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Ron Cao, founder of VC firm Sky9 Capital, tells Sebastian Shehadi about the impact of technology, especially from China, on global investment trends.

Q: What are the biggest trends in international investment that aren't being talked about enough?

A: I believe that Chinese startups will be the international yardstick for the size and scale of growth that companies around the world will be measured by. This is because Chinese tech startups are reaching IPO incredibly quickly (an average of five years, compared with nine for similar companies going public in the US) and there is a wealth of high-quality of Chinese entrepreneurs. The country’s venture capital market is also evolving rapidly, and China offers unique opportunities for startups, including investing heavily in R&D and its internal supply chain, alongside a population that is quickly adopting new technologies.

All these factors will see Chinese companies become increasingly influential in the international market. So far, most investments in China have been focused domestically, but Chinese companies are looking to become more global increasingly earlier in their lives, even in the startup phase. We’re seeing more and more Chinese companies looking at the US or south-east Asian market as the first market to penetrate, because they feel they have certain advantages, such as a technology advantage or a business model first-mover advantage, that prompt them to enter those markets earlier. We’re seeing that happening in real time and I believe it’s quite a significant trend that will have an impact on global economic growth in the medium to long-term.

Q: Why are short-term developments, such as trade wars, less of a concern for your business activities?

A: A number of new technologies that are on the horizon mean that long-term changes will continue to have an increasingly profound impact, such as the 5G network, which has a much lower latency and is potentially up to 100 times faster than what we are used to today. Just imagine the type of applications that will enable us to run, the rich content we can watch, the multimedia broadcasts, the interactive shopping. These are all around the corner, although sometimes it can be hard to fathom how big they will be and how much disruption they will cause. On top of that, the advancement of AI and adoption of blockchain technology will have almost endless the applications that will be incredibly impactful. These will cause permanent disruptions to the status quo that will have a greater long-term impact than any short-term policies or phenomena.

Q: How is Sky9 furthering using tech to make investment decisions?

We’re exploring how to use data to help us make better decisions. Data has helped almost every industry to be more efficient and run more effectively. We’re seeing data helping the hedge fund industry in high-frequency trading, some of which is highly automated, and the wealth management industry to analyse data, look for patterns and try to be more intelligent in making decisions.

Venture capital has traditionally been more of a craft-led, artisan business, but there’s also a lot of data around entrepreneurs and quality of companies. The question is how we leverage that to make venture capital into something more institutional and systemic. That is, I think, the opportunity for our industry.

Q: Greenfield foreign investment from the US into China’s ICT and electronics cluster hit an all-time low in 2018. Can this be so quickly attributed to the trade war?

A: I don’t think the decline is trade war-related. Foreign direct investment is still very important to China, expertise that multinationals and foreign talents bring to China is important to the country’s development and the government understands that, so they encourage open doors, free trade and talent coming in and out of the country to learn, to develop, and to collaborate. Overall, I don’t think there are any long-term trends that are different. I think we are heading towards a more open China, a more co-operative China and a China that’s going to play an even more important role in the world stage.

This article is sourced from fDi Magazine
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