Investor of Chinese unicorns on identifying the next billion-dollar startup

Written by Heniu Business Published on     5 mins read

Work hard, live harder—Matrix Partners’ David Zhang’s early life experience shaped his investment philosophy.

David Zhang is one of the founding partners of Matrix Partners China. Some of his notable investments include Didi, dating and social media app Momo, and Ele.me, the second largest food delivery platform in China.

Unlike most investors, Zhang focuses on adding value through post-investment management. He formed a team to do precisely that and is heavily involved in the personal growth of founders. His warm personality has earned him a nickname: Zhang is the “sunshine” of the VC world.

The following text is a compilation of snippets from Zhang’s public speeches and interviews. These provide a glimpse into how his early experiences have molded him and the way Zhang formulated his unique investment style.

Turn yesterday’s pain into a weapon

When my family lived in the United States, we illegally lived in the garage of a two-story house. The environment was pretty bad. Even if someone coughed on the street, I could hear it through the walls.

I went to one of the worst public high schools in San Francisco, and there was violence every day. Whites bullied blacks, blacks bullied Latinos, Latinos bullied Asians, and Asians bullied American-born-Chinese, who bullied Hong Kongers, and Hong Kongers bullied Cantonese, and Cantonese bullied everyone else. I am from somewhere else in China, so I was at the bottom of the food chain.

What high school instilled in me was the ability to interact with people of all races so I could survive.

All these experiences from my past proved to be an invaluable asset when I became an investor. I apply what I learned from those years to evaluate founders. During my interactions with founders, I find that it is important to treat them as equals and not pick on them because of my position.

Practicing this day in and day out when working with founders gave me a huge advantage in building rapport and trust with them. It gives me an incredible sense of satisfaction when founders trust me enough to open up to me.

In the long run, your brand and reputation within the industry, along with the relationship you have with the founders, can turn into a competitive advantage and set you apart from other investors.

Live every day like you have just two years left

When I returned to China in late 2003, I was blessed to meet my founding partner, David Su. We were fortunate to enter the market at a time when the TMT (technology, media, and telecom) industry in China was booming. I was blessed to be dealt an excellent hand of cards, and it is my duty to play a good game and do meaningful things.

The COVID-19 pandemic made me more certain about never compromising my lifestyle and work ethic.

I do not believe in the saying “live each day as if it was your last.” Imagine if today is the last day of your life. How would you spend it? I would do nothing except be with my family. But if you treat each day as if you still had two years ahead of you, you can live a vibrant and meaningful life.

For me, Matrix Partners China is an important platform, both professionally and personally. However, I am also interested in documentaries, motocross, and gaining a deeper understanding of the world we live in. I have many goals I want to achieve outside of work.

In March 2017, I launched the company Jingwei Chuxing.

It started out as an annual travel and networking event for CEOs. The goal is to gather founders of new economy startups to take part in high-end, curated trips to expand our reach and meet more CEOs. Slowly, we would build a valuable community, eventually facilitating commercial deals and investments.

Jingwei Chuxing was launched for another more important reason: the pressure that founders and senior management face every day at work is getting more and more extreme. I hope travel can be an outlet for founders and senior management to relax, recharge, and rejuvenate.

Entrepreneurship is a marathon, not a sprint, everyone needs to find a balance between work and life to go further.

“Live every day like you have just two years left”. Image by eko pramono from Pixabay

Founder’s self-actualization determines the future of the company

How do you minimize your rate of misjudgment when you’re looking for the next billion-dollar startup? How do you identify the next Wang Xing, the founder and CEO of Meituan, China’s biggest food delivery and localization platform? Or the next Cheng Wei, the founder and CEO of Didi? There are no straightforward answers to this, but I will try to address them from three perspectives.

First, investors should be able to improve the efficiency of decision-making.

Second, investors need to create good synergy between founders, senior management, and investors. The ideal scenario would be an investment team that strikes a balance between quantity and quality. At the same time, firms should instill the practice of periodic reviews to revisit projects that were turned down. This would reduce the misjudgment rate.

Finally, a founder’s growth is crucial. Some founders will clearly hit their ceiling of growth, while others are constantly improving themselves and proving their value. My role as an investor is to help founders learn from each other’s strengths and grow together.

I constantly think about what I can do to improve my judgment and be more efficient in making investment decisions. I am aware that we perform thorough due diligence to eliminate many companies and founders who do not make the cut.

However, I am also equally aware that we are wasting 80% of our time working on things that do not matter. It is the remaining 20% of the time that generates 75–80% of our revenue. This worries me greatly, as I cannot tell the difference between unproductive work from productive work until three to five years later, when we perform a review. It is a hard fact to accept, but it is the truth.

It’s growth or death

The most important piece of advice I give to the CEOs in my portfolio is to always find a way to become the industry leader.

Every founder should approach this problem with both sense and sensibility. They should draw conclusions through data and by analyzing competitors to determine their next steps. Plans for succession, limitations in personal growth, and strategies for growth are also important factors to consider.

As an industry leader, how do I stay competitive and widen the gap between my closest competitors and myself?

And if I am not an industry leader yet, what do I need to do to become one?

The right kinds of changes are usually drastic and painful. When faced with difficulties and challenges, most people will become defensive and look for reasons for their failure. In reality, these are often excuses, not the true cause of their failure. Usually, they failed because they didn’t put in the effort or apply the proper diligence.

Fear and pain determine a person’s boundaries. Many people would have easily given up when life hits them, but those who are most successful have chosen to accept their pain and break through their fear because that’s what winning is all about.

This article originally appeared in Heniu Business. Oasis was authorized to translate and publish the entry.


Heniu Business


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