Founded in 2015, WaveFront Ventures (Chinese: 创想未来资本) is an investment institution focusing on IoT companies. Since 2015, it has carried out a series of strategic investments and innovation incubation in the global IoT industry and has established a portfolio of more than 10 early-stage and large-scale companies, covering key IoT vertical and horizontal segments.
Going Back to User Scenarios
Regarding investment logic, Ken Li believes that the bottom line is always focusing on the user scenario.
EqualOcean: what is your logic behind investments in Sparkoz (Chinese: 汤恩科技), Lesheng Smart (Chinese: 乐生智能) and Dogotix (Chinese: 多够机器人)？
WaveFront Ventures: At the end of the day, be it artificial intelligence or robotic devices, all these trending industries serve the purpose of making life simpler and better. Cleaning robots contribute to reduced working hours and an easier chore-completion process, so they are bound to become a popular trend. When I say user scenarios, I don't mean scenarios like IoT but daily-life use cases such as cleaning, ride-share and food delivery. As long as there are user needs in these daily scenarios, there is a clear investment incentive. This is why we invest in B2C and B2B cleaning robots, as there are different needs and scenarios to cater to What Drives Overseas Success
In recent years, the robotic industry has developed rapidly, having entered the stage of large-scale application from initial market cultivation. With heightened pressure, the domestic market has shifted from incremental demand to existing market competition. Under such circumstances, finding new incremental markets has become many Chinese robotic companies' priority and go-to survival tactics. The overseas market has gained more attention as a result.
EqualOcean: We observed that the three robotics companies you have invested in recently made some globalization moves. For example, Sparkoz has cooperated with Kacher in Germany. Lesheng Smart has collaborated with several world-class Fortune 500 companies and established overseas sales networks. What is your view on their globalization effort so far?
WaveFront Ventures: So far, it is very smooth. Lesheng Smart itself is already a leader in China's cleaning ODM industry. Unlike other domestic companies such as Ecovacs Robotics (Chinese:科沃斯机器人) and Roborock (Chinese: 石头科技), who are private brands and will not do OEM for other companies, the positioning of Lesheng Smart itself is an ODM foundry of household cleaning products, so it is by nature more of an ODM business and manufacturing business of European and American brands. So in this regard, they have deals with many first-class brands in Europe and the U.S.
The key here is that their core products are solid. The future development of this industry is not just about scaling up and reducing cost, but more importantly, identifying which functions and scenarios the end user needs. That is to say, how to push back from the demand side to decide on product development and design, and this is where the Lesheng team excels at.
EqualOcean: What characteristics do you think help companies to succeed in overseas markets? And which ones are more prone to setbacks?
WaveFront Ventures: Nowadays, many companies want to go overseas, but going overseas is more about leveraging a foreign trade mindset. You want to sell this product at the FOB (Free On Board) price and sell it in US dollars. Of course, it also includes cross-border e-commerce, for instance, when you are on Amazon. You do FBA (Fulfillment by Amazon) warehouses, ship them overseas, and then sell them on Amazon. This kind of foreign trade logic is one way of going overseas; you transfer the cost-effective advantages of the Chinese supply chain to foreign countries to exchange for US dollars.
Overall, Chinese companies need to consider the following two key factors before going overseas.
Firstly, developing products with key features is essential. You must possess certain competitive advantages, no matter what you call them, cost-effectiveness, attractive physical appearance, or exceptional functionality.
Secondly, you need ensure you are fully prepared and have a thorough business plan before tapping into overseas markets. Do you have a sufficient budget, a good business plan, and an excellent technical team? Adequate upfront preparation will shorten unnecessary time and cost during overseas expansions.
Biggest Concern as An Investor
Talking about the biggest concern when investing, Ken emphasizes the 'kick' of the team.
The key is whether start-ups can maintain a certain level of drive and enthusiasm when they scale up. We call it the state of returning to zero. Can your team remain in a dynamic state? How do you sustain such vitality? This state is not about how you should work hard towards it, but whether you have perspectives that support you to observe and stay on or even ahead of the future trends of one industry. To do that, entrepreneurs need to constantly question themselves about product functions and the user's needs. This topic has always existed, but I believe only true talent can do this well.
Export Destination Selection
For many Chinese companies, when deciding which countries to start entering, the U.S. and Europe become prioritized options, given higher unit prices and increasing labor cost considerations. Ken agrees with this assumption partially. "In terms of market size, the United States is definitely the largest, Europe second, and then Japan or Southeast Asia. But in the early stages, how to quickly conduct a lot of overseas execution and verification in smaller test phases, as well as the wearing-in and cooperation of the team, that, I believe, is the most important thing," said Ken. "If you have no way to test the market on a smaller scale, no matter how big the potential market opportunity is, it will not be 'the opportunity' for you.", he added.
Key Suggestions for Chinese Companies With Overseas Expansion Visions
EqualOcean: Do you have any key messages you would like to share with companies planning to go overseas?
WaveFront Ventures: Don't just stay on the product level and don't simply say that I have advantages in resources, cost, or supply chain. Claiming these is not helpful. The core is that you need to "sell" your products in overseas markets. You need to set your sales strategy and business model well. Several questions need to be answered, including how I will approach marketing and what content I will focus on. Once you set up your core structure, you can complete a detailed overseas plan. If you don't have your logic spelled out, or you didn't spend 6-12 months laying out the basics, I don't believe you are ready to sail.
About the Interviewee:
Ken is the founder of WaveFront and has more than 10 years of working experience in the IoT field. He has led several successful investments, including Quectel Wireless Solutions (603236.SS Shanghai), which is valued now at CNY 22.7 billion.