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Hurst Lin, Sina Co-Founder, Discusses DCM’s Investment Strategy in China

DCM is a venture capital fund with offices located in Beijing, San Francisco, and Tokyo. It also manages the A-fund which focuses on investing in start-ups who are actively involved in the Android ecosystem. On the sidelines of Disrupt Beijing, I sat down with Hurst Lin, head of DCM’s China office, to find out more about his role and thoughts as an investor. Prior to his investor role, Hurst co-founded Sina, the giant Chinese internet media company, which made its name in recent years with Sina Weibo, a popular microblogging platform in China. While his Sina story is very interesting, our chat concentrated more on DCM and Hurst’s views on DCM’s portfolio in China.

Multiple offices and languages? Not a problem

DCM has a very interesting structure. Hurst explained that each office will search for potential start-ups in their location but will not offer the term sheet until all three offices have vetted the pitches. Every start-up shortlisted will be invited to pitch at the respective DCM office – China, US, or Japan. All of DCM’s three offices will find a suitable time each week to bring all the start-ups together for them to listen/grill their pitches. The pitch, as Hurst described, will include real-time translation so every DCM investor can understand even if pitches were communicated in Chinese or Japanese.

Most of us would assume that DCM would bring tens of start-ups to pitch each week but Hurst said that the number is no more than three. Each pitch and Q&A session will normally last for a couple of hours as the investors fire questions at the founders to find out more about the idea, the market, and their background. The founder’s attitude, as Hurst explained, is key to winning investment from DCM. There are times when DCM has rejected an idea pitched previously but yet invested in the same idea later because they became more comfortable with the founders. Hurst remarked that investing in a start-up is like a marriage, as DCM is expecting to work with its founders for years. So whether the founder suits the DCM family is an important consideration before offering the term sheet.

When asked why DCM would go through the trouble to bring all the pitches together, Hurst explained that it is good for all investors to understand what are the latest ideas and trends in the U.S, China, and Japan. Investing in start-ups in China

“In China, you invest for the market,” said Hurst.

DCM has invested in quite a number of start-ups in China, including Mbaobao, Greenbox, and Vipshop. Interestingly, as some of you might have realized, all three are specialist e-commerce start-ups.

Hurst took time to explain to me why DCM decided to back Mbaobao, a site which sells handbags online. First, the founder has a fantastic character and, second, Hurst thought that lady’s bags are one of the best items to sell via the internet. He explained further that bags don’t have sizes, which is a huge plus in e-commerce. Anyone — fat or slim — could use the same bag. He also said that girls just love buying bags and described it as a “fast fashion” industry.

“E-commerce is content,” he said. By posting regular bag designs, users (or specifically ladies) will often log on to the site to check out the latest fashions. If the user does it long enough, one day she will click on the buy button.

Hurst also pointed out Greenbox, an online apparel store for kids, as another start-up he invested in. He explained that in the U.S there is a growing trend that modern parents are spending moolah to dress up their kids more stylishly than in the past. Such trends are supported by emerging kids apparel extensions like Polo Ralph Lauren for kids, and Gap kids. But junior apparel is a tough business because its per unit price is low while the inventory holding cost remains the same (i.e. the rental fees). So Hurst explained that selling kids apparel on the Internet ensures that demand is met while avoiding needless overheads.

“Be the first one to believe in them, before others start believing in them,” said Hurst as he wrapped up our conversation.