Before Patrick Cheung founded ZWC Partners, he was a serial entrepreneur himself.

“I founded an internet company in 1999, during the first wave of internet growth. My second company was an outdoor media lab company, used a technology-enabled platform to provide a one-stop media service and nationwide media solution to corporate clients,” reminisces Cheung.

Indeed, his rich, hands-on experience in building companies from scratch has contributed to ZWC Partners’ success today.

With an AUM of over USD 1 billion and over 60 portfolios in China and South East Asia, it is a veritable giant in the capital markets and is especially interested in helping to bridge the connection between these two regions.

Connecting the dots between the regions

“ZWC Partners is very interested in encouraging cross-border opportunity and collaboration between China and Southeast Asia,” emphasized Cheung. “However, I know that SEA still has many local VC funds, so we need a differentiating strategy to create a competitive edge, so that good entrepreneurs are willing to work with us.”

To this end,  Cheung and his fellow partners’ entrepreneurship experiences can come in very handy. For instance, one of ZWC Capital’s founding LPs, Jason Jiang, was the founder of Focus Media, the largest offline digital network in China.

“Because of my entrepreneurial background, we do not want our fund investors to be pure investors, but also people with entrepreneurial experience to provide value below the surface. This is an important value-add we provide  – not just providing capital.  Today, capital is becoming less powerful,” muses Cheung.

“In terms of market liquidity, there is so much good capital in the market for good entrepreneurs and startups. The most important value add we can provide is helping them connect the dots between China and SEA in three aspects, namely, China’s experience and know-how, potential cross-border company co-operation, and human resource and talent exchange.”

In particular, Cheung emphasized the wealth of experience and the rich variety of business models that have emerged from China’s experience.

“Over the past 10 years, there have been lots of new business models emerging in the Chinese market. Some were copied from the US, but some are truly interesting models that evolved from the Chinese market, resulting in several very successful tech companies,” said Cheung.

In addition, talent exchange is crucial in order to bridge the gap between entrepreneurs and investors originating from SEA and China. To bridge the gap, ZWC Partners set up a program in 2019 to recruit the top 10 potential entrepreneurs from China and Southeast Asia.

“Crucially, we organize this program in Southeast Asia. We hope to help to bridge them, and coach both talents, in the hope that something will happen between these entrepreneurs. We are very open, however, and do not force them to do anything  – for our entrepreneurs, initiative is key.”

Localization is crucial to success

Drawing from China’s experience, however, is no simple matter.

“China has gone through several generations of the Internet. This serves as a good reference for other emerging markets,” said Cheung. “However, I always emphasize the entrepreneurs looking to create businesses in SEA should not blindly copy Chinese models. China is only a reference for SEA.”

“Many American companies made the same mistake when they tried to enter China. This was because they did not localize fast enough. Conversely, many local SEA entrepreneurs may be keen to learn from China – for example, to become Pinduoduo of SEA. However, the first step is to know why Pinduoduo succeeded in China. Many investors only look at the outward success of Pinduoduo and not why they succeeded even when Alibaba was so strong,” Cheung emphasized, drawing an example from Pinduoduo, another popular growth story among SEA entrepreneurs.

In addition, Cheung drew on his wealth of entrepreneurial and investment experience to offer his advice into the human element: the skill of sizing up and evaluating the potential of an entrepreneurial team.

Drawing further on his Pinduoduo example, Cheung explained that for instance, potential entrepreneurs need to know the character of the founders and the nature of the team of Pinduoduo, in order to truly localize their business plan and organizational structure.

“Why was Pinduoduo successful and what factors were considered? When you know this, you can adjust your execution plan and thesis to fit your infrastructure to fit local user behavior to make a similar business succeed in SEA,” advised Cheung.

Tech giants have valuable roles to play in nurturing the investment ecosystem

Tech giants, such as China’s Alibaba, Baidu, and Tencent, or America’s Amazon, Google, and Facebook, are household names worldwide. In SEA, big names such as Grab and Gojek are starting to show their hand as well.

To an extent, such huge players may be infamous or seen as inimical to the development of young startups due to their massive competitive power. Cheung however, offered a more nuanced perspective on these unique players.

” Some people may think that giants are not good, because they dominate the market. From China’s experience, however, giants can provide an ecosystem for entrepreneurs to a certain extent, provided that giants have an open system.

For example, over the past ten years, Tencent has supported many companies’ growth. Meituan was invested in by Meituan. Our portfolio company, Mobile was invested in by Meituan.”

To push in the point, Cheung summarized with a startling fact: “Tencent has helped to build three 100 billion-dollar company: Pinduoduo, JD, Meituan. This is a very interesting phenomenon and we hope to see the same in SEA.”

Aside from investments, tech giants can also make acquisitions and in turn, galvanize the entrepreneurial ecosystem. Cheung referred to how ZWC Partners’ portfolio company, XPeng, was founded by He Xiaopeng, after his company UCWeb was acquired by Alibaba.

“A similar ecosystem exists in Silicon Valley. Competition between giants enhances and educates users. For example, without WeChat, Pinduoduo would not be successful. WeChat built up an ecosystem and payment structure that helped social commerce succeed,” said Cheung thoughtfully.

To summarize his generally positive thoughts on tech giants, Cheung cheerfully left us with a piece of advice. “From an investor’s point of view, I encourage giants to become more open!”

COVID-19 is a time machine

Cheung mentioned that enterprise services were a key value driver now that the development of the Internet has reached a new phase.

“For example, we invested in Wix.AI, because we believe in the development of AI in the region – over the past four years in China, we have a very good experience in the AI and enterprise services sector. The first half of internet growth in China was the consumer internet. The second half is enterprise services, which enable different industries technologically,” said Cheung.

However, this trend has accelerated following Covid-19. “COVID-19 is a new normal. The interesting and good thing is that we think that COVID-19 is a time machine,” suggested Cheung.

“Objectively it is not a good event. However, everyone needs to work, buy, and receive an education online now. It feels like we are being transported 10 years into the future. This has made a lot of people get a glimpse of the future. Stakeholders, investors, and partners have all see the future, even if things go back to the way they were previously.”

For young startups and entrepreneurs looking to weather out this period of financial uncertainty, Cheung was also kind enough to dispense some advice.

“In the pandemic, cash flow is key. Raise more money if you can. Secondly, you need to hire the best people during this people, because you need to think about how to keep and recruit the best people from the market during this period. Importantly, you also need to think carefully about how you can produce the best product and services that you can.”

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