E121: Hans Tung, Managing Partner at GGV Capital – Interview

August 3, 2017


This interview on venture capital in the US and China is inspiring. It’s with Hans Tung. Hans is a managing partner at GGV Capital. He looks at investments from the global perspective, which he has done for years.

Just hearing him talk will give you energy to run through walls.

His portfolio is quite impressive. It includes Airbnb, Slack and Wish. And he was one of the first investors in Xiaomi, the huge mobile handset company in China, investing in their Series A, B and C.

If you want to learn more about looking at investments and companies from a global perspective, Hans is one of the best to learn from.

Here are some other things we talked about:

-What questions did Hans have for Wish before investing?
-What major trends did Hans identify in China way back in 2005?
-How did Hans know to invest in Xiaomi?
-What future trends does Hans see for investing in the US?



Dave Kruse: Hey everyone. Welcome to another episode of Flyover Labs and we get to talk to Hans. And Hans is a Managing Partner at GGV Capital. Hans is quite interesting because he takes a very global perspective on investing, especially including China and his portfolio is quite impressive. It includes Airbnb, Slack and Wish and he is one of the first investors in Xiaomi, a huge mobile handset company in China investing in their Series A, B and C, so not too shabby. So I’m excited to learn more about what Hans has learned over the years and what he is interested in now. So Hans, thanks for joining us today.

Hans Tung: Thanks David. Happy to be on the call.

Dave Kruse: Definitely. And so all right, before we jump into what you are doing now, which is a lot of interesting things, can you tell us a little bit about your background?

Hans Tung: Sure. I was born in Taiwan. I moved to Los Angeles when I was 13. So I did my middle school and high school in LA and then I was fortunate enough to go to Stanford for my undergraduate studies and that’s when, right around the time when internet started becoming a phenomena. After that I spent the next nine years of my career in investment banking and doing two internet startups and that took me from New York to Hong Kong to Taipei to Singapore. So I saw quite a bit of the world in that nine year time period and during that time I also saw that China potentially could emerge as the next interesting frontier for tech investing and ended up coming back to the US to join a US management firm called Bessemer Venture Partners in 2005 to start their China effort. So from 2005 to now, over the last 12 years is when I built out my venture investing career — about eight years in China and almost four years now back in the US.

Dave Kruse: Wow! All right and so I got a couple of different – many questions, but a couple I’ll start with it. So in 2005 did you go to Bessemer and say hey, we – you know you should look at China. Let me start your program or did they come to you or how did that work?

Hans Tung: Good question. I think back in 2005, 2004 it wasn’t obvious that China was going to be the next big thing, but there were some early signals that it could be interesting. Back in 2005 I noticed that all the internet companies that are big in the world were all in the US. Yet in China in a short period of time there were four IPOs that caught my attention. That was 2003, the number one travel website in China called Ctrip went public. The valuation was $216 million. The next IPO was Tencent. Now think of it as sort of the Facebook/Instagram/Whatsapp of China and they IPO’ed in Hong Kong and the valuation was around maybe $1 billion, $2 billion US and so that was sizable. It was something that was eye popping. It was the first of a kind unicorn in China and then Shanda went public in late 2004 as a gaming company and then – well the biggest IPO at that time, in 2005 was Baidu which was known as China’s Google. You know on the first day of their listing on NASDAQ the stock price quadrupled and went from you know zero in 2000 to a market cap of $5 billion in March 2005. So in a span of five years you have a $5 billion market cap company even though the revenue in 2004, a year before IPO was only $11 million. So in China, in a short span between September 2003 and May 2005, in the span of 18 months, four IPOs happened, with two what we call today unicorns over a billion dollar valuation. It was eye-popping and Chinese broadband internet penetration, not narrow band, but broadband, so you could do a lot more on broadband obviously than narrow band (dial up). Broadband, we see internet penetration was getting to about 100 million users and growing rapidly, about 20% to 30% a year. So you can see that or one can imagine that internet maybe the fastest way to build an online retailer, whether it’s selling virtual items like games or some physical goods, like Alibaba or like eBay or Amazon within the US. In China that would be Alibaba and then you can see that building a business online is the quickest way to scale on a national basis to get something offline in China, each province is almost like a different kingdom as in the case of Europe, so it’s just takes more work to expand offline. So that was – I think that was my aha moment in 2005 saying that you know what, the internet could be the way to go and in China a place that most of them associated with fast growth but also corruption and lack of clarity on the laws and so forth. Building a business online actually is easier, because the consumers have to decide to use their services, almost a meritocracy – pretty much making it a meritocracy not democracy. People like you, they pay for the service. If they don’t they cancel – they don’t come. So it’s very fair. There’s a lot – the market force decides who and who does it when. So I saw that internet could be quite interesting. Obviously I didn’t know that 10 years later, of the top 10 you know internet companies in the world today that’s listed, half come from China. Back in 2005 it was unthinkable.

Dave Kruse: Wow! And so how – you know at that point in 2005, I don’t think there is a ton of American VCs thinking the same thing about China. I could be wrong and you know better than me, but you know what made you and from your experience to be able to kind of see that potential? I know you grew up in Taiwan, near China and then you headed some start ups in investment banking. You know how did you see this before many of the other VCs?

Hans Tung: Right. A lot of smart VCs from Sandhill Road, from California, went to China in 2004 and dropped by.

Dave Kruse: Okay.

Hans Tung: Every single one of them was trying to figure out if there was a China play for them and if so, what would it be. I think I had a benefit of being a student of history and watching how East Asia in general, whether its Japan and then South Korea and Taiwan, Hong Kong and Singapore, the Asian four dragons, the Asian four tigers, all end up modernizing over a period of two or three decades and the effect will be that China with the export driven economy, exporting a lot of goods will follow that growth engine model as well and become much more modernized than before. So you have to take that view that it’s China’s time to modernize, therefore there will be a lot of investment opportunities that are associated with that. And the second thing is that most Silicon Valley VC will see China as a way to recruit engineering talent for the portfolio companies in the US and also were looking at investing and extending the semiconductor investing from the US and to some extent Taiwan into China. But what ended up happening is that anything that was export related wasn’t as good for venture investing in China rather it is about domestic consumption which is something bigger. In China, as I said, the broadband internet penetration rate increased and you can see 100, 200, 300 to now 700 million broadband internet users 10 years later from when I first moved to China and that has become a huge base for someone to sell services to them and that was something, that wasn’t as obvious to VCs in Taiwan or VCs in the US. And I think again – as a student of history – I love studying how the continental economy emerged in the US after the Civil War where you had railroads built in the US in a short period of time during those four years. I think it in the North from 8,000 miles to 40,000 miles the railway was built and then after World War II highways got built in the US in a big way, you know better use to work and during those two construction periods what you got was a unified national economy that is connected via railroads first and then from highways. China was starting to build their railroad as well. You can see that the national economy is emerging in China and if it had political stability, it could be quite interesting, that’s at a macro level. At a more micro level, what I also saw was that ecommerce – I thought -could take off in China, because my experience of living in China, working for a US VC firm was that shopping offline was a terrible experience. You buy something. As soon as you bought it, it’s yours, even before you leave the store and most of these top line enterprises were government linked and run by state owned enterprises, so the service level wasn’t great. The employees can work there forever. So they didn’t care whether they provide good customer service experience or not. Whereas someone like Alibaba was beating eBay with their free model. You can see that users want to spend time on it, buy from other sellers because the alternative is buying nothing in the offline store with terrible service. So despite the fact that you used to wait three weeks, four weeks for a shipment, they were willing to buy and try Alibaba, Taobao and then Tmall later and in that process what happened is that as more people used the service, the service quality grew and given that in China there there was no credit card, there was no … any sort of online payment or any kind of online payment company, Alibaba had to invent their own payment call Alipay. And what Alipay did was that in order to just solve the lack of trust issue between the buyer and seller in China online, it functions as an escrow service. It’s like we’ll get to deposit you know $100, $200 in there and you sell some or you buy something, you don’t have to worry if the guy doesn’t ship it to you, because the money you pay them sits at Alipay as a third party escrow service and only once you get your goods and within a week you don’t complain about the goods would your money be released to the seller. So you don’t have to worry about who the seller was, whether he or she is trustworthy or not, because your money is safe with Alipay. And as a seller you don’t have to worry about it once you ship your goods that the buyer wouldn’t pay you because the money is already there in the Alipay escrow service. So that, replaced the need to have a credit card as in the case you would do in the US with PayPal and the credit card in order for the online payment problem to be solved. And then shipping was a problem. There was no UPS, there’s no FedEx, there’s no DHL. It’s easy for US VCs to see that every condition that made Amazon and eBay possible in the US simply didn’t exist in China. But in China because shopping was such a terrible experience offline back then, that online we’re willing to figure out alternative solutions to solve that pain point. So what I learned is that instead of just copying or watching another country, one has to understand the historical condition, the sociologic condition for a society to solve its own pain point which are very common as used in the US but in a different way. That’s just a localized condition. I think that was my second aha moment – that localization is more important than the original creative idea, because how we figure out how to localize something determines whether you can build a huge company or not.

Dave Kruse: That yeah, I think that’s a really good point. I think what a lot of startups miss is that you can have a really creative idea, but if you don’t understand the process of how to make the idea happen and make it part of somebody’s daily routine, then it’s not going to go anywhere at all, which is – that’s interesting.

Hans Tung: Right, and what I also learned is that the lessons I saw in China are not China specific, because what I find in China is a bottom up approach. You target the mass market of users for there are more of them online, they need more help and they are underserved – instead of catering to the richest 1%, you can focus on the remaining the rest – the 99% – and you can build a much bigger business. That analogy I like to use in the US, we see Uber start with Uber Black as a premium black car service. For the 1% customers if they want to build the best brand and you want to go out or you put a best driver to serve that 1% and then four years later they offer UberX and that becomes a mass market solution and ends up propelling Uber to become a much bigger company. Obviously since then there’s Uber Pool and other services that target different segments of the consumer base. But UberX was the one that went much bigger scale and more people could afford UberX and therefore people would consider UberX or even Uber Pool as a substitution for a car ownership in the US. In China, it was different. In China, the “Uber” is called Didi, D-I-D-I and we’re an investor in the company as well and eventually Didi bought Uber China last year. But Didi started off with going after taxi. Just how do you book a taxi? So they couldn’t even charge the user to book a taxi, because by law in China you can’t charge a user for doing that and the industry for the first few years, they had a lot of volume or the rights but no revenue. But people wouldn’t give money to grow because once they have the user base and the market share they can always up sell value added services and offer Didi Black later for the high-end user. Because you already have an established brand that people trust, more high-end users are willing to come and use their services and then build a company in exactly the opposite way that Uber did with the mass market first – to raise the most amount of money and have the business market share before they monetize with additional value-added services to specific higher-end users later. So this model we actually think was not particular to China, but it may also work in many other emerging markets all around the world and potentially even in the US. My experience with Wish [a company] that targets consumers in the fly-over states, gives them the flexibility to buy anything they want, anything they please with mostly merchants from China today, is a testament that thesis can work even in the US.

Dave Kruse: Yeah, and Wish is pretty amazing. We’ve bought stuff from Wish. I think my wife bought some dresses on there and man, it’s amazing that its affordable, yet good stuff and it comes to your door. Like the shipping time is well, less than I thought it would be. So it’s very interesting.

Hans Tung: Yes, initially it only took them three to four weeks and over time as there are more people using it and the merchants trust them more and they’re willing to be more responsive, the shipping time gets cut down to a week or two weeks. I think over time it will be a week or less. So as there is more volume, the delivery time could be a lot less and they can offer — once they know you more and know you’re a frequent shopper — they can figure out a way to get you the stuff sooner by being willing to take out a bit more inventory on the most popular items with the most active consumers. So once you have the way to use data to help you manage the user base, you can provide more customized service — a higher service level to the most frequent shoppers that provide highest profits over time. So it is interesting to see how Wish’s two founders who came from Google and Yahoo – you know search guys – so they always want to use technology to solve problems. So they have the leanest team of anybody in the ecommerce space, yet have done the most volume of gross merchandise value. It’s just kind of interesting as you see a mixture of east and west, of both Amazon and Alibaba in Wish.

Dave Kruse: Really? How lean a team is it do you know? Well you probably do know. I don’t know if maybe you can disclose it. I am curious now.

Hans Tung: I think one of the things is the employees, the number of employees in the hundreds, not in the thousands.

Dave Kruse: Wow!

Hans Tung: Yet the gross merchandise value you’re doing could be counted in billions per year.

Dave Kruse: Wow! Okay, so back in 2005 I am curious why – I mean I know you had an investment background, but you also had a start up background. You know you saw this huge opportunity in China and you decided to go with the VC route versus like starting you know your own internet company or start up. You know why did you decide to go with the VC route versus…

Hans Tung: Right, good question. For me, I know my limitation. After I did my two startups I realized that I am not someone who is as good as to focus on one vision and completely see that through. I have a wider range of interests, much more interested to figure how technology effects society and therefore how do you come up with a better solution that’s both disruptive, at the same time accretive to improve the utility factor in society. So I will fall in love with more than one vision, more than one start up idea. As such, being a VC has allowed me to work with you know tens if not hundreds of portfolios over my lifetime will be more interesting, and for me it fits my skill set better than working on just one. That’s why I admire entrepreneurs who focus one idea for five or ten years tremendously. I think it takes a lot of risk. It is sometimes extremely lonely to be a good entrepreneur and a little bit crazy too. So I have a lot of admiration for entrepreneurs who want to do that. I am happy to be behind them to help them to succeed with that.

Dave Kruse: Got you. No, that makes a lot of sense. And so how – so why don’t you just focus on China or did you just focus investments on China back in 2005?

Hans Tung: That’s a good question. I am loving the question and by the way I learned this from China. Several people asked me that when I decided to make the move in 2013 to move back to the Bay Area. What I saw was that in 2005 that only China was the right fit. Okay, China was rising. It could be on par with the US. China and US will end up being the two largest technology economies in the world. So that was when I saw a trend and tried to go there. In 2013 I saw a separate trend, which is that more Chinese companies will eventually go expand beyond China and more US companies, start-ups, will be interested in China, either selling into China or sourcing from China, set up R&D centers in China. You may eventually even learn something from China as the case with many social networking companies in the US today are learning from WeChat in China, given its popularity. So I thought it would be a more cross border convergence between the two markets. So as I would have been in China for eight years, I thought the best way for me to be useful and helpful to my portfolio companies, is to come back to California whilst they maintained linkages in both markets. So right now I go to New York probably six times a year, LA four times a year, Seattle twice a year and I also go to China six times a year. So each month I am either in New York or China basically, and there’s always something going on. And I think over time I’ll probably end up going to different cities in Texas and the Midwest. I don’t go there speaking directly. I’ve seen many of my portfolio companies in the US target users in the South as well as in the Midwest, basically anywhere where there are underserved consumers. We think that it will be a great to have a service targeted to them. And I think something else came along that caught up in 2013, 2014 is that with the arrival of millennials, there was more similarity between millennials in US and China and around the world as there is between the millennials and their parents. Meaning that someone, a millennial in New York, in Austin, in Beijing and Shanghai have more shared values and more shared taste than between the millennials and their respective parents’ culture. And that was a sort of insight or a intuition that I follow when I make an investment. That’s why you can see sometimes somebody like Wish that can scale globally outside of China so quickly. They are based in San Francisco, but within the first one year of selling Chinese merchant products from their platform, you already see users from the flyover states in the US, you see users from Western Europe, you see Germany, UK and France as well as users from Latin America, millennials all using it. And the span of the speed that that happen was much faster than anything I had ever seen scaling on a global basis and that taught me that millennials love spending time online, especially on a mobile phone. They love to swipe right or swipe left just to check on what’s going on and they would be very quick where they dispense their opinion on any product. It doesn’t take a lot of time to make a decision and have an opinion of their own. And that is a global phenomenon, not a US specific or a China specific phenomenon, which means that companies that focus on mobile first and can build a global first company targeting millennials, and the price point for the millennials actually is a lot cheaper than otherwise. Therefore a lot of talent in the US that’s good at branding, storytelling and so forth could be now tailored towards an UberX type product without needing to wait for four years before showing up with UberX. They could sell UberX from day one and that to me is super exciting.

Dave Kruse: Interesting! Are there certain areas that your super – really excited about? I mean ecommerce has definitely been a theme of consumers. Where do you think that could be right for disruption in the United States where you are focusing more on the masses instead of the high end?

Hans Tung: It will all be millennials focused. I think strategically we are – we manage close to $4 billion investing in both in US and China – it’s roughly evenly split. We have six partners plus another roughly 10 investment professionals and– we divide our team is in three buckets, three sectors and these sectors has a global process to be investable to the US and China. The three sectors are consumer internet and includes B2B market places as well and then there is SaaS, enterprise SaaS cloud investment that look after providing solutions to enterprises big and medium in size and the third bucket is frontiertech, that’s looking at AI, machine learning, VR, AR, anything that takes uses a hard port technology to solve a national or global problem. So those are the three practices that we have with some other additional minor sectors underneath, but this was the three big buckets and so we think that these are trends that will be significant over the next five or ten years that we need to capture. Specifically within consumer internet we think that partly millennials on a global basis allow you to build a global company from day one and this premise from social networking to ecommerce to building e-brands as well as building market places that makes it more efficient, and collapse the supply chain of a lot of offline company verticals. For example in travel, Airbnb is affecting how hotels run their businesses and in home furnishings, Houzz, our portfolio is affecting how architects and designers work with their suppliers and their clients. In the case of Didi, it’s affecting how the transportation industry is going to be shaped going forward. So all this is what we call sort of consumer internet that we track. In the case of SaaS enterprise we think that more and more cloud-based software solutions is going to change the world and enable small-to-medium companies to compete against big enterprises and make them more efficient and leverage internet to scale much quicker with a less amount of money. And also the way you build a social product today in the consumer space is affecting the way that an enterprise product is being built. That it’s going to be easier to use enterprise product, you know with the same way you would play with Facebook, Insta[gram] or Snapchat. You look at how Slack – it is a very consumer friendly product yet it used for corporate use and the scale is much faster than any corporate Saas ever before. We see more companies like Slack and think more products with Slack will be built within various segments within the enterprise space. And obviously frontiertech – it combines hardware and software and services all into one and we think that something like Alexa or Echo that is going to be a revolutionary product. DJI from China is the number one drone company in the world and what they are doing in the consumer space and down in the industrial space are very interesting and exciting. So across the board these little trends we see and obviously we think that digital health for healthcare in general over the next few years would be much more affected, you know where the IT industry had been over the last 30 years. So we started investing in digital health as well to study that trend more.

Dave Kruse: Interesting! I think I used the majority of your portfolio companies at some point Houzz, Airbnb and Wish, you mentioned so many. I use – like Houzz I now look at almost every day, so…

Hans Tung: Yes, same here. It’s both inspirational, gives you new ideas, as well as aspirational. It makes you want to work harder to make your house better.

Dave Kruse: Its true. I know. Every time that comes in my inbox, I’m like ‘Ooo! What’s it going to show me there?’ It’s terrible and awesome. No, I mean it’s terrible in a good way, but I love it though.

Hans Tung: Right, right. I know what you mean, yeah.

Dave Kruse: So I think we’re kind of running out of time, but speaking of inspirational, it’s fun talking to you, because I just love your vision and you know your thesis and – but I’m really curious. Like with Wish, well it’s like Xiaomi, you mean in this team, you know at what point did you know that they have something special? You know how early did you invest in Wish or Xiaomi what do they have? Do they have much? Like how do you know they are going to build a – this is the question I am always curious about everyone. It’s just…

Hans Tung: How do you know?

Dave Kruse: Yeah, exactly.

Hans Tung: No, that’s right. It’s one thing to write a small check $50,000 to $100,000 to participate in like 100 companies and one of them is up being Wish or Xiaomi.

Dave Kruse: Yeah.

Hans Tung: That’s one way to invest. Obviously that’s not how we invest. With Xiaomi it was unique. I got to know the founder Lei Jun for three years before he decided to do his second start-up. He was at his first start-up Kingsoft for 18 years before they went public and then he took time off for three years to invest as an angel investor. He was interested in thinking about what is the next big thing. So he used to be investing exclusively in the social networking in China as well as mobile internet services and e-commerce and those happened to be the three trends I liked in the consumer internet space at that time in China. So we clicked and we co-invested together. In the process of seeing him doing that, you can tell he is edgy – thinking about what to do next. So when he decided to do the next start-up, he decided it will be something that can do all three, capture all three trends, but bigger. And that’s to build his own Smartphone. And the way you sell a Smartphone, market a Smartphone, introduce a Smartphone, is going to be in a very social networking way – in a way that would allow users to want to talk about his phone and to introduce these phones to each other. He wants to sell the phone over the internet because using e-commerce is a much better building a business than doing it through offline retail and by passing the middle man and pass on the saving onto the users. He knew that if you want to build something that was going to be able to provide a lot of mobile internet service beyond just the hardware of the phone, you would think of the company as a data company not a hardware company. So the way you thought about how he was going to approach and build something that’s disruptive and make the price so affordable, a lot of users can buy a spec that’s comparable to Samsung, comparable to the iPhone at a much cheaper price because he is selling directly to them. He is not sharing anything with the middle men. He is not putting any money into marketing because the price would be so affordable that people would naturally be in awe and talk about it and market it for him for free. And the experience we have from running another company earlier could give him the comfort to try this revolutionary model was something that most people just wouldn’t think was possible. But for someone like me who spends so much time with him and love these three trends that he has been investing, I was naturally very … gravitated and he had me believe that a model, his model could work in China and no one else had a combination of his experience to make that model work. So if we could see the intersection of a great idea that’s just a competitive landscape at that time, no one else knows how to do it. This entrepreneur and his core team, is uniquely positioned to make it work, then you have more guts to bet on something that is completely disruptive. If someone told me for Xiaomi to work, back in 2010 [that] Motorola, Erickson, Nokia will all have to fail for Xiaomi to work. But back in 2010 or 2009 that’s impossible to imagine that would happen. But if you believe that this model makes sense, because you see how it happened in online gaming already, you’ve seen it happen in online commerce already, you have seen it happen on the social networking already, do you think that hey, this model could be tied to the next one which is a Smartphone. And obviously this is 2010. iPhone, Xiaomi, Samsung and Huawei had been a full business winner of that space and now you don’t care about Nokia, Motorola or Erickson as much these days. And so I think being close to action and see what’s on the competitive landscape and believe that, I hate to say this, but it’s true, that democracy and meritocracy combined together is the most powerful and most unifying and most liberating force there is. You may have your case of fake news from time to time that you need to manage, but at the same time you also release a lot more potential than is possible that any monopoly potentially could be disruptive. And so if you have that belief that internet technology could be used for a good cause and despite some some of the problems that will happen from time to time and then you believe that what they keep doing back in 2010 made sense.

Now in the case of Wish, I asked Peter and Danny five questions in the fall of 2013 which were: what’s selling more on your platform? Branded or un-branded [goods]? And most VCs want to hear branded goods, because then they have special relationship with the brand, you have something that a lot of people will trust and want. Therefore you have the special advantage. For me as you want to probably want to hear private label or un-branded goods, because that means that you can – it’s a product that you can scale more quickly and is more affordable to the masses, and you can figure how to sell brands later. I don’t worry about the fact that you don’t have good branding. From day one if you sell unbranded goods, then brands won’t work with you later. I don’t think that’s true. I think once you have volume, you have market share and interactive customer service, eventually brands will come. It will be tough to win in the beginning, but over time once you are big that you could figure out a way to work with them later. So getting to scale first with something that’s more affordable for the mass market, to me made more sense than the unbranded goods.

And second, I asked him where are their source of goods from? They told me mostly from China and I was impressed, because most of them in the US wouldn’t have the guts to go to China to do that and their source from Chinese merchants online to sell to users worldwide, that just seems very hard to manage.

And number three I asked them, who is buying them in the US? Is it people in New York, LA? or the people consumers in the flyover states and I want to ask you which flyover states? I don’t want to sell something only people in the top three or four cities combined, because how big is that market? That’s maybe at best, a $20 million market worldwide or $30 million market worldwide. It is going to be extremely niche and niche is not interesting. Then they said you know, they showed me a map of where they delivered – a map of the zip codes of where they deliver their products or goods to and most of these are in the flyover states which I absolutely loved.

And then the fourth question I asked them is how many – what’s the sales split between – the revenue split between the US and elsewhere and I wanted to see how fast they could scale the business. And within six months in trying this solution, they said over … close to 50% of the goods are sold off of the US now, it’s got to be over 50%, we’re growing fast. And so I saw that this is one of the rare e-commerce companies that could sell globally from early on and that’s extremely hard to find. And that people don’t mind the fact that a product came from China. They are okay to put up with some of the Asian sizes. If there are more choices for them to choose from and a price range that’s affordable, they are willing to live with the limitations and the market spoke and said, that’s the right model.

And lastly, I asked them how many people do you have in China? They said zero, so we could use the help to build things in China. I said sure. I have been in China for eight years and just got back. I still have a good network there and be happy to help you figure out how to scale up your team in China. So those five questions – every single answer that turned someone in the US in the VC space off – but they were exactly the five answers I was looking for. It’s got my thesis and I love the scrappiness and the drive, the hard working personality of the two co-founders, so we decided to make the decision to bet on them. I met them maybe only twice and mostly able to have the comfort that they were doing the right thing.

Dave Kruse: Wow! Interesting. All right, so we’re almost out of time. I am curious. I really like how you think and a lot of your portfolio companies, I am sure the Founders, it’s much to their credit, but I also think you probably…

Hans Tung: It’s exactly to their credit. I’ll be ver clear. If you see something, you have got to make it work altogether, so they deserve all the credit…

Dave Kruse: I was going to give you credit, because you know in the sense because I do appreciate the – I know you want to give them all the credit, but I mean you – the energy you give off is pretty inspirational. I feel like you could, when you talk you can help people walk through walls a little bit, which is you know a big part of probably investing or like just being there to help motivate them through that downs and ups of building a company, so yeah.

Hans Tung: We actually enjoy doing that, to be able to share our sort of belief and enthusiasm in what they are trying to do, with them and being a former entrepreneur I know how lonely it is at night. At 1 o’clock, 2 o’clock in the morning you look around and no one is in office and you’re stuck making something work and you know that if you don’t make the right decisions, you know 50 or 100 peoples’ lives and their families lives will be affected. So we know how hard it is to do that, so we try to in every way possible to support them. We don’t make the investments lightly, but once we do we’ll come in and help them to succeed. I think that’s important for the VCs now that we’ve not got too carried away with their own role and impact. That would have to be someone that can cheer on and support our own.

Dave Kruse: That makes sense. So I know we’re pretty much out of time. Do you have time for two short questions? If you don’t, that’s fine too.

Hans Tung: Sure.

Dave Kruse: Okay. Well, one of them is, I am curious, you’ve probably seen a lot and what have you learned from the companies your – I was going to say failed investments, but…

Hans Tung: What I have learned is that in some sense I think we are very lucky, all of us have been lucky for it in this time period. It is being as through the history, if you look at it over the last you know two, three thousand years, people are at war more with each other than they are at peace, and so being in a period with nothing really major on a global scale has happened since World War II allows us the chance to have prosperity and to grow and do things in a way that was not just possible three hundred years ago when there was a war or something every other year. So from that standpoint I am thankful to see how technology can become put into interesting use with venture money since the 70’s and 80’s. But we shouldn’t take that for granted and seeing how even before the election results from last November, even a year and a half earlier, in terms of that discussion I had thought that you know that the election would turn out the way it did because there are a lot of people in the US who haven’t – you know worldwide, haven’t benefited as much through technology. So I think for us to want to continue this growth and to continue see technology making a difference, how do you make sure that technology innovation is more even, more well distributed throughout society. What should the technology companies need to do to invest more in the flyover states in the case of the US? Instead of just recruiting from the top 20 universities, does that make sense to figure out a way to recruit from the top 100 universities in the US and build bigger R&D centers in key cities in the south and the west? All of that is something that growth companies need to spend more time thinking about. And we learn from our portfolio companies that the entrepreneurs in New York and San Francisco, Silicon Valley, LA are great, but there are interesting great entrepreneurs everywhere. So we are hoping that start-ups that are in New York, San Francisco and LA with founders that originally came from the Midwest and South, would be interested to expand their services and expand their team back home. We saw that in China happen and we think that in the US it’s not impossible that it could happen, especially if real estate prices in New York, the San Francisco Bay Area and LA continue to increase. This still overall fact could happen. So I think over the next 10, 20 years what will be most interesting is to see how technology gets diffused around society and more start-ups come out and happen in more than the two coasts we’re in today. You see that would be the single most determinant as to how financial prosperity we could enjoy as a society. So I think that is something that I – an issue that I care about. I look at. I think someone calls it the – former founder of AOL calls it the ‘Rise of the Rest’ and I think there is definitely some barren truth to that and from looking at Wish, I can definitely see that it is possible and doable.

Dave Kruse: Well, of course we like that since we are based in Madison, Wisconsin one of the flyover states and we think we have some good stuff going on here. So yeah, I like the vision and…

Hans Tung: And I think it will take more someone from Wisconsin who has worked in Silicon Valley or New York and ends up going back. One of the people we met at CMU, Carnegie Mellon, Pittsburgh, I think it was professor Andrew Moore. He is now running a Computer Science school in CMU. He was at Google for 10 years. When he left CMU a lot of people were disappointed because he had chosen to go to Google, but now after he remained at Google for 10 years, he went back, now with the knowledge in network that he has, he can be much more beneficial to the CMU community in Pittsburgh. It’s almost like in the case of like LeBron James. He had to leave Cleveland and when he went back he did the impossible, brought Cleveland the championship. I think the same kind of sort of trend analogy could be applied into tech spaces.

Dave Kruse: I like it, all right. So last question, you seem – I’m curious how you keep learning and what you read. I mean you seem like a man of history, which I like. But yeah, what do you find yourself reading to get new ideas or just it could even be just for fun too.

Hans Tung: I think any idea that eventually needs to takeoff and becomes something big, has to fit what the society needs. Therefore as much as I read about what’s new and check out the different tech blogs and look at what are the new gadgets and so forth, I still come down to enjoying reading history about technology adoption. Any business books or history books, it’s about how you take the new idea and make the more mass market attracts me. So I think from like how ‘Crossing the Chasm’ that Geoffrey Moore wrote back in the 90’s to what books like the Outliers or Tipping Point or Blink written by Malcolm Gladwell.

Dave Kruse: Malcolm Gladwell, yeah.

Hans Tung: That’s right, Gladwell and to Black Swan, these are things that talk to me and help me direct those paths and in general I guess I love just reading history. So modernization, anything from the late middle ages, Renaissance period to the modern times in Europe, in US, in Japan, in China, in Russia or India attracts me. So I think once someone has a more historical perspective in looking at things, you don’t just focus on what’s happening tomorrow. You focus on the next three, five, ten years and what should happen, what could happen and what the benefits to society will be if it does happen. So how do we go back and figure out how to go from point A to point B as a result. That is how I think it helps me to recognize what could be the next big thing.

Dave Kruse: Interesting, all right. Well, Hans I really appreciate your time and thoughts and your energy and yeah, it was awesome getting to hear about your experience and your vision, like way back in 2005 and what it is now. So I really appreciate your time and coming on this show.

Hans Tung: Sure. Sure thing. I enjoyed your questions. When you first emailed me the questions, I was impressed. Sorry, I couldn’t a couple of times make this work.

Dave Kruse: No, I am glad we finally connected and I decided to kind of follow your career over the next 10 or 20 years. So I definitely hope things go well and I appreciate it.

Hans Tung: Sure thing. I would too.

Dave Kruse: Definitely, and thanks for giving multiple shout outs to the flyover states too, that’s good.

Hans Tung: Well, it’s one of the reasons to be here.

Dave Kruse: That’s right. And thanks everyone to listening to another episode of flyover labs. As always, I greatly appreciate it and we’ll see you next time. Thanks everyone. Thanks Hans. Bye.