In this episode of the China Paradigm podcast, Philip Beck provides invaluable advice for start-ups in China. Philip has over 11 years of experience investing in China-based start-ups and has seen his fair share of successes and failures. He is also the co-founder and CEO of data-powered competitive analysis companies in China.
Why does Philip Beck offer investment advice for start-ups in China?
As he addresses in the podcast, most angel investors do not invest simply for lucrative opportunities. There are always less risky investments like real estate. In Philip’s case, he invests since he knows how tricky it can be for entrepreneurs starting in their journeys. He wants to give valuable solid advice to founders.
However, when it comes to investing for Philip, the team is everything in a new company. Philip has a couple of personal boxes he needs ticking before he considers investing in a China-based start-up. They are mostly related to the team and the team member’s personalities. The team should consist of more than 1, and ideally less than 3 members. There is too much work for one person. Too many team members will overcome the inevitable bumps in the road. Another must-have is the inclusion of at least one Chinese team member. If the company succeeds in China eventually, there needs to be a Chinese face in the leadership. Another prerequisite is that team members’ talents and skills should complement and compensate for other members’ talents/ skills or lack thereof.
“People have shown trust in me throughout my working life, I want to repay that trust in kind by mentoring and investing in people who want to build their careers. One of the best bosses I ever had was Peter Irvine. He was my first boss and I worked under him for 14 years. He always showed trust in me and gave me incredible guidance. Peter is a very rich man and he could retire. But he is still committed to helping entrepreneurs become successful and helping people realize their true potential in life.”Philip Beck, Chairman & Co-Founder of Moojing Market Intelligence
How have his angel investments fared in China?
The answer is – pretty darn well! Philip has invested in over 25 start-ups, and his annual ROI is about 24%. The global average success rate for start-ups is about 1%. Out of Philips 25 investments, only 18 could be classified as failures i.e. They are no longer in business. Two of his investments have done spectacularly well. Both of those have more than made up for all the losses he has suffered along the way. To protect himself from too many speculative long-shot investments, Philip keeps close ties with other angel investors in China. If he likes a business idea but is not an expert in that industry, he will pass the opportunity to an angel who would be more familiar with it. Those angels do likewise.
About 75% of his investments are made as part of a group of other angel investors or investments referred to him by other angels in China. The remaining 25% will be situations where he is the first investor, and some will come through accelerator programs in which he is involved. Also, when Philip invests, he feels the best policy is often to commit long-term to the project. An average time of entry to exit for Philip is about 7 years. Throughout the 7 years, Philip will provide investment advice for start-ups in China to the best of his ability. For those areas where he finds himself out of his depth, he will use his network to find somebody who can help the start-up.
“Roughly 10 out of every 100 investments an angel investor in China or anywhere else makes will survive. 50% will fail within 12 months, the other 40% will fail within 3-5 years, the reaming 10 or so will survive and probably one out of the 100 will pay you back about 30 times your initial investment.
I’ve made roughly two of those 30x investments. One company I invested in at angel stage made more money than everything I had ever previously invested. It covered all my failures and I still hold equity. The second one is about to exit too so that one has done very well too.”Philip Beck, Chairman & Co-Founder of Moojing Market Intelligence
More than providing advice for start-ups in China
Philip also runs a successful data scraping company that provides brands with detailed reports on their competitors in the Chinese e-commerce market. Moojing, a company he founded in 2015, informs brands from any industry about the competition on China’s numerous e-commerce platforms. This company sells its services on a SaaS basis and provides monthly reports on competitors’ sales, SKUs, customer feedback on e-commerce platforms. As well as providing advice for start-ups in China, Philip also mentors young Chinese businessmen and women who work in leadership roles in different industries in China.
“We crawl or scrape the data available on Chinese platforms like Kaola, Suning, Taobao, Tmall, JD, VIPshop, etc. It gives brands an idea of what their competitors are selling, how many sales they are making, their competitors’ price points, what regions their competitors are stronger in, what the consumers are saying about their competitors’ products in the comments section. We scrape the data for 99% of the products available on platforms, which is about 100 million products every month. We give our clients an excellent idea of what the market is doing and demanding.”Philip Beck, Chairman & Co-Founder of Moojing Market Intelligence