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China innovators

Y Combinator to set up China arm with ex-Baidu executive as CEO

PUBLISHED : Wednesday, 15 August, 2018, 6:21pm
UPDATED : Wednesday, 15 August, 2018, 6:22pm

Former Baidu executive Qi Lu has been named head of Y Combinator China, marking the American start-up incubator’s first full-fledged international effort.

Y Combinator, which has seeded companies including Airbnb, Stripe, Reddit and Dropbox, will start its programme in China as soon as next summer. In the US, the accelerator selects two batches of companies a year for financing, advice and connections in exchange for a small percentage of equity. Lu will lead the Chinese programme, which will be called YC China and adopt a similar approach though there may be tweaks to fit the domestic market, said Sam Altman, Y Combinator’s president.

Altman said he first spoke to Lu about running the initiative before he joined Baidu. The Microsoft Corp veteran was hired in 2017 to accelerate the Chinese search giant’s efforts into everything from autonomous cars to digital assistants. But he surprised investors in May when he announced he was stepping down because he could no longer work full-time in China for personal reasons. That departure hammered Baidu’s shares.

At Y Combinator, Lu will split his time between China and the US. He will spearhead an effort to discover high-growth start-ups and help them explore the US market. The organisation will seek to raise funds in Chinese yuan and potentially work with American backers if dollar financing is required, but Lu declined to provide more details. Down the road, YC China hopes to leverage local founders’ expertise to help US entrepreneurs get into the world’s second largest economy.

“How to help American companies land well in China has been a common struggle,” Lu told reporters during YC China’s launch in Beijing. “There’s structural reasons, there’s a lot of reasons for these companies having difficulties.”

Y Combinator’s deeper forays into China come as an increasing number of American investors back Chinese start-ups despite escalating tensions between the world’s two largest economies. In addition to Sequoia Capital and Lightspeed Venture Partners that have an established track record of investing in Chinese start-ups, Bloomberg reported that Peter Thiel is considering strategies to invest in the country.

The growing interest is a result of the rapid growth in Chinese technology companies. Five years ago, the US had nine of the world’s 20 most valuable internet companies and China had just two; today, while there are 11 American firms on that list, the number from China has surged to nine, according to Mary Meeker, a partner of venture firm Kleiner Perkins Caufield & Byers, in her May internet Trends Report 2018.

Earlier this year, Y Combinator held its first official event in China at Beijing’s Tsinghua University, aiming to recruit more start-ups to its programme in Silicon Valley. Lu will continue to find Chinese start-ups for the US-based effort later this year; after that, he will focus on building the programme in China, Altman said. Currently, of more than 1,700 companies Y Combinator counts as alumni of its programme, fewer than 30 are based in China, he said.

Willett advisers, the investment arm for the personal and philanthropic assets of Michael Bloomberg, the founder and majority owner of Bloomberg LP, invests in Y Combinator start-ups.

Lu “will be able to take what works with YC in the US and adapt it for China,” said Altman. “My best guess is that a significant portion of tech companies in the next decade will be in China or the US Adding Chinese founders to the community will be exciting.”