Tech Bubble Or Tech Revolution? Yes And Yes! Mobile, China Lead Way


Rebecca Fannin, Contributor

July 22, 2014

Are we on the verge of a tech  bubble or a tech revolution? Venture capitalists Geoff Yang of Redpoint, Hans Tung of GGV Capital and entrepreneur Eric Feng, the CTO of Flipboard, say yes and yes!

Sand Hill Road thrives on optimism so it’s no wonder that these three agreed the good times are far from over while fundamental shifts in innovation will keep coming. “If I were a betting man, I’d hold my assets a while longer, sell in 12 to 18 months, and then buy them back at a low point,” Tung said.

Innovation cycles have sped up and capital investment requirements have declined to the point that new products can be churned out in a couple of months with less than $5 million today. That compares with just a decade ago when 900 people and $100 million in investment were required for major launches, said Feng, referring to Microsoft where he worked in Beijing.

The stock market has its inevitable ups and downs, but it’s hard to argue with the remarkable gains technology is making, Yang observed. He pointed to the ongoing shift of offline to online businesses as an “extremely strong and powerful” force.  Just about the only sector not undergoing fundamental is smoke stack manufacturing, he added.

The booming mobile Internet market is driving a lot of innovation globally, Tung noted. Companies can take business models from large domestic markets and roll them out to other countries with mobile in a way that was not possible before.

The rise of China tech innovation is another driver in the market that was highlighted by Silicon Dragon Talk.  From the drive of its talented entrepreneurs to the swift progression from copycats to innovators, the three technologists agreed that China is a force to be reckoned with by the west.

Business models from social gaming sites to virtual currencies in China and elsewhere in Asia have already been copied in the west. The next stage for China innovation — Chinese inventions being copied in the West – was pinpointed as a leading trend and GGV portfolio companies Wish and Curse are good examples.  Expansion by Chinese brands into the U.S. is another force – smart phone maker Xiaomi and Tencent’s messaging app WeChat are both penetrating the U.S. market.

With its huge mobile communications and e-commerce market, the opportunity in China continues to be a lure for U.S. companies. CTO Feng said that China is now the fastest-growing market for Flipboard and already its second-largest market in the world. Flipboard has recently set up a R&D center in Beijing with 10 staffers and will be expanding. The strategy is not to do battle with the market leaders in China but instead find partners and a market position within the top tier. “In China, it’s ok to be 2, 3 or 4 and still have a meaningful business,” he said, “unlike the U.S. where it’s not Ok unless you are #1.”

He remarked on the huge talent pool of quality engineers in China, while Yang spoke about how China’s work ethic is a draw.

“There’s really a tireless capacity for work in China, a hunger, a dedicated mission to succeed,” summed up Yang whose venture firm has invested in some startups in China, including IDreamSky Technology, which recently filed for an IPO on NASDAQ.  ”It’s something that the large companies in the U.S. fear as they strive to stay lean and mean,” he added.  The consensus is that the only way to really understand the pace and scale of innovation today in China is to go there.

What about Alibaba’s prospects as the large Chinese e-commerce leader heads for an IPO expected right after the Labor Day holiday, September 1? The consensus is that Alibaba will do well and will spark more ‘mini-Alibabas’ in many sectors to emerge.

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