DaD Asia is a seed capital investment vehicle for internet related start up projects in China. Since beginning operations in China four years ago, DaD Asia has invested in 14 different start-ups with a typical initial investment of USD 50,000 to 300,000. The company focuses on various internet projects related to web services, e-commerce, social networking, mobile, software as a service, media and entertainment, and gaming.
Monica Muriel is a co-founder of DaD Asia. She received a double degree in Law and Business Management from Universidad Autonoma de Madrid. Business Tianjin recently had the chance to talk to Ms. Muriel about how DaD Asia operates and about various internet trends.
How did you end up going from working as an auditor to becoming an entrepreneur in China?
[Laughs] Well actually, it was quite random. Although I did like my job as an auditor, it was a bit boring and there wasn't a lot of room for growth. So, I talked with my uncle, a successful entrepreneur. At first we were thinking about working in the US but in the end, my uncle convinced me that China “was the future” and if we went there we could start something together. A couple of months later I quit my job and ended up in Shanghai. Early on we decided that we wanted to do something in the internet space. However, we soon realised it was quite complicated for foreigners to start their own business in China so we got in touch with DaD in Europe. At the beginning we talked to them about bringing one of their successful products and replicating it in China, but after doing some research we instead suggested bringing DaD to China.
What kinds of projects does DAD Asia invest in?
Historically we have done a lot of e-commerce, but now we are investing in some new models. Right now there is a lot of interest in the market for travel and education so we are exploring those opportunities. Whatever project we invest in, it is very important that there is a clear business model and evidence that it can be executed well by the proposer.
Tell us about the screening process that DAD Asia uses to find projects to invest in.
Well, first we do an initial screening and analyse the materials they submit to us. The proposal will go through a chain of people starting with an analyst. If the proposal passes his criteria, it will then make it to an investment manager and then finally to an investment committee. From there the entrepreneur team will be brought in for a face-to-face presentation and interview. Finally, we will make an analysis of the project and present it to the investment committee and if everything goes okay we will invest.
What is the process after DaD Asia finds a project worth investing in?
DaD Asia does more than just provide funding for entrepreneurs. We also provide support in different ways. We regularly meet with the start-up management teams that we have invested in and give continuous support by setting KPIs (Key Performance Indicators) and advising them on corporate structure. We also advise the management teams on efficiency, marketing, legal issues, designing PR campaigns and so much more. Additionally, DaD Asia provides access to a network of contacts that can help in a variety of capacities.
What kind of financial returns does DaD Asia usually receive from a typical investment?
Our target return is 10 times our initial investment. We have invested in some projects that have yielded two times and some that have yielded 100 times our initial investment. Usually it will take about three to five years from when we inject the funds to when we realise these returns.
What is the number one reason that a proposal submitted to DaD Asia might fail?
When we analyse a proposal it is important that there is a market for the product or service and that it will be profitable. A lot of people will send us plans and prototypes that might be visually appealing or have some interesting functions but without a clear business model and strategy to obtain income and profits. A proposal won't make it very far.
What was the worst proposal that you have received?
We get a lot of proposals submitted where they emphasise China has a market of 1.3 billion people and that if they get just 1 RMB from each person, then their website will be extremely profitable. However, the actual amount of internet users in China is around 530 million people. Furthermore it is incorrect to think that you could generate sales from everyone in this large and very diverse marketplace of users. Other proposals are so overly complicated and involve the customer completing so many steps to setup. If you aren't willing to complete all these steps, how can you expect customers to be willing to?
What kind of differences do you notice between Chinese entrepreneurs and European entrepreneurs?
Well, for better or worse, Chinese entrepreneurs are action people. They generally don't spend as much time planning and are quick to go to the market and to react. So their speed of pace can be much quicker than in the West. Which I think is good for this kind of market. Europeans on the other hand are more metric and detail oriented. Because of the financial crisis, Europeans tend to be more conservative, especially with investing capital because there isn't as much available in the European market. In China there is a lot more capital available for investment.
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What kind of general business trends do you see emerging on the Internet in China?
Lately O2O (Online to Offline) has become very popular in China. O2O can be defined as attracting users online and directing them to physical stores that are “offline” (for example, group-buying). These trends are noticeable especially within the travel, food, and health/nutrition industries. Chinese people are becoming increasingly more conscience and concerned about these products and services.
Are there any online markets or business models that are difficult to target/setup in China that are already established in Europe or else where?
There are some services which the market is not ready for yet. For example, in our portfolio in Europe we have some luxury and gambling services that wouldn't be appropriate in China. However, it is also important to observe growing trends and the changing legal climate in order to properly time the market because sooner or later there will be a market for these services.
What advice can you give to the internet entrepreneurs who might be reading this article?
Go to the market! What I mean is that there are a lot of start-ups that spend so much time developing their product and delaying the launch. However, without going to the market you cannot get feedback from users and customers and you run the risk of developing in the wrong direction. Customer feedback is crucial in order to improve the product and to make sure it is what the customer needs. A lot of start-ups feel that the moment they bring their product to market is the “moment of truth.” While this is very important, the sooner you go to the market for feedback, the earlier you can start improving the product and make sure it is in line with your customers' desires and expectations.
By Justin Toy
