On the international economic stage, Shen Nanpeng performed the most magnificent movement - striding on "Ctrip", sweating to build "Home Inn", and cultivating "Sequoia" funds transplanted thousands of miles away on the land of China. In the arena of Nasdaq, he took the lead, passed the competition, and achieved a brilliant record. Ctrip and Homeinn where he joined have confirmed the glory and dreams of Chinese enterprises at an astonishing speed.
What makes Shen Nanpeng different from other entrepreneurs and venture capitalists is that he has the dual identity and experience of both an entrepreneur and an investor. He is both a model for entrepreneurs to learn from and a booster for them. After he founded Sequoia China Fund, he invested in more than 30 companies. In 2010 alone, he helped 9 Chinese companies successfully go public and achieved impressive results. He is known as China's "Investment Godfather".
Use your sense of smell to navigate between investors and entrepreneurs
Reporter: You have worked in the world's top investment banks such as Citibank and Lehman Brothers. How will this experience help your future career?
Shen Nanpeng: I still feel that I have benefited a lot from these eight years of investment banking life. I like to describe the work of investment banking as "squeezing cookies". Maybe it takes you 20 years to work in finance for a company before you can understand the company as a whole, but if you work in an investment bank, it may only take you three years to grasp and understand the lifeblood of a company. More importantly, investment banking is a "high-level" profession. People who work in investment banks usually come into contact with CEOs or chairman of the board of directors of listed companies, and their vision of a company or industry is more like a "leader's" and insightful. In this way, you can learn things faster, learn more, and learn better than others. In addition, my experience working in an investment bank was very valuable, and it taught me many methods. For example, entrepreneurs and investors have different views on whether a company can develop in the long term. Entrepreneurs can get more inspiration from investors.
Reporter: You are both an entrepreneur and an investor. Which identity do you prefer? At that time, you were doing well in an investment bank. Why did you suddenly give up this job and take the risk to start Ctrip.com?
Shen Nanpeng: As early as the end of 1998, I invested in an anti-hacker software company. The Internet was not very popular at that time, but the people I contacted in my investment banking job and many of my classmates in California continued to instill the idea of the Internet in me. Seeing that the Internet in the United States was developing so rapidly, I decided to invest in the Internet.
Later, Jian Zhang and Ji Qi and I had dinner together in Shanghai. We naturally talked about whether we could write some articles on the Internet. Everyone talked about Sina, NetEase, and Sohu, and thought about other industries that could be combined with the Internet to create sparks. Jianzhang first proposed the idea of transforming the traditional tourism industry. In this way, Ctrip was born.
As for risks, of course there are risks. You know, there is a huge opportunity cost. However, China's economy is developing at a rapid pace. No one wants to be just a bystander, but to participate as a leader. In fact, in addition to realizing my personal ideals, the most important thing at that time was that I felt that the risks of starting a business could be controlled. If I still want to go back to the United States and find a job in an investment bank, I can always go back.
The threshold for what Ctrip does is not high. From the beginning, many people wanted to copy this model. I remember when we started our business in 1999, there were five to six similar companies. After a cold winter of the Internet, we survived and found a reasonable one. The business model is Ctrip and one or two followers. Due to Ctrip's success, there are many companies that want to enter this market to get a share of the market. I personally feel that the competition is becoming more and more fierce, and Ctrip's position as a leader is getting stronger and stronger.
Play with "Nasdaq"
Reporter: At the end of 2003, Ctrip was listed in the United States. It was this ice-breaking journey that led many companies such as Baidu and Focus to successfully land on Nasdaq. It was also this venture that made you famous. As a successful person, can you provide some advice and advice to entrepreneurs?
Shen Nanpeng: I think starting a business is like doing math problems. You should start with the simplest ones. Take Ctrip as an example. Let me give you a simple example: First, start with hotel reservations. This is the "junior version" of Ctrip. Compared with booking tickets, booking a room is a simpler and more direct entry point. As long as the customer gets the reservation number online, they can check in with their luggage. Therefore, in the first year, Ctrip concentrated its efforts on opening up the hotel booking process. This simple job of helping people book rooms may be something that many returnees don’t bother to do. But don’t forget that you are in China and the people you want to serve are the Chinese people. Also, entrepreneurs must have the ability to change, keep trying, and constantly adjust their ideas. But in turn, investors must have greater certainty about the project and some in-depth judgments on the business model.
Reporter: Now you have resigned from your position as president of Ctrip.com. But in addition to Ctrip, the Home Inn hotel chain you founded was also listed on Nasdaq. How did you discover the business model of budget hotels at that time?
Shen Nanpeng: One year I went to the United States and passed through Dallas. It only took 30 minutes to drive from the suburbs to the city. There were about 30 low-star hotels passing by on both sides of the road. At the same time, we hope to use Ctrip's unique advantages to develop a new business. We have seen that foreign investment has come in to high-end hotels in China, and chain hotels account for a considerable amount of the market. But among low-end hotels, on the one hand, there are very few chain brands. In addition, the products and services of the previous chain guest houses and hotels are relatively poor.
From another perspective, a successful business model also needs to have certain barriers to entry, rather than your original business model being broken as soon as competitors intervene. So we chose Home Inn. The industry and management barriers that Home Inns is in are actually very high. Especially with the large-scale development of enterprises and the continuous copying of products across the country, the barriers to management will become higher and higher. The company operates in more than 50 cities. To open the same store in different areas of the same city requires the company to achieve a high degree of consistency in management through unified standards. No matter in any country, when such enterprises develop, there will only be a few brands left.
When it comes to budget hotels, I believe we are in the very early stages of an industry. We started as a budget hotel. In the future, we will do some multi-brand development, which is possible. We will create a hotel brand that is popular with consumers.
Reporter: Homeinns has chosen the chain operation model. There must be a contradiction between standardization and differentiation in terms of services. For example, in the southwest, the regions are different, and the things that local consumers like may be slightly different. At that time, can Homein's products be as popular as in Shanghai and Hangzhou? What do you think about this issue?
Shen Nanpeng: We pay more attention to the duplication of products. If the product can be copied and liked by local customers, we can open 200 to 300 Home Inns. We will first maintain product consistency. Of course, there are subtle differences in different regions, but room settings, broadband Internet access, bathtubs, etc. will not change. It is to adapt to the different needs of various regions and the psychology of different consumers while keeping the theme unchanged. Not all chain businesses have advantages. After Home Inn chain operation, it is essentially different from local hotels. For example, if there is a small hotel of the same size, a customer from Beijing may not have a chance to find that hotel because he has never heard of it, but Home Inn is different. Having stayed at Home Inns in Shanghai and Home Inns in Beijing, I would naturally choose Hangzhou Home Inns. In the hotel industry, the development of the chain industry across the country is indeed very positive.
Found a career that maximizes the value of life
Reporter: As an entrepreneur, you found a business model with core competitiveness and persisted in it, so you finally achieved success. This was the case for Ctrip and Homeinn. You successfully listed two companies in the United States in a short period of time. Is it right? Are you addicted to taking your company public?
Shen Nanpeng: (laughing) My personal interest lies in using the experience I accumulated during my tenure at Ctrip and other companies to help more Chinese companies grow quickly and healthily. This also prompted me to switch to venture capital. I feel that only as an investor can I best utilize my talents. So Zhang Fan and I jointly established the Sequoia Investment China Fund and started our venture capital career. After that, I felt that I had found a career that could maximize the value of my life - an investor.
Reporter: Whether you are the core of a startup team or an investment banker, you have extensive qualifications. In September 2005, you cooperated with Sequoia Capital to establish Sequoia China. What kind of cooperation model did you have with Sequoia Capital?
Shen Nanpeng: Sequoia’s investment style generally allows those who know the local situation best to make decisions. In India, Sequoia acquired a local venture capital fund with outstanding performance for many years, changed its name to Sequoia India, and then still made independent decisions with the same team. Similarly, for the newly established Sequoia China Fund, my partner and I are the real investment decision-makers, while Sequoia Capital’s global team only provides advice when appropriate. We have very close communication with investment teams from other countries, but experience cannot be summarized through individual cases, but depends on how a fund establishes its own investment style, how it conducts due diligence, and how it makes investment decisions.
We have invested in hotels, real estate, media, sporting goods, etc. From the perspective of American investment ideas, Sequoia China’s current investment distribution is unimaginable, but this is the significance of Sequoia China as a “local decision-maker”. For example, some industries are traditional industries in the United States and do not require investment, but they have just begun in China and will have a huge market in the future. Such cases, of course, need to be discovered by us.
In the past four years, we have benefited from cooperation with our American partners, whose more than 30 years of history have given us a lot of help. But Ruth walked step by step. We cannot complete in one year what others have walked in thirty years. Investment is also a kind of culture, which requires the accumulation of cultural heritage. We are exploring a mature, long-term investment path with Chinese cultural characteristics, and its emergence will take time. I believe that in four or five years, our investment will definitely be better. As Sequoia Capital adheres to the saying, "The next investment is the best investment." From a shorter perspective, I think the investment situation next year will be better than this year. This is not reflected in a certain project, but in our investment philosophy, investment experience and investment accumulation. Of course, the realization of this short-term goal requires the joint efforts of everyone and requires us to have more observations and deeper understanding of enterprises and entrepreneurs.
Reporter: In November 2010, it has been five years since the establishment of Sequoia China. Founding and Managing Partner, are you satisfied with your work in these five years?
Shen Nanpeng: Generally speaking, I am quite satisfied with the past five years. 2010 was the best year for Sequoia China, with 9 ipOs achieved within one year.
Reporter: As a professional investor, is IPO the only indicator of success?
Shen Nanpeng: I don’t think IPO is necessarily a sign of success. As a professional investor, rather than the number of IPOs, I care more about the returns we bring to LPs and whether the invested companies have become outstanding industry leaders.
How can entrepreneurs get venture capital?
Reporter: Sequoia China invests in many industries, so what kind of companies will attract the attention of Sequoia China? Many entrepreneurs want to know how to get venture capital?
Shen Nanpeng: Some people think that we have an investment selection formula. If there really is a perfect investment selection formula, then venture capital would be really boring. In other words, there is no formula, but in a general sense, there are some macroscopic judgment angles.
First, attention to entrepreneurs always comes first. The CEOs of early-stage companies often play a decisive role in the future development of the company. Secondly, there is the market. The vast market with potential will undoubtedly play a positive role in promoting companies in the industry as they move toward greatness. Again, it’s the business model. Let me give Home Inn Express Hotel as an example: Home Inn adds values such as cleanliness, comfort, and economy to the traditional hotel industry, and changes traditional hotel construction to chain leasing. Investors have reason to believe that new business models can lead Home Inns to success. A new business model is the innovation and negation of the original model. Every good project has a different competitiveness perspective, and there is no precedent that can be copied. Why do some companies only have a price-to-earnings ratio of a few times, while some business models can achieve a price-to-earnings ratio of more than 30 times, and are still pursued by people? Identifying the differences and potential of various business models is the essence of venture capital.
These three points are actually equally important, but if they must be divided equally, the influencing factors of entrepreneurs may be more obvious, because entrepreneurs may change the other two points. As a venture investor, everyone hopes to find another Robin Li, another Jiang Nanchun, and another CEO who may create great companies. However, the fact in most cases is that before a company truly becomes great, even the CEO himself has difficulty predicting the future of himself and the company.
Reporter: Even though there are three standards, in actual circumstances, it is still not easy to judge. Especially for individual entrepreneurs, it seems difficult to make an accurate judgment on a person.
Shen Nanpeng: Yes, in fact, although these three standards have been established, in actual operation, it is possible that one aspect is particularly outstanding and the other two aspects are ignored. For example, when you see a very special business model, you can’t help but want to invest. Even though I thought there might be problems with its CEO, I just thought that if it didn’t work out, I would replace it later, so I voted. As a result, errors may occur. A good investor can make rational judgments that are closest to reality amidst all kinds of messy information. In general, venture investors must be optimistic and passionate, otherwise how can you invest money in front of a person and just a piece of paper? But at the same time, you must be very cautious. The moment you decide to invest in each project, Everyone must be very, very satisfied with this project, and don’t invest if you have the slightest doubt.
Reporter: Homeinn’s business scale was not very large at the beginning, but it was able to knock on the door of Nasdaq. Are there any shortcuts for this?
Shen Nanpeng: I always tell entrepreneurs not to take listing too seriously. When a company reaches a certain scale after a certain period of time, listing will be a matter of course. If the success of a company must be measured in terms of listings, such thinking seems too narrow. Although going public will bring a new era for a company, for some companies in the early stages of growth, it is always necessary to give them more time.
In the process of helping companies go public, the most important role played by venture capital companies is to adjust them to operate as a public enterprise as soon as possible. There are actually many challenges that come with becoming a public enterprise. For example, there is a problem in the industry and you want to change your business model. If it is an ordinary enterprise, if you want to change it, you can change it. But as a public company, you have to consider how to explain it to investors in the event of changes, because when investors choose you, they are equivalent to choosing a relatively fixed business model.
Sequoia China focuses on four major industries
Reporter: Why do the venture capital projects you are responsible for span so many fields? Are there any unfamiliar ones? How to control them?
Shen Nanpeng: The fields we cover mainly include the Internet and wireless, consumer products and services, health industry and new energy fields. The three companies listed this year are in three of these four areas. We will not cover all industries, but only those industries in which we have expertise, considerable experience, and can do well.
Reporter: Do you feel that you are mature now in your career and life?
Shen Nanpeng: I am in my forties and have experienced two entrepreneurial ventures, so I am quite mature. For me, Sequoia is my third entrepreneurial venture. There are many things I am still learning. The fund is still young and needs a growth process.
Reporter: Do you feel old?
Shen Nanpeng: It seems that I still have a relatively young mentality. I prefer to see new things and new business models. I am still very happy to see the good ideas of young people to start a business. One day, if no early-stage company can pass my standards, then it may be too old.
Reporter: How did you form your judgment? How do you keep it accurate?
Shen Nanpeng: The reason why our job is very interesting is that we can continue to learn and have a deeper understanding of various industries. By learning from the practice of investment, we can do better year by year. Because the experience and lessons are getting richer and richer, as long as you are willing to reflect and constantly improve.
Reporter: What are Sequoia Capital’s main investment directions in 2011 and beyond?
Shen Nanpeng: We will mainly focus on four industries. The first is technology media, including the Internet, the second is consumer products and services, the third is the health industry, and new energy and clean technology. In fact, the ones we have paid most attention to in the past few years It is basically in these four industries. The few people just talked about it a lot, because the industry is still relatively short after all, only ten years, and many industries are groping. In the previous ten years, half of the main export issues in this industry were The time is almost closed, so in fact, the next ten years will definitely be better. This industry should indeed be a particularly good decade in terms of talent reserve and exit mechanism. In addition, I feel that the biggest challenge in the next ten years will be It’s competition. There are more and more participants. Many old faces from the previous ten years are still there. I have seen many partners become senior partners. In the past few years, many new recruits have joined. The entire investment talent team is expanding. There is a lot of money in China and overseas. Investing in China must be a very interesting thing. In this case, the competition in the industry will become more and more fierce. In fact, I think the biggest thinking is also mentioned by the previous two people. , how can a fund determine its own position and be differentiated in competition? Manufacturing or other industries talk about blue oceans and red oceans. Red oceans must not appear in this industry. I hope that participants in the industry can still find their own opportunities in differentiation. Status, you can make money.
Be the “entrepreneur behind the entrepreneur”
Reporter: Choosing an investment target seems to be similar to choosing a startup target. It seems that your investment and entrepreneurial experience before entering the venture capital industry naturally provides you with a lot of valuable experience.
Shen Nanpeng: Without those two previous experiences, I might not be where I am today. Not only do you understand the operation of the capital market, but you also know what problems you may encounter in starting a business. The combination of the two will be very helpful to the enterprise. But the investment banking work I did in the early days was actually completely different from venture capital. Investment banks only focus on the part of the company that goes public, but venture capital will give companies more and all-round help, which is even somewhat similar to the role of entrepreneurs. For example, many companies do not yet have a complete team in the early stage, and even their CEOs do not know what kind of CFO the company needs to recruit, so I will help them conduct recruitment interviews and recommend some candidates to them based on my experience. This is actually very helpful to enterprises. We are “entrepreneurs behind entrepreneurs.”
Reporter: Since you are the "entrepreneur behind the entrepreneur", what is considered a successful "entrepreneurship" in the investment industry?
Shen Nanpeng: The success or failure of an investment cannot be judged by a single project. What often happens is that a certain industry is particularly hot at a certain stage, and its heat will cover up many problems in it. A company may make money and successfully withdraw funds, but it will disappear after a few years and will not become a great company. If in 10 or 20 years, some or a certain proportion of Chinese private companies are invested by Sequoia and help them grow, I think it will be a sign of our success. We also believe that we will achieve this goal. The reason why Sequoia Capital has won everyone's respect is that it has invested in and discovered a number of outstanding companies with high growth and long-term development, including Google, Yahoo, Oracle, Cisco and Apple. The market value of the companies invested by Sequoia in the United States is now US$40 billion higher than when it was listed. The total market value of the listed companies it invests in exceeds 10% of the total value of the Nasdaq market.
Although we are not the founders of the company, it is very exciting to be able to enter the company at a very early stage, help the company grow together, and compete on the international stage. When investing in China, you should have the mentality of building a century-old store. It used to be that people had this kind of dream when starting a business, but now they still have this kind of dream when investing.
Reporter: What do you think of Chinese enterprises? How can entrepreneurs realize their dreams?
Shen Nanpeng: Chinese companies are learning from overseas successful models, but they are not limited to other people's business models. The innovative spirit of Chinese enterprises has always been indispensable. Although we are still exploring and learning from it, our management capabilities are constantly improving.
The greatest opportunity China can offer today is to make dreams come true. This is an age where dreams can come true. Of course, you will encounter setbacks and may encounter failures in the process of realizing your dreams. But if you have a good entrepreneurial idea, you may realize it through your own efforts. This was impossible 20 years ago, but today almost everyone in Chinese society has equal opportunities to participate. Our generation is actually a very lucky generation, and times often push people forward. Sometimes, a decision made subconsciously will be a good choice.
Reporter: You are a "rich man". As the person closest to wealth, what are your views and opinions on wealth?
Shen Nanpeng: I believe that even after you have wealth, your consumption habits will not change much; so the ultimate use of wealth is to become a tool to create new wealth.
[Introduction to Shen Nanpeng]
Born in January 1969, graduated from Shanghai Jiao Tong University and Yale University. He is currently the founder of Ctrip.com, founder and executive partner of Sequoia Capital China Fund, co-founder and co-chairman of Home Inns Hotel Group, and executive vice director of China Private Equity Association. President, member of the Hong Kong Youth Federation and member of the Global Young CEOs Association. He has been awarded "CCTV China Economic Person of the Year", Forbes magazine's "Best Venture Capitalist", and "Top Ten Figures in China's Private Economy". (Returnees to start a business to win the world Yu Shenghai)