you raise money, you can do that too. You made that decision early on. You didn’t want to have an app for China.

RENEE: That’s true, because the two ecosystems are so different to be honest. To be honest, I want to say that the audio consumer-facing product in China is much more cutting edge and advanced compared to…

HANS TUNG: Anything outside of China.

RENEE: That’s true. If you see recently, there are lots of apps banned recently. But if you see that like Zhiya (吱呀), like Bixin (比心), like Yu’er (鱼耳) and Kong’er (空耳), there tons of really good social apps, and are very popular. Monetization is huge.

HANS TUNG: In China?

RENEE: In China. If you’re talking about the non-social apps like podcast streaming apps, I think Himalaya (喜马拉雅) and Lizhi (荔枝) and Qingting (蜻蜓), they all are also doing really good. Also, Lanren Tingshu (懒人听书). They are making a lot of progress. If we’re talking about some other new apps, a new kind of format like Soul, even though they were banned recently, but this kind of audio combined new formats of apps, they are also much more advanced than what is now in the…

HANS TUNG: Have you incorporated any of the Chinese advanced app features into your English. 

RENEE: That’s true. Beyond Castbox, recently we launched a new app called Cuddle. It’s kind of like more social. It’s only targeting the younger generation. There’s a lot of gaming…

HANS TUNG: Different features.

RENEE: That’s true. That’s more a pure application content consuming app. This is an app. We really learned a lot of ideas from those Chinese apps. But we do our own approaches on the localization.

HANS TUNG: The users also give you feedback as well.

RENEE: That’s true. For example, the new app Cuddle, is really amazing. It was a really fast decision. We decided to make it as a separate stand along with live social audio apps as of the beginning of June, June 1st. 

HANS TUNG: June 1st of this year?

RENEE: Yes, this year. It was live on June 15th, within two weeks. Until today, we haven’t promoted the app that much. But we get only several thousand daily active users. But even with these several thousands of active users, people spend hundreds of US dollars per day.

HANS TUNG: Hundreds of US dollars per day per user.

RENEE: Not all the people, but several people, US $200 per day, not all the users but some users.

HANS TUNG: What do they spend money on. 

RENEE: Just the tipping and gifting. Also because they want to jump into the ranking, top ranking of sending gift. All these methodologies are already proven.

HANS TUNG: In China?

RENEE: In China. We just try to see whether or not, it will work in the US. It has been proven that it works. Even with only several thousand active users, we can still see people spend hundreds of US dollars.

HANS TUNG: You haven’t even started promoting it yet.

RENEE: Not yet. It’s organic. Only through word of mouth or some CB users from Castbox. This kind of app is still very new. This feature has not been developed well. If this kind of app is sold in China, people will feel that it is very underdeveloped. 

RENEE: As I mentioned, we developed the app in two weeks. Now when we sell it in the US, people feel, this is amazing.

HANS TUNG: Something new. 

RENEE: I don’t want to say that, but it’s true. Back to your question, why we don’t want to depend on the Chinese market but stay focused on the US market: it’s because of all these features. Consumer-facing products in China are much, much more advanced.

HANS TUNG: Do you think that people in the US think that Google is a great company? And it is, but when you look at the things you get at Google China versus what was happening at Baidu, or Tencent, or Ali, what’s the difference that you see in speed, in the sophistication of work and et cetera?

RENEE: For example, before I quit my job in Google, I said, Google is amazing. They have a lot of innovations and a lot of fundamental infrastructure, technology, skills. But after I quit Google, I began to meet more contacts and communicate with all these Tencent and Ali guys. I feel that they are much more advanced in all kinds of business models of commercialization.

HANS TUNG: In monetization and also in social features, product features.

RENEE: That’s true. It’s much more advanced compared to the US commercial facing apps if we’re talking about B2B business or SAAS business.

HANS TUNG: Of course the US is more advanced. 

RENEE: Much more advanced, but its consumer-facing, as you mentioned, is ByteDance and Tencent. They are all engineers and product managers and even operations people. They are very strong, especially for operations. For example, I think even in the US, when we talk about operations, we think about people who are working for Amazon, packaging staff. Operations-wise they are doing a lot of stuff.

HANS TUNG: Operations already exist inside Google.

RENEE: That’s true. They call doing user-support operations. But in China, the operation is totally…

HANS TUNG: It’s a science.

RENEE: It’s a science. That’s true. But the US people don’t feel that it’s important. When they talk about gross hacking, they are talking about operations, but more tech-wise. Even the word “to hack”. In China, for the whole operation, they really know how to make the online/offline, how to make more money, how to put in the game theory, or some game elements into the application, into the whole ecosystem.

HANS TUNG: For you, how do you do operations from China for US users or European users?

RENEE: This is a really good question. For example, regarding the new app called Cuddle we are now trying to hire people from MoMo (陌陌), from YY. They’re really familiar with the operation methodologies. They have them. But they are not good with English. For every single operation person, we get them with 2 interns, who can speak really good English, almost native English.

HANS TUNG: Interns from where?

RENEE: From Stanford.

HANS TUNG: From Stanford, Berkeley in California, who are Chinese-American.

RENEE: Chinese-American. They work as a very close group. For example, responsible for a Cadoo operation, for example, is one person from MoMo (陌陌). He really knows how to make audio games and social gaming fun. He can create a whole list of how this operation masses and how we can make the app really funny, more attractive. Then I ask his intern to translate, but not only the language, but translate the culture as if this would fail. This would not work. Then we’re using this translation to go to the localhost to say, this is how we can do. That’s why basically in this process we need three people, people who know operations in China, people who know the local culture, and people who engage in real communication with local BD people. It’s a little complicated, because in China, only one person can do what three do.

HANS TUNG: One can do all three jobs. Here, you need three different people to do it. But no one else can do it. That’s your mode.

RENEE: That’s true. At least they can do it. Also – to answer your question about what I think about Tencent or local Chinese companies – what is the most important thing, to be honest, when I first went to the US, is that I felt that all those US people, especially people working at Silicon Valley, are really smart. They know a lot of methodologies. Even today, I feel so. That’s why I said, I should have to be as humble as possible. I should learn from you guys, learn about the MVP theory. The class is taught by a YC. I do think there is a lot of things I observed from you guys. But when I met some local Silicon Valley startup core people, they felt the same. They feel they are good. I feel they are good. They do know about the WeChat Pay. But they only know about WeChat Pay. They didn’t know what is really happening.

HANS TUNG: What’s the real methodology and the philosophy behind it.

RENEE: That’s true. That’s why I think there is a lot of new stuff happening: because all these Chinese startups like entrepreneurs like me, or like big companies. When we came to the US, we try to learn. We try to observe as much as possible. Then the US people first of all, they have not been in China. If they go there, they try to teach.

HANS TUNG: They don’t learn. They are only teaching.

RENEE: That’s true. That’s why I think a lot of new things are happening in China. We can leverage the advantages from both sides.

HANS TUNG: That’s one of the reasons we decided doing this podcast series with Zara in the first place. There are so many things happening in China now which is just not taught or shared on a global basis. Not only, the Silicon Valley people but the people in New York, Toronto, or Sao Paolo, Jakarta, Bangalore, New Delhi, Bogota can all benefit too. I noticed that you’re also producing original content based on our discussions before. How is that going? 

RENEE: I have to say that at the very beginning, we didn’t spend too much stupid money in the content business, because it was not our strength. I have to say that we still continue to develop our original content. IP is will maybe be purchased by bigger movie companies. Maybe, it’s still an early discussion. Also, we try to monetize by creating bonus episodes, or integrate audio ads. But generally speaking, I have to say that I hope that I will not spend too much money on the original content, if I go through that again, if we look back.

HANS TUNG: At least not right now.

RENEE: That’s true. I think there are three reasons. The first reason is that original content is not something that we’re good at, because our strength is our product. It’s our technology. And it’s our operation. It’s not our content or culture. It’s not our…


RENEE: Yes, DNA. The second reason is that, content business is like a Hollywood business. You can never predict.

HANS TUNG: It’s a hit business.

RENEE: That’s true. We cannot predict. Previously, the content that we spent more money on brought the smallest revenue. The content that spent less money brought more revenue for us. That’s why I feel this is too unpredictable. It is not our focus. The third one is that we are now trained to do more innovation especially after Spotify and Google jumped into the industry. Since, for example, Spotify spent $1 million for his first original show. But we can never use that money. Even if we continuously compete with the original content, which we were doing two years ago, there was only us. But now, there are a lot of industry giants. If we keep doing something that is not competing with them, we can never survive. That’s why we’re trying to create all the utility tools to try to make the threshold of creating content easier.

HANS TUNG: Being social I always thought to be the best way for you to grow. 

RENEE: That’s true. As I mentioned, the third reason is that the competitors’ environment is changing a little bit. But, our original content also has some advantages for us. We didn’t learn by doing. We have a deeper understanding of the industry. Even though we didn’t continuously spend too much money, we still allocated a small budget to continuously find some good content, and try to build better and deeper relationship with those content creators.

HANS TUNG: What is driving you? What is motivating you to work all these hours? 

RENEE: For me, it’s very simple. When I was younger, my biggest driver to do things is to avoid failure. Because when I was younger, I was not that confident. I was always trying to say that I don’t want to fail. I don’t want to make mistakes. But when I’m getting older…

HANS TUNG: Applying a job at Google..

RENEE: After finally, getting my dream offer. Nowadays, I’m doing things, because I want to become a better version of myself. I think it’s a very positive mindset. Because even I met difficulties, I met problems. For me this is an opportunity.

HANS TUNG: To get better.

RENEE: To get better, to overcome the difficulties. When I get some really good data or good results from a product, I will still be very humble. This is only a very small step. If I want to achieve a better version of myself, I need to be standing in a higher place. That’s why I can have a whole picture, the bigger, have a bigger view. For me, this is not the result. This is only a process through which I can be better. Back to the topic, nowadays, the only thing that I really need to continue to work on, is to become a better version of myself. That’s why I feel that during these three and a half years, were much, much, much better than my work in Google. Google is great. But I feel that Google, after the first two years,  repeated the same things. But for a startup, everyday…

HANS TUNG: Something new, full of surprises.

RENEE: Full of surprises.

RITA YANG: All right, thank you, Renee. This was a fascinating conversation. Thanks for being on the show.

RENEE: Thank you.

HANS TUNG: Thanks for listening to this episode of 996.


Episode 39: Brian Gu of XPENG Motors: Why China’s EV Market Excites Me

We interviewed Brian Gu (顾宏地), the vice chairman and president of XPENG Motors, also known as Xiaopeng Motors, a Chinese electric vehicle company and a GGV portfolio company. The company designs and manufactures what it calls “Internet cars” which has AI technology integrated into the vehicles.

Prior to joining XPENG Motors in March 2018, Brian was the Chairman of Asia Pacific Investment Banking at J.P. Morgan. He holds an MBA from Yale University, a Ph.D. in Biochemistry from the University of Washington Medical School and a bachelor’s degree in Chemistry from the University of Oregon. At XPENG, Brian leads the company’s global strategy, finance, fundraising, investments and international partnerships. Brian discussed his journey from an investment banker to a tech company executive, why China’s EV market excites him, and how XPENG differentiates itself from its competitors. This episode also features a bonus interview with GGV Managing Partner, Jixun Foo, on why we invested in XPENG Motors.


HANS TUNG: Hi there. Welcome to the 996 Podcast, brought to you by GGV Capital. On this show, we interview movers and shakers of China’s tech industry, and discuss how founders from around the world can draw lessons from China’s tech ecosystem. My name’s Hans Tung. I am the managing partner at GGV Capital, and have been working at and investing in startups across the U.S., China and other emerging markets for the last 20 years.

ZARA ZHANG: My name is Zara Zhang. I’m the marketing manager at GGV Capital and a former journalist. Why is this show called 996? 9-9-6 is the work schedule that many Chinese founders have organically adopted. That is, 9 a.m. to 9 p.m., six days a week.

HANS TUNG: To us, 996 captures the intensity, drive and speed of Chinese Internet companies, who have produced many growth miracles over the last decade.

ZARA ZHANG: Also, I highly recommend joining our listeners’ WeChat groups and Slack channel, where you can connect with like-minded people interested in tech in China. We organize regular offline events across the world for our followers. You can join these by visiting 996.ggvc.com.

HANS TUNG: On the show today, we have Brian Gu or Gu Hongdi (顾宏地) in Chinese. He’s the vice chairman and president of XPENG Motors, also known as Xiaopeng Motors (小鹏汽车) in Chinese. It is a Chinese electric vehicle company and a GGV portfolio. The company designs and manufactures what it calls “Internet cars” which has AI technology integrated into the vehicles. Prior to joining XPENG Motors in March 2018, Brian was the Chairman of Asia Pacific Investment Banking at J. P. Morgan. He joined J. P. Morgan in 2004 and has held a variety of leadership roles instrumental in building J. P. Morgan’s franchise in Asia Pacific region. In his 14 years at J. P. Morgan, Gu led his team in a range of sizeable fundraising deals for Chinese tech giants, including most notably Alibaba’s $25 billion US IPO in 2014.

ZARA ZHANG: Before joining J.P. Morgan, Brian worked in the Global M&A and Global Healthcare practice of Lehman Brothers in New York from 1998 to 2004. Before working on Wall Street, he was the Senior Research Scientist at the University of Washington Medical School. He holds an MBA from Yale University, a Ph.D. in Biochemistry from the University of Washington Medical School and a bachelor’s degree in Chemistry from the University of Oregon. At XPENG Motors, Brian leads the company’s global strategy, finance, fundraising, investments and international partnerships. Welcome to the show, Brian.

BRIAN GU: Thank you. Pleasure to be here.

ZARA ZHANG: First question is, why did you join Xiaopeng Motors after 20 years in investment banking? What was the thinking behind joining a car company? 

BRIAN GU: I think after 20 years of banking, I definitely was looking for something different and more exciting to do. I think I was fortunate to witness the rise of Chinese industries. While I was at my tenure at J. P. Morgan in the last 14 years, I worked with a lot of leading companies, particularly a lot of entrepreneurs that built world-class companies. I think at the stage of my career, I would love to join a company that could also have the potential to be one of the global leaders and really experience the rapid growth inside the company and also during this entrepreneurial rise. Also, obviously joining XPENG is a decision I made looking at both the sector and also looking at the team and the company. I think the electric vehicle, combined with AI and also the autonomous driving phenomenon, is a huge game changer. I think it brings tremendous potential. I would say, from a timing perspective, we’re looking at an explosion happening at the moment. Also, obviously Xiaopeng himself is someone I’ve known for many years. I really identify with the way he thinks about the future and his capabilities as a leader.

HANS TUNG: For our audience, who may not be as familiar with XPENG Motors, we’ll give you some background on the company. It was co-founded in 2014 by Henry Xia (夏珩) and He Tao (何涛), former senior executives at Guangzhou Auto. It’s named after its chairman, He Xiaopeng (何小鹏), a former Alibaba executive and the founder of UCWeb, which was also a GGV portfolio company. My partners, Jixun and Jenny backed UCWeb. Together, we have all known him for almost 10 years. UCWeb was a mobile browser company that was acquired by Alibaba for more than $3.8 billion in 2014, as was the largest M&A deal ever in the industry at that time. After acquisition, Xiaopeng became the president of Alibaba mobile business group, and later served as the president of Tudou and Ali Games. In August 2017, Xiaopeng left Alibaba and officially joined XPENG Motors on August 29th as CEO of the startup. A lot of that was urged on by my colleague, Jixun. XPENG Motors is headquartered in Guangzhou and has raised over $1.5 billion since its establishment in 2014. Its investors include Alibaba, Foxconn, Hillhouse, Primavera, Morningside, GGV, among others.

ZARA ZHANG: Brian, how did you first meet Xiaopeng? Did you think it made sense for him to join a car company full time as a former internet executive?

BRIAN GU: Actually it was an interesting story, because I met Xiaopeng during an expedition in Iceland. It was actually a trip put together by a friend of ours, who is also a venture capitalist.


BRIAN GU: I think they organized a trip for a number of entrepreneurs to experience the wilderness in Iceland. I was the only non entrepreneur in that group. But we spent 10 days in, I would say, sort of the wild in Iceland. We drove a jeep and stayed in cabins. We cooked barbecue. I think it gave me a chance to really get to know the individuals very well. Xiaopeng was one of these entrepreneurs I started forming a bond. Since that trip, that was probably 4 years ago, we’ve actually been in touch for a long time. He actually showed me his investment in XPENG Motors. I’ve also been following the progress all the way to 2017, where Xiaopeng himself decided to leave Alibaba and to join XPENG as the chairman/CEO full time. He actually came to my house. We had a drink on our roof in Hong Kong. He asked me whether I would be interested to join. It took me a few months to think about it. But the more I considered the opportunity and the more I thought about both the sector and the company and the individual, I feel this is a must-do opportunity for myself, so I joined in March last year. 

ZARA ZHANG: We all know that China is the world’s largest EV market and actually accounted for 6 percent of global EV sales in the fourth quarter of 2018. By the end of 2018, electric vehicles made up 7 percent of all new vehicle sales in China. Thanks to a mix of government and market forces, the EV market is now extremely heated with hundreds of startups in the space in China. What do you think differentiates XPENG from the rest?

BRIAN GU: I think there are two things you mentioned that I definitely agree with. I think the first thing is that EV presents tremendous opportunity. I mean it’s one of the sectors, if not the sector with scale, with explosive growth and also with almost certainty that the change is going to happen. That’s something I agree with your assessment. The second point I can agree with your assessment is it’s also very competitive. You mentioned there are hundreds of new startups joining this movement. I think there are companies, not just from a startup perspective, there are also existing OEMs that are trying to do electric vehicle. However, I think what Xiaopeng or XPENG is doing differently is that we’re not just focused on making an electric vehicle. A lot of startups actually are people who came from the original OEMs. Their vision or their idea is just to make maybe a cheaper or better electric vehicle from a gas engine car. Because of the unique DNA that Xiaopeng himself brings to the business, as well as this very unique starting point of the venture, XPENG Motors actually is set out to design and build not just EV, but a smart, intelligent and autonomous driving vehicle. We are one of the very few, I would say, startups that actually do our hardware, software, autonomous driving all in-house. We believe in integrated capability. We believe that in order to provide the best product experience to the drivers as well as customers, you need to own all these three pieces, and not just merely to be an EV manufacturer and rely on suppliers for the software and autonomous driving pieces. Also, what we do differently from some of the other startups is that we started focusing on the largest segment of the auto market, which is middle segment. Our price point actually is hopefully targeting the largest selling price point segment in Chinese passenger vehicles. Unlike some of the premium brands, we want our technology to be used and enjoyed by the mass market. I think our technology differentiation in this segment will be actually very, very standout compared to our peers and competition. 

HANS TUNG: XPENG calls itself an internet car company, instead of an EV or electric car company. What is the difference between internet car and an electric car? How does Xiaopeng’s background as an internet executive for a long time become a differentiation here? 

BRIAN GU: This is actually a very interesting question. When we launched our G3, which is the car in December with delivery, actually I went around asking a number of opinion leaders in the industry to hear their definition of what an internet car or smart car, intelligent car looks like. Everybody gave me a different answer. That means that there is no absolute definition of what a smart car is. But what we believe that to make a core car smart, you cannot just be someone with a big screen and you can have some sort of application features. You really need to thoroughly design a vehicle that can actually learn, respond and provide you with a very intelligent experience. In my mind, there are probably three elements of a vehicle intelligence that you need to have in order to qualify as a smart car. One, I think the car itself should have a deep learning capability through the interaction exchange with the driver. For example, in our current vehicle that we are selling, we can use voice to command the car. The car can learn your preferences in terms of your routes, listening to the type of songs you like. You actually have some driving patterns inside the car. The car can actually become smarter and understand you better, and provide better services in entertainment and productivity to you. That’s the first degree inside the vehicle. The second degree I think to qualify a car to be smarter is the ability to do OTA. I think a lot of cars now claim that they have over-the-air upgrade capabilities. But if you look at them, some of those capabilities mainly just upgrade their screen applications. But I think in order to make a car truly smart, it has to be much deeper than that. Right now, I would say the majority of the ECU, electronic controlling unit, in our vehicle can be upgraded over-the-air. Our next model, which we will be unveiling in April, we actually anticipate to have 100 percent of our ECUs to be OTA. That’s the second part. I think the third part obviously is the autonomous driving capabilities. In order to make a car smart, it has to be able to learn how to drive itself. We actually are very proud to say that our current selling model, G3 is probably the only domestically manufactured, volume produced model that incorporates self-developed autonomous driving features. That’s something I think that will make a car also smart. With all those three capabilities, I think a car can be truly called a smart intelligent vehicle.

ZARA ZHANG: I want to talk about your personal background. Where did you grow up? Why did you go to the U.S. for middle school?

BRIAN GU: I grew up in Shanghai. I actually always tell my friends that I’m probably the… Because obviously you know that a lot of Shanghainese actually came from different cities. But my grandfather, my father and I were all born in the same hospital in Shanghai.


BRIAN GU: That’s pretty rare. I’m a true Shanghainese. I can make that statement. Zara, you mentioned I actually left Shanghai very early in my growing years. I went to the US when I was 12 years old. I actually spent two years in U.S. for middle school. Then I came back to China for high school, because I followed my mother who was a business scholar at the time. She returned to China after three years of experience. After the high school, I decided to go to the U.S. for college again. I went back to Oregon to get my undergrad degrees. Then I went to the University of Washington for my Ph.D. In my first phase of my career, I always wanted to be a scientist. I studied biochemistry. I was fascinated by science obviously, because my family are all scientists. My mom was actually a chemist. One funny story is that when I started in Oregon, before I walked into my first class, they already handed me a sheet saying, your major is chemistry. I said, “Who actually picked the courses for me?” Actually because of my mom’s background, she thought that was the best subject to study. I studied biochemistry. Then after I got my Ph.D., I decided that I want to do something different. I felt that the scientific training was very exciting, but I felt like I wanted to do something that is more dealing with people and commerce. But I didn’t know what I wanted to do, so I went to business school for a career switch. I went to Yale. I got my MBA from Yale School of Management. At Yale, I got to learn about the finance side of the business. It was an east coast school, so a lot of people focused on banking. Naturally, I sort of ended up joining an investment bank out of business school. The first few years, actually I was in New York. I was at Lehman’s M&A group. Again, given my background in biochemistry, they thought I would definitely make a good healthcare banker, which I spent probably 5, 6 years focusing on healthcare M&A, working with U.S. and global companies. But in 2004, I decided to return to Asia. I saw the opportunity with China booming. Also, I think the banking sector is also going through a transformation, so I decided to leave the U.S. and join J. P. Morgan Hong Kong office.

HANS TUNG: In China, we’re starting to see a tradition developing of top U.S. educated investment bankers or finance professionals joining a top internet company as an executive, such as Martin Lau (刘炽平) of Tencent, or Joe Tsai (蔡崇信) of Alibaba, or Charles Chao (曹国伟) of Sina. You joining XPENG Auto also could be another example of this. Obviously, in the case of Martin and Joe and Charles, they’ve all contributed a ton to Tencent, Alibaba, and Sina in the growth of their international credibility. What do you see as your role in contribution at XPENG to be like going forward? Now that you’ve been there for a year, what are some of the interesting surprises or adjustments that you have made so far?

BRIAN GU: Martin, Joe, and Charles actually are all very good friends of mine. I really respect what they have accomplished. I think they took different types of risks. Some went into the industry very early on at a young stage in the company’s development stage. Some I think joined after the IPO of the company. But along the way, they have made a tremendous impact as you pointed out on their respective businesses. I think this is definitely something that I would love to do at XPENG Motors. I believe that EV is a global industry. It’s also a cross section of multiple disciplines that have to make it work. For example, it’s not merely an auto company. It’s not merely a technology company. It’s not merely an operating service company. It can also have financial elements, too. It’s a very interesting and very complex business. I feel like my background being in the banking sector for that many years, seeing the development of many different successful companies, and also understanding the global nature of dealing with partners, investors and company executives, I believe I can bring a sense of global perspective to the business. At the same time, I think XPENG at this stage of growth needs to connect very closely with capital markets. That’s an area I think I have tremendous experience in given what I have done in the past. I think both in the near term and the long term, I would love to contribute to the vast growth and development of the company. Also, similar to those friends of mine who actually has done successfully in Tencent, in Alibaba, in Sina, I hope one day, my contribution can stir XPENG to be one of the global giants as well.

HANS TUNG: If I push this point a little bit further, on the operations side, what kind of things would you want to spend more time on? Is it international partnerships? If so, what kind of partnership is possible? Beyond that, what are the other areas of interest for you to spend time on?

BRIAN GU: I think the first order of business for us is to make sure we are firmly established as one of the global or China leaders at the moment in the EV space or the intelligent EV space. We want to have that in the mind of the global investors, the global thought leaders and global strategic potential partners. That’s an area I would love to spend more time to cultivate and establish. Also, I think as a young company, which I think haven’t answered your prior question on what I see in a young company is it’s very dynamic. Actually, it’s tremendously interesting in how a young company evolves. You won’t know that until you’re inside the company. I think there is a tremendous learning power of the executives around me. A lot of those probably have not gone through large companies before. But they have a lot of innovative ideas. To piece those good ideas in a structured manner I think also takes experience and organization. I think that’s also an area that I would like to make sure I contribute because of my background experience in larger companies. I think also to provide a global perspective on a lot of things we do also can influence the direction of the company’s businesses, both in terms of technology development, as well as business model selections. These areas I also hope to shape with my involvement as well.

HANS TUNG: It makes sense. I’m sure that’s why Xiaopeng decided to recruit you to join him from early on. Now that you’ve been there for a year, what has surprised you?

BRIAN GU: Like I said, I think what surprised me most is how talented and how large the potential to learn for the young executives around me. Because in a large company, you always feel okay, we have seen a lot, we know a lot and we actually can teach them how to do things. But in China, especially with the talent surrounding us, a lot of them have not gone through the large companies, but they have real good common sense and business judgement. They actually have very innovative ideas. Actually their ability to learn is also tremendously powerful. I think what surprised me most is actually I realized that a lot of times, it’s not me showing them how to do things in a proper or the global or sort of the sophisticated way in the larger companies. Actually I’m learning from them how actually we can do more innovative things and how we actually can achieve things more efficiently. I was very surprised by my own learning.

HANS TUNG: Do you have an example?

BRIAN GU: Let’s just use one. For example, in a traditional company, when you look at selling a product, I think there’s a lot of analysis we have to go through and also the standard channels you have to push and understand in the market. There’s almost a playbook. But there are a lot of innovative measures that we actually put into our business, which have not been seen before. For example, nobody in the past, other than Tesla I think, in China, people don’t click and buy automobile, right? Because it’s a larger purchase item, people want to test and feel it. But I think we actually try to break down the process into two parts. We want to efficiently leverage the online and internet traffic and appeal and the fan-based approach to generate excitement. At the same time, we actually are directing that and funneling that into our physical stores, which we built ourselves in large cities, which was never seen before nationally in China when we actually sell automobiles. A lot of times I think you have executives who come from large auto companies like BMW, or from other domestic makers. They were actually, I would say, blown away by how innovative some of the things that we’re doing here. I think we have results to show for it, because if we actually look at the foot traffic that comes into our showroom to buy our product, more than 50 percent of this foot traffic is actually converted online, which is actually a lot more efficient way than relying on just regular traffic inside a shopping mall or the physical stores. I think these are the things that we are doing that hopefully can differentiate ourselves.

HANS TUNG: It sounds like the stores that you have are your own stores, not dealers or channels?

BRIAN GU: Right. I think for a young company with a product that is very different, and also we want to have a direct connection with our customers, direct stores is probably the right format. But however, if we scale up and we actually want to penetrate into tier 3, tier 4 or other cities, I think we cannot build enough of our self-owned stores. We will also explore partnerships if we decide to scale up. I think we will always be looking for the best model. Maybe it’s a hybrid in a year or two. But right now, we are focused on building our own experience stores in the large cities.

HANS TUNG: I definitely see some similarity between your approach and how Xiaomi started selling phones online and then opened XiaoMi stores offline. It is definitely an internet-inspired model for sure.

BRIAN GU: Xiaopeng himself has been influenced a lot by Xiaomi. Lei Jun (雷军), the chairman of Xiaomi, used to be the chairman of UC. I think Xiaopeng used Lei Jun as one of the mentors. I think there’s definitely a lot of influence we receive from a successful business model like Xiaomi, which is also very innovative in the way they do business. However, I think as a car, that product is very different from smartphones. We need to tweak that model to make sure that it actually addresses some of the pain points for auto customers. That’s why we are actually constantly exploring new approaches. 

HANS TUNG: From my perspective, seeing how VANCL (凡客) trying to sell clothes online, but they weren’t able to open up good stores offline to sell it. Then a few years later, Lei Jun went with selling phones online and tried the stores offline. Then another few years later, you guys went to do that in auto. Each time the challenge being taken is hard. Before Xiaomi selling phones online, even Google failed. Then before you guys do that, not many others, maybe besides Tesla, have done it. Each time, Chinese founders are breaking new grounds, and it is super exciting to see. 

BRIAN GU: Absolutely. 

ZARA ZHANG: Xiaopeng’s G3 car which released in December 2018, could you talk about what’s special about this car? What has been the attraction so far?

BRIAN GU: First of all, it’s a SUV. It’s a compact SUV, five seater, beautifully designed. I can show some pictures actually. It’s very sporty look, particularly targeted at the young, active drivers in large cities. Also, the car is packed with technology. This car has level two plus autonomous driving features, which means that it has full ADAS plus some of the level three features in low speed scenario. For example, we actually have a full scenario auto parking that is very differentiated compared to everything that is out there on the market. Our car can park in more than 70 percent of the different types of parking scenarios in the Chinese parking lots and parking areas. Whereas compared to even Tesla, which I would say, is probably one of the smarter cars, they only can identify probably less than 20 percent of those parking scenarios. Actually we are trying to provide a very unique and targeted solution to our drivers. The car also has a range per charge of 365 kilometers, which is already, I would say, sufficient for city use. The car has a panoramic glass roof, very similar to the Model X experience. It also has one of the larger screens inside the car that has full control of the vehicle. It does not have the traditional vehicles like buttons and dials. It’s very futuristic. Also, what’s unique about the car is that I actually drive our vehicle to work every day. I don’t even touch the screen or control or window. I use my voice command. Actually the voice change is something that’s really, I would say, differentiating because you can actually select your music, lower your window, turn on your fans or adjust your own seats for you. It also has facial recognition features with an AI camera that actually can monitor whether you’re distracted, whether you’re tired. It can monitor your heartbeat. There are lots of these cool intelligent features in our vehicle. But more importantly, the price point that we actually are hitting as I mentioned earlier is very different compared to Tesla or other premium models. Our car is priced between RMB150,000 to RMB 200,000, which is less than half the price of Model 3, the most basic model in China.

ZARA ZHANG: That’s around $22,000 to $30,000.

BRIAN GU: Right. We want to provide a very differentiated unique product packed with technology to a segment that is the largest and at best growth in China.

ZARA ZHANG: What is the experience of driving that car in Guangzhou? Do you think China is equipped to have a lot of people driving EVs around, in terms of infrastructure, for example, charging points.

BRIAN GU: Driving an EV I think is very easy. It’s actually easier than other traditional gas engine vehicles. There’s no gear. You can actually just go. I think our G3 is also very easy to drive. It’s not designed to be a super car at this price point. We don’t have the super fast acceleration, but it’s nimble enough. I think in city driving, the acceleration is really strong, especially in the 0-60 kilometer, it’s very, very fast. But the reason I think people hesitate to buy EV, I think the top reason is the charging. I think the distance anxiety is something that people always cite. We provide actually a holistic charging solution to our drivers. First of all, we provide home charging to whoever that has the capability to install home chargers. If they have dedicated parking space or they have a garage, we will give them a free home charger. The second thing is that we have our own proprietary supercharging network that’s built in large cities that we’re selling our vehicles. Those supercharging network only provides supercharge, which is a fast charger that we designed with our partners. It provides 80 percent and above charging for less than 40 minutes. It’s a very fast charging time. We are likely to half that time in the next 12 months.

ZARA ZHANG: How many of those are there?

BRIAN GU: We have built close to 2,000 of these charging stations already. We aim to have close to 200 by the end of this year. Then the third solution we have is our vehicle can be charged at any of the third party charging stations, so charging companies or public charging infrastructures. China, as you know, is actually probably the most advanced in terms of building auto charging infrastructures. The government has already mandated by 2020 to have close to 5 million charging piles around China. It means that it is going to have more charging piles than the rest of the world combined.

HANS TUNG: The Chinese government has spent close to $60 billion in various subsidies, like you said, in support for building out charging stations and to build up the new energy vehicle industry in the last decade. But recently Beijing has also been rolling back on subsidies in some areas. How has the growth of spending money to help to build this industry help to support this industry? Does the cutback on the subsidies have any negative impact at all on the sector? 

BRIAN GU: I think the Chinese government has been very, very instrumental in facilitating the development of the EV industry. The subsidy you mentioned, the infrastructure investment all are a part of an effort to really push China to be one of the global leaders, if not the global leader in EV. I think the Chinese government is also thinking about what are the best ways to support the industry. I think the subsidy has been probably the main factor in the last 5 years. It obviously gave a lot of financial assistance to EV makers. But at the same time, I think it created some dynamic that encouraged lower-end producers to design and build products that’s not the best product but end up collecting subsidies, which is not the right thing I think for the industry. I think the government is actually realizing that and trying to change the way they support the industry into more efficient means. For example, there are a lot of policies that are now being implemented around Chinese large cities. EV can actually receive plates much easier than traditional gas engine cars. That’s one of the main drivers for a lot of people to buy EVs, because they can easily get the cars to drive in large cities. Secondly, I think they actually are pushing the emission standard for OEMs in the gas engine world. The emission standard will become more and more stringent. Actually I would say, by some measures, China is actually already ahead of Europe for the emission standard requirement. Some of the cities are likely to ban gas engine cars altogether. That is also some movement that is pushing the development of EV. Also, I think the continual investment into infrastructure is something I think the Chinese government will commit to do to actually foster the development of this industry. I think the overall tone as well as the overall support from the government continues to be very strong. For young EV companies like XPENG Motors, I think we clearly want to make sure we take full advantage of this support in our development. The scale back of subsidy is going to be felt by all the players in the industry. We believe that it actually favors companies like XPENG, who actually focus on product design and unique experiences and technology superiority. The more customers or consumers focus on the product technology itself, I think we actually get better advantages. In the long run, I think it’s good for the industry and we are very confident that we can actually be one of the potential leaders given the way that we define and position ourselves.

ZARA ZHANG: On the G3 SUV, how many orders have you received? How is delivery going?

BRIAN GU: We started delivering G3 in December last year. The delivery obviously is a slow ramp up process. If you look at NIO and other companies, they all went through the same phase, because it takes time to get the factories to perfect the manufacturing process, get the supply chains ready. The first three months, there was actually a low volume delivery. I think we are going to start volume delivery by later this month, which is March 2019. We actually aim to do delivery in the thousands, multiple thousands of range in the next few months. In terms of orders, we actually have been receiving very exciting momentum in our orders. We have more than 10,000 paying orders on hand. Our orders are already stretched in terms of delivery schedule well into the second half of this year.

ZARA ZHANG: As you mentioned, the XPENG car is priced very competitively at between $23,000 to $30,000. Could you talk about why you’re targeting this younger consumer group?

BRIAN GU: First of all, I think if you look at the demographics, the young. I would define young as between 25 to 35. I think it is actually the fastest growing driving crowd in China. Also, we believe at that age, these drivers are more tuned to try new technology, new features. For a lot of them, it may be their first car or their first family car. A lot of times, I think these people can truly enjoy and be involved with our technology development. I think that’s why I think targeting those core users is actually our first strategy. But again, I think once we actually can really put the precise positioning of our vehicle into the minds of these individuals or customers, then we can expand from there. One interesting data point for you is that if you look at the orders that we have on hand, given we have three trim levels of the G3. We have the basic trim level, which is without our autonomous driving features. We have the intelligent trim, which is including the autonomous driving, and then the top end. If you look at our order book, 97 percent of our orders are actually in the intelligent and the top end, which means that our positioning is quite successful. People who come to buy Xiaopeng cars are actually coming to us because of our intelligent and our technology approach.

ZARA ZHANG: Recently Tesla has also cut the price of its vehicles in China significantly. Do you think that will have an impact on you?

BRIAN GU: First of all, I think Tesla will bring Model 3 and Model Y, but I think it will take a little longer, particularly Model Y which is a similar size of our G3. It is a few years out. Also, I think at the current stage, I think the cars they are going to bring to the market are still going to be viewed as premium segment vehicles, even with local production. I think their supply chain cannot be completely localized yet. I think there will be additional cost. I think the vehicle will come down from the current price, but still way above XPENG’s price range. I think the competition itself, we will not feel directly, because we’re not going to compete in the same segment. But I think it’s actually a good thing that you have a good product coming into the Chinese market that stimulates Chinese consumer demand and interest levels, and at the same time, bringing high quality supply chains to the Chinese markets. I think those are actually in general good for the development.

ZARA ZHANG: Like Apple for the smartphone market.

BRIAN GU: We are actually seeing this as a positive development. I think also given years, let’s say in two to three or four years, we actually are confident that our technology, given the user base, the vehicle on street and the data we continually collect, we can actually come up with better features, more localized experiences in autonomous driving than Tesla. I think we are very confident that in the long run, we can compete well with Tesla products.

HANS TUNG: My last question is around a different topic, around talent. XPENG Motors currently has about 3,000 employees. This number is growing rapidly. As you know, in 2018 the company in one year alone added almost 2,000 employees, 70 percent of them in R&D. Xiaopeng has said recently and told us that he plans to add another 5,000 new employees this year. The company has been able to attract a wide range of high caliber talent, such as including yourself from early on. Can you talk about Xiaopeng’s talent strategy? What are the different profiles that you guys are looking for to add to the team? As you may know, many of our listeners of 996 podcast listened to our interview of a Chinese company before they joined them. Hopefully everything said today will be something that will help you attract more talent to join you as well.

BRIAN GU: We actually have a very diverse employee pool. We have employees coming from over 200 different companies. There is great diversity. We also have employees coming from over, I would say, a dozen different nationalities. It’s growing really fast as you mentioned earlier. Obviously, we are into adding employees at a pretty significant pace. The 5,000 number you mentioned includes part time employees. The full time number will be significantly less than that. But still I think it would be an impressive growth by any measure. We’re looking for talent in actually a lot of different areas. As the company is focused on automobile and technology, talents that bring the experiences in the relevant product areas, I think we’d love to talk to them. We would love to get experienced applicants in AI, in autonomous driving, in vehicle design, in power train, in a number of these specific product areas. At the same time, we’d also like to attract individuals coming from more non traditional and non auto backgrounds, because I think we are trying to do something quite differently. We want to bring individuals that have experiences with new retail models, new network development capabilities. We want to also attract executives in the functional areas like legal and finance and corporate strategy, etc. I think we are actually looking for talents across the board. This company has a very strong employee-focused culture. We have a very strong emphasis on human capital. One of the key area or department that Xiaopeng oversees directly is the HR function, because he feels like having the right infrastructure, right organizational structure, and right culture is important for a company to grow into a much larger scale. I think that that is something we probably are different from other fast growing Chinese companies, because of our emphasis on human capital and organizational structure. 

ZARA ZHANG: I also want to ask a career related question. I do have a lot of friends in investment banking, who are trying to pivot themselves to join a tech company, but it doesn’t come naturally to a lot of them. Do you have any advice for aspiring or current finance professionals who are trying to transition into tech?

HANS TUNG: Good question.

BRIAN GU: There are actually quite a few investment bankers in our company, myself included obviously. But in our strategy department, we have senior bankers and also junior bankers as well. We also have finance professionals, who have been successful investment professionals for over 20 years in the largest Wall Street firms. I think we have a very unique balance of companies from finance, technology and other areas. I think the transition from an investment bank to a fast growing entrepreneur company is always going to be challenging, because it’s a different pace. It’s a different culture. Also, it’s focused on different priorities. But I think if you are willing to learn, if you actually are flexible about the work schedule intensity, I think an entrepreneur technology company is actually very, very good experience for young bankers. I always feel it interesting that if I actually, in the earlier part of my career, have had experience inside a company and see the operation, I think that would make me a much better or much more well rounded banker. I think that experience is very valuable. I’ll give you another story. Actually, I had breakfast with Joe Tsai for example, when I joined XPENG. I asked him. I said, “You took lots of risks. You joined Alibaba when it was first founded. Why did you take that risk?” Joe looked at me. He said, “I don’t think there was a lot of risks.”

ZARA ZHANG: That was not so bad. 

BRIAN GU: “For me, spending two or three years in Alibaba even if it didn’t work out…”

HANS TUNG: Exactly, it didn’t matter.

BRIAN GU: “It’s a tremendous experience compared to if I stayed in Investor AB. Where’s the risk? I don’t see any.”

HANS TUNG: You can always get another job if Alibaba didn’t work out.

BRIAN GU: What I’m saying is that for young professionals who are starting their banking career, don’t be afraid. Try to be inside an entrepreneur company. The experience will be very valuable. You still have time to decide what you want to do later.

ZARA ZHANG: The only risk is not taking any risk.

BRIAN GU: That’s right.

HANS TUNG: I just want to emphasize on this point that Brian made again, which is that I don’t think I will be as good a VC if I didn’t have startup experience in the internet before. I highly encourage everyone to follow Brian’s advice. If you are in banking or in consulting, spend two or three years in a tech startup or a tech company, just gain more experience, not be afraid to try that. It would be much better, even when you go back to banking or consulting later.

ZARA ZHANG: Now I will jump to a round of quick-fire questions. You can just say the first thing that comes to your mind. The first one is who is an entrepreneur you admire the most and why?

BRIAN GU: Jeff Bezos and Jack Ma, because I think they not only built a big company, they weathered the ups and downs of a company. They always come up with new better ideas and better directions for their company. I feel like that’s true entrepreneurship. It’s consistent, not just one-hit wonders.

ZARA ZHANG: What’s a book you read recently that you would recommend?

BRIAN GU: Actually I read something I recommend to our management team is Founder’s Mentality, which is a book written by BCG I think or Bain, one of the consulting companies. They took some analysis on the companies they looked at and concluded a number of traits that  make a company better, which included a lot of the company characteristics that trace back to the founder’s way of doing business.

ZARA ZHANG: What is a habit you have that you think has changed your life? 

BRIAN GU: I think the best thing I learned is not to react too quickly. I think that that’s something I learned as a scientist, and then as a banker. I think a lot of times, the first reaction may not be the right one. Always take a pause and you will benefit from that slow response.

ZARA ZHANG: Lastly, what do you do for fun?

HANS TUNG: Go to Iceland. 

BRIAN GU: Travel is always fun, but it needs time. What I do is I usually try to find time to do hiking because Hong Kong has a lot of hiking trails. A group of friends will always like to hike together. I also enjoy wine and food. These are probably my hobbies.

ZARA ZHANG: Brian, thank you so much for your time.

HANS TUNG: Thank you, Brian.

BRIAN GU: Thank you very much.

HANS TUNG: It was great.

ZARA ZHANG: Next, you will hear a short interview with our managing partner, Jixun Foo, who co-led GGV’s investment in UCWeb with our other managing partner, Jenny Lee. UCWeb is a mobile browser company founded by He Xiaopeng that was acquired by Alibaba for over $3.8 billion in 2014 in the largest M&A deal ever in Chinese history back then. Jixun, could you talk about how you first met Xiaopeng and how you actually persuaded him to start his next venture, XPENG Motors.

JIXUN FOO: Sure. Actually my history with Xiaopeng, first of all, dates back to when I first met Lei Jun. Lei Jun was an angel investor at UCWeb. Back in ’06, he started to tell me this story about a mobile browser. I was thinking, future phone, mobile browser, what is that? He then made an introduction to one of the CEO co-founder of the company, Yu Yongfu (俞永福). Yongfu at that time was brought in and co-led the team with Xiaopeng. He became the CEO of the company. I actually first met Yongfu and then later met Xiaopeng. Xiaopeng was based in Guangzhou. He was really the guy who built the product for UCWeb. This deal is kind of interesting. Jenny and I actually got to know Lei Jun. There were a few deals at that time that Lei Jun sort of angel-ed as the most promising deal. He kind of helped out, promoted the deals to us and got us to look at it. One of them is YY, which he spent a lot of time and the other one is UC. We then subsequently did quite a bit of work. In ’08,‘09, we made an investment in UC. To be fair, we are a relatively small. We sort of co-led the round with what was called Nokia Growth Ventures at that time. It was Paul and his team. We co-led the round at about $150 million valuation at that time. It was an interesting start. The thing with UC has always been that, with a feature for market, how is that value going to evolve? Obviously, they made a huge impact in terms of growing, not just within China as a browser, but they also had scaled outside of China. Anyway, the long story short is ’06 was the time because of UC, that’s where I met Xiaopeng as the founder and key product person behind UC. Along the way, obviously we stayed in touch, but I spent a lot more time with Yongfu than I spent with him. Having said that, I think after the company got acquired by Alibaba, both Jenny and I were a little involved in trying to navigate the acquisition as well as a merger, because there were a few parties, not just Alibaba involved. There was also Baidu. Then post-acquisition, Xiaopeng stayed on at Ali. Then there was this time that he called upon Jenny and said, “Hey, I built this car, incubated this car. I want you guys to come and take a look.” I did. Jenny asked me and we went along. We went to Guangzhou and we saw this whole mockup, stripped out car, EV. He put together, incubated a team led by Henry, who today is the president of the company, Henry Xia. It was interesting, but I didn’t have a lot of drive. I said, “Hey Xiaopeng, are you doing this full time?” He said, “No, no, I’m still at Alibaba.” That didn’t really give me a lot of conviction or confidence in how he would want to build this. It was kind of like a project, a toy project for him. That was 2013, 2014. By 2016, I start to see the whole momentum behind EVs. I see there’s been a lot more talk about autonomous drive. I think that smart car is a big future. There’s a big potential because of all the potential infrastructure, investments that’s made by the Chinese government, the subsidy that’s been launched by the Chinese government, etc. I started to think and I spent a bit of time looking in the category, met up with NIO and Weima (威马) and a few other players. I felt like Xiaopeng, if he wants to do this, and he goes on full time, it would be interesting. I spent quite a bit of time talking to him. I revisited his team. In fact, this time round, I dragged Jenny along to spend a day at Guangzhou, meeting up with his team and so on. I spent probably, I would say, a few months talking to Xiaopeng and said, “Are you ready to go full time? Are you ready to go full time? Because if you are, I’m going to be backing you.” There was this day that I called him. It was just right after Chinese New Year, or just around Chinese New Year in February of 2017. I said, “You really need to do this.” That’s the point in time where somehow it struck him. I’m not sure why because he just had his newborn second kid and it was a boy. At that time, he was holding his baby. I didn’t realize that when I made that call to him. Then I was just ramping off telling him. I wasn’t congratulating him because I didn’t realize he just had a boy. I said, “You should do this.” That really turned him on. Thereafter, he made the decision to jump. He officially jumped in in August 2017 and went full time on Xiaopeng.

ZARA ZHANG: What about Xiaopeng that made you have such conviction that if he jumps in, you’re going to back him?

JIXUN FOO: I always give this analogy between a feature phone versus a smartphone. I think there is a fundamental change when you go from just a functional product to a smart product. There’s a lot more thought and ideas that have to go into the whole user environment. The car is not just a utility anymore. I thought that somebody like Xiaopeng with an internet product background could be very, very powerful. There are not many of such so-called entrepreneurs, if you will, who have done this before. To do this, you need a serial entrepreneur. If you look at NIO for example, Bin (李斌), the founder is a serial entrepreneur. Without that serial entrepreneurship, without the bit of halo behind you, it’s hard to draw the kind of capital to build a car company. Elon Musk is a serial entrepreneur. I actually think you need a bit of serial entrepreneurship to do this. There are not many players around. Number two, he has that. I mean he has an interest. That’s why he incubated this company. He has a passion for cars. He loves cars. There is an inner interest. He’s not just off the street, I pull any guy, a serial entrepreneur and say, “Hey, you go do this”. He’s somebody who’s been doing this and he understands cars. Thirdly, this is a business, given how capital intensive it is, you need to be able to put your money where your mouth is. Investors, not only will follow you, they will also follow your money. Xiaopeng, given the exit at UC and so on, he has, not just the halo, but the ability to say, I can put my money where my mouth is and draw other capital along. That’s important. I think there are a few reasons. I think there’s a market factor. There’s the fact that he has the charisma, the halo, his pot of gold, if you will, to actually do this and make it work. The market opportunity is there, right? China has 26 million new cars every year. Today, Tesla globally probably sells 200,000-300,000 cars. There’s still lots of room for a second, third, fourth player to come up.

HANS TUNG: I will add a couple of points to what Jixun said. I think he’s definitely right comparing what Xiaopeng is doing with XPENG Motors similar to going from feature phone to smartphone. Venture VC is a game of public recognition. When you see something shift from feature phone to smartphone like we all did with Xiaomi, it leaves an impression in your mind. When you go into a car, whether it’s utility or luxury, you see now you go from a dumb car to smart car. That experience just reminds you of the different shifts that you saw earlier both as an investor as well as a consumer. If everything around us is going to the cloud, why shouldn’t the car where we spend enough time on it, both going to work and leaving work, be smarter as well. Elon Musk already showed that is possible, and other countries should do that, especially a country as big as China. The second thing is that Jixun mentioned that Xiaopeng is a serial entrepreneur. A lot of times, the entrepreneur first time may be a creator of a product, but he may not be ready or she may not be ready to be the CEO of the company, because building a product and being the CEO, which requires more business background, are two different things. If someone has done it once, got an exit, but was never the CEO, and you have a new baby in your hand. You think like what is my legacy? I already have my money, but what do I want to be known as to my kids? As someone who kind of followed and did something or as someone who’s going like, I actually built something myself and took it all the way to the end and leave a legacy? A lot of times, a serial entrepreneur is driven, not by money anymore, but by a legacy. That’s an extremely powerful motivating factor for success.

JIXUN FOO: I think that’s absolutely right. I think for Xiaopeng, it’s definitely not about money, because he is well to do on his own after UC. He’s driven by a more important underlying mission and passion for something for himself. I think that drive for legacy, I think is a good way to describe it. It’s really what propelled him. I had a board meeting with him recently. Prior to the board, we had this lunch. He said, “You know what? I worked as hard as I was, if not harder than I was when I was in UCWeb.” I mean this guy has already made it, but yet he’s working so hard. He might be working more than 9-9-6, Hans.

HANS TUNG: Yes, I wouldn’t be surprised. 

ZARA ZHANG: Brian joined the company around a year ago. How did you first meet Brian? What do you think are some unique values that he has brought to the company? 

JIXUN FOO: I got to Brian while he was in investment banking. His last position was chairman at J. P. Morgan. I had touchpoints with him on and off. But Brian really brought a different set of skillsets to the organization, given his background, his knowledge, his perspective, his macro, and his ability to communicate very, very well with the outside world. I think Xiaopeng needs that. That’s one thing I would say about Xiaopeng. I said, his halo is important. This is not just about attracting investors, followers, etc. but talent. He’s able to attract talent to join him. Brian joining him is a testimony for that. It’s not just Brian. He has many other people who are ex-Tesla, or ex-Qualcomm, and Xiaomi, etc. joining the team, senior and professionals, etc. Brian is one of those. I think Brian really complements Xiaopeng in a way where he’s completely bilingual. He understands China very well. He has very strong linkage to various investors in the community. This is a capital intensive game. We need that ability to rally the support and the investors behind us to build the company. Brian plays that role really well.

HANS TUNG: It’s interesting that Brian said that now he flies economy class all the time. When he was a banker at J. P. Morgan, it’s usually all first class and making good money. Why is he doing this? We’re seeing more and more professionals in China willing to take that entrepreneurship jump and be part of a company that’s leaving a legacy, changing the world, doing something better for society that gives enough meaning and also enough payout at the end to make it worthwhile, because the market is massive, the opportunity is huge, and the upside is there. If you work hard for three to five years, you can really make a huge difference at multiple levels. 

JIXUN FOO: Right, and it’s really interesting. Not just flying economy class. They even have budget for hotels. He stays in budget hotels. For a guy who has made it as a chairman of J. P. Morgan, and was obviously treated first class everywhere, including flight and hotels and travel, to be willing to kind of step down and say, this is what I’ll do coming into a company and having the desire and trust to follow Xiaopeng and do this, it certainly means a lot. It certainly takes a lot, not just for himself emotionally, but also family and everything. I mean Brian lives in Hong Kong, but he works in Guangzhou. I stayed in the hotel where he stayed, which is just next to the company. It is a budget hotel. It’s a sign of commitment and conviction to the XPENG vision.

ZARA ZHANG: Do you think China’s EV or smart car market is inherently localized? Is it possible for non-Chinese players to be successful in China, or do you think the local players will in the long run beat everyone else? 

JIXUN FOO: Auto market is not a winner takes all market. I will say that you have Mercedes and you have BMW. You have Toyota and you have Honda. You have local players. It’s a big enough market, with 26 million new cars being sold every year. Granted the whole growth momentum behind new car sales has come down, 2017 to 2018, but it’s still a big market. It’s probably the single biggest market in the world in terms of number of cars sold. There’s opportunity to grow that market share. Today, the penetration of EVs is about 3 percent. There’s still room for smart cars to actually extend itself. I’m less worried about competition per se. I mean there is definitely the competitive element. But foreign or local, the chances are actually fairly equal. I think China is increasingly trying to open up. It’s not limiting foreign players per se. The market is open to all. Having said that, I think that it’s important for us to appreciate the local environment and the local market. I’ll just give you one example, and this I use quite a bit, this ability to auto park, XPENG, right? Most people when they talk about auto parking as a feature, the reality is that many of the cars only recognize 10 to 20 percent of the parking scenarios here in China. Out of 10 times that you try to auto park, only one to two times, you get the auto parking. Then that feature is quite useless. I think Tesla, for one, coming into the market and others who are trying to come into the market, if they want to support that feature, they have to localize to the scenario that is here in China. Xiaopeng, for one, is able to address 70 to 80 percent of the parking scenarios here. Out of 10 times, 7 to 8 times you could easily auto park your car. That becomes a true valuable feature, versus just a feature that you put on the brochure. That’s important, localizing to the marketplace that you see, because China is a very, very different driving environment, I’m sure Zara and Hans, you guys are aware, versus the U.S.


HANS TUNG: I will echo Jixun’s point a bit further. We get a lot of questions in the U.S. that China is different, so much regulation, government risk, blah, blah, blah. As if that’s the number one reason U.S. companies don’t do well. The reality is that, especially in this category, Tesla will be welcomed in China. That’s not the issue. That is not any more a bigger issue than any Chinese company will face. But what is different is that the Chinese companies do know the level of entrepreneurship and level of capabilities is so strong and so good that Chinese companies move extremely fast to satisfy the needs of local consumers. If you do that well, of course, consumers would use your product. If the product is not localized for China, then millions, hundreds of millions users are not going to use your product as readily even though you have an amazing brand from outside. Most American companies fail to realize why they should change and tailor a solution that’s specific for the Chinese market. Most of the time, that’s the reason why U.S. companies don’t do as well in China.

ZARA ZHANG: For Chinese players, there are a lot of companies in this space as well. What made you have such strong conviction that XPENG is the one you should bet on?

JIXUN FOO: First of all, I think that each of these companies have their merits. As peers of Xiaopeng, they have their merits. It’s hard for me to comment. But I do fundamentally believe that this is a product business. The car is a product. It is not a service business. The intensity and skills and knowledge needed to build a great product is important. I think Xiaopeng is the type of person, he’s a product guy. He’s not here to market and pitch sales. He is pretty focused on giving the right product experience to the end user. That’s what I believe in. I think underlying it is what does it take to build a great car company. I think Xiaopeng has what it takes. Therefore, I chose to back him.

ZARA ZHANG: That’s all we have for today. Thanks so much, Jixun, for your time.

JIXUN FOO: Thank you.

HANS TUNG: Thanks for listening to this episode of 996.

Episode 38: [AMA] Hans Tung on Breaking into VC and Other Questions from Listeners

On a special “AMA” (Ask Me Anything) episode, GGV Managing Partner Hans Tung answers questions posed by our listeners on a wide range of topics.

How did Hans break into the VC world? What made he move to China and then come back to Silicon Valley afterwards? How does he deal with failures as an investor? What does it take for non-Chinese entrepreneurs to succeed in China? What motivates him to wake up and work hard every day?

Join our listeners’ community via WeChat/Slack at 996.ggvc.com/community.

The 996 Podcast is brought to you by GGV Capital, a global venture capital firm that invests in local founders. As a multi-stage, sector-focused firm, GGV focuses on seed-to-growth stage investments across Consumer/New Retail, Social/Digital & Internet, Enterprise/Cloud and Frontier Tech sectors. The firm was founded in 2000 and manages $6.2 billion in capital across 13 funds. Past and present portfolio companies include Affirm, Airbnb, Alibaba, Bitsight, ByteDance, Ctrip, Didi Chuxing, Grab, Gladly, Hello Chuxing, HashiCorp, Houzz, Keep, LingoChamp, Namely, Niu, Nozomi Networks, Opendoor, Peloton, Poshmark, Slack, Square, Wish, Xauto, Xiaohongshu, Yellow, YY, Zhaoyou and more. The firm has offices in Beijing, San Francisco, Shanghai and Silicon Valley. Learn more at ggvc.com, or “GGVCapital” on WeChat.

Episode 37: Hao Wu on Making “People’s Republic of Desire”

We interviewed Hao Wu, a Chinese American film director, producer and writer to discuss his recent work “People’s Republic of Desire”, a documentary about the live streaming industry in China.

Originally trained as a molecular biologist, Hao worked in tech before becoming a full-time filmmaker. He held various management positions at technology companies including Excite@Home, Yahoo China and Alibaba. From 2008-2011, he was the China Country Manager for TripAdvisor. As his career progressed, so did his passion in more artistic and creative endeavors. In 2012 he decided to pursue documentary filmmaking full time. His latest work, which is the subject of this episode, is a documentary called “People’s Republic of Desire”, a journey into the live streaming industry in China, where Hao follows a few top streamers on YY to document their lives behind the screen. The film has won the Grand Jury Award at the 2018 South By South West, among many other awards, and has screened at over 40 film festivals worldwide. The New York Times calls the film “hypercharged,” while The Los Angeles Times says it’s “invariably surprising and never less than compelling.” If you haven’t watched the film, we highly recommend doing so. It is available on Vimeo, iTunes, Amazon and Google Play; just visit desire.film for the links. Hao has produced two other documentaries, The Road to Fame, and Nowhere to Call Home.

Hao holds a bachelor’s degree in biology from the University of Science and Technology of China, a master’s degree in molecular and cell biology from Brandeis University, and an MBA from the University of Michigan’s Ross School of Business.


HANS TUNG: On the show today we have Hao Wu, or Wu Hao in Chinese. He is a Chinese American film director, producer and writer, in our opinion superstar in the coming. Originally trained as a molecular biologist, Hao worked in tech before becoming a full time filmmaker. He held various management positions at technology companies including Excite@Home, Yahoo China and Alibaba. From 2008 to 2011 he was the China country manager for TripAdvisor. As his career progressed so has his passion in more artistic and creative pursuits. In 2012 he decided to pursue documentary filmmaking full time.

His latest work, which is the subject of our show today is a documentary called People’s Republic of Desire. It’s a journey into live streaming industry in China where Hao follows a few top streamers on YY, it’s a GGV portfolio, to document their lives behind the scenes. The film has won the Grand Jury Award at the 2018 South by Southwest among many other awards and has screened at over 40 film festivals worldwide. New York Times called the film hypercharged, while the L.A. Times says it’s, “Invariably surprising and nevertheless compelling”. If you haven’t watched the film, we highly recommend doing so. It’s available on Vimeo, iTunes, Amazon and Google Play. Just visit Desire.film for links. Hao has produced two other documentaries: The Road to Fame and Nowhere to Call Home, and both are very good.

ZARA ZHANG: Hao holds a bachelor’s degree in biology from University of Science and Technology in China, a master’s degree in molecular and cell biology from Brandeis University, and MBA from the University of Michigan’s Ross School of Business. Welcome to the show, Hao.

HAO WU: Thank you. Glad to be here.

ZARA ZHANG: I wonder how did you come to choose the topic of this film and why did you choose to focus on YY out of all the live streaming platforms in China?

HAO WU: Back in 2014 in the summertime I went back to China to start researching my new film project. Actually, I had six project ideas in mind. I did some research filming in China. And then just randomly one of my friends who is a financial analyst at that time asked me, since you worked in tech for so many years, have you heard of this company called YY? It’s listed on Nasdaq. Its market cap back then was over $3, $4 billion dollars already. Can you tell me a little bit about how to make money? I was immediately intrigued, because for many years as Hans was saying I was working in China Alibaba and TripAdvisor China, but then I asked around my friends in Beijing and Shanghai, very few of them have heard of YY. The few people who have heard about it said, okay it’s so Diaosi 屌丝, it’s very low. It’s all about these gamers addicted to gaming, they kill time online. I decided to really research, how can a company that even tech people in the big city don’t know about get listed on Nasdaq. That was my first impetus to start researching this.

Then luckily through an industry connection in China’s Internet industry I was introduced to Li Xueling, the founder of YY. Li Xueling then introduced me to YY’s marketing department, so I shadowed their marketing department as they worked with live streamer, what they call hosts, Zhubo 主播. In China they did some events. Then I was like, wow, this is so fascinating because you see all these live streamers who are not that very talented in the real world, but online because with their mic, with their mixers, they sound much better, they look prettier and then they attract all these digital gifts that cost so much money. And then as soon as I realize there are a lot of Tuhao 土豪, the rich-

HANS TUNG: Rich consumers.

HAO WU: Rich patrons, as well as the Diaosi 屌丝, the losers, all getting together in showrooms and worship them. And every night when they do their shows it’s 20,000 to 50,000 to even 100,000 people watching simultaneously. I was like, wow, this is fascinating. Because world over if you want to see, the rich and the poor, they don’t get together, they don’t mingle. But online this community they are together, and they actually talk to each other, they worship each other. That to me was so fascinating I decided to make a film about that.

ZARA ZHANG: How long did it take you to make the film and what were your biggest challenges along the way?

HAO WU: I started filming in the summer 2014 before live streaming really exploded in China. If you guys, follow the development of the Internet industry in China you know live streaming really exploded into mainstream consciousness in 2016. My plan back then was, because I knew YY every year has this kind of Niandu Shengdian 年度盛典, the annual competition coming. I was like, wow, that’s going to cool. So, I followed my live streamers as they prepare to go to this competition to win “the Idol” title. That can be fun to watch, and then next year I can come back and film a little bit about the personal stories and cut it in and build a more typical three-act structure. But then, very quickly, soon after I finished filming the first competition where one of the live streamers won, the other one lost, the girl, the female, Shen Man, she had a plastic surgery and she moved to a different apartment so I cannot film her personal life and try to cut it in before the competition to cheat to build a three-act structure anymore. That forced me to continue filming to film the next competition.

I filmed all the way into 2016 as a witness of the explosion of live streaming in China so that’s almost like two years of filming, production. And then the editing took a long time, took a year and a half. Because YY is such a complex ecosystem. Their business rules, how they replicate the social status, the luxury cars, the digital lollipops, and how the agency works trying to promote the live streamers they manage. The business rules as well as the different levels of relationship is so complex. It took me a long time trying to streamline the story enough so audience could potentially understand it, but at the same time to really retain the complexity. Because that to me was what’s fascinating about this is that we can replicate real life online in this fantasy world. That took a year and a half for me to find the balance between simplicity and complexity, between portraying this virtual community versus the character stories, how the characters are feeling as their fame goes, ups and down, as online trolls trash them or blackmail them online, how they feel about the relationship with their families, and how their real life relationships are being impacted as their online fame grows.

HANS TUNG: It feels like the mixture of Hollywood, Netflix, Snapchat kind of all combined into one and more.

HAO WU: Yeah. When I was making the film, I’m a huge fan of Black Mirror, so the overall feeling is the film is very sci-fi-ish, because I feel like China is already compared to the US in the future already in many ways. I decided consciously to make this film feel more like a sci-fi film. Also, the feel itself is very Black Mirror-ish.

HANS TUNG: Your film is Black Mirror-ish. I’m saying that YY’s system reminds me of online Hollywood, and Netflix and Snapchat all combining into one.

HAO WU: That’s absolutely correct.

HANS TUNG: I love your title, People’s Republic of Desire. I find that very thoughtful. Can you explain the logic?

HAO WU: Yeah, I mean what’s the logic? Painaodai 拍脑袋, right, a lot of time. Because as a film title, you want to convey this film is about China. Obviously, People’s Republic of something. It’s something that took us a while to arrive at. What is this YY or virtual community about? It’s about, in the end, it’s so hard because people asked me to explain. Why do these poor people spend money online? Why do these rich people spend money online? I was like, it’s so hard to explain that. For each rose in that online community, their motivations are multifaceted. It’s not simple to summarize. In the end I just decided like, okay, desire, because the desire is this longing, is this aspiration but it’s-.

HANS TUNG: It’s emotion.

HAO WU: Yeah. And it’s broad enough to cover a lot of bases, like money, fame and relationships basically.

ZARA ZHANG: The film’s characters all leave a pretty deep impression on the viewer, from the two Wanghongs 网红, internet celebrities, who devote their whole lives to live streaming on YY, to the Tuhao 土豪, the super-rich, who lavish virtual gifts on their favorite streamers, to the Diaosi 屌丝 who is a migrant worker searching for cheap entertainment. I’ve always wondered, how did you find these people and how do you get them to agree to be filmed?

HAO WU: I was lucky as I mentioned earlier, I was introduced to Li Xueling. They introduced me to their marketing department. Back in 2014, I think YY was not as conscious about its PR.

HANS TUNG: No. If it was a $10 million company, it would be different.

HAO WU: Yeah. Nowadays if you go approach them, it’s probably going to be different. So, the marketing team was really, really nice to me. They introduced me to the different live streamers. I would say, can you help introduce me to this one or that one, and they would do that. At first, the marketing team definitely tried to push certain live streamers to me. Can you profile them? Because they are-.

HANS TUNG: Up and coming maybe?

HAO WU: No up and coming, it is more, why we want their live streaming all day.

HANS TUNG: Wholesome.

HAO WU: Wholesome, that’s the word. But then I talked to these wholesome live streamers, first of all, some of them can be boring. They can talk a lot in front of a webcam, but in real life they can be a really boring person. So that’s one thing. Secondly, some of them actually tell a different story online in terms of, one of them I really wanted to follow, I really liked and YY also liked. I’m not going to name names, but she portrays herself to be a college student online, but in real life she’s a 29-year-old teacher married with kids. So, there’s no way I can portray the real story about her.

HANS TUNG: Online she’s like a Baifumei 白富美 in college?

HAO WU: No, no. They never tried to pretend to be Baifumei 白富美, because everybody has to be, every live streamer has to have some needs that they need money so their fans can support them. So, they can never be Baifumei 白富美. But most of them kind of make up a story online about who they really are. But in terms of gaining their trust, in the beginning, the live streamers were confused. They thought I was making a corporate video for YY. After I showed up a couple of times they were like, “Why are you still coming back?” I said, “No, I am making an independent documentary.” And they were like, “What is an independent documentary? What’s going on in the film?” I was like, “I don’t know the ending yet. Can we just hang out?”

With the guys it’s easier. With the migrant worker, with Lao Li, the character was really easy they open up to me. Because I’m a guy, we can just hang out, have beer, go hang out. But with Shen Man, it was very difficult because she’s a girl, she livestreams in her bedroom, she flirts and talks sometimes dirty jokes to her patrons. And with me, a guy, in her bedroom filming the whole time, she felt really uncomfortable. So, for a period of time, she actually said, “You cannot come.” So, I’ll fly back from New York to Chengdu and wait for a week or two because I’m very thick skinned and every day I just keep on knocking on her door, “Can I come in? Can I come in?” In the end she let me.

ZARA ZHANG: You filmed her in some really intimate moments including when they’re like crying or really intense moments. How do you get them to be comfortable in front of the camera?

HAO WU: I think the key is you just have to show up. Once you show up holding the camera in front of them long enough, they kind of forget that the camera exists.

HANS TUNG: That’s a very good point. And they do it online anyway, so they get used to it.

HAO WU: Yeah.

ZARA ZHANG: Many reviewers have called the film provocative and unsettling or terrifying. Was that part of your intention? Did you mean for it to be that way, or was it more like an unintended consequence?

HAO WU: I think there are different types of filmmakers, different types of documentary filmmakers. Some documentary filmmakers just want to give the impression that you’re just observing life along with the filmmakers. But I’m the kind, I want to tell a good story. I want to find the most dramatic moments to tell a good story, to give a strong impression on my audience and let my audience try to figure out what the message is. Obviously, I followed them for two years, I have like 700 hours of footage which I shot, as well as hundreds and hundreds of hours of recordings of their live streaming shows. It’s up to me to pick the right moment to convey whatever I want to use this film to convey.

So, yes, I intentionally really pushed for some dramatic or provocative footage and kept some footage in the film, because even when I explain live streaming to a Chinese audience who may have heard of it but who don’t understand it, they all find it shocking, too. Because live streaming is something very uniquely Chinese, very uniquely complex and astonishing also because the amount of money being transacted on any given night. Yes, I think it’s part of my intention. It is also part of what the reality is. It is really shocking.

HANS TUNG: I see it as an investment thesis. We think that there will be other forms of live streaming in other emerging markets. Whether it is Southeast Asia, or Latin America or other places. Because when I looked at YY, when my colleague Jenny made an investment, it feels like a bit of pro wrestling, and soap opera during the day in the US and professional sports all combined into one. There’s a very intense feeling that even the most Diaosi 屌丝 users, the more mass-market users can participate and feel like a part of a movement to change the order where your champion, the person you support could end up winning it all. And if he or she wins it you feel like you did it as well. Almost like sports. That’s why sports is so popular.

HAO WU: That’s right. That’s why YY and other major live streaming platforms they all have competition. They all have annual competition. They also have monthly competition or sometimes weekly competition because they want to encourage live streamers’ fans, the patrons and the poor fans all get together to support your idol, get him or her to win the number one for the vanity for the fame.

HANS TUNG: So, wherever soccer is popular I think there’s a chance for live streaming to have a shot.

HAO WU: But we need the whales.

HANS TUNG: We need the whales, yeah. And there are people who gamble on soccer games, so I feel that it’s there. You just need to have a great team to get that out of people.

ZARA ZHANG: I wonder if you got different reception to the film from Chinese audience versus American audience.

HAO WU: Very different. I think here, in the developed world, not just in the US like in Europe, when people watch this film they were like, “Wow, can this be real?” Their first reaction is like, this is so crazy. I think they look at it almost really like Black Mirror, because several reviewers mentioned Black Mirror in their reviews of this film. They really do think that this is a very dystopian near future kind of story. But I think for Chinese people, it’s real. Because first of all we have heard of live streaming if you’ve not have been a fan of live streaming. Secondly, in terms of the motivation, it’s a lot more understandable for Chinese people to understand why the rich want to show off by throwing money online.

HANS TUNG: They cannot do it in the real world, it’s too dangerous.

HAO WU: Yeah, it’s too dangerous. Also, in the real world the rich people hang out with rich people, they don’t stand out. Online they stand out among tens and thousands of poor people. The poor people just say, “Oh, you’re so awesome.” Weiwu Baqi Shuai 威武霸气帅. That’s what they say. Their ego gets a huge boost. Here, people don’t understand that but in China people immediately get it.

ZARA ZHANG: Recently we have actually been seeing live streaming slowing down in China whereas short video is rising fast to become the go-to medium for entertainment for the vast majority of Chinese mobile internet users, like Douyin 抖音 and Kuaishou 快手. Did you see this trend coming when you were making the film?

HAO WU: No, I was so busy editing my film. But it’s kind of obvious. You guys definitely know better. Douyin抖音 right now, or the short video Douyin 抖音短视频, Kuaishou 快手, they’re taking a lot of the buzz from live streaming. But also, live streaming, in my view, I mean I want to hear what you think, and short video are very different, the audience appear very different. Because in live streaming you really need to be spending an hour, at least an hour every night watching. So, who does it appeal to? People who are lonely, who don’t have friends, who are staying home, who don’t have income, right? The Diaosi 屌丝 population. But if you look at short video, short videos have a much wider appeal. It’s very short, it’s kind of funny. You can spend however much time you want on it. So, no wonder short video, right now the popularity I think overshadows live streaming.

HANS TUNG: We’re a shareholder in TikTok, in ByteDance 字节跳动, so we know how well they’re doing.

HAO WU: Can I make a film about that? Can you introduce me?

HANS TUNG: Yes, you can. I can introduce you to Zhang Yiming. I will guess there’s probably a lot of overlap between YY users and Kuaishou 快手 because Kuai is very grassroots, mass market as well, as you know. I think users can be on both platforms and get different entertainment value out of it.

HAO WU: Yeah. A lot of the YY live streamers I follow actually, when Kuaishou 快手 first started taking off they were all using Kuaishou 快手 as well.

ZARA ZHANG: One impression I’ve been getting, working in US-China cross-border tech is that there’s a general sense among people in China that tech is a force for good, whereas the opposite is true in the US. Do you agree with this assessment?

HAO WU: Are you talking about media impressions?

ZARA ZHANG: Just general public.

HAO WU: Honestly, I feel like in the US we tend to live in our own media bubble, right? Depends on which media we follow, which Twitter celebrities we follow. I feel like if you watch a lot of the films coming out about American internet, I would say the majority of the internet consumers are not as concerned as some of the media elites about “the dangers” of the internet, of technology. Even though, yes, all the mainstream media right now, we are talking about the Facebook, or privacy, or the alienating nature of technology in the mainstream media. But if you watch American Meme on Netflix, it’s a documentary about Instagram celebrities, or if you watch Cam Girlz- I recently talked to a reporter who is doing a story, writing a book about Twitch, America’s premiere live streaming platform. I think it’s the same thing. If you talk to the actual users, their day to day, they are not thinking as much about that, but I definitely do agree, in the mainstream traditional media in the US there’s a lot more pause and reflection about the complex roles technology can play in the society as compared to what’s happening in China today.

HANS TUNG: But when you were in China filming, do you feel there’s more a general sense of people in China think that technology or internet can make their lives or make the world better?

HAO WU: Oh yeah, absolutely. I think in China, it’s been well discussed elsewhere, we don’t have as much of a concern for privacy per se. That’s not to say everybody don’t care about privacy, just in general. And also, we are more open to embrace the latest, the newest technology. Even right now, right? Chinese people still believe in technology even like AI. Here AI has almost a bad name now in the US, but in China we still believe AI can bring a lot of good.

HANS TUNG: I think what the Chinese are going through is very similar to founders and general consumers in Southeast Asia, in Latin America and in India. In developing countries where often world is not as efficient, extremely inefficient, you feel like tech is changing and making a difference. In developed countries, the gap is not as big between online and offline.

ZARA ZHANG: I want to talk about your very interesting career path. You were trained as a biologist, then went into tech and then filmmaking. Could you talk about how you made these transitions and what guided your decision-making processes?

HAO WU: When I was growing up in China, even in middle school and college I was always interested in the humanities and arts. But as a Chinese son of very traditional Chinese parents, your parents would, and it’s not just the parents, the entire social expectation kind of nudge you, they never pushed me, they nudged you into doing STEM.

HANS TUNG: They guide you to do something better.

HAO WU: Something stable, something with a better future. That’s why I decided to do biology, do science. But then it was not satisfying. I love science, but it wasn’t emotionally satisfying. Then I didn’t know what else to do. As a good Chinese immigrant, you do either business, law or medicine. I picked business because it’s the most flexible. I actually love tech. I love tech. I started off as a product manager at Excite@Home doing web products.

HANS TUNG: What great timing.

HAO WU: No, I joined just as the bubble was bursting. Then I worked my way up from product management into general management. I helped Alibaba launch Alimama.

HANS TUNG: That’s a very important product.

HAO WU: Yeah, so the Alimama platform. But then I guess I always had this urge to express myself more. I like product management because it is creative. You work with a team of people to do it. But gradually as I become more and more into general management, I feel like I’m getting farther and farther away from the creative process of actually making it. I love to get my hands dirty. I’ve always been doing some writing or filmmaking on the side.

HANS TUNG: Which years were you at Alibaba?

HAO WU: 2007-2008. That’s right after the merge with Yahoo.

HANS TUNG: That’s right. Yeah.

HAO WU: At a certain point I just had to ask my question, do I want to be an entrepreneur, launch my company, become a multi-millionaire first before I do what I like, or do I want to do what I like right now. It took a while for me to really say, it’s okay to not be a multi-millionaire and do arts. So that’s where I am right now.

ZARA ZHANG: When you went to Alibaba was that the first time you were back in China after spending a lot of time in the US?

HANS TUNG: You were probably with Yahoo first?

HAO WU: No, I joined the Yahoo China side right after the merger. Initially I was managing the technology transfer of Yahoo’s advertising technology, the ad networks and exchange, into the Alibaba Group. I was managing the deployment of technology so the ad operations. I moved back to China 2004, took a year off doing film making and then I joined an e-commerce startup. That didn’t go anywhere so then I joined Alibaba because back then people were already talking about Alibaba as a very unique Chinese Internet company. Because the first wave of the Baidu and the Sohu 搜狐, you can always argue they were a copy, it’s a copy to China model. But Alibaba was really unique so that really intrigued me. I really wanted to understand the culture, what makes Alibaba so different from the rest of the crop.

HANS TUNG: Right. And what was your takeaway after spending there over a year?

HAO WU: Personally, I loved it. I think the Ali culture is so strong I personally don’t think it’s right for everyone. But I consider myself still very “local”. I get the culture, whether you’re talking about the close camaraderie, the 9-9-6, the voluntary 9-9-6. Ali’s all voluntary 9-9-6. I like that. In Ali, it’s like YY. Everybody was battling. Jack Ma is the general. It’s like, “We are trying to build a great China. It’s us against the world. You guys are the troops. Let’s all do the battle.” I like that kind of feeling, but then some other people find it so different.

HANS TUNG: Brainwashing.

ZARA ZHANG: And then you went to TripAdvisor to be their General Manager for China. What was that like?

HAO WU: That was very different. TripAdvisor China had the advantage and disadvantage of a typical Western Internet company trying to expand in China. Whereas you have a lot of great industry know-how, you have a very successful business model in the US, but how to adapt that in the China marketplace where it’s-

HANS TUNG: So fast moving.

HAO WU: Fast moving, super competitive. Do you want to replicate the success story in a different market, or do you want to create something new? That was always something we struggled with. It was a great learning experience but a challenging one.

HANS TUNG: Did you guys compete with Kuxun 酷讯 and Qunar 去哪儿 back then?

HAO WU: I think we acquired Kuxun 酷讯.

HANS TUNG: That’s what I thought.

HAO WU: Yeah, we acquired Kuxun 酷讯.

HANS TUNG: Because Zhang Yiming was part of Kuxun酷讯.

HAO WU: That’s right. We were competing. TripAdvisor was primarily a hotel review so there was no pure play competitors in China back then. The two biggest competitors we looked at was Ctrip 携程, because Ctrip 携程 has both hotel booking as well as tons of reviews, as well as Qunar 去哪儿. Qunar 去哪儿was a metasearch. They have a lot of hotel data and also, they aggregate a lot of hotel reviews.

HANS TUNG: Actually we did a simple analysis, look at the Chinese founders who sold their first startup to an American company, worked there for a year or two and hated it because it’s so slow and not fast-moving enough, and they come out and do their next startup, the success rate on their next startup is super high.

HAO WU: Oh, you should have told me that, because when I quit TripAdvisor, I was thinking to do a startup, but then I thought, oh, there’s a film I didn’t finish in editing. So, I gave myself six months to finish editing that film. The six months became a year, became a year and a half. By the end I was like, “Should I go back?” That’s when I decided not to go back to tech.

HANS TUNG: You could’ve done either one successfully.

HAO WU: Yeah.

ZARA ZHANG: So, are you still playing with the idea of entrepreneurship?

HAO WU: No. It’s really funny because whenever I travel back to the US, the immigration will always say, “Welcome back to the US.” Sometimes they’ll say, “Oh, what do you do.” In the past whenever I said I’m a filmmaker, I always feel like I’m a fraud, like an imposter, the imposter syndrome. But now finally I feel like I can say I’m a filmmaker.

ZARA ZHANG: What’s the next film we can expect from you? What are you working on?

HAO WU: My new film is launching on Netflix, it’s a Netflix original short. It’s a 39-minute. It’s called All in My Family. It’s about me having kids through a surrogacy in the US and take my kids and my “modern family” back to China and face my traditional Chinese parents. If you guys watched Ang Lee’s early film, Wedding Banquet, it’s kind of similar to that. It’s a comedy with a lot of tears. That’s my own story so you’ll see me, you’ll hear my voice in that film.

HANS TUNG: Do you find Ang Lee as an inspiration, a model or something?

HAO WU: Obviously. I think he’s amazing. He’s someone who can stay truly Chinese but also has universal appeal because he focuses so much on the human emotion.

HANS TUNG: Yeah. That’s part of motivation for us to do 996 as well. We’re nowhere near but it’s the same kind of thinking.

ZARA ZHANG: We’re really appreciative of people who can tell the China story in English to the greater world in a way that’s authentic and true to the actual experience of living in China. In that way I think 996 and what you’re doing are kind of in the same vein.

HAO WU: Thank you.

ZARA ZHANG: As someone who has had a lot of dramatic career shifts, I wonder how you develop the self-knowledge to know what you’re good at and what you should be doing? Because I think a lot of our audience are younger people trying to figure out what their next steps should be and whether they should move to a different field etc.

HANS TUNG: What did you do to help you find your true self and true calling?

HAO WU: That’s a tough one. A lot of times you have to be almost stupid.

HANS TUNG: Or idealistic.

HAO WU: Not idealistic, you have to be pigheaded enough-.

HANS TUNG: Stubborn enough.

HAO WU: Stubborn enough to really believe you can do it in order to do it. That’s a prerequisite. Despite what everybody else tells you you’re going to fail, you have to have the strong- If we put in a bad word, it’s ego. You have to have ego that you can do it.

HANS TUNG: That’s true, a chip on the shoulder.

HAO WU: Yeah. And also, secondly, just start doing it, rather than thinking about it. When I wanted to make films, I just started writing a screenplay, I picked up a camera, started reading some books, started making short films, watched a lot of film and try to learn it that way. I did it, like I said earlier, on a part time basis for a long time before I had my last film which is The Road to Fame, Chengming Zhilu 成名之路. When I saw the film, when I premiered the film at festivals, I knew I could do this. I knew my next film would be even better than that. You need to be able to get your hands dirty to try it out before you know you can do this full time or not.

ZARA ZHANG: Have you figured out a business model for documentary making?

HAO WU: No. It’s really hard because when I first started doing documentaries full time, every once in a while, I put my business hat on. I’d be thinking about the ROI of all the hours I’m putting in.

HANS TUNG: Your MBA degree has to be worth something.

HAO WU: Yeah. Where can I optimize this process to make it faster? But you can’t. If you think about it, documentary film by nature has limited market appeals, just like certain types of writing. There’s no business model per se. I’m not doing this right now to really try to make a lot of money. But ideally once you make enough films and have enough repetition, other people will commission you to do a film, like HBO and Netflix, and then that’s how you can make a decent living. But right now, I’m also like kind of in transition, thinking about the other ways-.

HANS TUNG: Non-documentary kind of films.

HAO WU: Like narrative films, like commercial narrative films and there are companies in China that’s talking to me right now. I’m exploring that as well.

ZARA ZHANG: Hans, I know you really enjoyed the film.

HANS TUNG: Yes, I did.

ZARA ZHANG: I wanted to just hear from your perspective what do you like about it and why do you find it so compelling?

HANS TUNG: Partially it’s personal because GGV was an early investor in YY so just seeing that story being played again and see how the characters are in it different but very familiar, is something that’s easy for me to relate to. Secondly, I think Wu Hao did an amazing job of showing the complexity of the system. I struggle to explain to the westerners how YY works, yet with a film everything becomes so alive. I think if we have more time, we’ll probably want to go into how it is very similar to how professional sports and other forms of entertainment work in the Western world were developed all around the country, around the world. How there’s a lot of similarity between the two.

I would love to see Wu Hao go through some of that later in another format to show how he sees it too. Because a lot of things I saw in the film are maybe uniquely Chinese, but the values are extremely universal. It’s the universal aspect that’s not as obvious to westerners who watch it for the first time. They were so shocked by the details that they forget that there is a universal connection as well and that’s something that I’m sure Wu Hao will do more with that kind of topic and material over time.

ZARA ZHANG: You lived in China on the ground for eight years so this reminds you of what you saw.

HANS TUNG: Totally. And even when I go back to China today, I still see a lot of that. It’s a challenge to the point where it’s a country with a rising middle class, but also a group of people kind of left behind as well, and they want to feel part of this progress and movement. By participating on YY, it gives them a chance to do that. However little money they make they’re using that in a way to give themselves, their life a lot more meaning. That part of our connection is extremely universal. It may look specifically Chinese, but the desire was a great, great word. The desire to be connected, to be meaningful, to be part of a movement is extremely universal.

HAO WU: Yeah. I think whenever people ask me whether the YY model can become popular in the US, I say you already have it; it’s called YouTube. The vlogging never took up in China for various reasons but then live streaming kind of took the role of vlogging in China. If you look at the Internet celebrities on YouTube, the type of content they produce, and also how they rely on stunts, controversy to generate popularity, it’s very similar to live streamers in China.

HANS TUNG: And YouTube, a lot people don’t see it, but YouTube almost fails at monetization the way YY has done. If you have all these interesting broadcasters on YouTube, the form of monetization should not be just advertising. There are actually users from around the world willing to pay for additional value-add services on YouTube. It’s just that YouTube did not do as good a job as they could have. One thing that we want to do when we invest in companies, hopefully they learn the best of both the US and China and build companies to provide services that we think are truly, truly world-class and multicultural.

ZARA ZHANG: The concept of 9-9-6 has been in the news a lot recently with 996 ICU and all that. Jack Ma just released an article about what he thinks about the phenomenon. I was wondering as someone who has lived in both US and China deeply, what’s your perspective on this kind of, I don’t know if we should call it hours or mentality, but this phenomenon?

HANS TUNG: Do you work 9-9-6?

HAO WU: As a filmmaker, I work longer than programmers. I’m editing around the clock. I think 9-9-6, I think the reality is that most startups are doing 9-9-6, right? Whether the startups are in the US or in China, if you want your startup to succeed, or anybody who’s doing anything they feel truly passionate about, they will do 9-9-6. I remember when I was working at Alibaba, when I was launching TripAdvisor China, we were all working 9-9-6. Nobody complained about it. Everybody felt so excited being part of something great. They want to work 9-9-6.

I think right now what maybe the discussion in China, there are two reasons why we’re having this discussion in China. One is, I don’t pretend to know the younger generation, I do feel like the younger generation think differently compared to the older generation. That’s one. Secondly, a lot of the Internet companies in China in the headlines, the Alibaba, the Tencent, they’re established companies already. For established companies to continue to have this, it’s hard to cultivate the startup culture, the cohesiveness-.

HANS TUNG: That mission, that feeling-

HAO WU: That mission to get people excited to willingly do 9-9-6. That’s why we’re observing Silicon Valley as well, right? There are some companies with the exception of Amazon, but in general, I think instead of trying to enforce or ask people to do 9-9-6, their HR should do a better job in terms encouraging people to really buy into the company’s mission, buy into the project they are working on. No, I shouldn’t be advocating volunteering, that sounds bad. Make it fun for people wanting to do that, wanting to help the company.

HANS TUNG: I’ve worked in probably six or seven different companies in my career. Even VC alone, GGV is my third partnership. I think a lot of people think that they’re just working in order to live. They talk about the work-life balance. Completely understandable. But for the things I do, I don’t just do it for my employer, I’m doing it for myself. I’m sure when you decided to do filmmaking, you’re doing it for yourself. There’s a story you want to tell, there’s a mission you want to achieve. There’s a personal growth you want to get to. There’s a personal agenda and viewpoints you want to come across. And for all of us who are multicultural, who have lived in multiple cities, how do you have something that’s uniquely you with quite a bit of Chinese elements, yet at the same time you want to make a universal so that other people don’t think you’re weird but think that, “Wow, there’s something deeper there and something I can learn from.”

So, to me it’s never about work-life balance, it’s always about work-life integration because I don’t treat work as work. I treat work as my life calling. When you treat something as a life calling why would you be balancing away from that? If you treat it as a job just to make money, you don’t find meaning in what you do, quite frankly you shouldn’t be doing it at all. You should do something that you truly, truly love so you don’t find it something that you have to fight against.

ZARA ZHANG: Yeah. With that, I want to move to the last part of the interview which is a round of quickfire questions so you can just say the first thing that comes to your mind. The first one is, who is the entrepreneur you admire the most and why?

HAO WU: Tony Ma. He built a truly, truly professionally well-managed Internet company in China.

ZARA ZHANG: As someone who worked at Alibaba.

HAO WU: No comment. I think Alibaba’s business is hard to replicate. It really requires some charismatic leaders like Jack to do that.

HANS TUNG: That’s true. We’ve seen it from 2003 onwards so we know without Jack, Alibaba wouldn’t happen.

HAO WU: That’s right.

ZARA ZHANG: The second one is, what’s something you read recently that you recommend?

HAO WU: I just finished reading the latest issue of Foreign Policy talking about nationalism. I find that fascinating. It’s emerging worldwide, everybody is talking about nationalism. It’s also happening in China. Why is that? It’s not a book but it’s a magazine.

ZARA ZHANG: What’s a habit you have that you think has changed your life?

HAO WU: Always believe that in order to get better I have to do actual work. Benniao Xianfei 笨鸟先飞. That’s what my parents kept on telling me when I was little. Even nowadays sometimes I find a lot of the political discussion in this country is baffling. It’s like, if you want to get better, just work harder.

ZARA ZHANG: What do you do for fun?

HAO WU: I don’t have. I have two kids. I have my films so it’s always about work. I watch films on Netflix.

HANS TUNG: My wife asked me the same thing and I gave her the same answer and she’s not happy with that.

ZARA ZHANG: When is your Netflix film coming out?

HAO WU: May 3rd.

ZARA ZHANG: Okay. So, everyone please go watch that on May 3rd. And with that, thank you so much for your time and we really enjoyed the conversation.

HAO WU: Thank you for having me here. Thank you.

Episode 36: Tao Peng, President of Airbnb China, on Redefining Travel

GGV Capital’s Hans Tung and Zara Zhang interview Tao Peng (彭韬), the president of Airbnb China.

Prior to joining Airbnb in Sept 2018, Tao has founded a number of companies in the travel space including Breadtrip, a social app for recording and sharing trips, and more recently, CityHome, a management platform for short-terms rentals across China. Before founding Breadtrip, Tao has worked at the network security provider IntelliGuard and has also worked for McKinsey for two years as a management consultant. Tao graduated from the University of Melbourne with Ph.D degree in computer networks and the Huazhong University of Science and Technology with a bachelor’s degree in communication engineering. He is also an avid traveler and has been to over 50 countries across seven continents.

Earlier on the 996 Podcast, we have interviewed Nathan Blecharczyk, Airbnb’s co-founder and chief strategy officer as well as the chairman of Airbnb China. If you haven’t listened to that episode, we highly recommend checking it out here; it was released around exactly a year ago on April 11th, 2018. Airbnb is a GGV portfolio company and our managing partners Hans Tung and Glenn Solomon actively works with the company especially with regards to its China strategy.


HANS TUNG: Hi. On the show today we have Tao Peng or Peng Tao 彭韬 in Chinese, who is the president of Airbnb in China. Prior to joining Airbnb in September 2018, Tao has founded a number of companies in travel space including Breadtrip 面包旅行, a social app for recording and sharing trips, as well as more recently CityHome 城宿, a management platform for short term rentals across China. Before founding Breadtrip, Tao has worked at the network security provider, IntelliGuard, and has also worked for McKinsey for two years as a management consultant. Tao graduate from the University of Melbourne with PhD in Computer Networks, and the Huazhong University of Science and Technology with a bachelor’s degree in Communication Engineering. He is also an avid traveler and has been to over 50 countries across seven continents.

ZARA ZHANG: Earlier on the 996 podcast, we have interviewed Nathan Blecharczyk who is Airbnb’s Co-Founder, Chief Strategy Officer, as well as the chairman of Airbnb China. If you haven’t listened to that episode, I highly recommend checking it out. It was released around exactly a year ago on April 11th, 2018. Airbnb is a GGV portfolio company, and our managing partners Hans Tung and Glenn Solomon actively work with the company, especially with regards to its China strategy. Welcome to the show, Tao.

TAO PENG: Thank you for having me.

HANS TUNG: So, Tao, you have been running Airbnb in China for almost eight months now. How has it been like for you and what are the top three things on your mind right now?

TAO PENG: It’s a great journey. At the moment for me I think still quality, community and a brand are the top three priority for me. For travel everybody wants to have a good travel experience, so we focus a lot for quality because quality is very important to ensure people have a great own trip experience. We launched Plus last year. For Plus we have more than 100 checklists to make sure Plus satisfied users’ travel requirements. Plus is one of the key drivers for us to offer high-quality listing. Second, actually we focus a lot on the community building. We believe human trust is a very precious part for travel, so we want the host to be very welcome to the guest and the guests feel belonging anywhere. The third part actually we focus a lot on building the brands. We believe Airbnb is a super brand, especially to the millennials. Sixty percent of Airbnb China travelers, millennials they travel around the world. They really want some guidance on how they explore the world and Airbnb has a unique position to offer that guidance.

ZARA ZHANG: So, could you talk about the first time you met with the Airbnb team. When was it and what was it like? And how did you find each other?

TAO PENG: That was a very interesting experience and I found that actually is a really kind of destiny to me. Originally it was not for an interview. Actually, while doing that I really find out how Airbnb thinks about managing platform. I just had a chat with Nate. We actually have a chat and we find actually that really, we have very good chemistry. Nate is very smart, successful and humble. It is a very unusual combination. I was really deeply impressed by that. We had a lot of chat. Then Nate went back to the US and decided to say this was the opportunity for Airbnb China. I was very impressed. He just decided flying from San Francisco to Beijing just like immediately that we want to have a chat. We have a five-hour dinner. The next day we have about another five-hour breakfast. I was feeling like, kind of like a moment for me, I said I think
this is a dream I really share. I really want to work for that.

Sometimes, to be honest, I used to be very kind of proud, thinking I can never work for anyone. The only company I worked for is McKinsey and I was a lecturer at Melbourne University. But I feel like I shared a dream with Airbnb, and also, I think the way they redefine travel is really something I feel very passionate about. And more important being an entrepreneur I realized the secret of this industry. Scale is the Holy Grail and Airbnb has the scale. The second actually travel is global. I do think, you know, to work with Airbnb is a better way to realize my dream, and so together we can help Airbnb. That’s the story.

ZARA ZHANG: When you were meeting with Nate was, he pitching you on the role?

TAO PENG: The first time actually we just had a casual chat, find out what is Airbnb. The second time it is. The second time we talked about this role.

HANS TUNG: After he spoke to you, he called me up as well to tell me how excited he was after he met you. We have been helping him for one or two years to look for the right person. It’s easy to start with senior executives in the top companies in China, but I think I give Nate the credit that by talking to a founder who’s looking for a bigger platform it actually makes a lot more sense that you are probably the best fit for them. In your mind, why do you think that the fit has worked out so well for you as well? Because a lot of people in China feel like, I don’t want to work for a foreign company. I have to deal with a lot of people back in-home office. They don’t know anything about China. There’s a lot of local decision making that need to be made. They’re going to be super slow because they don’t understand it, so I want to work for a foreign company in China, especially Internet space. That’s sort of a common complaint we hear about CEO, GM position for China for Internet companies from the US.

TAO PENG: I think there are three reasons for that. First of all, I think as I mentioned before I’m actually lecturing in travel space. I really know the exciting things and toughness about this space. We see lots of companies up and down. For me, I ran in basic change gear for a number of times just to get the right direction. I know for this one is a low frequency, it is especially challenging if you do not have the scale because you don’t have the good unit economics. While Airbnb has more than 6 million unique listings around the world, across 91 countries, that’s an actually unique asset, you can set a good foundation before you do bigger things. The second is Airbnb is very unique. Airbnb, their culture, their value actually helps the business. I think that’s the only company for me. I find the value and the mission directly help the business. I was an Airbnb guest first and then became Airbnb host. So, a number of situations, because I really believe in Airbnb value, I actually resort into a basic understanding of the host if he makes some mistakes.

If the guest requires something, some situation, I just give him a full refund. I think that this happens a lot in our platform. But if not everybody believes in this vision this will become a serious ticket. Basically, people will have to spend time to resolve that bad experience. I think that kind of seamless system makes Airbnb very unique and powerful. Third thing, I think, for me, confidence is directly linked to the founder. I believe we have lots of commonality, the dream. I really believe all the three founders have the passion; they believe in that so that’s something very special to me. Also, they gave me the assurance this can be different. So direct from the founder I see it from their eyes, I see in their eyes they really want to make the success. As I talked to Nate, I said China has 1.4 billion people. If it’s not successful in China how can you say Airbnb is for everyone. And China is so big, if you do not have listing and have homeowners in China how can we say Airbnb is anywhere. I believe that. This is why I decided. Although there are lots of problems, we need to tackle that’s fun problems.

HANS TUNG: Fast-forward to today, eight months later, are you still in the honeymoon period or have you woke up and say, “Oh my God, there’s so much to do and I don’t know if I have enough resources”?

TAO PENG: No. I really enjoy it; I still enjoy it. The key thing is I define myself as a problem solver. I really like to solve problems. I would feel very bored at something too comfortable. I could live in Melbourne. Melbourne is the most livable city in the world. I have stayed there for eight years. I could choose to just stay in Melbourne. I could be a lecturer at Melbourne University. But I really enjoy all the problems. And the most important is the problem solving. I think all this is very tough, but these things are very important to connect to a mission. We want to build a world where there are no strangers and people can travel and have the best experience.

Being a hardcore traveler myself, I think the best experience a traveler can have is this kind of mingle with the locals, to see something like a local. That’s the best thing about travel. I do believe that’s a reason why people want to travel. I think life is like a journey. The lens actually is limited, but the views are defined by yourself. If you want to broaden your views you have to travel because traveling you actually live another people’s life. I fundamentally believe this is why people want to travel. I believe the experience Airbnb is building is actually what will be attractive to people, especially people the young people, to realize this is exactly what they want. This is something I feel every day, although on a very tight schedule, I really feel very passionate.

ZARA ZHANG: Could you talk about your communication with the US headquarters so far? What has encouraged you and what have been some of the challenges?

TAO PENG: I think, how to explain the difference about China. But now actually I own one of the sentences, which is actually now widely propagated in the US corridor. I explain a difference saying that China is like another, different operating system. For example, the US is more like Android, it’s very open and China is like iOS. It is very closed, with everything. Think about if you do something port the program from Windows to Mac, then you just don’t simply redesign the interface, you actually rebuild the code. That’s exactly the effort I try to expand to the US headquarters they should do. This is why we will have a business unit in Beijing. We have engineers. We pretty have a full stack of people here. It’s like a startup. We also ask people to have this startup mentality, and we try to recruit the most aggressive people, aggressive and talented, and give them very ambitious goals. Inspire them by the big goals to go big. I think that’s the only thing you can do, the right thing you can do to be in China.

ZARA ZHANG: I think a lot of US founders have difficulty not seeing China as just another market. A lot of them still consider China as an international market. They don’t understand how you need to start everything from scratch. Do you get the impression that the Airbnb co-founders have been well receptive and open minded than perhaps other US founders you’ve met?

TAO PENG: I think they’re very open minded. I think Nate traveled to China a number of times, and actually still travels with high frequency. I think being physically in one place actually will make you instantly realize, wow, this is a different operating system. In order to make this happen, I also initiated a program called China Offsite. Basically, to bring all the senior folks from San Francisco to Beijing. If you ask all the people what is the biggest shock, the biggest shock for them apart from the big buildings is people here actually travel without their wallets. Everybody is just using mobile phones. They’re really impressed. These people without WeChat Pay they can do nothing. Basically, this instantly makes them realize, oh, WeChat is so important. Before they had us, or the payment functions to do something pretty. For them this is important. Why is that important? This is something that we with communication with people instantly realize this is, WeChat Pay, Alipay it’s just part of Chinese daily life. This is very different from the credit cards in the US. This can help them a lot to understand what’s the difference. I tend to use the operating system to describe the difference so if you want to port a program to China you have to rewrite the code, you just don’t redesign the interface.

ZARA ZHANG: Speaking of WeChat, I think Airbnb now has a WeChat mini-program. Could you talk about how that came about? Is that something you spearheaded after you joined?

TAO PENG: I think we just think about WeChat is virtually another platform for all Chinese. It’s actually a cross-operating system. We told the headquarters this is another way to broaden our top funnel traffic. We designed that. But the hard thing is just to make it work globally. Because Airbnb has lots of global listing. There are a lot of things that are actually not so dirty work at the back and need to be happening. It’s not like a local startup, just build a mini-program and you can do it in one week. We build that and we have to meet all the agreements, and we also need to make sure everybody’s committed to that. That has been a very good success. Now after WeChat program is increasing tremendously fast. We also, while having mini-program we can do lots of Chinese style campaign, like gamification of the red packet, and also connect this to the WeChat public accounts. That actually will be one of the growth drivers for us. We also believe that’s just in a nascent stage. I think there is more to come.

HANS TUNG: Airbnb has been putting a lot of resources as we all know into Airbnb experiences. Could you talk about how Airbnb experiences have developed in China? Are the Chinese consumers embracing it? What are the opportunities and challenges with this in China?

TAO PENG: Experience is our company’s strategy. I think it’s very important for us to provide, to use a magic journey. I think a few years ago we only have 10 experiences in Shanghai. Now we have more than 2,000 experiences in more than 10 cities in China. The experience has grown tremendously. When we design experiences what we do is we actually try to make sure this is something unique to offer to the guest. During the experience, we find out all the Chinese guests, especially young people they want to redefine travel. This kind of experience to them an eye-opening experience, and it’s actually easy to generate word of mouth. We have very good momentum for experience in China.

ZARA ZHANG: What are the most popular types of experiences?

TAO PENG: I think the most popular are photo walks. Basically, some people take you to walk around the metropolitan cities, to talk about history and have you take some photos. Just like I took an experience in Sydney. I’m just back from a trip from Sydney. That was amazing. Basically, it’s an Australian guy who used to study in China, so he gave us that experience, a group of Chinese guests in Chinese talking about the history about Sydney. All the guests actually feel that this is the experience they never have, and it’s a kind of upgrade of the traditional bus tour. For the young people, right away they try to share the WeChat moment. I think this kind of thing is a way for us how to redefine travel. Other things could be some things about nightlife. For example, you want to experience some kind of pubs so there is some local take you to have some drink. This is another very popular experience in Airbnb.

ZARA ZHANG: For the people joining those experiences, are they mostly foreign tourists or local Chinese people?

TAO PENG: Both. I think we can say more and more actually people use the experience for the weekends. They do not necessarily book the listing, but they actually view that as a way to experience travel. You can see in Shanghai and Beijing they have people within the city or come from the nearby city, they come to Beijing, another way to discover the city. Basically, I think we positioned ourselves, how to help people just live like a local. This is an important ingredient to our accommodation capability. People live there, in the accommodation and they want to find out what to do nearby. Sometimes they also have a dinner. Some people host like a dinner table. This kind of thing I find out that young people really like and it’s very viral, so people tend to be super fans about that. And remember, this is how Airbnb started, people really liked this experience. They were ambassadors. A person who really believes the experience will go very big. Also, we are working on a number of ways how to make booking Airbnb listing and experience very smooth.

HANS TUNG: How do you decide which experiences to select and feature on Airbnb in China?

TAO PENG: For us basically there is a category we have designed for experience. It’s the one I explained before. That is advice based on user’s feedback. They have good reviews, good conversions. The second is actually we also look at what’s the next city which needs this kind of service. People after booking want to look for something to do. All this together we will run some experiments to make sure the experience really fits the user’s needs. All the numbers can tell us which one is on the upward trend, which one is actually not exactly what people want and we need to some work on that. We have a set a very clear feedback loop to improve the product. Ultimately, I think this is something we tackle, the user journey. For user journey, it’s kind of a non-standard experience. We want to be unique. How to make it scalable? We had to break down the non-standard things to the standard components. We will identify what the key component to make up a unique experience is. I think all of this is an advantage or a barrier for us to accumulate, because we know exactly what the host wants and what the guests want, and we will find the things which make that scalable. Actually, some of the experiences now are in the pre-scaling mode, they scale in many countries. I think that’s something I think we find out is very exciting.

HANS TUNG: Wow. Sounds like experiences in China are becoming more weekend driven, which means that this will be a higher frequency of usage because it’s more local anywhere nearby.

TAO PENG: Yes. Recently we did a campaign called 48 Hours. We know travel is a low frequency, we want to create some scenarios to make sure people have a way to travel. This campaign basically gave people some unique listing, plus some experience. Design ways how to make a 48 Hours meaningful. That has been a tremendous success. We have a super strong growth lately, close to 3x growth across all China. In some VR destinations, vacation rental places, we’re nearly four times growth. We are very happy the local tactics took effect. The team is also very enthusiastic because we can move fast so we can capture the gain.

HANS TUNG: Great. We talked a lot about domestic travel Airbnb in China. What’s it like for outbound travel? As you know there are so many Chinese millennials going to different parts of Asia and also beyond Asia. What kind of a unique or Chinese tourist-oriented experiences or listings are there to maximize and make it easier for them to feel comfortable traveling abroad?

TAO PENG: For us what we’re doing now we basically try to talk to our partners all around the world, basically we host our partners. Make sure they can be Chinese guest ready. That could be like a hot water kettle, could be a sleeper. I also offer some congee, something like that. We talk to them say, hey, you get ready for the Chinese guests. In reward, we will give you a tag called Chinese-guests ready. Because we’re a separate business unit. Actually, we can own the ranking score and we can own this kind of tag. This has been very positive. Everybody really wants to embrace the largest travel outbound guest origin so they’re very super excited. This has actually been to a few countries. Or the host community, they are very keen to find out what the Chinese guests would like. In the future you will see, those guests will see some kind of listing that says, Chinese-guests ready. When they book that they won’t worry about communication. They will somehow have a Mandarin concierge and they won’t worry about the check in, check out, the luggage where it is stored. In return we’ll make sure all these houses have a good business. That’s actually what we try to play and try to have more an interaction with our supply to make sure we create a good circle to work to those benefits.

HANS TUNG: In which cities you have the most number of Chinese-ready partners?

TAO PENG: At the moment I think it is more in Japan. They have a number of Chinese-guest ready listings, but we talk more in Thailand and in Sydney.

ZARA ZHANG: In the early days of Airbnb China you guys were more focused on the Chinese outbound piece than the inbound piece. Is that still the case and how are you balancing the two right now?

TAO PENG: For us, I think we do not differentiate what is outbound or domestic. For us, travel is across the border. We are a global company so our only goal is to make sure the global network effect can play to its full potential. Everything just happened naturally. The first wave people don’t know Airbnb, they go outbound. They have a very good experience. They come back, they become maybe a host in Shanghai. Then some people from Suzhou, they come to Shanghai, they find there is a beautiful listing in Puxi 浦西 so they have a great experience. They come back to Suzhou and they have a listing as well. This is how it goes. Basically, all the network effect is very strong, especially where community driven. We always have the first visionary users, they’re co-host, they really believe in this culture, because they believe in this kind of human interaction. For us, I think it’s more to make sure this network effect won’t be blocked by some market conditions. We want to educate the market. We want to help the host to grow. So, we will offer some tours and offer our support to make sure they are not alone, that there is some people, we work together to provide this kind of guest experience. That’s our strategy.

HANS TUNG: What’s it like for you in the inbound market with foreign tourists coming to China? Do you need to do anything special to help them to get comfortable or acclimated to the Chinese environment sooner, quicker, faster?

TAO PENG: Yes. Inbound also happens naturally so for us some page, especially our host that would translate their page to English, they just make the inbound guests more welcome. China is set to overtake France as the world’s number one tourist destination by 2030, as the growing middle class in Asia is looking to spend more on travel. I remember the report, the foundation is that because Asia gets in more developers, people choose China as a destination more likely we will probably see lots of guests from the APAC region. That’s actually also good for the network effect. For example, you can see rich people from Malaysia, or rich people from Vietnam, middle class. They want to explore; they might travel to China because it’s closer.

HANS TUNG: A lot of people don’t know that more than 50% of the population lives in China, India, and Asia-Pac in the world. It’s an impressive user base for you to grow.

TAO PENG: I think a high-speed train is another game changer. Basically, you can very easily move around. Many travelers, especially inbound guests, they’re very impressed about the infrastructure in China. They really have a good time here. We will see this is the trend become more and more obvious. We will attract more and more inbound guests.

ZARA ZHANG: I wanted to talk about your earlier experiences. How did you go from consulting to working for a network security company, and to starting your own travel startup?

TAO PENG: That’s a very good question. I think for me sometimes life is random. Opportunities just come by itself. Then, I think the only thing that if you summarize all the experience, I think I have a very strong curiosity about life. I’m just very curious. This is a way that brings me to overseas studying. I’m very curious in network security so I did a PhD there. And then actually I had a chance to have funding for a startup. Then I just find that the opportunity in China is so big that I’ll go back to China and bring my network security startup back to China. Then, some kind of financial crisis happened that make me have to make a choice go back to Australia or stay in Beijing. I made a choice to stay in Beijing. Then McKinsey moved to the same building of my previous startup. That’s how I know that there’s a company called McKinsey. Then we interviewed, I get in there.

I think McKinsey broadened my education, broadened my horizon. Before them, I’m really like a hardcore tech. That’s actually helped. At the end I think I just feel like I have a passion to build a business from zero to one. To grow a business always was something I feel very passionate. Especially in the place I love, for example, travel. Basically, from my own personal travel experience, I feel like if you can have a good travel journey that will be a precious memory for you. I think that can bring people happiness. Actually, that’s why I founded Breadtrip, because we all remember the precious moments. People feel very happy in the trip journey. This is step by step. We find out. We get in the travel industry. Then we know that in the travel industry the most important problem to tackle is accommodation. That’s what people have to have, and they know this how it is in Airbnb. I feel like it was some kind of destiny, and also everything works pretty well in line with your mission and you know the industry well to solve. I think the goal is to bring happiness to people. This energized not only me or my colleagues in China.

HANS TUNG: Your left side brain has done well because you have a PhD in computer engineering. Then the right side of your brain you like to travel, and you’re passionate about travel building the community. How has this combination helped you to win, establish credibility with folks in headquarters back home and Airbnb in San Francisco?

TAO PENG: I think first one. I think Airbnb is a company that I really believe in their value, the way I think. It’s a natural fit in Airbnb culture. It’s a very interesting experience or funny experience. I joined here, the first day I just feel I belong here. I don’t feel like it’s something I’ve got to get used to. I talk to people and I just feel like we’re the same people. That’s really very unique. You don’t need to have people to jumpstart, like to educate a culture why I think like that, because I have always been thinking like that. The next part is basically I think the training I did in McKinsey is very helpful. How to do some structures, thinking, communication, be analytical.

So, everything should be backed by logic and numbers. That can gain some kind of credibility, so people think you’re not just like very passionate without thinking about the reality. And the third par,t I have close to seven years internal experience in travel. I learned a lot, good or bad. It’s a really great learning experience and I think that helped me a lot to think straight to the problem. Basically, there is no something, basically right to the problem. I like to communicate directly because I want to solve the problem. I think all these three things help me to communicate. I feel people here want to realize a mission, so they really commit to solve the problem. I have no problem communicating directly. Especially now I have this trust from the founders so I can just speak right away what’s the problem. I don’t worry about whether I should rephrase it because I know everybody believes, we all have the same vision and that we just need a quicker way to solve the problem.

HANS TUNG: A lot of people in Airbnb in San Francisco like you a lot so you’re definitely doing something right.

TAO PENG: Thank you.

ZARA ZHANG: When you were starting a startup in the travel space why did you pick content sharing as your starting point?

TAO PENG: I think when I started, I knew nothing about travel, to be honest. I had this kind of mission that the precious memories are a very important part. But with all this getting on I think I realized what’s the best way to deliver that. So, the learning, seven years of learning, lots of interaction and also being entrepreneur, you grow the business. I think all those things actually get you to know deeper the industry. Another reason of doing from content is actually that’s another wave of mobile Internet. At that time, I choose to be an entrepreneur, wanting to travel and use the mobile internet. Mobile internet is easy to get viral and you have good content. We designed an application basically distributed by Apple. That’s actually how I got started. During the learning experience from what you see, the numbers, and from what you see the user’s requirement actually make you realize what is the core ingredient of travel and the what challenging and also the secret of travel. That’s actually I think what I believe Airbnb, the most important for people to belong anywhere is accommodation. You have to offer that. That kind of belonging is what people are really looking for. That’s how we ended from there here.

ZARA ZHANG: What was the biggest challenge you encountered while building Breadtrip and what are some lessons you learned?

TAO PENG: You need to build a super team. I think the team is very important. You need to empower the team. You need to set the right culture. I think you should treat the team like a sports team. Everybody has to grow. The growth is the most important for the employee and the tough love to give. Very easy mistake to make is you think you’re very nice to people, but you don’t think about their growth. For me, I will focus a lot on how to grow the employees, make people everybody to their full potential. I encourage them just like a coach sometimes. This is something I learned.

HANS TUNG: Great analogy. That’s our experience as well. What kind of talent are you looking to add to the Airbnb China team, and how can our listeners reach out and get in touch?

TAO PENG: For the talent team we want to have in China, basically first that they believe in our vision, the ways we want to be. The second is actually they have to be really down to earth. They can solve problems. The next thing we want to grow is actually we want to build our offline capability to enable we have a good offline experience. The third thing is, the candidate that comes here should come with a growth mentality. People should have a very strong desire to grow, and also should get used to change. Any reorg, any change, for them, they should view that as a growth opportunity. That’s something like the core criteria I’m actually looking for.

HANS TUNG: How can applicants apply?

TAO PENG: At the moment we have opened, there’s a website where they can subscribe their CVs. Second, we also have a different kind of WeChat accounts so there is a link like Airbnb 爱彼迎, there are articles and also, they have the link, you click and supply. Thirdly, we also work with different kinds of recruiting websites. They also have job ads like LinkedIn. You can see these ads. I think this is all the channels. If they’re good candidates, they can reach out to us. We’re always hungry for talent.

ZARA ZHANG: In July last year Airbnb invested $5 million in CityHome, a platform for managing short rentals in China, and the company that you co-founded. Could you talk about the synergies between CityHome and Airbnb, and how have the two companies worked together since then?

TAO PENG: The synergy is that CityHome more provides good supplies. The reason investment is that Airbnb wants good supplies. They want to build a good ecosystem. For some cases, you have this professional company running, you just make some kind of low-frequency maintenance issues more scalable. The way Airbnb works with CityHome is just with the ecosystem in mind CityHome is just one of the ecosystems. We work closely with CityHome to try out some kind of techniques, how we work with our downstream suppliers. We take this learning and apply it to all ecosystems because we have this kind of like relationship. We can build a trusting relationship and we can run something quicker. That’s basically is something we do with CityHome.

ZARA ZHANG: Next we’re going to a set of quickfire questions. Just say the first thing that comes to your mind. The first one is who is an entrepreneur you admire the most and why?

TAO PENG: I like the founder of Bridgewater, Ray Dalio. I think he’s an amazing guy. I like his book. I put his book on my desk all the time. I think what he writes summarizes a lot I learned during the past seven years. I wish I could have read his book earlier but I’m not sure-

HANS TUNG: You would not have learned as much.

TAO PENG: At the time maybe I wouldn’t have believed it. I really like the book and I like the author.

ZARA ZHANG: I realize all self-help books you just draw a new level of meaning from it once you become an operator.

HANS TUNG: That’s right. You learn a lot more because you’ve experienced it. I know it helped me a lot when I was a founder.

ZARA ZHANG: What’s something you read recently that you recommend, besides that book?

TAO PENG: I’m reading a book called The Score Takes Care of Itself. It’s is a legendary coach.

HANS TUNG: Of the 49ers.

TAO PENG: I also like that book because I played basketball before and think the sports analogy reminds me a lot of some concerns with management issues, how to encourage a team, how to build the right team culture and how to actually make people proud, that it’s something they feel is worth fighting for. I think that book is great. I’m somewhere in the middle of that.

HANS TUNG: I’ve read the book. I agree. Glenn has read the book as well. He highly recommends it and I can see why.

ZARA ZHANG: What’s a habit you have that you think has changed your life?

TAO PENG: I think the habit that changed my life is reverse thinking. I used to have something like a hypothesis I want to prove is right but now I actually for a hypothesis try my best prove to prove it’s wrong. It sounds very counterintuitive, but I think I made a lot of mistakes because I tried to prove a hypothesis right. It’s not scientifical, but I realize it’s a thinking fraud. Now actually when I have something, I always think the worst scenario so what could go wrong. If you find one out you just do not do that, then you’ll be right. That habit changed me a lot.

ZARA ZHANG: And not making pre-assumptions about things.

TAO PENG: If you make assumptions, you want to prove right you can do lots of cherry-picking. It’s very easy to prove it right and then you claim success. Because the reality is the world is so complicated, you only simplify it for a reason. But if you make big decisions, if you’ve simplified, cherry-picking some stats to support your judgment, you can easily claim success for yourself but it’s not for the reality. At the end, the reality will tell what it is. It’s better to have this kind of reverse thinking mindset. You try to challenge yourself or ask your team to challenge yourself. We want to build a culture where everybody can challenge me. Maybe challenges can just make you think. Maybe the challenge might vary, but at least you see there’s a blind spot. Everything has blind spots. That habit helped me change a lot.

HANS TUNG: I’m going to ask you the toughest question in this interview. What is your favorite travel destination?

TAO PENG: Africa.


TAO PENG: People migrated from Africa. Every time I travel to Africa somehow, I just feel connected. I just feel like I belong because this is how humans started, right? They just started from East Africa. They still have a particular fashion or love East Africa. I’ve been to East Africa a number of times, see the safari, climb Kilimanjaro. I don’t know, I just feel like it’s a very unique place to me.

HANS TUNG: Great. Cool.

ZARA ZHANG: Thanks, Tao, for your time.

HANS TUNG: Thank you. Really enjoyed it.

TAO PENG: Thank you.