Known as the "godfather of Chinese venture capital," Hugo Shong has been a pivotal figure in the country's tech and media landscape for decades. As the founding chairman of IDG Capital, he was instrumental in investing in many of China's most successful companies, including Baidu, Tencent, and Ctrip. Through his extensive career, Shong has shared a wealth of knowledge on investing, entrepreneurship, and navigating the ever-evolving market.

On Investment Philosophy

  1. On the three things he focuses on in venture capital: For more than 20 years in the venture capital industry, Shong has said he only focuses on three things: the market, the product, and the management team.[1]
  2. The most fundamental aspect of investing: He emphasizes that the most crucial part of his focus is on understanding people.[1]
  3. The importance of trying things firsthand: "I have always believed that to invest in an industry, you must test the waters yourself, otherwise you can only linger in the shallows and never enjoy the ultimate challenge and joy of riding the waves of the sea."[1]
  4. The dual return of a great investor: "An outstanding investor, in addition to pursuing considerable financial returns, cannot give up on dreams and passion."[1]
  5. On taking calculated risks: "If you just want to make money, venture capital would rather invest in a film company than a single movie. The reason is simple, a one-shot deal is too risky. But I believe that for an industry and market with unlimited growth potential, you must dare to 'take risks'."[1]
  6. A key to IDG Capital's success: "I have always believed that the Chinese market is perhaps the most precious in history. It is not only a paradise for entrepreneurs, but also for investors. Because there are too many opportunities, and both domestic and foreign securities markets are very optimistic about Chinese companies."[1]
  7. On maintaining a VC DNA: "No matter if IDG Capital is doing growth funds, PE, M&A funds, or holding companies, the DNA in our blood is still VC. Why do I say that? The biggest feature of doing VC is not just sitting in the office calculating financial indicators, but also being close to the market, close to young people, and close to new technologies. This is our DNA."[2]
  8. The regretful nature of investing: "Investing itself is an industry of regret. Why? If you invest wrongly, you will say why did I invest back then; if you invest correctly, you will think why did I invest so little back then, or exited too early."[2]
  9. The necessity of a good mentality in investing: "Never live in regret and anxiety. For me, there is nothing to regret, just be happy every day. You must have a good mentality to do investment."[2]
  10. The importance of reverse thinking in a cold market: "When the market is cold, you must never lose your passion and confidence in the market, because this may be the best investment opportunity. When the market is cold, your heart must be hot; and when the market is hot, you must look at opportunities calmly. This is a dialectical truth."[3]
  11. Successful investments are often made in down markets: "I often joke that good investors should think in reverse. Just like our more successful cases, Baidu, Tencent, and Sohu, were all invested after the Asian financial crisis in 1997, because the market was cold and everyone was very cautious, so they looked at the technology very carefully, and the results were better."[3]
  12. Patience is key for a good investment company: "A good investment company must be able to withstand loneliness and have long-term holding plans. Only in this way can it be prepared for the emergence of future trends."[3]

On Entrepreneurs and Startups

  1. What to look for in a founding team: "When investing in a startup team, it is very important to see if the team is solid, pays attention to details, and has a religious-like fanaticism and passion for what they are doing."[2][4]
  2. The challenge of consumer-facing businesses: "A difficult point in doing consumer business is how to scale up quickly without being copied by competitors. Because the threshold for consumer goods is relatively low, it is not like a certain technology that is not easy to imitate. Everyone basically understands clothing, food, housing, and transportation. The question is whether it can be quickly scaled up and build its own moat."[2]
  3. Don't try to fool investors: "The success of a company lies in helping your customers succeed, but if you treat investors as your customers, sorry, we don't buy that. We don't invest in companies that rely on fooling investors to seek development."[2]
  4. The importance of attracting talent: "The ability to attract talented people in the early stages of a business is very important for the team leader."[4]
  5. The team's ability to learn is crucial: "The learning ability of the team itself is also very important. It is not enough for the founder to learn alone. The entire team must learn to continuously improve itself, because the service industry is really something that anyone can understand. It just depends on who can do it better, who is more solid and more detailed."[4]
  6. Passion is like a religion for entrepreneurs: "It is very important that the entrepreneurial team must have a religious-like fanaticism for what they are doing and have entrepreneurial passion."[4]
  7. On the "craftsman spirit": Shong admires companies, particularly in Europe, that have a long history and pay incredible attention to detail, which he attributes to a "craftsman spirit" and a "religious-like fanaticism."[4]
  1. The potential of the Guangdong-Hong Kong-Macao Greater Bay Area: "In the next ten years, the Guangdong-Hong Kong-Macao Greater Bay Area will become the focus of global attention."[5]
  2. Key investment areas: For IDG Capital, TMT (technology, media, and telecommunications) is a primary focus, along with artificial intelligence, new energy vehicles, and consumer upgrades like healthcare.[5]
  3. The future of investment is international: "I believe that going international is the future investment attitude."[5]
  4. The next "BAT" (Baidu, Alibaba, Tencent) will be international: "What will the next BAT look like? A very important point is internationalization."[5]
  5. On the sharing economy: "The emergence of the sharing economy is due to the development of the mobile Internet. This is a new format, but whether each format can achieve development must be tested in the market."[5]
  6. Sustainable business models are customer-centric: "The ultimately successful business model is one that customers like. Only when users feel that the products and services are useful can they support the company's development. It is not sustainable to just rely on investors to burn money."[5]
  7. The fast track is 5G technology: "From a macro perspective, I think the fast track is the popularization of 5G technology... this is a good opportunity and may produce a disruptive revolution."[2]

On Personal Growth and Career

  1. Learning from mentors: "I learned a lot from Pat McGovern,” he says. “He had a philosophy of ‘Let’s try it.’ I learned to identify opportunities, and he was willing to bet on me.”[6]
  2. Exceeding expectations: Early in his career at IDG, Shong recalls asking his boss, Pat McGovern, if he had met his expectations. McGovern replied, "Hugo, you have exceeded all of my expectations," and doubled his salary.[6]
  3. Seizing opportunities: Shong attributes much of his success to his ability to recognize opportunities and his willingness to seize them.[6]
  4. From journalist to venture capitalist: "Everything I knew about venture capital I learned from being a reporter and writing about it... I really didn’t know much, but I knew people who did."[6]
  5. The value of education: Recalling the end of the Cultural Revolution, Shong said, "My happiest memory was in college... I could take classes and learn new things every day. I always thought, isn’t that the most wonderful thing in the world."[6]
  6. Embracing change and lifelong learning: "When variables become a new normal, you are no longer anxious. Whatever problems arise, everyone will solve them... Every generation has its own opportunities. Always maintaining a good attitude and constantly learning will enable a company to have the genes for a long-lasting foundation."[3]
  7. The value of failure: "The most valuable thing is the lessons of his failure. The more experienced a person is, the more lessons he has learned from failure and the more losses he has suffered, the more he should share."[3]

On China's Development

  1. China's unique advantage: "China now has one thing that the whole world is jealous of, that is, it is very rich, there is a lot of money among the people, and the country also has a lot of money. How to use this money efficiently."[1]
  2. The opportunity in China's market size: Shong illustrates the opportunity in China by comparing the number of movie screens in the U.S. to China's population, highlighting the significant room for growth.[6]
  3. Applying American business models to China: A significant part of his success has been the application of American business models to the world's fastest-growing economy.[6]

On Work and Life

  1. The conflict between work and wisdom: Shong quotes Lin Yutang: "From a philosophical point of view, labor and wisdom seem to be fundamentally opposed. A wise man is never toiling, and a man who is too toiling is by no means wise. He who is good at enjoying the years is truly wise."[1]

Learnings from Hugo Shong's Career

  1. Pioneering Spirit: Shong is recognized as "the first person to introduce high-tech industry venture funds into China," demonstrating the value of being a first-mover.
  2. Building a Global Network: IDG Capital's success is built on a global perspective, investing in companies not just in China but also in the US, Europe, and other parts of Asia.[7]
  3. The Power of a Strong Track Record: With hundreds of successful exits through IPOs and M&A, IDG Capital's proven track record attracts entrepreneurs and investors.[8]
  4. From Media to Investment: Shong's background in journalism provided him with a unique perspective and network that he leveraged in the world of venture capital.[9]
  5. Adaptability: Starting with technology magazines, Shong expanded into venture capital, consumer magazines, and even entertainment, showing a remarkable ability to adapt to changing market opportunities.[6]
  6. Philanthropy and Giving Back: Shong has actively supported education and other causes, donating to his alma mater Hunan University and Boston University, among others.[10]
  7. Confidence and Boldness: Proposing to start a venture capital fund in China in the early 1990s, with limited direct experience, showcases his confidence and bold vision.[6]
  8. Strategic Partnerships: The initial joint venture with the Shanghai Municipal Commission of Science was a crucial step in establishing IDG's presence in China.
  9. Long-Term Vision: Shong's career demonstrates a consistent long-term vision for the potential of the Chinese market and the technology sector.
  10. Understanding Cultural Nuances: As a "returnee" who was educated abroad, Shong has effectively bridged the business cultures of the East and West.[6]
  11. Focus on Core Competencies: Despite diversifying into various sectors, Shong emphasizes that IDG Capital's core remains in venture capital and its ability to identify and support early-stage innovation.[2]
  12. Resilience in Crisis: During the 2008 financial crisis, Shong and his team successfully raised significant funds, demonstrating their ability to navigate economic downturns.[11]
  13. The Importance of a Founder's Story: Shong's own journey from a factory worker to a leading global investor is a powerful source of inspiration and learning in itself.[11]

Sources

  1. fuhaoku.net
  2. tripvivid.com
  3. sina.cn
  4. vcinchina.com
  5. southcn.com
  6. bu.edu
  7. weforum.org
  8. idgcapital.com
  9. cnfin.com
  10. wikipedia.org
  11. people.com.cn