Analysis | Can China’s Internet celebrities run successful businesses?
After a record year of fund raising in 2015, the euphoria may be ebbing for China’s venture capital firms
Luo Yonghao had a vision when he founded Smartisan in 2012: China was ripe for a home-made smartphone that was so beautifully and artistically crafted that it could rival Apple Inc’s iPhones and Samsung Electronic Co.’s Galaxy.
Four years later, and after burning through 300 million yuan of investors’ funds, the reality hasn’t quite lived up to the vision for the former English teacher and Internet celebrity, who has no manufacturing experience. He’s sold 1 million of his cheapest phone, an 899 yuan ($140) model with modest specifications called the U1, reporting a 600 million yuan loss in the 18 months since the start of 2015.
Luo’s product launches, far from being the standard-setting staple on China’s technology circuit, has descended into annual variety shows, where he collects between 100 yuan and 600 yuan a ticket for the audience to listen to his repartee and revue.
If the 2016 launch of Smartisan’s T2 phone disappointed his fans, Luo admitted as much.
“To be frank, there is not much innovation in hardware this time, which makes me guilty to those loyal supporters of Smartisan,” he said during his Shanghai product launch last week. “The past few years have been very difficult, but I have a great determination that has supported me to carry on to today.”
Flushed with easy financing and a dearth of investment options, Chinese venture capital funds and private equity investors -- including government-backed funds -- tripled their money under management to a record 2.2 trillion yuan (US$330 billion) in 2015, according to Zero2IPO Group, a consultancy.