Business / Industries

Venture capital keeps faith with e-commerce companies

By Cai Xiao (China Daily) Updated: 2014-07-22 07:30

Chinese e-commerce companies tend to rely more heavily than their US counterparts on credit.

Some of them would continue to lose money for a longer period of time but not because of a major flaw in their business.

Zhou cited JD as an example. "The company has very good growth prospects although it has yet to become profitable," Zhou said. "I don't agree with the saying that it's already winter time for e-commerce."

On the contrary, he said, more people are using smartphones. If China can come up with better solutions for Internet speed and fee charges, it would send the business into a bigger boom.

By the end of 2013, China's mobile Internet users numbered 500 million, accounting for 80 percent of the people who use the Internet, according to iResearch, a research organization focusing on China's Internet industry.

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Instant communication has been the most popular use, followed by third-party payment, searching, mobile shopping and news browsing, said iResearch.

In the wireless age, as information is fragmented, distribution may at times be more important than content, Zhou said.

One example in this regard is Xianguo, an online subscription provider from whose website or app users can choose their favorite news suppliers, magazines and books.

Liang Gongjun, founder of Xianguo, has been in the online content distribution business since 1997.

His service aims to help users avoid too many choices by designing their personal need package.

Xianguo's business model impressed KPCB and drew an investment of $8 million in 2011.

Xianguo now claims to have 25 million users who have downloaded its mobile phone app, and its database has accumulated 5 billion pieces of information.

Xianguo is one of the leading players in the Chinese mobile reading market along with Zaker and Tou Tiao.

Like JD, Xianguo has yet to make a profit, but it is already generating a revenue stream from its advertising and pay-for-view services.

Liang said he is in no hurry to become profitable because he is convinced the content business will be sustained, and his company will realize its value in due course.

KPCB also takes a patient view.

"We take care of two things: supervision and help," Zhou said, explaining that his company's standard strategy is to try to understand a target company's business environment, help it recruit talent and find the right resources.

He said KPCB China wins by identifying high-potential early-stage companies and helping them grow.

Liu Yiping contributed to this story.

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