Hilsberg on scale: China is calling
Shanghai: The Australian startup scene here is very US-centric, and that's just wrong
Chinese women rock as business managers, even white guys can make money in China and the steepness of the growth ramps there can help cover up a lot of mistakes for budding China entrepreneurs.
These were just some of the insights coming from Terry Hilsberg, a veteran China investment hand who in former lives has done everything from being CIO for the old Commonwealth Employment Service to reviewing Australia’s higher education landscape for the Federal Government.
Mr Hilsberg began investing in Chinese companies in the mid-nineties, ‘straight off the boat’ as he puts it, after selling out of a venture capital operation in Japan.
Among other investments, he put money into China’s first light aircraft maker, a liquor store chain and coal trading.
China’s huge emerging consumer markets and the subsequent warp speed growth available for companies that get it half right serving those markets can protect investors from a lot problems, he says.
“Growth hides a lot of problems in China. In Australia you are eking out gains in a market that only grows at three per cent per annum and beating each other up.
“In China, growth has been going at 10 per cent. In the industries we invest in now it’s still growing at 15 per cent even though GDP growth has come down to six per cent.
“It hides a hell of a lot of your mistakes when you have got high growth.”
Through his China lens, Mr Hilsberg sees the whole of Australia as small beer, roughly equivalent to the size of a large Chinese city or a small province.
From investing in China, Mr Hilsberg moved to doing startups in China, many in education and telecommunications.
“Unlike everyone here I’ve had failures,” said Mr Hilsberg, who was addressing the crowd at the InnovationAus.com China Money, China Markets event last week.
While three of his ventures there tanked, enough of Mr Hilsberg’s companies succeeded for him to learn that “a white guy can make money in China.”
“That’s a good lesson and I don’t speak particularly good Chinese,” he says.
Another lesson was the value in employing Chinese women in managerial roles.
“Chinese women rock,” he said. “Behind every startup that was successful, I’ve had Chinese women running it for me.
“They did a whole lot better than me. I have an iron rule [now] which is that any company I start up in China I ask a Chinese woman to come in as co-founder with me.”
Recently, Mr Hilsberg has been trying to convince Australian startups to move into the China market, but finds locals too starry-eyed about the attractions of Silicon Valley.
“The startup scene here is very US-centric, and it’s just wrong. It forgets the fact that there’s a million people of Chinese background in Australia.”
Again he points to the market scale available in China, citing a company he is involved with that delivers compulsory maternity education to a Chinese province.
“It’s an online app and it has 500,000 expectant mothers a year going through the program.
“This company went from zero to turning over $50 million Australian in one year.
“That is scale,” he says.
Also at the China Money, China Markets was Jason Yat-Sen Li, who was famously parachuted into the 2013 election by then Prime Minister Kevin Rudd to try and win the northern Sydney seat of Bennelong.
As well as politics, Mr Li is the chairman of Vantage Asia Holdings and is involved in investing and mergers and acquisition work.
He believes Australia maintains a distrustful attitude to China which is holding back mutually beneficial involvement.
“There is an overriding, very suspicious attitude to China in Australia,” he says.
“The other side is just the lack of understanding. Predominately people here see China as not a very innovative place with all sorts of intellectual property issues – a place to lose your shirt in short order.”
“I think that is a much broader challenge across Australia that hopefully each of us can do something to address.”
One avenue for bolstering Sino connections is Australia’s higher education sector which has many Chinese students.
“While acknowledging the potential, Mr Li thinks Chinese/Australia alumni networks is an area that still needs to be ‘cracked.’
Her also warns Australian businesses looking to go north to make sure their eyes are wide open before they make the move.
“For Australian business understanding your market is critically important. The startup environment in China is like a bearpit," he said.
"It is tremendously competitive and very different to here. You must have something distinctive, something that is monopolistic or oligopolistic – something that other people can’t get.”