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During the "Thousand Talents Program" entrepreneurship competition, Mr. Zhe Wei, who is the former vice president of Alibaba Group and one of the contest judges, gave a speech about ‘How to Learn from Alibaba to Become Surviving Entrepreneur’. Below is the transcript of his speech.
How to Handle the Investment Capital– If you have not been able to spend a lot of money, forget about the money
“There are many investment institutions in China, more than 10,000 to be precise. Really good business projects do not have to find money because money will find them. At this point I would like to ask everyone: what kind of money are you looking for? How much?
From the point of view of investors and founders, the current investment environment can be described with the following three words: “stupid people, lots of money, high speed.”
Stupid people does not mean that investors have a low IQ, but that most of them aren’t from this industry, so they have no experience. Lots of money refers to the availability of foreign, state-owned and private capital. High speed means that the appraisal cycle of an investment institution in a project is getting faster and faster.
From the entrepreneur's point of view, these three words should be read backwards namely "high speed, lots of money, stupid people". High speed refers to the blind pursuit of speed and size of entrepreneurship, with few entrepreneurs talking about efficiency. Inefficient growth is not a slow suicide but an accelerating one as it leads to inefficient expansion of large amounts of capital. Lots of money means that more and more entrepreneurs can now get more money. Stupid people means that such a situation will turn smart entrepreneurs into fools.
So, how much money do you need to get? Let me give you another example from Alibaba. In 2007, Alibaba was first listed in Hong Kong and financed with $1.7 billion. This huge sum of money would not even be a penny in today, while in 2007 it was a lot of money. The next day after the listing, Jack Ma told CFO Cai Chongxin, “Find a place to put $1.3 billion as a deposit, but don’t let me see it because we are unable to spend $1.7 billion, we can probably spend $300 million. Let’s remember that we have only $300or $400 million financed.
Today, many start-up teams have the ability to manage teams when they have $5 million, but it will be very hard if they get $50 million after half a year. We saw many start-ups who died, not because they starved to death but because they got too much money as founders and teams don’t currently have the opportunity to spend so much money. Similarly, as a manager of a fund, I often wonder what magnitude it could have. If the amount of funding is too big, when I am not able to manage it, we will die because of too much money.”
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