How naked Group’s Grant Horsfield Pioneered a Lifestyle Brand in China

Hans Tung:

Hi there. Welcome to the show, where we interview movers and shakers of China’s tech industry, as well as tech leaders who have a U.S.-China cross-border perspective. My name’s Hans Tung. I am the managing partner at GGV Capital, and have been working at startups and investing in them in both the U.S. and China for the past 20 years.

Zara Zhang: My name is Zara Zhang. I’m an investment analyst at GGV Capital and a former journalist. Hi, everyone. On the show today we have Grant Horsfield, whose Chinese name is Gao Tiancheng 高天成, a very ambitious name. Grant is the founder of the luxury resort company naked Group, and the coworking space, naked Hub.

Zara Zhang: Grant is from South Africa and first came to China in 2005. In 2007, Grant started naked Group with his wife Delphine. It focuses on developing rural properties in China for rental and tourism, and its flagship resort is located in Moganshan, a beautiful mountain a 30-minute drive from Hangzhou that prioritizes sustainability in design.

At naked Resorts, visitors can immerse themselves in nature and enjoy being away from city life. They can sleep in farm stables, ride horses, climb mountains and the environment encourages them to retreat and bare themselves to nature.

naked Group pioneered a concept of yě shē (野奢) in China, which translates into wild luxury, a concept of combining raw nature with luxury hospitality.

Hans Tung: In 2015, Grant and Delphine started the coworking chain naked Hub, which also focuses on environmental sustainability and stripped down architecture. naked Hub offers several services including open office, private office and hot desks. It now has 10,000 members across 24 office locations, both in Shanghai and Beijing. It has expanded into Australia, Hong Kong and Vietnam.

In April 2018, a month ago, naked Hub and WeWork announced that they would join forces to support business in China and throughout Asia. Welcome to the show, Grant.

Grant Horsfield: Thanks, guys. Happy to be here.

Hans Tung: So let’s start with your personal story. Why did you move to China in 2006? Incidentally, in fact, my family and I moved to China in 2005, so around the same time. But you were from South Africa. You were a successful entrepreneur. Why did you decide to come to China?

Grant Horsfield: So yeah, good question. I’d done an MBA and a teacher, a lecturer, had given me a story about China which really caught my attention. It was a crazy entrepreneurial story with a guy who ended up bringing chicken feet to China and making a whole bunch of money in six months.

Hans Tung: So there’s a billion people here, if everybody just went and bought a pair…

Grant Horsfield: The thing about the story that was interesting is that it was about selling to China. Nobody in that time was thinking about that. Everyone was about buying from China.

Hans Tung: That’s right.

Grant Horsfield: So I came here thinking, well let me come and explore this place and maybe something will catch my eye. And when I was here, I was searching, constantly searching, for a product. That’s what I thought it was. I thought there was something from Africa that I was going to bring to China.

And after a year, year-and-a-half where I was actually working with a company invested by Naspers —

Hans Tung: Naspers from South Africa.

Grant Horsfield: Naspers is from South Africa.

Hans Tung: A major investor in Tencent.

Grant Horsfield: Yes, exactly. I realized that what was missing here was lifestyle. It’s so difficult to explain to people that what you don’t know, you don’t know. And the people here were happy, and it’s a great city, but they just didn’t know.

Hans Tung: What they were missing.

Grant Horsfield: What they were missing. And I grew up in Cape Town, I mean I grew up in a small town called Knysna, but I went to University in Cape Town, had business and Cape Town and it’s a real lifestyle city, where people genuinely live life more than they work. It’s the opposite of China.

Hans Tung: Lifestyle is a very popular word these days, and the concept is great, but 12 to 13 years ago, no one thought of it.

Grant Horsfield: No one thought of it. So what I was really trying to do was solve the problem for myself, which would give me something else to do rather than go out to the bars and restaurants and stuff, and live life a little bit better. But that experience, I guess, was what we ended up importing. So we didn’t import a product, we imported a lifestyle, I guess.

Hans Tung: Did you have to bribe Delphine to move with you? It’s not that easy to convince a wife to move to China in 2005.

Grant Horsfield: I met Delphine in China. She came to China in 2000 to design Xintiandi. So she was the original architect of Xintiandi.

Hans Tung: So she was more successful than you at that point in time.

Grant Horsfield: Absolutely. I definitely hit well above my weight.

Hans Tung: You lucked out, you married up.

Grant Horsfield: And I met her in a bar, and if I had actually known how successful she was I would have been too nervous to talk to her.

Hans Tung: Too intimidated to even talk to her.

Grant Horsfield: Yeah, exactly. But I was the young cocky kid that, I saw a pretty girl and –

Hans Tung: Ignorance is bliss.

Grant Horsfield: Exactly, exactly. But just as a heads up, Delphine was always involved with me, but she remained as an architect in a separate company for many years whilst I started naked, but I must say, I could never have done any of this without her. She’s the grounding that I need in life, and so I have to credit her for a lot of that.

Hans Tung: For those who haven’t been to China, Xintiandi was the place to go to in Shanghai in 2005. The first modern plaza, with money from Hong Kong that made it happen.

Grant Horsfield: Yeah, that’s right.

Zara Zhang: Grant, I wonder what about the environment you grew up in inspired your interest in nature?

Grant Horsfield: Yeah, I think everyone’s influenced by their background. I was very, very blessed. I grew up in a little town called Knysna which I think is probably one of the most beautiful corners of South Africa. I went to a school that was in the bush. There was no town. It’s just the countryside. I was there from five years old as a boarder, so I only went home three times a year. I didn’t know the city or towns, I only knew nature. We did survival camping from like nine years old, where you are just dumped in the bush with no parents, no teachers, no nothing.

For me, I’m far more comfortable. I always say it Delphine, like when we are in the countryside I can get you anywhere, but put me in a shopping center, I’m lost. I think that’s one’s background influences you and in Africa, I don’t know, I seem to find that all African people tend to have an affinity to love and care for nature. So this is something that’s very important to me now in my life, about not only what we’ve contributed to China and the way we build sustainably and operate sustainably, but now going forward how we can perhaps use our influence to help save some of the animal problems that we have in Africa.

So yeah, I think your background. It always comes back to sort of how you grew up. If you experience that your whole life and then you come to somewhere where there isn’t essentially any nature, it’s kind of obvious and stark.

Hans Tung: How difficult was it for you to start naked Resort in China back then?

Grant Horsfield: Wow, yeah. I mean the stories go on and on. I mean it was never easy; no business is easy, to be honest. Was it easy to do what I did? I think there was an element of luck for me in the fact that I was African and a farmer. When you go out to the countryside, you know farmers anywhere in the world are the same. And for me, just dealing with the farmers in Moganshan was no different from dealing with the farmers where I grew up.

So I don’t have a great sort of ego towards, well maybe I have a big ego, no question about that.

Hans Tung: Oh definitely, no question about that. Just look at your Chinese name. We’ll get to that in a second.

Grant Horsfield: I didn’t give myself that name.

Hans Tung: But you accepted it and kept it.

Grant Horsfield: My name was Ge lan te (格兰特) and when I found out that was an air conditioner I said, “You need to change my name.” But no, the thing is, Chinese rural people, as long as you come down to their level and drink baijiu with them, get to know them, be genuine with them, they fall in love with you, just like any other rural people. So that was my benefit that other people didn’t have.

Hans Tung: How did you get funding to get the first one started?

Grant Horsfield: Well, that was interesting.

Hans Tung: And the permit.

Grant Horsfield: Yeah, look, so we start small in China. I think that’s my advice to anyone, get your grounding. Our first resort wasn’t very big, it was 21 rooms, so we just needed a few million dollars. It wasn’t that expensive. But we did use some friends to help invest in that first resort. And I must tell you, that was the first time I realized that I never want other people’s money.

Hans Tung: I’m not offended.

Grant Horsfield: I knew straight away, they kept asking me “So how’s it going? What’s the performance? Are you going to give me a report?” And I said “No. It’s going fine, and that’s good enough.” And then soon, very soon, I was like okay, I don’t want anything to do with that.

So when we built naked Stables, which was a huge, ambitious task, I decided not to get any investors. I used debt as the primary source of money. That was the greatest thing I ever did, because obviously naked Stables became a massive success and I got off the ground, and life moved on. But I took a massive gamble, and it almost failed. It actually very, very almost failed in 2009, during the middle of the crisis.

Hans Tung: Of course.

Grant Horsfield: The banks took money away from me that actually was in my account. This is China. I mean, these are like the lessons. It’s like, “No you can’t. You can’t. That’s mine.” “Oh no, we can. You didn’t use it.”

Hans Tung: Right.

Grant Horsfield: So anyway, it was what it was.

Hans Tung: How did you survive through that?

Grant Horsfield: Well, it wasn’t easy. I had a heart attack, it was serious. I had a myocardial infarction. I think when you’re an entrepreneur, when things are the worst defines if you are a good entrepreneur or not.

Hans Tung: Who you are, right.

Grant Horsfield: And I needed money, so nothing else was going to solve my problem. So I was searching and I found two people that were willing to lend us loan shark money, 28 percent interest. I mean you know, crazy stuff, but I needed it in a month. And they trusted, they looked at me, they said, “You look trustworthy.”

Hans Tung: Trustworthy. Cocky but trustworthy.

Grant Horsfield: I had nothing to leverage other than my smile.

Hans Tung: Yeah, your charm.

Grant Horsfield: My charm. They helped me out. Both desperately wanted equity, both. I said no.

Hans Tung: You held on.

Grant Horsfield: Yeah, and then I made it through. I always knew that if I ever got the product finished, it would work. I proved that with a 21-room place, even though the 21-room place would never make money, because I learned later in business, in the hotel business, that scale is very, very important.

So I knew it would work. I just had to get there. I had to just survive long enough. And that’s always been my mantra to being an entrepreneur is, stay alive as long as you can. And if you stay alive long enough, you will ultimately come out okay.

Zara Zhang: I also wonder what people thought of your idea at that time, because that concept of combining nature and luxury was pretty much unheard of in China. I think wild luxury was like an oxymoron, because people associated the wilderness with hardships and peasants. They didn’t really think of that as what the middle class would do.

Grant Horsfield: Sure, I mean you’re absolutely right. There are two sides. There’s my friends and my investors, and they thought I was mad. I mean, everybody was going “Seriously? You cannot go and put that amount of money in the middle of nowhere. No one’s going to come.” There was a lot of that, and to be honest, it was maybe one or two people that even gave me the slightest hope. They just wrote me off and said, “This guy’s nuts.”

Hans Tung: And back then, Moganshan didn’t have much, unlike today.

Grant Horsfield: No, there was nothing.

Hans Tung: Today, Moganshan is regarded as a resource center.

Grant Horsfield: There was nothing anywhere, to be honest.

Hans Tung: Outside of Hangzhou, that’s right.

Grant Horsfield: Yeah, but you must know that in my heart, I knew that people would need lifestyle. They would need to enjoy nature and stuff like that.

But coming back to the idea of trying to keep it natural and environmentally friendly and stuff like that, that wasn’t some creative marketing idea. That was just because that’s who Delphine and I are. If we were to build anything, it would be that way. Just to give you a context, when I took Delphine on a honeymoon, it was in a Land Rover, where we slept on the roof of the Land Rover, driving through Africa, six countries in Africa, sleeping with the lions and the elephants.

Hans Tung: That’s amazing.

Grant Horsfield: And her parents are from Hong Kong. They were very, very, very upset with this, and they were like, “This is ridiculous.”

Hans Tung: You put my daughter through this danger?

Grant Horsfield: So I don’t know. I don’t think people understood it in China, but I did realize that our name, the Chinese name, luo-xin, that helped everything. Because in a way, no one had put those two characters –

Hans Tung: Together before.

Grant Horsfield: And when we did that, it kind of made a new word and it linked to nature and it was pure and it was just authentic, and people fell in love. There was just a day, I remember it so clearly, the resort just was full and I was like, All right, we’ve done it.”

Hans Tung: We got it.

Grant Horsfield: It’s okay, everything is going to be fine now.

Zara Zhang: And for our listeners who don’t speak Chinese, luo-xin (裸心) means naked heart. How did you come up with this name?

Grant Horsfield: I have to take credit as a non-Chinese speaking person, but we got lots of input from various people, different names and there was a friend of ours who actually gave us those two characters together. But we did a survey across our company and no one liked it except me. I said, “That’s the name and no other. That’s where we are going.” and they were like, “No, that’s a terrible idea.”

My wife, to be fair, she was ambivalent to the idea. She was like, “Okay, it’s okay. It’s not okay, but whatever you say, we’ll do that.” So I have to take credit for calling that as the name that we were going to be, and it took us a long time. I must tell you that we started the company in 2007, but we only actually finally hit on luo-xin in 2009. So it wasn’t something that was from day one.

Hans Tung: So when you first had luo-xin out as the brand, the first consumer feedback, what was it? Did people, when they first heard the term, what did they associate it with?

Grant Horsfield: Instantly success. Instantly people were like “Whoa.” Like almost like we were some sage or some Buddhist-like monk, some deeply spiritual person. And everyone was like, “Whoa, that’s so cool. That’s so pure.” I’m not going to lie to you, but we’re not that. But it was cool, and today, all over the Internet people write poetry about it. Obviously everyone tries to copy it, so there’s a number of court cases that we are in all the time, trademark infringements and there is luo-xin everything, everywhere, always trying to use our trademark. But you know, we should be proud of that, I guess.

Hans Tung: I’ve got to ask you about your Chinese name Gao Tiancheng which means as high as the sky or heaven.

Grant Horsfield: Yeah, heaven. And he fights like Jackie Chan, by the way, I just want you to know. It’s not just the heaven, it’s also his combat skills. When I got here, because my name is Grant, I was given this name Ge Lan Te (格兰特) and I didn’t speak any Chinese, I was trying to learn Chinese at the time.

Hans Tung: Ge Lan Te doesn’t sound cool.

Grant Horsfield: I was walking down the street and someone said, “There’s your name.” I was, “What do you mean?” And we looked up at this billboard an air conditioning company writing Ge Lan Te. I said, “That’s my name?” And I said, “Well that’s pathetic. That’s going to change immediately.”

So I went to the HR and I said, “Can you come up with a name?” I think they must have been having shits and giggles when they gave me my name, like this huge big name. But I didn’t know. I was like, “Yeah, that sounds cool.”

Hans Tung: They know your personality so they figure you can live up to it.

Grant Horsfield: Yes, so I was given this name, but in Moganshan, nobody knows Grant or Horsfield or any English name.

Hans Tung: It’s only your Chinese name.

Grant Horsfield: Lao Gao 老高 is like, if you go anywhere Lao Gao is me. I didn’t even know that Lao Gao meant old, and I started building that place, I wasn’t even 30. I was 29 and they were calling me old.

Hans Tung: It’s a term of endearment.

Grant Horsfield: I know, I know.

Zara Zhang: It’s endearing.

Grant Horsfield: I know, but in a way, I didn’t deserve that at that time.

Hans Tung: They give you a lot of credit.

Grant Horsfield: Xiao Gao 小高 would have been sufficient.

Zara Zhang: How much baijiu did you drink in Moganshan?

Grant Horsfield: I’m the king of baijiu. I have consumed every baijiu brand and huge quantities of baijiu. But remember that baijiu, in those days, it wasn’t, for me, a scary thing. It was like a necessity, because some of those houses were so cold in the winter, my feet would be frozen. If I wasn’t drinking the baijiu I would have died.

Hans Tung: You wouldn’t have survived.

Grant Horsfield: The baijiu was a form of fuel to stay alive. But no, I got to know all the families through baijiu, through getting horribly drunk and doing stupid things like shaving each other’s hair off.

One night, I’ll tell you a story. I’d been having this massive altercation with Lao Ma 老马, and Lao Ma is, he’s like the strongman of the village. He was kind of like, let’s say the alpha male.

Hans Tung: The Lao Ma. Same last name as Jack Ma of Alibaba.

Grant Horsfield: Yes the same as Jack Ma, but he was kind of a little different from Jack Ma.

Hans Tung: A little bigger?

Grant Horsfield: No, but he’s still skinny, but strong. Anyway, so him and I had been having this issue. We started drinking and then I realized there was a ghost house that everyone in the village was scared of, it’s like hidden away in the forest. I said to him, “Come, you and me, we’re going to go sleep there tonight. Just the two of us.” And he was like, “No, that’s a crazy idea.”

But I could see he was scared. I knew if I could get him there, we would resolve our issues. He would have to tell me, show me his fear. I would be able to give him comfort and we might fight, but it will all work out well, as long as I get him to the ghost house. But damn, he was scared. So finally, at about, I don’t know, 1:00 in the morning we get our way up there and we make a little fire inside the house. I mean, in the middle of the house, there was no chimney. There was one bed and it was broken. I said, “You can have the bed, I’ll sleep on the floor.” I was drunk so I was asleep in no time. I woke up and I could see, he was still sitting on the bed and he couldn’t sleep, he was terrified. I sort of said, “Lo Ma, do you want to go back home?” He says, “Yes, let’s go.”

And that was it. We were solved. From then on, we were best friends. He thought I was a hero. Today, Lo Ma will probably tell you that I’m a rock star. So you know, that’s how we solved our problems; getting drunk and doing silly things.

Hans Tung: That’s a great lesson for anybody from the US who wants to expand into China.

Grant Horsfield: Good luck with that. If you’re an American, good luck.

Hans Tung: This is what you’re going to have to do. Drink lots of baijiu and go to a haunted house. Before we talk about naked Hub, I am going to ask one more question. Back then, going to Moganshan is like picking out Las Vegas in the middle of nowhere. Why Moganshan, 30 miles outside of Hangzhou?

Grant Horsfield: A lot of people think that this was like some deep decision. All I was looking for was a place that was quiet. In fact, actually it was even more detailed. I was looking for a place at the end of a road. So where they wouldn’t be, it’s not a transient place, it’s a place that you go to and it kind of ends.

So my wife and I and my secretary at the time, and various people, I used to go on these trips outside Shanghai, just looking for a quiet place. And it was quite difficult, because to get off the main roads, all the signage and everything was in traditional Chinese characters. Only the main roads had Pinyin 拼音. So it was quite difficult for me to navigate, and I was driving this old Beijing Jeep, so trying to get off the beaten track was never that easy.

One of these trips I actually took a bicycle trip with a group called Bodi Bikes, and fortunately, the guide was useless and we got lost. When we got lost, we actually stumbled across this little village called Sanjiu Wu which is on the Moganshan Mountain. The whole village was pretty much deserted, there were 12 old people that lived there still, and I just fell in love. I said, “This is it. I found it.” And actually signed the lease that day with Nainai whose husband had just passed away, but she was so happy that I was coming in to share her house with her.

And so the early business was just we long leased, 40-year leases on all the buildings. Later on we ended up buying the land and building the projects. So Moganshan wasn’t detailed research. I just looked for a quiet place.

Hans Tung: Where your heart took you.

Zara Zhang: What kind of traction did you gather for naked Resort? I heard the rooms are booked out all the time. What kind of people go there?

Grant Horsfield: So 92 percent of our customers are Chinese. People don’t realize that. I mean we talk about naked, no one actually knows the word naked, only luo-xin is really what is famous in China, and that was always our mission. But in the early, early days, obviously it was my friends, my network, so more foreigners in the early, early days.

I’ve always believed, no matter what you do, if you make a good product, people with buy it. With a good restaurant, if you make good food, you can’t fail. The good food part is really important, but people mistake that. They think it’s about the ambience. In a resort, it’s about the experience. So it isn’t about the room. It isn’t about the food. It’s about the actual experience, and people sometimes forget that. Fortunately for us in China, I don’t think that we’re that good at what we do. I just think that everyone else is that bad, because no one is actually focused on trying to –

Hans Tung: Back then, no one was trying to focus on excellence.

Grant Horsfield: Yeah, but still today even, people are building resorts all the time.

Hans Tung: And neglecting some of the details.

Grant Horsfield: They miss the part about actual experiences and doing things. They just build hotels in the mountain. It’s just random, but they think that’s going to make money. Anyway, that’s their choice.

Zara Zhang: Let’s talk about naked Hub, which is your coworking space. What motivated you to go into this space in the first place? Transitioning from a luxury resort to coworking?

Grant Horsfield: Yes, I think the shared economy is something that’s always intrigued me. People don’t realize, but our resorts are actually very much part of the shared economy. Very unusual from any resort you’ll see anywhere in the world, naked Stables, 81 of the 121 rooms are actually shared villas with multiple rooms. Meaning that people travel there as families or groups of friends, and people are actually sharing experiences. Something that a lot of society forgets we used to do hundreds of years ago in society. That’s how people lived, in courtyards and people’s homes. We always used to travel and spend time with each other. So that’s kind of gone, and the only time we get together with people today seems to be in restaurants.

So when we did that, it was kind of bringing people together. That intrigued me. I also realized that we could scale this business, the coworking business, very fast. That our design ideas my wife and I had, we could maybe be more creative, have more chance to do things. And to be very, very frank, a coworking office takes us three months to build.

Hans Tung: The resort takes much longer.

Grant Horsfield: The resort takes us four or five years. We struggle with getting satisfaction, like this feeling of oh yeah, that’s beautiful, we’ve done it. It takes so long. This is just great, where we can get real, instant satisfaction, instant gratification.

Coworking, people also thought I was crazy being so aggressive in the early stages, but we saw immediately that the future was this idea, but I didn’t actually know the business that well. I just kind of jumped into it and then I learned on the job.

Hans Tung: So you first heard about it elsewhere, and go hey, we can do it better.

Grant Horsfield: Yeah, exactly. A friend of mine actually said we should do it, but I really didn’t explore what it was all about. We just kind of played with one or two, and they were full very quickly and people loved it, and we enjoyed doing it. So it was a good process.

Zara Zhang: At that time, were there a lot of other coworking spaces in China already?

Grant Horsfield: No, and there still aren’t, by the way because I don’t believe most other people are doing coworking. But no. I think 3Q had built one place and that was pretty much it. So it was pretty early on. But I must comment on that. That’s not flippant joke just for sakes, I think coworking is so misunderstood. It’s just so random that people think it’s space, an arbitrage of space.

Hans Tung: Sharing, yeah.

Grant Horsfield: It’s so far from space, but no one in China seems to get that, which is kind of random for me. Even though I talk about it all the time and I’ve done interviews about it all, Edmund Newman speaks about it all the time. People still continue just to treat this like, let’s rent space and rent it out. Cut it up and rent it out. That’s their problem.

Hans Tung: What are the five things or three things that you had to get right to make naked Hub a lot more popular and offer better experiences?

Grant Horsfield: So the most important thing is being able to let your members connect with each other without it being invasive. Now you do that through physical space, so your designing of the physical space. How do you create the common areas where people feel comfortable to come together, meet each other? And that’s really important. The whole idea of this business is essentially trying to break down the barriers between companies. The more that companies can interact with each other, the more business they can do with each other, the more successful they can be. And funny enough, the smaller they can keep the companies by using other companies to solve some of their problems, rather than insourcing you outsource.

Hans Tung: Outsourcing, yeah.

Grant Horsfield: And we see today so many more smaller companies operating in the gig economy, et cetera, that this is the future. There is no question that this is the future. So the physical space.

The second part was the technology to allow people to connect outside of the physical space. How can I promote my business? How can I promote who I am? How can I connect with other people and members? And that was the technology platform which nobody does, but the way, except we work at naked in a very effective way. We spend a lot of energy on that.

I think the third part is scale, realizing that you can run this as a mom-and-pop operation just like a hotel.

Hans Tung: But you need a network effect.

Grant Horsfield: Exactly. So in a hotel, if you don’t have enough rooms you’ll never make money unless you’re a home operator, like a mom-and-pop.

Hans Tung: Bed and breakfast.

Grant Horsfield: Exactly. So this is the same. If you really want this to succeed, you have to have huge, ambitious dreams to change, and then realize that you are a solution for landlords. You are not renting from landlords. Just like a hotel, no one’s going to sign a management agreement with you if you haven’t done it before. So you have to invest your own money, build out these spaces, and then the landlords realize well hang on, we don’t have to be competitive. We can work together.

So that’s what happens today. We don’t sign leases, we just sign management deals. But you have to have proven yourself. I read these stories on the Internet constantly like “Aren’t you exposed? What happens if the rental market changes and suddenly there’s a drop in global rent? Wouldn’t that hurt you?” And I say, “Yeah. It would hurt, but it wouldn’t be significant because most of the deals we do aren’t linked to a liability of rent.” It’s a partnership between the companies.

So those are the factors that really most operators don’t get. And you have to be a good product, essentially, for people to want to do management deals with you. If you’re clearly a guy who’s just in it for the short term, ultimately big landlords like Vanke 万科or whatever are not going to go and say “Hey, let’s work together.”

Hans Tung: So for you, did you take outside money this time, in order to scale quicker?

Grant Horsfield: Well funny this, I didn’t.

Hans Tung: Again you didn’t.

Grant Horsfield: It is random. So firstly we invested heavily by ourselves at the beginning.

Hans Tung: Right, from the cash flow from your resort business.

Grant Horsfield: Yeah, so we fed some of our positive cash flow into running this business. And then we did a B round for the first time. By the way, I’ve never done an equity fundraising round in my life, and I’m actually really proud of this. But in the B round, we did a convertible note, with Gold Capital and TrustBridge and another company, Eamon. So these guys, we were imminently about to close our C round, which was finally an equity, like finally. It was a big round, a big valuation, but that’s when WeWork stepped in. And so the guys that were in the B round, they had the opportunity to convert just an hour before the transaction closed. Effectively speaking, you can say that that B round was kind of an equity deal, even though it was only for one hour.

But you know, I am old fashioned. I really don’t like the idea that entrepreneurs are thrown money by investors. I think it’s a flawed thing. It’s worked for a lot of companies, but there’s lots of companies it hasn’t worked for. I think entrepreneurs should have more skin in the game.

Hans Tung: Have their own profitable business, nobody is going to bail you out.

Grant Horsfield: And they should commit their lives to it. Really feel what it’s like to be imminently bankrupt. That’s what I want to see more entrepreneurs like. Today in China it seems that everyone just goes and gets other people’s money. Anyway, I’m old fashioned, I guess.

Hans Tung: Got it.

Grant Horsfield: And honestly now I don’t need to use other people’s money, so it’s fine. I’m good. I’m done with this whole, using other people’s money.

Hans Tung: But I thought you were going to raise a round and expand throughout Asia.

Grant Horsfield: So now, technically, with the merger I’m no longer executively involved in naked Hub. I’m on the board. My wife and I will continue to advise and we are helping on this fundraising round for WeWork, but it’s not my company. Even though I’m a shareholder, I’m just not the alpha male anymore, and no one has to listen to me. I can only just advise on the direction.

Hans Tung: So what prompted you to do this then? You are clearly good at operating. You’re good at projecting the vision and the brand value of what you’re doing.

Grant Horsfield: Look, this business, WeWork and I were competing on two fronts. We compete in probably acquisition, so where we are making these deals with various landlords, and that hurts us on the one side and we are fighting for the same customers.

So you know, normal competition is healthy between companies, but when you’re competing literally on two fronts with the same company, and that company –

Hans Tung: Has a lot of other people’s money.

Grant Horsfield: And a lot of money.

Hans Tung: A lot of money.

Grant Horsfield: I knew that they really didn’t care about how much they lose to hurt me. And I’ve seen enough stories in China, and we have all seen the Didi-Uber battles, et cetera.

Hans Tung: Yeah, if you were invested in Didi, you went through that.

Grant Horsfield: And look at Didi now.

Hans Tung: They’re fighting with Meituan.

Grant Horsfield: Yeah, it’s another battle. I also had a good connection with Adam. He made a big mistake. He should have taken me out two years ago. He would have saved himself a whole bunch of money.

Hans Tung: Oh yeah, totally. Went for Uber as well. Most people don’t learn.

Grant Horsfield: We had to get to know each other. I liked where he was going, and honestly WeWork had the same ideas that we did.

Hans Tung: Yes, you guys are very alike. It’s amazing.

Grant Horsfield: We just didn’t care about the moneymaking on the real estate. We wanted to figure out how to solve a bigger problem.

Hans Tung: Yes, that’s very clear.

Grant Horsfield: So we had a very, very strong technology team here, design team and hospitality. Those three things WeWork just didn’t have in China. And actually, WeWork didn’t realize the importance of hospitality as much as we did. So we brought that hospitality, we brought some of the tech ideas that we have, and it was a good partnership. I think we did exactly the right thing for the success of both companies.

Hans Tung: But why do you not stay in the operation? Because clearly with their balance sheet, you can do even more.

Grant Horsfield: Yeah, but I’m not employable. That’s just a fact.

Hans Tung: You cannot be corporate.

Grant Horsfield: No, I just could not.

Hans Tung: You’ve got to be alpha male.

Grant Horsfield: I could physically not work for someone. It will end in tears. Everyone will be unhappy. I will either murder or just something. It will just not work out.

Hans Tung: You know yourself, that’s good.

Grant Horsfield: I knew this many, many, many years ago. That’s why I became an entrepreneur. Go back to school, the teachers hated me. I mean, anyone who had to tell me anything. If you had to just say “Hey, Grant, won’t you please go and do that?” “No!” I just wanted a fight against anyone who wanted to tell me anything. So I was like okay, I’m really bad at being told what to do. So essentially, I know that that won’t work.

But I still have a big role to play in WeWork, and I don’t know what exactly that’s going to be and how that’s going to happen, but I believe in this industry and I really believe in what we’re doing. I will find a way to be.

Hans Tung: So besides resource and coworking space, what will be a third product that would pique your interest?

Grant Horsfield: I am very passionate about a big, big problem, a huge problem that I want to solve.

Hans Tung: Which is?

Grant Horsfield: Which is the fact that teachers are the worst-paid people in the world.

Hans Tung: Sure.

Grant Horsfield: And so I’ve been exploring this a lot. I’ve been thinking about this a lot. I spend most of my awake hours thinking about this problem. I tell people sometimes that 150 years ago when you went to university, you didn’t go to university because it the name of the university was Harvard. You went there because there was a professor there that you wanted to study under. When you learned how to go fishing, there was someone who taught you fishing or riding a bicycle or a car, everything was about teachers. And teachers just lost. Today, they are the worst-paid people. The janitors make more money than teachers.

So we have this concept called BULA, which the idea of it is trying to reverse that, and make teachers fundamentally the entrepreneurs. I believe that I can actually reverse this completely and make the university hire the teachers on a consulting basis, not as employment contracts. And if I can find a way to make the good teachers go up to the top, and the bad teachers go down to the bottom and make it a transparent system, I believe we can we make teachers the richest, the most well-paid people in the world again.

Hans Tung: This is obviously potentially a global business.

Grant Horsfield: Yes, it’s a global business.

Hans Tung: What would Phase 1 look like.

Grant Horsfield: We’ve already tested Phase 1. We tested it in a very small, narrow area in wellness with yoga teachers. It was an area where I could explore the idea, and it was kind of simple and narrow, and it was amazing.

Hans Tung: Yeah, and controllable.

Grant Horsfield: We proved that a teacher can make 20 times more money than they can, 20 times.

Hans Tung: This is in China? Or elsewhere?

Grant Horsfield: In China, in Shanghai in Puxi, in a very small little district of Puxi we just said, that’s the area, a microcosm, built the software, rolled it out, BULA, and the teacher that used to work for Y+ or some studio, on our platform they’d make 20 times more money.

Hans Tung: How is that possible?

Grant Horsfield: Well it’s simple, because the institutions of today make all the money. So what I mean by the institution is the Harvard, the school.

Hans Tung: Right, overhang.

Grant Horsfield: Or the Y+ studio is someone who had the money to rent the space, to fit it out, to make it all pretty and then use and abuse the teachers who are actually the heroes. And why the teacher isn’t the hero? No one remembers the teacher’s name.

Hans Tung: So you want to make it where you can have a coworking space to have that.

Grant Horsfield: So the coworking spaces do help, having that space, but actually space is everywhere, you just don’t realize it. So we’ve found spaces. Let me give you some examples. Hotels. The gyms are empty.

Hans Tung: Empty, right.

Grant Horsfield: Restaurants.

Hans Tung: So you need a technology platform that allows the booking of those things.

Grant Horsfield: Exactly. But we’ve already done all of that.

Hans Tung: And you already did all that, so it’s easy.

Grant Horsfield: You know, there’s so much space. Restaurants are all empty.

Hans Tung: I’d be happy to be an investor in that company, and I will be easy to get along with.

Grant Horsfield: I have about 50 people offer me money.

Hans Tung: You do, but we’ll be the best partner.

Grant Horsfield: Yeah, okay. Well we can talk, when I get to a round. Right now, I really believe it needs a lot more thinking and I really want to figure out, I actually thought this idea was kind of small at the beginning. Now I think I can really disrupt everything. Like the whole – do you know how deep teaching goes?

Hans Tung: Okay, the key thing is the space. To have the space, you’ve got to have the technology, you’ve got to have an industry relationship. People have got to trust you. You have that.

Grant Horsfield: I thought that was hard, but that’s the easy part.

Hans Tung: Yeah, because you have that already, so it’s easy. For everyone else, that’s not the easy part.

Grant Horsfield: Yeah, I have a lot of space around the world.

Hans Tung: You do.

Grant Horsfield: You know, WeWork is the second-largest tenant in London.

Hans Tung: And they want to have more and more services, they don’t want to just be renting space.

Grant Horsfield: I know. It’s good that they are my friend.

Hans Tung: Exactly.

Grant Horsfield: You know, they’re my company.

Zara Zhang: So how are you spending your time these days? How do you split your time between this project, naked Hub and naked Group?

Grant Horsfield: So we still have this integration going on between the two companies. No merger is easy, so this is a challenging time where a lot of emotions happen and people feel nervous and stuff. So I’m still playing an active role there. I’m supporting a little bit on WeWork on doing this fundraising round, where I can help. We have quite a new number of new resorts under development, so I spend a fair amount of time on that. I’m still the only person, me and my wife, but on the master planning side, we’re the only people that can do that, so looking at how the resort will actually look like. We are still involved in that.

And then I’m spending a lot of time thinking about BULA and I’m building a global team. So we had a first meeting in L.A. last week, in fact, where I flew in a whole bunch of people to meet.

Hans Tung: Makes sense.

Grant Horsfield: We’ll be building more software out of Vietnam, so it’s going to be a real global business.

Hans Tung: Yeah, it makes a lot of sense. Why did you pick L.A. as the place, because that’s where most of the teachers –

Grant Horsfield: There was a really good pool party going on there.

Hans Tung: That’s Hollywood.

Grant Horsfield: No, I actually went there because one of my great friends, Goodwin Gore, he came. His first project in the world was building the Roosevelt, and that was like his big thing. My big thing was building a hotel too, so I wanted to go see his, because we’ve been friends for a number of years. And so I wanted to stay at the Roosevelt.

I mean, I think L.A., London and Shanghai are important corners of the world.

Hans Tung: The three epicenters for what you’re doing.

Grant Horsfield: For teaching wellness and stuff like that. Less than New York, obviously.

Hans Tung: Less than New York, yeah.

Grant Horsfield: I don’t know, that’s kind of like what I’m thinking about. I don’t know how I’m going to do it. But I know that’s what I’m good at. I’m good at navigating the things that other people don’t know how to do.

Hans Tung: We have four investments in L.A. and actually I grew up in L.A., my mother still lives here. But L.A. we think is good for lifestyle investments, brands, media, digital media, and particularly e-commerce.

Grant Horsfield: We’re going to build a resort in Napa called naked Napa.

Hans Tung: Yeah, makes sense.

Grant Horsfield: So coming soon, watch this space. We’re trying to pick up some of that cheap land that was burned. That sounds bad, but hopefully I can bring it back.

Hans Tung: Sounds good.

Zara Zhang: I’ve been to the naked Hub headquarters in Shanghai. I felt like it was very different from other coworking spaces I’ve been to. There are a lot of common areas like event spaces where people can get together. There is a food court on the first floor. For our listeners who haven’t been, could you give a visual description of what naked Hubs look like, and how they’re different?

Grant Horsfield: Yes, I think the one area where we had the confidence and the courage was to create that common space or that shared space, essentially a coworking environment should fulfill five functions that you share. One is the kitchen or coffee area. The other one is the living room, we call them meeting rooms or workshop spaces, hot desks and then the wellness spaces.

These we end up using about 30 percent of our GFA, so the total area of the building in putting into shared space. That’s about double what most other companies globally do. But in order to do that, you have to have the belief that you can sell a thing like a hot desk product or we have another product called naked Hub Go where people will be willing to pay increments, small increments money and you’ll be able to get people to use the space. That’s what we proved, and we were very successful at that.

I think the future will look more and more like that with space, because it’s a so much more efficient use of space. People don’t realize that commercial office space is the most inefficient thing in the world. A normal office will use 20 square meters per person, and we will use about five. So we can reduce that by a 75-percent reduction on space. Think of how much less construction you’d have to be doing, and how much less space would be needed, because it’s actually being used. Meeting rooms in traditional offices are just so inefficient; used like 9 percent of the month, the room is being used. That’s not good use of space, that’s not environmentally friendly, it’s not anything.

So I think naked was always trying to figure out these sort of environmental questions, at the core of what we were trying to do, and through that you have to have courage and conviction to make that shared space.

Zara Zhang: I’m very interested in your new product that you are offering, naked Hub Go, which are hot desks that can be rented by the hour, so users can see the available locations on a WeChat mini program, just like how they can view available bikes on a bike-sharing app, and they can pay by the hour and then enjoy free coffee. I personally think there’s a lot of demand for flexible spaces like this, because people are always struggling to find suitable places to do a couple of hours of work in between meetings in the city. So how did you come up with this idea?

Grant Horsfield: I’m very much a product person, that’s how I think every day. But it’s by the minute, by the way, not by the hour. The idea, yes, there are people in the world who want that sort of random space. But for me it was more of an enterprise solution. Companies, especially large multinational companies, they all have offices which are inherently in one location in a city, and a city is a big place and commuting around a city can take you an over amount of time.

Hans Tung: Too much time.

Grant Horsfield: Our hope is that multinationals will be able to reduce the size of the offices by half, and then start to use a platform like this where they have 50 different other offices in one city.

The idea really stems from what we see today in consumerism, where people are buying things on small increments. Just buy what I need, and obviously Mobike and the bike-sharing apps were excellent at that, but so was Airbnb, so was Didi and Uber. What we’ve learned is that the technology, the phone essentially became a new tool for us to be able to do things. Without that, we couldn’t do this.

Hans Tung: It’s not possible.

Grant Horsfield: The thing is, just no one realized that this was a thing that could be done. So we love it, and it’s become hugely successful. We literally are in the beta-testing area, but it’s going through the roof. I think we’ve signed more naked Hub Go members than we actually have real members, and we did that in a month.

Hans Tung: I’m not surprised.

Grant Horsfield: It is insanely cool. Obviously WeWork was extremely lucky to have done this deal because if I’d done the deal a little bit later, I could have gotten even more, because naked Hub Go’s success has got real traction. And when we roll that out across the globe on the WeWork platform, it will be massive. It will change everything.

Hans Tung: And also, this is the basis for other services you want to do. Whether it’s teaching or other things.

Grant Horsfield: Correct. That’s how you get people into the ecosystem, and then you start to derive other revenue streams.

Hans Tung: Correct.

Grant Horsfield: The real estate is never the future. That is just not it.

Hans Tung: At best, an entry point.

Grant Horsfield: Exactly. The landlord can make the money on the real estate. Let’s figure out how to make other revenue streams.

Hans Tung: Because like you said, a lot of the real estate is just not utilized, and there’s so many services that can lay on top if designed well.

Grant Horsfield: Exactly. And we always say this to developers. We don’t want to be in competition with you. You guys are good at what you do. You carry on doing that, we’ll do the other stuff.

It will get there.

Hans Tung: It will get there.

Grant Horsfield: People are still threatened by WeWork and naked, but these kind of products will make people feel more and more comfortable.

Hans Tung: Do you see WeWork rolling out naked Hub Go to other places?

Grant Horsfield: Yes, absolutely. Shanghai is going to be a testing ground for a lot of new products that we develop, and then they will roll them out on the WeWork platform. We’ve got 60 to 70 engineers now working here in Shanghai. We are going to scale that up to 1,000 engineers focusing on product development with how we can bring more solutions to the general person on the street.

And by the way, the first 15 minutes are free when you walk in a naked Hub, so you scan and can literally –

Hans Tung: You can get a taste of it.

Grant Horsfield: You can have a beer and a coffee and walk out and pay nothing.

Hans Tung: But just get you into the door and develop a habit, you can do so many more things with them afterwards.

Grant Horsfield: And I figured out that if you’re a good beer consumer, you can get drunk really quickly without needing to pay much money. So students are highly recommended.

Zara Zhang: What would be your top advice for other non-Chinese entrepreneurs who want to start businesses in China?

Grant Horsfield: I think most of the same things that you tell entrepreneurs anywhere in the world. The best advice for non-Chinese, I would say respect and learn from Chinese. Do not have the arrogance to think that you know more.

Hans Tung: Think that you know more.

Grant Horsfield: That is just so common for me, I’ve just seen foreigners do that for the last 15 years. And it’s just so dumb, because they just don’t listen. They don’t take the time to actually try and understand what the local guys are trying to tell you. So I think, what’s the right word?

Hans Tung: Presumptuous.

Grant Horsfield: Being humble in your surroundings. China didn’t happen by accident. It’s kind of a big play.

Hans Tung: Presume that you know more without being here is kind of ridiculous.

Grant Horsfield: So I always laugh that I think that’s my great advice.

Hans Tung: Yeah, completely.

Grant Horsfield: I can’t think of better than anyone, so we are at like the lowest run on the low-rung things.

Hans Tung: It’s honest.

Grant Horsfield: Yeah, come here and learn from China and enjoy it, embrace it. Actually, really localize yourself. So many foreigners cannot do that. If you don’t get it in the first year and you don’t localize, just leave, because you’re never going to.

Hans Tung: Totally true. As you know, in China new retail is a buzzword that Jack Ma started in January 2017. You also see a lot of unmanned snack shops, convenience stores, a lot of stuff. For someone who is a believer in the sharing economy and the human connection, how do you feel about that trend that’s supposedly happening?

Grant Horsfield: I think it’s the start of another, I don’t think that is exactly the solution that we’re going to see is going to be the solution, but it’s going to be the thing that helps us learn how new retail is going to go. Retail is in a major, major problem right now. I mean the whole of retail. Pure online is not a solution to solve –

Hans Tung: It needs more.

Grant Horsfield: And this kind of unmanned retail is also not a perfect solution, but we are consumers, human beings are consumers so there needs to be a form of it. We just need to learn what it looks like. Shopping mall are not it, High Street shops are not it. But I think this new sort of retail idea is a stepping stone in the direction. So if you’re an entrepreneur and you like this industry, I think it’s a great place to think more about it, because I think there’s going to be a lot more innovation in that area. Me personally, I’m not a big fan of retail, so I’m not thinking about it.

Hans Tung: You’re thinking about services, you’re thinking about experiences.

Grant Horsfield: Exactly. Seriously, I’m thinking about solving the teaching problem. It bothers me. For my children, for my children’s children, it’s just wrong. Sorry, I have to just say this.

Hans Tung: No, go for it.

Grant Horsfield: If they are the worst-paid people in the world, they are going to be the worst teachers. That’s a really bad thing for society.

Hans Tung: And you can afford to spend time on doing something that’s impactful, that is something that you believe in the cause.

Grant Horsfield: Exactly. And retail, buying stuff, I kind of don’t do that. I’m from Africa. I don’t know how to explain it, but yeah. Shopping ain’t high on my list of things to want to go and do.

Hans Tung: Makes perfect sense.

Zara Zhang: We’re going to end this interview with a round of quick-fire questions, so just tell us the first thing that comes to your mind. The first one is, who is the entrepreneur that you admire the most and why?

Grant Horsfield: Two. Richard Branson and Elon Musk.

Hans Tung: Really? Wow.

Grant Horsfield: Richard Branson just because I love his mantra. He’s all about the brand, living the brand, actually being the brand.

Hans Tung: But he’s different from you. He’s all about doing this in a regulated industry, enjoying some kind of monopoly.

Grant Horsfield: But he wasn’t when he was young, he was crazy and wild and I loved that about him.

Hans Tung: That’s fair.

Grant Horsfield: And remember that there’s a similarity between Virgin and naked, but I’ve always thought if we put those two companies together we could have a real fun company. But you know, that’s a sideline.

Hans Tung: That’s a sideline. Another topic for another day.

Grant Horsfield: I think Elon Musk, he’s my countryman, he’s a South African. I love the fact that he doesn’t give a shit, and I ascribe to that. I despise when I read media that just writes rubbish. And trust me, I read international media about China. It’s like hello, have you even been to China?

Hans Tung: Right, obviously not.

Grant Horsfield: Can you just read this stuff? So I have a bit of a thing at the moment, I don’t like media that much. I have that in common with Elon. We both really don’t like media that talks bullshit. Sorry I know talking to the media here.

Hans Tung: But we’re VCs. You may not like them either, but it’s different.

Grant Horsfield: And I love Elon Musk’s ability and courage to just throw it all in again, like just, let’s throw it all in and more money, well it’s a new idea, we’ll just double down.

Hans Tung: And he’s always taking on big challenges.

Grant Horsfield: Exactly.

Hans Tung: That need to be solved.

Grant Horsfield: And I think my teacher problem is a big challenge.

Hans Tung: Completely.

Grant Horsfield: And I think I’m going to solve it, and it’s going to be a big deal. So those are the two guys. Elon Musk, Richard Branson.

Hans Tung: What’s something you read recently that touched you a lot? Or heard?

Grant Horsfield: Heard, environmental stuff. Just a couple of days ago a whale came on the beach full of plastic. It’s a big problem. The rhino population being decimated. I read a lot about this, so it hurts me. I just think that human beings are so idiotic the way we keep killing the animals, so our children are not going to have them. Yeah, I read too much of that stuff. And to be honest, I’m stopping reading Western newspapers because they are all just full of such horrible stories, and I’m far too emotional to cope with that.

Hans Tung: Got it.

Zara Zhang: What do you do for fun?

Grant Horsfield: Wakeboard with my daughters, and golf. Golf and wakeboarding and boating, sailing.

Hans Tung: How do you do that in China? Where do you go?

Grant Horsfield: I don’t do it in China. I do golfing in China. I go so far as I built a golf simulator room in my house. I can play any golf course in my house.

Hans Tung: You live outside of Shanghai?

Grant Horsfield: No, I live just down the road.

Hans Tung: What?

Grant Horsfield: But don’t ask me how and why, I build things. I’m good at that stuff, right? And then we have a yacht. We have a couple of yachts, one in Phuket, one in Hong Kong so yeah when we go to the boat, we wakeboard. My daughters, our eldest is 7 and she’s a rock star at wakeboarding already. We love being on the ocean and we love being in nature, and Phuket is –

Hans Tung: Beautiful.

Grant Horsfield: We are never actually in Phuket we just land there, get on our boat and sail away. So that’s what we do for fun.

Zara Zhang: Grant, thank you so much for your time. We encourage our listeners to visit naked Hub when they can use naked Hub Go. This is a really cool product.

Grant Horsfield: Thanks, guys. Thank you for having me.

Hans Tung: Thank you. It was a lot of fun.

Grant Horsfield: All right, cheers. Bye-bye.

Hans Tung: Cheers.

Thanks for listening to this episode. By the way, we also produce a weekly email newsletter in English which has a roundup of the week’s most important happenings in tech in China. Subscribers have told us it is informative and fun to read. The newsletter also features original content and analysis from Zara and me. Subscribe at https://nextbn.ggvc.com/engage/

Zara Zhang: GGV Capital is a multi-stage venture capital firm based in Silicon Valley, Shanghai and Beijing. We have been partnering with leading technology entrepreneurs for the past 18 years from seed to pre-IPO, with $3.8 billion in capital under management across eight funds. GGV invests in globally-minded entrepreneurs in consumer and new retail, social Internet, enterprise cloud and frontier tech. GGV has invested in over 290 companies with more than 45 companies valued at over $1 billion.

Portfolio companies including Airbnb, Alibaba, Ctrip, Didi, Domo, HashiCorp, Hellobike, Houzz, Keep, Slack, Square, Toutiao, Wish, Xiaohongshu, YY and others. Find out more at GGVC.com.

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Hans Tung: If you have any feedback on this podcast or would like to recommend a guest, please reach out at https://nextbn.ggvc.com/engage/