Telling founders what to do is a ‘common mistake’, says award-winning venture capitalist

Back then, the Chinese technology scene had been burgeoning since the late 1990s with the dot-com boom. Technology-inspired startups sprang up, coinciding with the widespread adoption of the Internet, but the bubble eventually burst in March 2000 as capital dried up.

“I still remember at that time a lot of people left the industry,” said Su, now the founding managing partner of Matrix Partners China, which has over 70 billion yuan (S$13.1 billion) worth of assets under management. “It was a difficult period, with almost no one investing.”

Yet, the 52-year-old Singaporean “stuck with it” and grew to garner many accolades, including being ranked among the Forbes Midas List Top Tech Investors, Forbes China Top 10 Best Investors and Fortune Chinese 30 most influential investors last year.

Serendipitous journey

Su’s journey into the VC world has had “a bit of serendipity”, he told The Business Times.

After graduating with a computer engineering degree from Nanyang Technological University (NTU) in 1993, Su landed his first job at Lotus Development, a software company later acquired by IBM. He spent seven years there, with more than five years in Beijing, heading Lotus’ Greater China group.

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Initially intending to leave Lotus to explore working for a startup, Su found himself drawn to the Chinese startup scene when he encountered Venture TDF, then a Singapore-based VC firm that was expanding into Shanghai. In 2000, Su joined as the managing director of Venture TDF China.

After a three-year trough, the investment market started to pick up just like every boom-and-bust cycle, Su recounted, and it enjoyed a “great two decades of entrepreneurship with many good businessmen (and) startups, especially in the technology sector”. 

In late 2003, Su led Venture TDF’s investment in Baidu’s third fundraising round, alongside key investors such as Google – it was often listed as his most notable deal.

Despite its success, Su remains humble, attributing it to good timing: “We were fortunate to have this opportunity as there were not so many (VC firms) in China back then.”

VC firms are often in intense competition for the most important deals, he added. “Sometimes we invest first, and other VCs will follow, sometimes vice versa, but oftentimes, there is another opportunity to invest.”

He later became the founding general partner of TDF Capital in 2005. From 2007 to 2008, he spearheaded TDF’s joint venture with KPCB, an established US-based VC firm, to establish KPCB China.

When another American VC firm, Matrix Partners, was seeking opportunities in China, Su and the other two founding partners, who are both Chinese, seized the chance and established Matrix Partners’ affiliate in 2008.

Since then, his team has grown rapidly from eight to 120 people, with 40 focused investors, as China undergoes rapid globalisation and economic development.

The team’s successful ventures include electric vehicle (EV) brands XPeng and Li Auto, ride-hailing app Didi Chuxing, food delivery platform Ele.me, and many other big names that constitute the bread and butter of an average Chinese consumer’s life.

VC investing 101

With a plethora of new startups coming into existence, an important part of a VC investor’s job is to sift out companies with genuine potential and those that are just bubbles.

“We often look at two key aspects of the business,” explained Su. “One being how inspirational the business idea is in tackling key needs for consumers and solving a particular problem, and the other being how well can you monetise the big idea.”

He added that “VC is always a local business” and the focus on domestic demand from China’s 1.4 billion population always comes first, before looking at exports.

For example, one of Matrix Partners China’s best-known investments, Ele.me, which means “are you hungry” in Chinese, started as a website for online group-buying, targeting college students in Shanghai.

Seeing the boom in smartphones – which made it possible for hawkers and small restaurants to access a central ordering system, coupled with customers’ growing penchant for the convenience of food delivery – Matrix Partners China co-invested in its Series B funding round in 2013. Ele.me has since grown to become China’s second-largest food delivery platform.

However, scrutiny does not guarantee success. “We are early-stage investors. Fifty per cent to two-thirds of the companies don’t make it,” Su said. “Even if the business idea is good, it may not necessarily work out.”

While the market has slowed in the past two years, Su remains optimistic, seeing unmet domestic demands in the three core sectors Matrix Partners China focuses on: technology, consumer and healthcare.

Highlighting the energy transition as the next technology wave to catch, he said what excites him the most is his team’s early expansion of investments into the broader energy technology space, including the EV ecosystem, renewable energy and robotics.

“We are the only VC firm in China that backed Li Auto and XPeng in the early stage back in 2017,” Su said.

Li Auto and XPeng have grown to become two of China’s top three premium EV makers and have found their way to the US stock market, alongside Nio.

A front-seat passenger

Unlike the household names they invest in, Su and his team keep a low profile and attribute the success of their portfolio companies to the business acumen and innovative spirit of their respective leaders.

Su avoids glamorising the role of venture capitalists, adding: “If operating a startup is like driving a car, 99 per cent of the time, (the) VC acts as a front-seat passenger. Only 1 per cent of the time (does) it co-pilot with the founders.”

The value of VC firms is in providing “occasional navigation”, as they have seen different business situations and companies with different stages of development, he said. They also help to link up resources, including talent, he added.

With 158 active portfolios on which his firm is currently focusing, Su regularly meets the top executives of these companies every two to three months.

“Asking a venture capitalist his favourite investment is like asking parents who their favourite child is. Every company brings different challenges and joy,” Su said.

A lesser-known portfolio he takes pride in is AAC Technologies, a Shenzhen-based manufacturer of miniaturised acoustic components and upstream supplier for Apple. He invested in it in 2005, before the first iPhone was released.

“It is really amazing (that with) every phone you pick up, there is a key component produced by the unsung hero in the background,” Su said.

Giving back to the community

Having spent almost 100 per cent of his time in China over the last 20 years, Su confessed that he feels less and less familiar with Singapore.

But he is pleased that he has had more time to spend in his home country in the last two years, as he had been setting up Matrix Partners China’s global head office in Singapore. He is also ready to explore investment opportunities across Asia. 

One of the things he looks forward to in the next few years is engaging in more corporate social responsibility efforts both in China and Singapore.

He is a member of the Aspen Global Leadership Network and a fellow of the inaugural class of its China Fellowship Program. He also co-founded San Si Institute, a community of high-achieving entrepreneurial leaders in China committed to tackling societal challenges.

In Singapore, he gives back by acting as a board member of his alma mater, NTU, and Singapore Management University, as well as serving as a non-executive independent director of CapitaLand Investment.

For aspiring venture capitalists, Su believes there are three defining characteristics of a good investor: curiosity, strong fundamentals and humility to learn.

“Trying to tell founders what to do is a common mistake for young investors,” Su said. “What is really needed is to support the founders along their journey.”