Author: Zinc calibration reporter Huang Xu special correspondent Wang Dongdong, Editor: Xu Wei, head picture from Visual China, November 2009, Li Kaifu in the Innovation Workshop Office.
There were no celebrations, no press conferences, only very low-key personal microblogs and a few messages from the circle of friends.
“Ten years ago today, the Innovation Workshop was founded… I have never forgotten my first intention: to help young entrepreneurs sincerely, to persist in being a technology-based investor, and to make Chinese innovation respected by the world.”
On September 7, Kaifu Lee sent three successive messages in the circle of Weixin friends: “Thank you for the past ten years”. Ten years ago, on September 4, he announced the end of his four-year experience in Google with a “goodbye, Google” micro-blog. Three days later, a high-profile announcement was made about the creation of an innovative workshop, which was transformed from the former president of Google Greater China into an entrepreneur.
In the past ten years, Innovation Workshop has become a well-known investment institution in China. According to IT orange data, it has participated in 437 investment incidents so far. It manages four US dollar funds and three RMB funds with a total size of about 15 billion RMB. There are 22 cases of exit through mergers and acquisitions, including 5 cases of exit from listing and 17 cases of exit from mergers and acquisitions.
As a professional manager, young mentor, Weibo University V, investor with the most exposure and halo in the past decade, is Kaifu Lee really satisfied with the report card of Innovation Works in the past ten years?
Starting in March this year, Zinc Calibration contacted Li Kaifu through Wechat, trying to talk about the changes of innovation workshops in the past ten years, but failed. In August, an insider close to the Innovation Workshop, Kaifu Lee, said to the zinc scale: “They taboo the tenth anniversary slightly.”
The reason is simple: “It’s not really good.” These people said.
1. “Helping Chinese Youth Start a Business Successfully”
Over the past few years, there have been many people outside who know about innovation workshops and very few who know exactly what they do.
Initially, people thought it was an incubator, then they thought it was an “incubator + investment” organization. Until 2018, Li Kaifu personally convened the media to explain: Innovation Workshop is a VC + AI organization, but also a technology-based investment institution.
Now, whether Li Kaifu or the top executives of the Innovation Workshop, they never mention that they are related to “incubation” – but in fact, building a business incubation environment different from the traditional PE/VC is Li Kaifu’s first intention to establish the Innovation Workshop.
“We don’t make direct investment.” On September 26, 2009, in a conference room of a five-star hotel in Chongqing, a reporter and Li Kaifu had a 90-minute interview and exchanges, he said when he talked about the future orientation of Innovation Works.
At that time, the Innovation Workshop had just been established for less than 20 days. The headlines of major websites and newspapers were still Kaifu Lee and his newly established Innovation Workshop. Li Kaifu and co-founder Wang Zhaohui have been traveling frequently to sign and sell books for his newly published autobiography “The World Is Different for You”. It may be a coincidence that the date of publication of the autobiography is the same as the date of the founding of Innovation Workshop, which is September 7, 2009.
In this exchange arranged by Wang Zhaohui, Li Kaifu talked about his past and entanglement with transnational giants such as Google China, Microsoft, Apple, SGI, and his expectations for the future of innovation workshops: “Innovation workshops are a new kind of angel investment and integration of innovative products, like a Huangpu Military Academy, to help Chinese youth succeed.” Start a business.”
It was an exciting job for him. After all, in addition to the title of president of Google Greater China, he was publicized as an 11-year-old international student, Barack Obama’s College classmate, 33-year-old Vice President of Apple and so on, as well as the “young mentor” in the hearts of countless College students. At that time, he had made at least 300 university speeches. Half a million students answered questions and wrote seven open letters to Chinese College students. Wang Zhaohui, who originally worked in a university magazine, was also related to Li Kaifu.
At that time, Y Combinator, a well-known Silicon Valley incubator, had just gained a reputation in Silicon Valley. The term entrepreneurship incubator was not yet well known. YC was the entrepreneurship accelerator that Luqi, who left Baidu 10 years later, joined. Li Kaifu’s goal at that time was also to create “Y Combinator for China”.
To this end, he personally told reporters: “Absolutely do not make direct investment, which is the biggest difference between us and venture capital. We don’t accept investment projects, we just accept their ideas to invest in us.”
At the same time, he promised that the Innovation Workshop would provide a package of services for the enterprises to be trained, such as capital, commerce, technology, market, manpower, law and training, to help entrepreneurs create a batch of products with the most market value.
Startup incubator has become the definition of innovation workshop. Until three years later, when the Shanghai office was completed, the entrance still said, “It’s not just projects that are incubated here.”
At that time, the most influential Chinese Internet, and even a certain degree of influence far beyond Ma Yun, Robin Li, Ma Huateng’s personal brand – Li Kaifu’s Innovation workshop, not only from the very beginning, Liu Chuanzhi, Terry Gou, Yu Minhong, Xu Xiaoping and other 800 million yuan of start-up funds, it is no exaggeration to open this. After many years of domestic business incubation boom.
In Kaifu Lee’s personal appeal and the mode he has defined, the Innovation Workshop has established several incubators to guide small teams to implement projects, and has further grown into an independent company.
At the same time, within the Innovation Workshop, a professional team helps entrepreneurs deal with financial, legal, personnel, public relations and other daily affairs. Of course, and most importantly, these entrepreneurial teams will be guided by Li Kaifu, Wang Hua, former director of Google China strategic development, Tao Ning (former Google China Operations Director) and Cai Xueyong (Alipay former architect).
“It was so simple at that time that Wang Hua’s idea of Kaifu was embodied in his products. Innovation Workshops first recruited technicians, and the first product was to implement the ideas of their founders. Tao Ning, the current CEO of Innovation Workshop, once told the media.
From its inception to 2011, the early entrepreneurship projects of Innovation Works include pea pods, snacks, application sinks, alliances and Magic Pictures, which are incubated projects within Innovation Works and then grow up independently.
Here, the most famous project of the year was the pea pod, which was sold to Alibaba for less than $200 million in 2016. The most forward-looking is the Alliance. As the second venture project launched by Innovation Works in August 2010, Jiang Fan, the founder of Alibaba, joined Alibaba after the purchase of Ali in 2013 for $80 million. Now Jiang Fan is president of Taobao and President of Tianmao, and a member of Alibaba’s “Five New Executive Committee”.
2. Betrayal investments
Pictures from Kaifu Lee’s circle of friends
Therefore, strictly speaking, the Innovation workshop at that time was an entrepreneur who started his own business and then pulled a group of people to start their own business.
At that time, the most questionable question from the outside world was probably: Kaifu Li was not a successful entrepreneur, and his partner team lacked practical experience. Why did he teach others how to start a business? What’s more, innovative workshops still account for about 17% of the equity. For mature and excellent entrepreneurs outside, why should they accept the conditions of innovative workshops?
Objectively speaking, although innovation workshops could help entrepreneurs in starting funds, talents, product suggestions, and public relations dissemination, the only IP available in the whole innovation workshops was Kaifu Lee.
Big man influence is the best endorsement, let alone diligent big man. People familiar with Li Kaifu say that he works almost anywhere at any time, using fame and connections to bridge investment projects.
At the same time, he also strives to manage micro-blogging and make himself a spiritual leader of micro-blogging, so that huge micro-blogging fans will also add a lot to the investment projects of innovative workshops.
“VC only has the industry brand, but Kaifu Li has a more public brand, which is greatly conducive to product promotion.” A CEO of an Innovation workshop company once said that Li Kaifu was regarded by his incubated team as “K in the poker card” and “No. 1 person beyond doubt”.
External criticism and doubts have never ceased since their establishment.
Among them, the Innovation Workshop has no exciting star projects, and has become the biggest criticism from the outside world – “Pea Pod” is only a “copy” of the 91 mobile assistant; “snack” is only an enhanced version of Android system. The investment knowledge and point-to-point network also copy the corresponding foreign models Quora and Tumblr respectively.
Li Kaifu, a well-known entrepreneur, is even more difficult to solve the biggest problem that troubles entrepreneurs: the profit model.
At the beginning, many entrepreneurs who were attracted by Li Kaifu’s personal brand and settled in innovation workshops complained after leaving that the brand effect of innovation workshops was greater than incubation effect. After one year, the team still did not find a clear profit model. What’s the use of brand endorsement alone?
There are also innovative workshops that are short of money. Due to the continuous expansion of the team, by July 2013, the total number of workers in the Innovation Workshop had exceeded 3000, the annual operation and maintenance cost was hundreds of millions of yuan, and the annual investment was also hundreds of millions of yuan. Wang Zhaohui said that Li Kaifu often thought about how to raise such a team with limited money.
Facts have proved that in 2015, when all kinds of incubators were like a spark of fire, there was still no effective solution for entrepreneurs – this led to the death of countless entrepreneurs, but also led to the closure of countless empty incubators.
There is no way to guess, if Kaifu Lee has always adhered to his original intention, then today’s Innovation workshop is what the status quo.
The only thing to be sure is that Li Kaifu knew this field earlier and more clearly than those who went forward and entered it later: “Incubator” model is problematic.
“Not to mention sustainable development, every year development is very difficult, incubators need to exit time, if there is no follow-up infusion of funds will be unable to maintain.” And this model can’t attract the best entrepreneurs, Li said. “Entrepreneurs don’t want mentors to tell them what they need. They want to be able to decide their company’s future.”
More importantly, innovation workshops have missed many investment opportunities. In 2012, Innovation Workshop invested only 19 projects, while True Fund and IDG Capital invested 32 and 26 projects respectively. In addition to the absence of star projects, innovation workshops were also absent in many areas of investment institutions such as local life, e-commerce and so on.
He began to “betray” and “do not invest directly”, and adjusted the business model to set up a venture capital (VC) fund of $500 million in scale. From the former pure “incubation” to “incubation + investment” business model.
It is worth mentioning that after adjustment, most of the funds are used for later-stage investments with shorter return cycles and higher success rates. Previously, he chose to be a highly risky Angel wheel fund and investment, coupled with incubators, which made it more difficult.
The adjusted business model means that innovative workshops can bring greater value to LPs (Limited Partners) and provide more stable sources of capital for entrepreneurs.
After all, even old friends need to be rewarded, as can be seen from the list of fund LPs raised by Innovation Works – China Economic Cooperation Group, Lenovo Holdings, Foxconn, New Oriental, Sequoia, IDG, Liande Development Section, a large part of which are friends of Kaifu Lee.
3. Turn to a pure VC investment company
Wang Hua, one of the key figures in reversing the fate of innovative workshops
The hand of fate is unpredictable. From September 2013 to February 2015, Kaifu Lee left the Innovation Workshop for 17 months because of lymphoma.
This 17 months is precisely the period when the mobile Internet has exploded and many new business models and business trends have emerged.
For example, Lenovo acquired Motorola Mobile to compete with Xiaomi for the top player in the domestic mobile phone market; Ali acquired Golden Maps, UC, Youku Potatoes and went to the U.S. market to launch billionaires overnight; Tencent’s “Wechat Red Pack” became a popular mobile social network, and Baidu acquired shares in Beijing East Mall and public commentary; Glutinous rice, let the competition of takeaway platform further upgrade.
This is also a time when a large number of business incubation platforms similar to innovative workshops have emerged. According to the statistics of Qingke, the domestic VC investment scale reached a new high in 2014. In 2014, the angel investment scale of China was 3.235 billion yuan, an increase of 94.96% over the same period of last year.
Within the Innovation Workshop, significant changes have also taken place – in April 2014, two partners, Lai Xiaoling and Qiu Hao, left their jobs to start their own businesses, and Tao Ning left temporarily in September 2014 for some reasons.
But when Lee returned, he was surprised to find that in the 17 months since he left, they had invested nearly 80 projects (according to IT orange data) in the year of 2014 alone, and the $100 million of the two-phase fund had been fully put into operation. But more importantly, the investment of Innovation Works has never been involved in Round C before and after, but in the past 17 months, Round B investment has increased significantly, and involved in Round C and Round D.
Wang Hua, the managing partner, who is mainly responsible for innovative workshop investment business, is a representative figure of Kaifu Lee from behind the scenes to in front of the stage after his illness. According to media reports, Stanford graduated with a well-known investment vision, he spent almost all his energy on industry development and product research, no hair, no initiative to sleep, do not like to contact people.
In February 2015, after Li Kaifu officially returned, the Innovation Workshop began to upgrade from incubator 2.0 to 3.0 mode. The Brotherhood within the company promoted by Tao Ning and Wang Zhaohui, as well as the Qunying Association founded jointly with Xu Xiaoping and Cai Wensheng, were established successively.
In February 2016, Innovation Works listed the new third board after several equity changes, becoming one of the few VC/PE listed on the new third board.
However, as the founder and chairman of the board, Kaifu Lee does not own shares in the Innovation Works – because Kaifu Lee has a foreign nationality status, does not meet the new third board conditions. His earnings at the Innovation Workshop mainly come from the Director’s Compensation Payment Agreement.
In April 2016, Wang Zhaohui left his post to set up a new fund, Ruchuan Investment Fund. With several e-mails, Li Kaifu became a key figure of countless young mentors for college students. After nine years of journalism-related work in China University Student magazine and becoming one of the four founding members of Innovation Workshop, he helped the Innovation Workshop invest in Miwei Media. It is said that the Innovation Workshop invested tens of millions of Miwei Media. The yuan has increased 6.5 times in a few months.
From 2009 to 2014, the Innovation Workshop moved three times, from Tsinghua Science Park to the third largest building, and finally to the 7000 square meters of Dinghao Building. Since then, although the Innovation Workshop has not moved any more, it has nothing to do with the word “incubation”.
Following Wang Hua’s emphasis on de-incubation in November and December 2017, in April 2018, he raised over $500 million from the Fourth Phase of the Innovation Workshop Dollar Fund. Li Kaifu stressed to the media that Innovation Workshop is a VC+AI institution and a technology-based investment institution.
Innovation Workshop has changed from YC to Benchmark, an American venture capital company. Half of Benchmark’s partners have a science and engineering background and have successfully captured companies such as Uber and Snapchat.
“The Innovation Workshop team also has 15 PhD’s, hoping that the future Innovation Workshop will become a Chinese-style Benchmark.” Li Kaifu said.
4. Decade of investment returns and the halo of “disappearance”
Nowadays, the investment track of innovative workshops has become focused and clear, mainly in five areas: artificial intelligence and big data, consumption upgrading, enterprise services, education and cultural entertainment.
Among them, AI is an important direction of Li Kaifu’s “preaching” on various occasions in recent years. In September 2016, the Innovation Workshop established the Institute of Artificial Intelligence Engineering, and Li Kaifu was the president. In June 2019, the headquarters of Innovation Workshop in Dawan District of Guangdong, Hong Kong and Macao was unveiled, and a team of Dawan Research Institute of Artificial Intelligence was established.
According to the data of IT Orange as of September 2, 2019, Innovation Workshop has participated in 437 investment events so far. Among them, Wang Hua led the most active in 2014, participating in 93 investment events, accounting for 21% of the total investment events. Since then, the investment frequency has declined every year. Up to August 30, 2019, Innovation Works participated in 11 investments in 2019.
Among them, investment is mainly concentrated in angel and A rounds, of which 188 are angel rounds, accounting for about 42%, and 172 are A rounds, accounting for 38% of the total investment events. The investment in the middle and later period (round B and beyond) mainly comes from the year after 2014.
Up to now, the total number of investment events in entertainment and games is 123, accounting for about 27%. However, these investments are concentrated in the key areas of education, e-commerce, local life, finance, and AI which Kaifu Lee attaches most importance to before and after 2014.
In addition, up to now, there are 22 cases in which innovation workshops withdraw through M&A or listing, of which 5 cases are listed and 17 cases are merged and withdrawn.
However, these dull data are still difficult to prove that the results of the past 10 years are satisfactory, or that the returns as an investor are satisfactory. Among the investment lists published on the current official website of Innovation Works, only Metuxiu, easy-to-use cars, ignorance of technology, Mobai, Zhihu, droplet mutual assistance, pea pods, VIPKI are included. D, BitContinent and Dragonfly FM are well-known enterprises.
Innovation Works did not disclose the specific return on the above investment or exit. However, the industry generally believes that Metuxiu, Moby’s bicycle and ignorance of technology should bring rich returns to innovation. Metuxiu was listed in Hong Kong in 2016 with a market value of HK$37.1 billion. Innovation Works once participated in its A-round and B-round investments and invested 7.23 million yuan. On June 19, 2017, in the midst of a sharp fall in the share price of Metro, Innovation Works sold 666 million shares of Metro, with an average price of HK$8.5 per share, and cashed in HK$561 million.
In April 2018, the American Regiment acquired Mobay Bicycles for $2.7 billion. The acquisition also brought substantial returns to early shareholders of Mobay Bicycles. However, due to the large number of participants of more than 30 Mobai shareholders, they are divided into two camps: the early investors represented by Pleasure Capital and Innovation Workshop, and the middle and late investors represented by Tencent and Sequoia Capital. All parties have different interests and great complexity. They have participated in the innovative workshops of Mobai B, B + and C rounds, and have not yet published the return figures.
The other is currently running the first wave of neglect technology in AI in China. In July 2013, Innovation Workshop participated in millions of dollars of A-round financing, while in January 2015, Innovation Workshop and Qiming Venture Capital participated in 47 million dollars of B-round financing. But in May this year, when $750 million of D-round financing was neglected and valued at $4 billion, Lenovo Venture Capital, Innovation Works and other redemption preferred shares withdrew from the shareholders’ranks and Kaifu Lee withdrew from the directors’ ranks. This series of actions triggered speculation inside and outside the industry.
It is worth mentioning that in 2018, the operating income of innovative workshops increased 74.91% to 169 million yuan, while the net profit of shareholders belonging to listed companies fell 97.18% to 924 million yuan.
Whatever the point of view, Li Kaifu has completely turned into an investor and a businessman in the past ten years. In the past, many halos on Kaifu Lee’s head – Apple’s 33-year-old vice president, Microsoft’s global vice president, the founder of Google China, young mentors of countless Chinese students, and micro blog V of tens of millions of fans – are disappearing with the passage of time.
Of course, in this era, to some extent, there is no need for young mentors, or even micro blog big V. Once, Kaifu Lee wrote a Book “Weibo changes everything”, but now, Kaifu Lee’s circle of friends and the latest Weibo, part of the content is to publicize the publication of various versions of “AI Future”; part of the content is his views on the AI era; and part of the content is to sun Yangzhou Red Mansion Banquet, Japanese cuisine, and now roast. American deep-sea fishing.
Maybe this change came in late August 2013, three days after the Internet pushers Qin Huohuo and Li Er Jie Si were caught for rumors, News Broadcasting reported that the transmission of Big V “intensified the spread of rumors, and the side effects of rumors were magnified several times”, while a symbolic smile appeared on the screen, Li Kaifu Weibo, the owner of Weibo. A screenshot of the page.