VC Panel: New Angels in China will Waste a Ton of Money … but that’s OK

The panel at Silicon Dragon Beijing on Wednesday night brought together five prominent venture capitalists to butt heads over several topics, the most interesting of which concerned the future of investment in China.

Most agreed with Singtel Innov8‘s William Bao Bean that the number of venture capitalists will fall while the number of angel investors will rise dramatically. “In the US you have about 18 to 20 billion [USD] invested by angels. In China, the figures are a little rough, but it’s about a billion,” says Bean. “Early stage investment is really small here. There are angels, but it’s mostly friends and family.”

500 Startups‘ Dave McClure says even though more angel investors and incubators are definitely in China’s future, “I think they’re all going to lose a fuckload of money.”

“Globally, people are worshiping entrepreneurship like it is the next coming of Jesus Christ,” says McClure. “This is fueling a lot of bad behavior. It’s fueling a lot of entrepreneurs who have no business being entrepreneurs deciding that this is a good thing to do. It’s fueling a lot of angel investors putting money into a market when they know absolutely nothing about investing or entrepreneurship.”

But Qiming Venture Partners‘ Hans Tung argues all that “dumb money” isn’t necessarily a bad thing. It still contributes to encouraging and training China’s up-and-coming entrepreneur class. Tung says someone in their 20s getting investment is rare. “If you’re a young, 25- or 26-year-old, then you don’t have many friends in this world to help you. So it’s a very different world than it is in the US.”

For the incoming angels looking for a place to put that cash, Tung defined a “special group” that drives a lot of internet activities: “people between the age of 25 and 40, mostly male, lots of money, bosses of SMEs or government officials,” he says. “If you wanna figure what is the next big trend in China, then look at and track what these people do on the internet.”

Bean adds the big firms — Baidu, Tencent, Alibaba, et cetera — are more likely to open up to startups, rather than try to crush them as they have in the past.

“Some of these big platforms are going to war with each other,” Bean says. “They’re trying to find some friends to help them fight each other.”