‘Why I’m a bad investor’: China’s Elon Musk, Li Xiang

The following is an abridged translation from the personal blog of Chinese investor and entrepreneur Li Xiang, who was once described by media as China’s Elon Musk. Xiang is the founder of several car-related businesses, including CHJ Automotive and US-listed Autohome, currently valued at US$9.3 billion.

Looking back on the my last few years as an angel investor, it would be fair to describe my investment returns as extremely bad.

I think I have been a pretty good entrepreneur, in contrast. My company reached a leading position in its market and has produced strong economic returns for both our investors and our team.

But among our angel investments, there are only a handful of successes – and to be frank, those were pure luck. They had nothing to do with my own judgment or any help I gave to the teams. In fact, successful startups typically don’t require my help.

So why would a successful entrepreneur like me have such a poor record as an investor? After completely ceasing all investment, I spent some time thinking, and I believe I’ve answered this question.

Image credit: Tech in Asia

The reason that I’ve been a successful entrepreneur is that I’m good at making use of people effectively. I can find top-tier talents, and I can get 100 percent of my team’s maximum value because I truly trust and empower them. I’m also good at training average talent into top talent, which provides tremendous value. They’re by my side every day, and I don’t fear their mistakes. I trust them, support them, and help them mature.

But it hasn’t been like that with my investments. Since I’m not a professional investor, I don’t have time to find the absolute best entrepreneurs, so I’m using my entrepreneurial mentality to make investment decisions, thinking that average talents can be turned into top-tier performers. But these investees are not around me every day, and the ways I can help and influence them are limited. Thus it can sometimes take them years to get to understand something I can communicate to my team in a few sentences. The results have been predictably poor.

So the talents I invested in were not cultivated; all I did was choose the “materials.” I now understand the high success rates of angel investors like Huang Mingming, who scour the earth for top-tier entrepreneurial talent and thus give themselves a far greater chance to see a large return. He spends more time and energy pursuing his entrepreneurs than I spent pursuing my girlfriend.

As an entrepreneur doing angel investment, I have lost money, and I have also been unhappy. Looking at my pack of average entrepreneurs who lack even the most basic ability to focus on an important point, I have realized – painfully – that they are useless.

All in, I’ve been an exhausted mess every day. Now I see that ceasing my investments and investing in myself instead is a way of playing to my own strengths and avoiding my weaknesses. People come to see my new startup after a few months of work and think we’ve been in business for years.

Doing something that suits your strengths is more important than anything else.

Why I’m a good entrepreneur

I’m good at starting businesses, so I’ll share some of my experience with you. First, we need to understand a few major rules.

First, there are two choices when it comes to internet entrepreneurship: users or customers. WeChat’s users are users, buyers of value-added services are customers. Advertisers are customers, Baidu’s visitors are users, etc. You must choose between being user-first or customer-first, and there is no right or wrong answer in general. But there may be a right or wrong option for you and your business.