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Westerners can learn from China, VC says

Posted: 01 Jun 2005 ?? ?Print Version ?Bookmark and Share

Keywords:china? asian technology roundtable exhibition? arte?

Rather than wait for China to adopt Western business styles, U.S. corporations and investors would do well to "easternize," Silicon Valley venture capitalist Joseph Schoendorf said at the Asian Technology Roundtable Exhibition (ATRE), a two-day technology and investment forum held in Beijing.

"A lot of my friends who have come here think China is westernizing, but from what I've seen and been reading about China and Confucius, we'd do better in the United States if we easternizedmy word," Schoendorf said in his keynote speech. "There is a core set of values here that I am struggling to learn, and I like what I'm learning. I don't think China is westernizing, nor do I propose that China do that."

Schoendorf, a general partner at Accel Partners, then zeroed in on some sensitive turf, tackling the subjects of cross-cultural values and trust. "If you sat down in a room of Western venture capitalists and said, OK, what is the downside of doing business in China, they would say, 'trust.' They would say, 'we don't understand, and that which we don't understand, we don't trust.' "

But in 10 trips to China, said Schoendorf, "I've come to understand that the trust culture in China, measured at the family level, is as strong as any trust culture anywhere in the world." Urging his peers to work harder at bridging the cultural divide, he said, "If we are going to build global companies in China, we have to try to find a way to change that lack of trust because that will be an impediment."

Accel Partners, he disclosed, is poised to become the first major Valley venture capitalist to establish a China-based partnership. "We plan to be in China as soon as we find a competent group of people that we trust and can communicate with, that can continue our investment thesis," Schoendorf said. "I'll just tell you that we are looking for partners who will help us set up and run Accel China, and we will build a team here and then we will raise funds here."

"We look forward to being long-term trusted partners with you," he told fellow investors and the heads of about two dozen Chinese tech startups at ATRE. The event has become a magnet for some of China's hottest startups and a must-stop networking venue for the tech world's most powerful VC investment companies.

Schoendorf offered a candid assessment of China's emergence as an axis of regional and technology dominance. "I started in this business before there was an Apple and an Intel, and I've watched the Valley, Israel and Europe grow up," he said. "And I have come to the conclusion that it's China's turn to play on at least an equal basis in that league."

The new era will require a new VC model, Schoendorf said. "And I call it one word: global." At one time, he said, "When we started a company, the rule was you put everyone in one building: engineers, marketing people. You wanted cohesion in the team and when you grew up, the biggest problem you had was how to move the team. Now we're doing technology development in Israel, the United States and Europe, and have an open-source database with engineers in 70 places around the world. The broadband Internet had changed the model for where and how you can do technology development."

Venture capitalists are now "looking for the best technology companies wherever they are," Schoendorf said. "We've been talking to a lot of smart Chinese technology people in the last two years, but we've only done one small deal and that's because we were not here yet. But we're going to change that. We cannot manage investments from afar and we do not believe in remote venture capital; it doesn't work."

Schoendorf said that "Innovation is what we venture capitalists back. We back people who say, 'I see a hole in the market as HP or IBM or Dell are screwing up'--and go start a new operating--software or services company. Innovation is the key to what we are looking for."

Citing "one of the great books I have read," Trust: The Social Virtues & the Creation of Prosperity by Francis Fukuyama, Schoendorf said, "If you look at trusted societies that people understand, the United States, Japan and Germany, you also find the three largest GDPs. As China takes its place and begins to replace those countries in GDP ranking, it's going to be on the same basis of trust that those countries have established.

"The question is when this model is going to take effect. The answer is now," Schoendorf concluded.

- Richard Wallace

EE Times




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