Jason Kincaid currently works as a writer at TechCrunch.
He grew up in Danville, California and later relocated to UCLA in Los Angeles, California, where he studied biology with a minor in ‘Society and Genetics’.
You can reach him at jkincaidtc@gmail.com (he has other addresses too, so don’t worry if you have a different one). → Learn More
Just let me get my translation on. I am just going to have to learn Chinese by the next time we do one of these. For people who don't know, you are a serial entrepreneur in China. Your first company, Kingsoft, was sort of a Microsoft company that Microsoft came in and quickly followed you on in the market, went public on the Hong Kong stock exchange in 2007. It's about a six hundred million dollar company, you are still on the board of. After that you did Joyo which sold to Amazon for 75 million in 2004, so you've been at the forefront of Chinese entrepreneurship. Your new company, which has gotten a lot of attention here in China, is a really aggressive mobile phone ecosystem company, that a lot of people think is your attempt to take on the iPhone and it's called Shao Mai. So lets get right into it. Tell us a little about, well, actually, let's dial back and talk about the problem. Chinese love products; it's the biggest growth market for Apple gadgets are sold left and right here. China is the place where all of the know-how of how to build those products is. And, yet, we have not seen brand new products, companies coming out of China, why has there been that gap? Back in 2007 Apple had introduced the iPhone. It has redefined the concept of smart phone. In the past five years after that introduction, the mobile phone industry has kind of kept on a dizzy foot. They can not keep up with that pace. I started the Chow Mi out of that same reason. The success of the iPhone is actually in an integration of the internet and the hardware and software. So, for the top five OEMs, they're basically doing the hardware. They don't know how to do the software, but the software company is afraid of doing the hardware, so, for me to to establish Chow Mi we would have to combine that three elements together, software and hardware and internet. And I think that will be a very good starting point and with only that starting point I can be really established in the market. That is why I want to establish Chow Mi.Some video you want to show us. Do we have that cued up? Anyone? Yes, no. Yes, no, maybe. No. OK. We'll go on. So, in putting together this company you put together this all-star team, a lot of people who had been from Google China, Google Motorola, I believe. Was it a vision that people really wanted to get behind? How did you put that team together and what elements were you looking for? Two years ago I had a joke. If I can prove that people if we can integrate or merge the Microsoft, Google, and Motorola then we will be able to compete with the iPhone, but I don't, I don't see that coming, that Google is acquiring Motorola, but the only thing is that if we think we can put that three companies together we would be great, so that's why a large part of the employees coming from Google and Kimsoft and Microsoft. So, the most important element is I have a dream, and I would like to establish a brand new mobile phone company. This is the opportunity. At least we can strike for a world class company, and we would like to be listed in the Fortune Top 500. So, those friends, they used to work for those top-notch companies. So they also share the same dream with me. So, they would like to join me. Do you think the talent base the market, do you think China is ready to have a Fortune 500 global product company? I mean, is there the talent here now to really compete with the iPhone? Not just locally, because it's a cheaper phone, but on the merits of the phone itself, the hardware itself and the software itself. Is that sophistication in China now?
Ok. I think to establish a company of such a kind in China is tailored to the characteristics of the Chinese market. China is the largest market, I mean, the largest single market, it's 25% of the market share of the world, so if you can win in China you will have a greater chance to win in the world. China is an open market. It is not a market regulated or controlled by the carrier. But, in America you can only buy phones from the carrier, but in China you can buy a mobile phone from any outlet. So if you can do a good product, you don't need to have the relationship with the carrier, so that is what I mean by saying that China is an open market. But, on the other hand, China is also a closed market because, for the foreign investors, they don't know what is happening right here in China. So, they have to adjust it to China. But we are local, so I think given these three elements, I think the chances are we can see a great mobile phone company. And I convinced those friends. They really think that there is opportunity. So, in addition to it being significantly cheaper, the iPhone - and tell us how much cheaper - what are some of the features that make it? Let's talk about the software and the app ecosystem that you're trying to build around this phone as well. Okay.As a matter of fact [??] is sold for the price of a 1,999. It's not that cheap because you can buy a knock off mobile phone for 2 100 RMB, so around 2000 RMB. That is not cheap, but what's still, people think it is cheaper because the Sao Mi mobile phone is the first dual core 1.5 gigahertz mobile phone. It is the first ever mobile phone of such a kind. Maybe you don't know about that for iPhone 4, it is a single core and 1 G. But for Cell-me it is dual core and 1.5 G, and we have a 1G RAM 1900 an emperor, like the mobile phone. And we are also using the, leveraging the vendor supplying to iPhone so it is really a top-notch configuration. That is why people think it's such a good configuration, and it is only two thousand. And, it also includes all the tax like the custom, the duty, but in America, it will be sold for 200 40 U.S. dollars for the same kind of phone, but in China the value added tax is 70%, nearly 2000 RMB for Xiaomi, it's all text included. If we're going to sell it in America, it will only sell for 240. So, that's why people think it is cheap against that configuration. Why we can come up with such a good price? We would like to sell that phone close to the factory cost because we try to make money out of the software rather than make money out of the hardware. That is why we are different from all those hardware providers. Given my procurement capability I can only do that price, but if we have a better procurement capability then we will be able to better offer a stronger phone with an even better price. So compare with all those phones the great competitiveness of Xiaomi is that we are not going to make money out of the hardware. For example, like the Kindle of Amazon He's making money out of the other non-hardware piece. So for Saumi mobile phone, our logic behind this Sao Mi phone is that we would like to provide hardware to those top-notch fans of the mobile phone. For example, we are using the team to the M 1200 for the Motorola. They have worked for Motorola for quite a long time and they are very experienced in terms of hardware and in terms of software. We are based, the customized Android system Miy, that's quite famous, over five hundred thousand users around the world has change the mobile operating system of their phone to that system in over 24 languages. having fans of over 24 languages around the world has developed apps for our mobile phone. So, we are quite well received by those fans. And, you may not have noticed that, in the end of last year we had already received international fame around the world, like a lot of technical, foreign fame. We have got a lot of discussions of it there. So, again, for me, why compare with other OS? The differentiator is that we haven't adopted the idea the internet to the OS. Every week, we can introduce a new version. In the Nokia era, it will be like three to four years. For Google it's around one quarter and for iPhone around one year. But, for us, we can update our version every one week can just enable the upgrade of the software by the OTA. So any feedback on the Internet will be I realized as fast as just, for example, these Friday afternoons. So every suggestion and idea. of the me can be actually reflected on the physical handset that customers toting their hand. So we have integrated the concept of an Internet. And thirdly, we provide many Internet services people here they feel have access to a variety of our Internet-based services like This is a social network. In the past people just sent short messages pictures and tax, but now they can have all due and picture-based communication. They can try it each other other in a diversified way. These are the features and this pleasant surprise created by Saumi mobile phone and Saumi has created a new miracle and we only sell the mobile phones from the internet. We want to develop Saumi into an internet-oriented brand. Google wanted to do that, but Google didn't succeed, why we succeed? And when the colleagues from Google joined other company, they asked me very sharp questions. They said, "Google failed. How do you think you will succeed?" I told them that I'm an expert on basic technology, Google was not. Now we can use the internet to sell the cell phone. There is no doubt about it, and we had over 300,000 orders after the release of Sao Mi, and in the internet-based field we often use Baidu index to see how popular the product is, where if you go to Baidu to see the popularity, and as of the second day of the release the Baidu index is four times of iPhone 4. The index is over 400,000, so we enjoy great support from the users in China. So, Sao Mi has been very successful in the past two to three months. Sao Mi suffers a big headache which is the pressure from the supply chain. In the past several months we have made a lot of supply chain difficulties like the flood from Thailand and their 850 parts and components in every cell phone. We have to have adequate supply. When I was in the internet field, I didn't expect there would be so many difficulties But as long as we can breakthrough, make a breakthrough in the supply, we will succeed and I'm highly confident in that.How much of the appeal of your phone is a level of national pride? The iPhone is very popular people are here. You know, walking around I've seen the Steve Jobs biography on people's desktops. Tony Ma mentioned yesterday Steve Jobs was his personal idol. You know obviously, Apple has a strong a brand here as it does in the U.S. and around the world, but do you think the Chinese want their own brand? I mean, is there a matter of national pride here of why can't we have our own Apple? Okay.Okay, I think the support for a local brand matters to certain extent, but it is not a crucial factor to offer success, and half of the Mi Wai system. The users of the Mi wai system comes from the international users. I think this model will be successful in the U.S.A. too. have the best hardware and Internet-based software. I think that has been very successful in the Internet [??]. All the cell phones are sold through the Internet. I'm an expert on e-commerce. I know how to of our products through the Internet, so I think there is greater creativity later. I will show you a demo and you will see the interesting innovations. Before we get to the demo let's talk a little about you as an angel investor. Because you know, I know that a lot of entrepreneurs feel like you are an angel investor investor who really looks out for entrepreneurs, because you've been there; you've started companies. That's not necessarily the case with all Chinese investors. Tell me a little bit about how you think you're different than the typical investor in China, and maybe what needs to change about the typical investment scene in China. I know today there are many international firms. They may not know the companies I invested in. Just now at the back office one of my good friends asked me how I would introduce the cases I invested and he told me that you could introduce the number of companies you invested in and the operation of those companies in 2005. I invested in the first case in 2008-2010, I made a lot of the investment I invested in 20 countries. 17 to 18 of them have got V.C., the venture capital investment. and just now, I did a simple calculation for the 17 to 18 companies, and we have got over one billion US dollars cash. And...
Dollars in cash?Yeah, yeah. One billion US dollars, one billion US dollars. And those companies were started up in 2007, '08 and '09, so raising that kind of money is not easy and I made the investment decision when the companies were not even established. I just talked about the idea and we talked about the potential partners, the name of the company and how to get the company registered. And I played the role of co-founder because the company was not established They just approached me to talk about their idea, and after our discussion some of the ideas changed significantly into theories of the companies that I invested in. The companies were not established when they approached me. So, basically, this is totally different from the concepts of angel investor in the USA The companies haven't been established. The average investment is two million R and B [sp?], about one million US dollars in the USA. So one might make an investment. Loking back, I think there were several factors contributing to my success in the investment. The first factor is accurate future forecast. Five years ago, I identified the three potential fears. One is mobile internet. And nobody mobile internet. Five years ago I told the people that the size of mobile internet will be 10 times of P.C. internet. If you invest in that you can succeed. I made many investment decisions in mobile internet and the second aspect is e-commerce. I made a lot of investment in e-commerce, too. And the third field is community and social network. The 20 companies focused on these three fields. I didn't invest in other fields. I mainly focused on the mobile internet, e-commerce, and the social network, the internet community. There are most successful cases, all together three. And four years ago I invested in Vanco, Vanco. com. Vanco.com is a fashion or costume brand. created through the platform of the internet. And if you ask the young people they will know Vanco. And in a mobile internet I invested in UCWeb, the largest independent cellphone browser, and in one month 167 million people used UCWeb to get connected with the internet . So in one month was 17 percent, we got successful in a short time. And there is another product Wywy. Yeah, yeah.So we'll learn all about Wywy.Yeah, OK.So, I want to just, we want to make sure that we can get to this video, but before we do that, tell me a little bit about what you think the US and the West needs to know about Chinese entrepreneurship. Do you think we underestimate Chinese entrepreneurs? Do you think that Chinese entrepreneurs are changing? Are they evolving? And, just now, I introduced the three companies The companies have innovative models that didn't' exist. In the US market, they have great creativity, with high growth rate. I met a lot of American investors. They like those three companies especially. Well, why? They think it is innovative. they are very happy about it. So I think that most of the people think that the ideas are from America in the internet development, but personally I think a lot of ideas come from the local entrepreneurs. The growth rate of internet in China is unprecedented.Ok, great. And we're going to get to a demo in just a minute. Okay, last name, as I was telling you backstage, a lot of the people in the audience were people who came to the Hackathon. They're younger entrepreneurs, people out of college, people just starting their journey. What's the biggest piece of advice to them? If someone could go back in time to the Lei Jun in the late 90's who was starting his first company, what do you wish someone had told you? Okay . Do what you want to do. Do what you'll like to do. Only when you do that, do you ever have the motivation and the patience about what you do. And twenty years ago, I was a programmer. I liked software a lot. That's why I was involved in the funding of Kingsoft. So please focus on what you like to do.Big round of applause for that: doing what you want to do. Alright, we've had a little bit of con
To kick off Day Two of TechCrunch Disrupt Beijing, our own Sarah Lacy interviewed Lei Jun — one of the most successful entrepreneurs in China, whose resume includes cofounding Joyo.com (sold to Amazon in 2004), sitting on the board of Kingsoft, and chairing the board of massively popular mobile web browser UCWeb (he’s also made numerous investments in successful Chinese startups).
Most recently, Jun is the founder of Xiaomi Tech, a startup with a very ambitious goal: it wants to take on the likes of Apple in the mobile phone industry, by producing a high quality phone that’s sold at prices significantly below the competition. You’ll find a video of the interview above, and here are some of the highlights:
Asked about the fact that his new company includes many former employees of tech giants, Jun recounted a joke — he said that if he could merge Microsoft, Google, and Motorola, he’d be able to take on Apple. So he went after employees from each of them as he builds a new mobile phone company.
Lacy then asked about the difficulty involved with launching a new phone, which isn’t something many (if any) startups in the US would attempt. Jun pointed out that the Chinese mobile phone market is more open that the US market — unlike the United States, where the phone you use is largely dictated by the carriers, in the Chinese market the phone manufacturer doesn’t need to maintain good relationships with carriers, as consumers can buy and use what they want.
Jun also discussed the long-term strategy for Xiaomi: they’re going to sell their hardware at around cost, then make money through the software, which gets updated every week. The phone sells for 1999 RMB, which is not cheap, but is less expensive than competitors — it’s around $240 in the US. The company has faced unforseen challenges in managing the supply chain (recent floods impacted some suppliers), but Jun says he’s confident they’ll push through them.
Asked whether Jun thought Chinese consumers would favor his phone over, say, Apple, Jun said that he thinks that there will be some sway, but that it won’t be a crucial factor. He points out that half of the OS’s users are international.
Asked about his success as an investor, Jun outlined his strategy. Five years ago, he identified three key areas to invest in: mobile internet, ecommerce, and community/social networks. Those twenty or so investments have proven to do quite well: Jun says that the companies now have over $1 billion cash combined.
Finally, to conclude the interview, Lacy asked Jun about his key advice to entrepreneurs. His answer?
