Picking right investment target crucial

If a startup cannot quickly get financing, the road to success will be a hard one

In an extraordinary British documentary series, the latest edition being 56UP, a director has attempted to show how difficult it is for a person to escape their social class in the United Kingdom, highlighting how children from rich families tend to stay rich, while children from poor families often remain poor.

The filmmakers selected 14 children from various backgrounds and checked on their progress every seven years, starting at age 7 then subsequently at 14, 21, 28, 35, 42, 49 and 56. The last installment was in 2012.

The lives of these children appear to have confirmed the director's initial suspicion: Rich people rarely grow from poor families.

At Long Capital, we invest in entrepreneurs. Going on our own experience, and those of our market peers, we have come to prefer investing in entrepreneurs from wealthy backgrounds.

They have already seen a lot of money, and they may have already accumulated good business experience, so their business is more likely to have a high win rate. For first-time entrepreneurs, the probability of success is relatively much smaller.

We also like people with clear goals. In an era of tough competition, people need to be visionaries. Small business partnerships can often hit rocky water, so if there is no clear goal a little setback may change their entire business direction. An entrepreneur also needs to motivate himself or herself; they must be disciplined. If a person cannot control their weight it's hard for investors to believe he or she will control their company.

Plus, the modern business world has evolved. It is no longer "big fish eats small fish", it's now "fast fish eats slow fish", and if you cannot quickly gather a quality team, if you cannot quickly get financing, the road to success will be a hard one.

Many investors are now warning entrepreneurs that there could a large-scale drop in startups this year. Intense competition has resulted in higher requirements. Now an entrepreneur must have an ability to tell a story, not only through good publicity, rapid financing and brand image, but also through team support and cohesion.

A good friend of mine once asked Jack Ma, the founder of Alibaba, "Why are you so good at bragging, and why do you stand out from your many corporate counterparts?" In answer, he said it was because he bragged and did practical things, while others bragged but did not believe what they preached.

At Long Capital, we have a unique approach to choosing the right person to invest in.

We visit them at home, meet the family, and enjoy a family dinner, for example. Here we can observe a person's natural environment and gauge whether they have a sense of responsibility.

We invite entrepreneurs out for a drink, too. Alcohol can be a good thing; it loosens people up. I sometimes joke that, to get my money, we must get drunk. On other occasions, I've gotten entrepreneurs together to play board games, or get a foot massage. These are things that usually allow people to show their true selves.

I have my own investment logic. Ultimately, the history of science and technology indicates the direction of the business world. First, the evolution in science and technology is pushing the advent of mobile Internet. Second, humans have a basic desire for beautiful things. Third, humans chase freedom and opportunity; mankind would rather give up the comfort of a country life to live in the slums of New York, Paris and other cities.

And artificial intelligence. The trend is clear, intelligent elements will slowly merge with the material, and we will see the integration of the artificial brain.

Based on the above, we summed up our own investment strategy: Investment should be all based on mobile Internet products and services, the new commercial civilization.

We focus on four areas, O2O, the mobile transformation of catering, logistics, education and other sectors; mobile healthcare; financial service; and corporate mobile Internet services.

The author is a founding partner of Long Capital, an investment firm based in Shanghai.

(China Daily Africa Weekly 06/12/2015 page9)