Q&A: Veteran VC Ron Cao on why he thinks China’s market is ‘just getting started’

Ron Cao, founder and managing director of Sky9 Capital. Previously at Lightspeed Venture Partners. Photo credit: Sky9 Capital.

There are few investors in China as experienced as Ron Cao. Founder and managing director of Sky9 Capital, Cao has headed three venture capital firms over nearly two decades of investing in tech companies in the US and China.

Specifically, Cao seems to have a knack for picking up on trends at the right time. The Wuxi native has led a number of investments in leading technology companies in China – from Tujia, dubbed the Airbnb of China, to food delivery and daily deals unicorn Dianping (now Meituan-Dianping). He’s vetted peer-to-peer lending companies, cloud service startups, and even an ecommerce platform for moms to sell to other moms.

I feel like China is just getting started.

Now, over a year into founding his VC firm Sky9 Capital, Cao is as bullish on China as ever.

“I feel like China is just getting started,” he says. Urbanization, high-end consumerism, increasing savviness around financial products – all of it is happening in real time, he emphasizes.

Like many tech elites in China, Cao has extensive overseas experience. He earned a Bachelor’s and Master’s degree in electrical engineering and computer science at MIT before working at Goldman Sachs and Intel. His investment experience would pull him back towards China, however, with cross-border investors like Lightspeed Venture Partners – he was the founding partner for the firm’s China arm in 2006 – straddling tech ecosystems in both Silicon Valley and China.

At Sky9 Capital, Cao is focusing exclusively on early-stage Chinese startups. When I asked him why he started Sky9, he said he felt the opportunity in China was so great, “I just had to start my own firm.”

We caught up with Cao in Shanghai to learn more about trends in China’s investment landscape, how early-stage investors evaluate startups, and other lessons he’s learned over 18 years of investing. Below is an edited transcript of our conversation.

As someone who has investment experience in both the US and China, have you noticed any differences between early-stage VCs in the two countries?

I don’t think so. I think the top funds around the world have the same formulation. It’s to be extremely people-focused and talent-focused. How you judge talent might be different, but overall early-stage investing is really about investing in talent.

As an investor, how do you get to know founders when you’re vetting them?

After you have been doing this for awhile, you can have a pretty good feel for a founder’s strengths and weaknesses – and with a high degree after two or three meetings.

Generally, we look for two things. One is their capability – the ability to create, manage, lead, and have a vision and strategy.