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Contents

More Praise for Startup Asia

“With the Pacific Century well underway, Startup Asia is required reading for anyone serious about the next wave of technology entrepreneurship. Rebecca Fannin elegantly weaves impressive facts, stunning anecdotes, and insightful visions of the future to paint a highly engaging portrait of this amazing region and its new class of leaders. She has written another gem!”

—David Lam, Managing Director, WestSummit Capital, and Board President, Asia America MultiTechnology Association

“Rebecca Fannin manages to take a still picture of a scenario that is almost too fast-moving to photograph. Dip into her book on entrepreneurial Asia, and adventure will grab you by the throat.”

—Peter Rupert Lighte, banker and sinologist

“Once again, the author of Silicon Dragon has written a book based on original research and firsthand insight. Startup Asia offers a unique overview of promising startups from Asia’s emerging entrepreneurs. Rebecca Fannin includes personal profiles of the individuals behind each venture, which makes the book an enjoyable read and gives it a girl-next-door perspective. Her detailed snapshot of Asian innovation amply demonstrates why the world’s most dynamic continent will continue its ascent in the global economy.”

—Dan Schwartz, Chairman Emeritus, AVCJ, and author of The Future of Finance

“Rebecca Fannin is quickly establishing herself as the ultimate expert on Asia and its countless budding entrepreneurs. Fannin profiles up-and-comers in China, India, and Vietnam; delves into the hottest market sectors; and details strategies for startup success. A must-read about Asia’s burgeoning startups.”

—William H. Draper III, General Partner, Draper Richards and Draper International, and author of The Startup Game

“While there are books galore about the innovation model in the West, rarely are books written on what’s happening about innovation in Asia. Rebecca offers a fascinating view of how innovation is developing in the world’s fastest-growing region. Startup Asia is highly recommended for business leaders, policy makers, students, and entrepreneurs alike.”

—Stanley Kwong, Managing Director/Professor, Greater China Programs, School of Management, University of San Francisco

“This is a critical time for making the right decisions in a very complex and at times baffling Asian market. Rebecca’s ability to get to the real players in the market and get them to talk about what they are really thinking and planning is fascinating. The stories and strategies are insightful and at times enlightening. Startup Asia should be on the reading list of everyone who wants to understand Asian thinking and investing. I believe this will be a classic in its time, too, like her previous book, Silicon Dragon.”

—Egidio Zarrella, Clients and Innovation Partner in Charge, KPMG China

“There have been many attempts to replicate Silicon Valley’s successes, and to date all other regions have failed to challenge the Valley’s dominant position. Startup Asia makes a compelling case that for the first time in venture capital history, a region has the potential to challenge the Valley’s dominance.”

—Kevin Fong, Special Advisor, GSR Ventures

“Rebecca Fannin’s newest book, Startup Asia, makes an important contribution to the discussion of China’s rise and deepens our understanding of how and why. Startup Asia helps us formulate our own views of what the world will look like in the coming years. So, get ready: The probability that your son or daughter, or possibly you yourself, will be spending time in Asia, perhaps learning Chinese, is higher than ever before. Asia’s rise, and China’s with it, cannot be ignored. This book helps us understand and evaluate what it all means for us in the twenty-first century.”

—Ken Wilcox, Chairman, Silicon Valley Bank

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To my family—John, Mom, Deborah, Tom, Kyle, and Kelly—for hanging in there with me throughout the journey

Foreword

There are amazing opportunities in the Chinese Internet space.

Powerful American companies such as AOL, MSN, eBay, Amazon, MySpace, Google, Yahoo!, YouTube, Facebook, and Twitter all had a hard time in China for various reasons, such as short-term profit focus, powerless local teams, and a lack of attention to tailoring products to the Chinese culture.

Their lack of traction has created an opportunity for Chinese companies in the Internet space to scale. The first wave of Chinese companies was largely content-oriented, such as Sina, Sohu, and Netease. The second wave of Chinese companies was mostly entertainment-oriented, such as Tencent, Shanda, Giant Interactive, and Perfect World. Of course, Baidu and Alibaba were two notable exceptions.

We believe that we are now witnessing an explosive third wave led by startups in the mobile Internet, e-commerce, social network, online gaming, and cloud computing.

This was why I left Google to found Innovation Works, an incubator and captive fund dedicated to opportunities in the Chinese Internet.

So I am pleased to see Rebecca Fannin’s new book about this same topic.

Rebecca has reported on my career for several years, since she first interviewed me at Google China in Beijing in 2006, to when I set up Innovation Works in 2009, and still today as we enter our second year. Her book Silicon Dragon played a role in documenting the changes in the tech scene in China. She has followed several startups from zero to IPO, and many of the characters she has profiled later become tech celebrities and well-known names.

Her new book, Startup Asia, builds on Silicon Dragon and takes the technology innovation theme to new frontiers. It shows the parallels with China in mobile, gaming, e-commerce, and the Internet, and puts China in the lead, followed by India.

She deserves credit for being one of the few Western journalists to cover China’s growing tech economy from a close-up perspective with regular firsthand interviews over the past decade. Now, she has taken the time to interview entrepreneurs and venture investors in Asia’s emerging markets and document their own path. Rebecca has not stood on the sidelines but has been an active participant in and chronicler of the tech scene in Silicon Valley and China. With her outreach, she is helping to build an East-to-West bridge in the tech community.

Her ambitious and comprehensive book Startup Asia shows us through case studies and narratives that entrepreneurs in Asia are beginning to set the pace and the standards for innovation.

Kai-Fu Lee

Chairman and CEO of Innovation Works, Beijing

Introduction

James Vuong first introduced the concept of VIC to me. We were eating Vietnamese pho beef noodle soup at an outdoor food court in Hanoi. When I wondered if it were another dish I hadn’t sampled yet, he gave me a little triumphant grin and explained that VIC stands for Vietnam, India, and China. It takes some getting used to, after the all hype about BRIC—Brazil, Russia, India, China—as the next economic frontier.

But Vuong, a young venture capitalist in Vietnam, may be on to something. The firm that Vuong works for in Vietnam, Pat McGovern’s Boston-based IDG Ventures, invests hundreds of millions of dollars in tech startups in Vietnam, India, and China and has made tons of money. China is the gold mine, India is the land of promise, and Vietnam is the frontier. IDG is a pioneer with this strategy. This odd-seeming group of nations belongs together because of a growing number of overlapping trends. Of all the dragon and tiger emerging economies in the East, the VIC countries best represent the entrepreneurial spirit and venture capital rush of Startup Asia.

Peacesoft founder Nguyen Hoa Binh with IDG investor James Vuong in Hanoi

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Multiple Silicon Valleys have sprung up in Beijing, Shanghai, and Bangalore, and even Hanoi and Ho Chi Minh City could get on the tech map soon. From John Doerr’s Kleiner Perkins to Jim Breyer’s Accel Partners, all the Sand Hill Road shops are parked in Asia’s boomtowns. Entrepreneurs and college graduates have landed in Asia’s tech hubs, too, and haven’t looked back. Alice Wang grew up in San Diego, California, and left Yale University during the spring semester of her junior year to move to Beijing and take a job as a sales director at Groupon China. She knew it was risky and challenging, but the lure of this tantalizing opportunity to join China’s tech race was irresistible. Wang spent her first few weeks working past midnight to meet incredible sales quotas and described it as chaotic but “very exhilarating.” This self-assured dynamo still found time to host a dinner for me in Beijing with a dozen 30-and-under members of a global entrepreneur network, Sandbox, she spearheads in China. There’s a good chance your daughter, too, and certainly hundreds of the followers and friends Wang has on Twitter and Facebook will land in Beijing and stay for a startup career. Who isn’t studying Mandarin today to get ahead? Even Facebook founder Mark Zuckerberg, who has a Chinese American girlfriend, is learning the language and checking out China as his next move.

The chance to become rich and famous with a startup is no longer just an American dream. It’s happening in Asia, in record numbers. Take a look at these compelling sums that highlight Asia’s progression and also point to a reverse brain drain of talent, energy, and resources flowing from the United States to China and India:

Asia’s innovation hotspots are fast emerging as first-choice destinations for bright young entrepreneurs. China and India have grabbed the brass ring and are attracting top talent, capital, and tomorrow’s leading startups. Meanwhile, Vietnam emerges with mobile gaming and search, Singapore helps to seed budding entrepreneurs with government handouts and skillful coaching, and Taiwan lures startups to move beyond their base in churning out more than semiconductors and electronic goods.

The supercharged emerging markets of Asia promise to deliver the next Facebook—a turning point that will spark a creativity surge like the social network did during this decade’s digital media boom. Startups create jobs and wealth, plus enthusiasm for future innovations.

Once, Sand Hill Road investors rarely scouted deals outside the San Francisco Bay area. Now, they can’t get enough of Asia. Silicon Valley leader Dick Kramlich of New Enterprise Associates left his Nob Hill home and art collection and moved with his wife to Shanghai for more than a year to be in the thick of this happening city. Venture heavy Gary Rieschel of Qiming Venture Partners left behind a career and his wine collection in the Valley and relocated to Shanghai, working from the 39th floor of JinMao Tower overlooking the Bund. Former Sequoia Capital India head Sumir Chadha—now back at WestBridge Capital Partners—moved from his comfortable suburban residence in Burlingame to a sea-facing condo in Mumbai. IDG’s McGovern has made 100 trips to China and is now exploring new terrain in Vietnam and India, while financing dozens of scrappy young entrepreneurial ventures.

Innovation Works founder Kai-Fu Lee in Silicon Valley

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“The opportunity is now. In a few years, it will be too late,” says Kai-Fu Lee, the former president of Google China. Now chairman and CEO of Beijing-based startup accelerator Innovation Works, Lee advises young Chinese entrepreneurs in Silicon Valley to “Go East.” With backing from YouTube founder Steve Chen, angel investor Ron Conway, and Facebook financier Yuri Milner, he’s already invested in 12 tech startups from a $180 million fund and is incubating 34 startup projects in mobile, gaming, e-commerce, and social networking.

Naturally, the United States, the font of venture capital, still is the kingpen with 70 percent of startup investments and 64 percent of deals globally. But, Asia venture capital investment had tripled from $5.4 billion in 2005 to $15.6 billion in 2010, while the United States had barely grown to $26.2 billion in 2010, from $25.2 billion five years ago. Granted, the United States towers as the world’s superpower innovator. But, the U.S. share of patent filings slipped to 28 percent in 2010 from 34 percent in 2005, while China leaped ahead to 7.6 percent of the world’s total.

A World Economic Forum report in 2010 ranked 138 countries on technology development and competitiveness and spotlighted the rise of the Asian tigers and dragons. Singapore placed second for two years in a row, Taiwan moved into sixth spot, Korea climbed to tenth, and Hong Kong trailed as twelfth. Both China and Vietnam have raced forward, with China leapfrogging to thirty-sixth and Vietnam advancing swiftly to seventy-third on the charts. India checked in as forty-eighth, lagging due to poor quality infrastructure and red tape, but earning points for a sophisticated financial market, well-developed tech clusters, and fast-growing mobile telephony. Meanwhile, the United States dropped to fifth place.

These trends underscore a shift in entrepreneurial and inventive muscle to Startup Asia. As the center of gravity for tech innovation moves across the Pacific Ocean to China and onward to the Indian Ocean, America’s long-term competitiveness and leadership are increasingly at stake. Consider just how much venture capital can fuel economic growth: Startups in the United States contributed 21 percent of the U.S. gross domestic product and 12 million jobs in 2009, as one example.

Powerful tides are shifting, and swiftly. Chinese and Indian immigrants are returning home because of improved economic opportunities and family ties. Young professionals and the best and brightest college graduates are packing their bags and settling into a comfortable lifestyle and community of like-minded dynamos in Asia’s top-tier cities. It’s not a roundtrip ticket either, but a several-years’ journey or a lifetime commitment. This mass exodus of Silicon Valley expats and Ivy League graduates is enriching Asia and laying a foundation for expansion and innovation in China, India, and Vietnam and other Asian upstarts. Think of some of the great companies created by Chinese and Indian immigrants to the Valley: Sun Microsystems, Hotmail, Yahoo!, and YouTube.

“Silicon Valley will not forfeit its leadership, but China and India will compete heavily,” says Ajit Nazre, a partner at top-tier venture firm Kleiner Perkins. “We will see hundreds of companies coming out from these markets with huge growth and lots of potential.”

As the finest grads from Yale, Harvard, Princeton, Stanford, MIT, and Berkeley and the elite of Sand Hill Road—who jumpstarted Cisco, Google, and Facebook—go to Asia, the startup game is increasingly playing out in the world’s fastest-growing region and its next superpower. PayPal alum Dave McClure organizes “Geeks on a Plane” tours for Silicon Valley techies to meet with star entrepreneurs in Asia, and not just for a joy ride but for inspiration and enlightenment.

This new dawn began in China early in the twenty-first century. I documented the rise in my first book, Silicon Dragon, which profiled several leaders of China’s emerging tech economy, among them Robin Li of Baidu and Jack Ma of Alibaba. Since then, several of those startup founders I wrote about have become high profile, namely, Joe Chen, who runs Renren, and Peggy YuYu, who leads Dangdang.

The tech innovation trends I described in Silicon Dragon are evolving. Sure, China still copies some of the best Internet sites. Have you heard there are more than 1,000 Groupon clones in China, not to mention two close replicas of LinkedIn? But microinnovations are coming. Sina’s microblog layered in photo and video sharing before Twitter did. Web sites are not just blankly copied but tweaked for the local culture. The ecosystem for the mobile Internet is building out more rapidly in Asia’s tech hotspots than in the United States because of high volume and no legacies.

And here’s the really interesting phenomenon: Just as China copied the U.S. success models Facebook, Google, and Amazon, India has copied China’s best, and so has Vietnam. In Ho Chi Minh City, social networking and gaming startup VNG wraps in both of China’s leading tech companies, Tencent and Shanda.

The digital communications boom is happening at an unprecedented pace. “There is nothing in India or China that can compare to the size or value of Facebook—and in the short time it was created,” says Bill Tai, a partner at Charles River Ventures. “There are only a handful of companies that are pioneers in their category, such as Tencent, which has Facebook-like characteristics.” But startup innovations are speeding up, he says, due to always-on Internet and mobile communications. “Far greater market values are being created in shorter periods than ever before thanks to data that is coming from cloud computing that is connected to data devices,” he explains.

Each market has different origins and progressed at its own pace. China’s base is in manufacturing, while India built up a service economy around outsourcing. China leaped ahead of India with startups that have excelled with big IPOs on Wall Street and hefty investment returns for Sand Hill Road. China, too, is moving to the next level by developing an indigenous venture capital community, local currency funds, and its own stock exchanges. China’s Silicon Dragon is becoming more distant from Silicon Valley and ultimately could pass the United States in transforming research and development into commercially viable enterprises. India, meanwhile, is charting a separate course and still is years away from closing the tech gap with its large neighbor to the north. But India’s startups have the chance of going global more readily than do China’s emerging businesses, owing to the commonality of the English language and Westernized concepts that filter in uncensored. One landmark alone—online travel site MakeMyTrip—could be a door opener for more Indian startups to get on the stage.

A good chunk of the content in Startup Asia belongs naturally to the two giants of the region—China and India. But looking to the future, this book paints a portrait of Vietnam and the country’s wired entrepreneurs, who most remind me of those I saw in the first generation of China’s technopreneurs. Singapore takes nearly a chapter because it is arguably the Asian tiger with the most advanced government-supported ecosystem for tech entrepreneurship. Taiwan and Hong Kong are getting dwarfed by Mainland China’s rapid ascent but are leveraging their strengths as high-end tech production centers and financial trading hubs.

I take you on a journey to the best practices of these nations’ entrepreneurs in the fastest-growing market sectors—mobile, cleantech, consumer commerce. Then, this book delves into top strategies for winning market leadership, from taking a startup from zero to IPO, to disrupting the standard, to going global. The entrepreneurs I profile in these following chapters have distinct paths and experiences but share an ability to, as Steve Jobs said, “think different.” All have the hallmarks of successful entrepreneurship: creativity, imagination, perseverance, and passion. Startup Asia is upbeat, and meant to be, just like the entrepreneurs I’ve met during this long journey of reporting and researching—a lively, successful group who just say no to naysayers.

Yes, several of the tiger and dragon economies lack the many benefits of democracy, a free press, a built-out infrastructure, a tech superhighway, a fair and just legal system, and top-rated educational systems—all the deep-rooted cultural foundations that have given the United States its universal stature and dominance. These pillars that have allowed U.S. tech stars like Mark Zuckerberg and Larry Page to shine are hard to duplicate through government dictate or budgetary spending. Perhaps this is one reason why no Chinese-born scientist has been awarded a Nobel Prize for research done in Mainland China, but several have won Nobels for work conducted in the West. It will take years before we will see a grassroots entrepreneur in China or India who could shake up the establishment as much as Steve Jobs has.

Several of the cast of characters you will read about in Startup Asia are people you’ve probably never heard of from distant locales in China, India, Vietnam, Singapore, and Taiwan. But I predict you will be hearing more about this select group of up-and-coming entrepreneurs I’ve identified as the next generation, loudly and clearly, and soon.

Notes

. Asian Venture Capital Journal.

. Dow Jones VentureSource.

. World Intellectual Property Organization ().

. Vivek Wadhwa, “Foreign-Born Entrepreneurs: An Underestimated American Resource,” Kauffman Thoughtbook 2009, Ewing Marion Kauffman Foundation, .

. AnnaLee Saxenian and Jumbi Edulbehram, “Immigrant Entrepreneurs in Silicon Valley,” Berkeley Planning Journal 12 (1998): 32–49, .

. Renaissance Capital, 2010 Global Market IPO Review and 2011 Outlook.

. Renaissance Capital, 2010 Global Market IPO Review and 2011 Outlook.

. MakeMyTrip scored a market valuation of $903 million on its opening day on NASDAQ, August 12, 2010, based on closing price first day.

. Source: Dow Jones VentureSource, 2010. M&As were far more common among U.S. companies than with China-based companies, however. A total of 15 mergers and acquisitions of China-based companies garnered $866 million, compared with 445 mergers and acquisitions of U.S. venture-backed companies that raised $33.9 billion, according to Dow Jones VentureSource.

. Sharon La Franiere, “After Brain Drain, China Is Luring Some Scientists Back Home,” New York Times, January 7, 2010, .

. IDC Asia/Pacific, 2010 figures.

. Dow Jones VentureSource, 2010 figures.

. Asian Venture Capital Journal.

. World Economic Forum and INSEAD, The Global Information Technology Report 2010–2011. Rankings are based on widespread use of mobile phones, Internet, and personal computers, as well as regulatory environment and IT infrastructure.

. 2009 study conducted by econometrics firm IHS Global Insight.

. National Science Foundation–supported study in 2008 conducted by the Georgia Institute of Technology.

. “Nobel Science Popularization,” Beijing Municipal Association for Science & Technology; Sharon La Franiere, “After Brain Drain, China Is Luring Some Scientists Back Home,” New York Times, January 7, 2010, .

PART I

Asia’s Hotspots of Innovation

This section is a close-up look at the key growth trends that shape emerging entrepreneurship in China and India plus the frontier market of Vietnam.

China, the world’s largest mobile and Internet market, is in the lead with an unmatched number of rising stars in search, gaming, mobile communications, e-commerce, and social networks. China also ranks tops for startups that have made it to the big time by going public on NASDAQ or the NYSE. Already, the Chinese market is going to the next stage and becoming more localized, as founders and venture investors take fewer cues from Silicon Valley.

India is closing the gap with gains among tech-centric startups from cleantech to mobile to the Web. Indian startups have the chance of going global more readily, too, though comparatively few have scored an initial public offering yet.

Vietnam has looked to China as the model for its own brand of tech entrepreneurship and scrappy startups.

Many of the same venture investors who funded young businesses in Silicon Valley moved into China, then India, and are now finding their way to Vietnam, Taiwan, Singapore, and other emerging markets. These investors are taking lessons learned in one country and applying it to the next.

Local entrepreneurs and returnees alike are becoming more sophisticated and savvy as they scale made-in-Asia startups. Throughout Asia, tech hubs are forming that are the rival of the original Silicon Valley.

Additional material related to Startup Asia and to its predecessor, Silicon Dragon, can be found at . The site contains news, events info, video interviews with entrepreneurs and venture capital investors, articles, research, and updates on speaking appearances.