Hearst has gone through a century-old cycle, and Hearst Capital has also gone through a quarter of a century. It has been acting as the group’s reform pioneer and industry “tentacles”, continuously injecting enduring vitality into the century-old store.
Among the many CVCs (Corporate Venture Capital) in China, Hearst Capital is undoubtedly a very special existence.
Different from most strategic investors who require business cooperation, Hearst Capital, with its extremely streamlined team, has no hard and fast standards for the track and round of the invested companies. The essence of business is the supreme logic, and this institution is more like a typical financial investor. Looking back at its 25-year history, it is not difficult to find that this positioning is inseparable from the original intention of the Hearst Group to invest.
Hearst is one of the world’s diversified media and information service companies. The world has more than 300 magazines, 30 local TV stations in the United States and leading cable TV networks, with an influence covering more than 170 countries around the world.
In 1995, Netscape, the originator of web browsers, approached the Hearst Group for investment. At that time, it was still the embryonic stage of Internet technology, and no one would know the future direction. After internal discussions, with the idea of ”learning new trends through investment”, Hearst Group not only invested in Netscape, but also established Hearst Capital. Since then, Hearst Capital has been acting as the group’s reform pioneer and industry “tentacles”, continuously injecting enduring vitality into the century-old store.
After many waves of Internet product development, Hearst Capital has stepped on a number of key points: In addition to Netscape, there are also e-book basic technology E-ink, streaming music platform Pandora, streaming TV Roku, etc. . In the process, they have also become the Bole behind many star entrepreneurs——
Contemporary Iron Man Elon Musk (Elon Musk), the first external financing company after dropping out of Stanford University, Zip2 (publishing software that develops online content for news organizations), received investment from Hearst Capital. Zip2, which had increased its horsepower, was acquired and exited by the well-known computer company Compaq. That’s why Musk won the first pot of gold, which opened the way of continuous entrepreneurship that he later talked about: Paypal, Space X, Tesla, etc.
Another representative entrepreneur is Mark Cuban. In 1995, Cuban co-founded Broadcast.com, an Internet sports video site that looked very forward-looking in that era, and attracted investment from Hearst Capital. In 1999, Broadcast.com was sold to Yahoo!, the Internet giant at the time, for $5.7 billion. The entrepreneurship made Cuban a member of the American billionaire club, And opened the “open road” of multiple identities as entrepreneurs, investors, celebrities, etc. Since then, in the eyes of the American people, Cuban is the owner of the NBA 2011 championship Dallas Mavericks team and passionate fans, and the well-known venture capital reality show “Shark Tank, the Winner of Innovation” is clearly Star Investment people and judges, as well as billionaires who are keen to appear in major film and television dramas and become familiar faces of the audience. At the same time, Hearst Capital also continued to cooperate with Cuban in different forms on a number of projects: Mark Burnett, a well-known producer that Hearst participated in (represented as a reality show “Fei Huang Tengda/The Apprentice”, “Survivor The production company of Survivor, etc. has produced the “Shark Tank” series. In the 111 episodes it participated in, Cuban invested a total of 85 projects with a total of nearly 20 million US dollars. United Artist Media Group, the distribution channel of the show, also had a stake in Hearst Capital, which was eventually acquired and exited by MGM.
In 2006, after Hearst Capital entered China, it cooperated with IDG and the former News Corporation to establish a new media fund and invested in projects such as Bilibili and Legendary Pictures. Since 2014, the team has formally launched direct investment in this fertile land for entrepreneurship. The investment includes Flash delivery , only two, LiuLiSuo、酷家乐 , bump travel, special praise and other well-known projects.
From LP to follow-up investors and then to lead investors, in the primary market in China, Hearst Capital is getting deeper and more proactive. Behind this change is a century-old Western media group’s continuous in-depth understanding of the Chinese market, which can also be seen as a side proof of China’s new economic development. Although the specific investment decisions are constantly changing with the pace of the times, the Hearst Capital team also has a consistent methodology: streamlined team, in-depth research, trust in people, believe in the essence of business, and insist on long-term companionship.
This year marks the 25th anniversary of Hearst Capital. On this occasion, I interviewed Hu Yingqing, the managing director of Hearst Capital and the general manager of China. Hu Yingqing graduated from the London School of Economics and Political Science with a master’s degree in finance and economics. Previously worked in the Hong Kong Investment Banking Department of Credit Suisse. After joining Hearst, he was mainly responsible for Hearst’s investment business in China and was one of the main core members of Hearst Capital’s global operations. Its representative investments include: English fluent speaking, cool home music, bump travel, flash delivery, special praise and only second-class projects.
Hu Yingqing, Managing Director, Hearst Capital
In the dialogue with, Hu Yingqing detailed the background of the establishment of Hearst Capital, his judgment on the current Chinese market, and the investment secrets of Hearst Capital.
The following is a dialogue——
From LP to direct investment, investment is a means of learning
: Hearst Capital is a very special existence in CVC, not overly pursuing business cooperation, more like a financial investor. How is this positioning formed?
Hu Yingqing: When we started investing in 1995, we had a vision: we hope that investment will become a means of learning. Managers have long realized that both the media field where Hirst is located, or the group itself, have taken shape for a long time, and it is easy to enter a solidified operating mode. Just in 1995, Netscape came to us for investment. At that time, there were different voices within the group, and finally decided to invest in Netscape browser. Later, Hearst Capital was also established immediately, which also set the tone for our entire investment: hope that investment becomes a means of learning.
: How does Hearst Capital consider financial returns?
Hu Yingqing: The core purpose of establishing Hearst Capital is to establish insights into new technologies, new trends, and new fields. Only through investment can we do this more efficiently. But for us, financial returns have always been a foundation. Investing should not be just for learning. Only on the basis of obtaining a certain financial return for the group can we discuss what is worth learning. This also answers, why our style is more like a financial investor, all investment activities are still operated in a very professional standard.
: Hearst Capital began investing in China in 2006, and began to set up team direct investment in 2014. During the period, how has the judgment of the Chinese market changed?
Hu Yingqing: From 2006 to 2014, Hearst Capital mainly participated in investment in China as an LP. Around 2014, the group’s view of China had undergone a very big change. Since then, we have realized that we have grasped China Mobile The opportunity for Internet development has become very important.
: How did the change happen?
Hu Yingqing: On the one hand, it is because China’s voice is getting louder and louder in the world, and many things about China can be seen and heard in the United States. On the other hand, through our previous investment to “educate” the US headquarters in disguise, Chinese companies are undergoing earth-shaking changes. For example, Liuli said that at the beginning it was developed by a small team of 3-4 people, and later it was launched in the United States, which could influence so many people to learn languages. Another example is Kujiale. When we invested, we found that no other company had better technology than Kujiale.
This is a big touch for the group: In addition to the original model innovation, the technological level of Chinese companies has been able to achieve the world’s leading position. In the past, we often said “it is a benchmark against XX company in the United States” when we invest in projects, but now, overseas colleagues will say “this project is a benchmark against XX companies in China”. Recently, a colleague from the United States saw an online one-on-one yoga project. At the meeting, she introduced that the company’s target was the Chinese Vipkid model. It’s amazing that only companies with a global background can intuitively feel such a change.
: What is the direct impact of the change of attitude on Hearst Capital’s investment in China?
Hu Yingqing: In the beginning, we have always adopted a follow-up investment strategy. In 2016, we started to have our first lead investment project-Tezan. The amount of investment is also changing. From the initial 500,000 U.S. dollars, to now it has been a single start of 5 million U.S. dollars.
From the investment field, we also have more freedom. At first, I felt that China would do better in the fields of education and consumption, but now our Chinese team has a greater say in the judgment of the field. Once we find a good direction, we can go to the headquarters to demonstrate, the headquarters will also trust our judgment, and there will be more opportunities to invest in areas that they are completely unfamiliar with.
: What are your areas of focus recently?
Hu Yingqing: Corporate services, more specifically, use technology and data to help companies solve internal problems and optimize internal links more efficiently. This is our global theme. In fact, in addition to toC-related media assets, Hearst Group has a B2B department with a history of more than 30 years. We have the largest used car pricing service system and medical database in the United States, and we are 100% shareholders of Fitch. From these B2B businessesWe have summed up one point. The more economic downturn, the B2B business will grow better, because the cycle of toC is not completely consistent.
: A big change this year is the changing international situation. As an investment institution with a global background, how do you deal with this environment? Will the environment affect your investment in China?
Hu Yingqing: Nothing has changed. From the perspective of the group, any current changes are temporary. Group executives sometimes joked that China and the United States had not established diplomatic relations when the group was established. In the long run, we must be optimistic about China and optimistic about China’s new economic development.
Forget GMV, the essence of investing in business
: Compared with many dollar funds on the market, the team at Hearst Capital is actually very streamlined. Will this affect your investment strategy?
Hu Yingqing: Yes, our investment team in China currently has only two people, which makes the entire decision-making process very fast. After deciding on the investment target, with the approval of the head of global investment at the headquarters, you can go to the IC (Investment Decision Committee). The colleagues in the group business will give some partnership suggestions or raise related questions, and the investment can be implemented after there is no problem.
Efficiency is an advantage of small teams. After all these years of investment, I have discovered a pattern. Good projects are only identified and proactively searched for instead of waiting for the door. For example, the investment is only two, that is, I am optimistic about the fashion recycling field. After reading a lot of clothing rental and second-hand platforms, I finally locked the only two. This kind of efficiency is the highest, and this working mode also makes us do not need a lot of people.
: Is Top-down the way you are better at it?
Hu Yingqing: There will be both top-down and bottom-up. From the perspective of results, the top-down method is easier to succeed in finding the target, or it is easier to grow up.
Investment in us has never been Spray and Pray (we cast the net and count on probabilistic events). Maintaining a high hit rate can better exert excellent capital efficiency. This kind of investment strategy requires us to do more research work to support our investment decision to bet on the company that is expected to become the head of the track.
: A relatively small investment team will not have the pressure to miss a big case. However, it is very important for you to ensure accuracy and correctness when you shoot. What is the secret of being a good sniper?
Hu Yingqing: The core is to understand the investment field, to understand and figure things out, to understand how top companies operate. Then, find founders who have similar ideas and can successfully land. There is a high probability of success.
: How to make your understanding of the industry accurate and leading?
HuYingqing: In terms of industry selection, because our size is relatively small, we will not touch very unfamiliar fields. We will still tend to the fields we are good at and familiar with. The group has the direction of accumulation and will do a lot homework. In addition, we will have two reviews every year, and the global team will have in-depth exchanges. Hearst Capital’s global layout has certain advantages. The teams in China, the United States, Israel, and Europe can learn a lot from each other.
: Can the above method be regarded as the basis for you to choose only two among the many second-hand platforms?
Hu Yingqing: It can be understood like this. From a macro perspective, the economic downturn will probably continue. This kind of background is naturally good for the second-hand industry, and this is also true in Japan. Specifically, 3C second-hand has been very standardized, and the second-hand cycle in the fashion field still has room for improvement, and we have certain resources. So, I read all the related companies on the market.
I found that only two after switching from the inventory model to the consignment model, I built an ERP system for the internal processing of goods. The management system won my approval: for example, a piece of clothing starts from the moment the seller takes a picture There is a Unique code, this unique code will follow the dress from the first moment to the last Link sold. Second-hand, for buyers and sellers, traceability is very important, but at this point, it is the best among all players. At the same time, from the company’s perspective, as the volume becomes larger and larger, the processing link will become the largest part of the cost, and standardization can maximize efficiency.
: In your opinion, only two have the most thorough understanding of the second-hand field?
Hu Yingqing: Yes. Fashion recycling involves sellers and buyers, and who the platform focuses on is a big learning, and it will also lead to different final models. Are you more concerned about serving sellers? Still have to give a lot of coupons to attract sellers and attract traffic? These are two completely different styles of play. The only thing is that the most important thing is the supply of goods. There are good things that no one will buy. I think the point they grasp is very accurate: the key is to serve the seller well, and only when the seller gives you a good enough source of goods can you distinguish it from your competitors.
: But paying attention to buyers will bring better GMVThis is also an indicator that many consumer investors in the primary market pay close attention to.
Hu Yingqing: We never pursue short-term GMV or temporary scale increase. We look at the nature of business, the nature of business, whether it is sustainable, and whether it can make money in the end. Returning to the genes of Hearst Capital, we are making long-term investments. When looking at any invested company, we do not think of exiting with quick money investment, but hope to accompany the company to grow into a towering tree. .
Vote for a leading company and become a first-line fund with brand endorsement
: The consumption and enterprise service track developed by Hearst Capital is also a hot spot in the primary market recently. Will Hearst Capital be seen as a competitor when encountering market-oriented funds?
Hu Yingqing: When we initially focused on co-investment, mainstream funds in the market would not consider Hearst Capital to be a competitor. But as we slowly start to lead the investment, competition is inevitable. Of course this is healthy competition.
We will often express this point of view: No matter who leads the round, Hearst Group’s resources are very unique to the enterprise. I believe that everyone can reach a consensus. It is a good thing that Hearst Capital is on the company’s shareholder list. For the company, Hearst Capital is different from the characteristics of general dollar funds, and we have unique resources.
: Some people think that the era of investment institutions fighting for capital has passed. For toB track and consumer brands such as “not bad” entrepreneurship, resources and brands are the core of investment institutions’ competition. What do you think of this view?
Hu Yingqing: Most companies have no choice over investment institutions, and this situation still exists in the head companies. There are fewer good companies, so the competition for capital is getting bigger. In the eyes of the founders of these companies, what they really value is the brand endorsement of the investment institution. In the early stage of rapid development, companies did not rely on resources to win. In my opinion, resources are not a decisive point. Most founders understand it, but they care about the brand of capital. In particular, the founders value whether the brand can add points to future financing and even listing. We have gone through this section of the road, and the feeling will be deeper: Liuli said that when it was listed in the United States, the secondary market investors called the Hearst Capital the most, because the US secondary investors are more familiar with us.
: In the long run, what kind of investment institution does Hearst Capital hope to become?
Hu Yingqing: Simply put, we hope that in the entrepreneurial circle, Hearst Capital will be recognized as a first-line dollar fund with brand endorsement. In the limited fields involved, we hope to invest in leading companies in this field.
Hearst Capital Investment Portfolio