这仅仅是O’Brien第一堂“中国课”。接下来，他审核了60多家公司BP，并与一半公司团队见了面，其中有3家自诩是中国YouTube，另外1家自认为是中国Jigsaw。在与团队交谈中，O’Brien渐渐发现，“创始人能力确实与英文水平有某种程度反比关系。”这种观点已经不是第一次提出，甚至有VC宣称不会投资说英语的创业团队。

　　陪同O’Brien此次中国投资行的是Lightspeed中国区主管曹大容。曹大容去年6月加入Lightspeed，截至目前已经投资超过5家中国企业，但是相比Sequoia、DCM、GGV等，Lightspeed感到自己已经“迟到”。所以O’Brien一直试图尽快充实上海分支实力，无奈乐拍的投资相关事宜直到去年11月才落实，此时距离曹大容加入已经过去5个月。O’Brien对此依然比较乐观，“我会习惯中国的一切。”

　　（本文节选编译自Red Herring）

A Valley VC’s Adventures in China

Heavy drinking, spicy food, and lots of opportunity: the trials and tribulations of a Silicon Valley venture capitalist in China.
January 29, 2007 Print Issue

By Kaiser Kuo

 They’re into their favorite game: get the foreigner drunk. You can usually avoid it in Beijing or Shanghai, but not in Chinese cities where East and West do business with less frequency. Not in cities like Jinan, capital of east China’s Shandong province. It’s just one of the hundred-plus Chinese cities with a population of over 1 million that you’ve probably never heard of. Yet with 2.2 million residents, Jinan would rank fourth were it an American city, between Chicago and Houston.

 Eric O’Brien, China point man for Menlo Park, California-based venture fund Lightspeed Venture Partners, is being an awfully good sport about all the drinking. He fully expected it, and really, it’s why he’s come to Jinan in the first place: for a signing ceremony with the local officials and joint venture partners who’ve made Lightspeed’s latest China investment possible.

Two other VCs, DT Capital out of Shanghai and Intel Capital’s China fund, are also committing $5 million a piece into a $15-million first round for a new live-auction home shopping television channel called Lucky Pai. But since both DT Managing Partner Joe Tian and Intel Capital Associate Director John Hsin are ethnic Chinese, no one questions that it should be Mr. O’Brien—only half Chinese, and therefore foreign enough—who gives the speech at the ceremony, who takes the seat of honor at the banquet, and who bears the brunt of the endless, increasingly voluble toasts.

 Just an hour into the banquet, one of the other guests of honor—an unlucky member of Lucky Pai’s founding team—is beet red, and moaning with his head down on the table. But Mr. O’Brien knocks back shot after shot of the local firewater, a sorghum spirit called Baotuquan that the label says is 61 percent alcohol.

 Between toasts he eats what he can, but there’s not a lot he’s eager to fill up on: braised sea cucumber, fish heads stewed in red pepper sauce, chilled duck tongues. After a half-dozen glasses, the evening’s hosts—the provincial and municipal heads of the State Administration of Radio, Film, and Television (SARFT), plus the director of Shandong Cable Television Center—move on to red wine. But they keep the foreigner’s shot glass filled with the hard stuff. Mr. O’Brien keeps a running tally. He announces shot 24 and grimaces. “Every time I burp it tastes like paint thinner.”

 It’s Eric O’Brien’s first time in Jinan. It shouldn’t have been. He was supposed to come on a Lightspeed due diligence trip in September, shortly after arriving in China with his wife and two young children. Instead, his Shanghai-based partner Ron Cao, a U.S.-educated returnee who joined the firm in April, joined some of the founders and another VC from DT Capital on the trip in September. Walking out of the Jinan airport into the September morning air, hazy with the smoke of burning corn stalks, he shakes his head: “No Eric. He didn’t realize that you need a passport for domestic flights,” he explains.

Chinese Lessons

That’s one of the simpler lessons Mr. O’Brien has learned since he landed in China. In that time he’s screened over 60 companies, and has taken meetings with about half of those. He’s been pitched by lottery equipment providers, e-commerce sites selling used cars, 3D mapping companies, and software outsourcing outfits. He’s looked at three companies that call themselves the Chinese YouTube, and at one that bills itself as the Chinese Jigsaw. He’s met companies with strange names like WigiWin and—no joke—PP Stream (the latter, by the way, is a P2P streaming site).

 In some cases, founders speak perfectly good English, and Mr. O’Brien’s Mandarin has improved. “I was able to tell the masseuse how to get to my place,” he proudly announces one day about a month into his stay. But he still stumbles communicating in most meetings. “The best questions that we ask in the Valley are very nuanced questions,” he says. “If you’re fundamentally constrained by language, you have an inability to filter those shades of gray.”

 Luckily, Lightspeed has Mr. Cao—as bilingual as they come—to help out. English-speaking founders are out of vogue these days, and it’s become fashionable for VCs in China to be “more local than thou” in the investments they make.

 More than one VC has proclaimed that he won’t even look at companies where the founder speaks English. “That’s a bit of bravado,” says Mr. O’Brien, but he grants that there’s something to the boast. “I do believe there’s some inverse correlation between your English skills and your ability to operate on the ground,” he says.

 With many a Sand Hill VC showing up in China in recent years (including Sequoia Capital, DCM-Doll Capital Management, and Granite Global Ventures), it’s not surprising that Mr. O’Brien and his partners “felt like we were late to the party.” He and fellow Managing Partner Chris Schaepe were dispatched here on two exploratory missions in early 2006, and the firm soon made two investments, amounts undisclosed, in online payment company 99Bill and in semiconductor equipment maker AMEC. At least these moves set them apart from the looky lous, Mr. O’Brien says.

 There is a lot of venture money pouring into China: Ernst & Young and Dow Jones VentureOne report $361 million in foreign and domestic venture investment in the third quarter of 2006 alone.

 Foreign investment still outweighs domestic by about two to one, according to Beijing-based VC research firm Zero2IPO, though lines between what’s foreign and what’s domestic are blurred. In any case, Chinese entrepreneurs are increasingly discerning about the term sheets they’ll sign because money is chasing relatively few good founding teams. “A VC with no partner on the ground in China,” says Mr. O’Brien, is “not considered nearly as worthy an investor.”

 To make itself China-worthy, Lightspeed has earmarked up to 25 percent of its $475-million fund for China. Partner Cao is on the ground for the long haul, while General Partner O’Brien was scheduled to complete his tour at year’s end and shuttle between the United States and China in the new year. Besides working on Lucky Pai, Lightspeed’s most recent China investment, Mr. O’Brien helped the fund invest undisclosed sums in a Beijing-based mobile 2D barcode company called Gmedia.

Smoke and Mirrors

Mr. Cao, meanwhile, led an investment in Shenzhen-based fabless LCD driver chip design firm Teralane. That brings Lightspeed’s China investments to five, including the Lucky Pai deal.

 “Things are not what they seem,” sighs Mr. O’Brien, taking a short break between back-to-back deal meetings at Centro, a bar-by-night, café-by-day in the Kerry Centre Hotel in Beijing. “Everything here looks good at first glance, especially when you come here from the U.S., where most deals don’t.” Here in China, Mr. O’Brien is blown away with how fast the Chinese web plays seem to ramp up—tens of millions of users, sometimes in a matter of months, and overnight headcount growth from mere tens to several hundred. “It all looks good, and they’re everywhere,” he says.

 But watching all the frenzied activity by VCs, both domestic ones and the dozens of Valley funds now plunking down money in China, he’s not without misgivings. He says he’s developed a gut instinct that enables him to weed out companies quickly: to tell him when a founder—language barrier or not—just doesn’t have the right stuff, when a startup can’t scale, or when he’s being flat-out snowed. But he still hasn’t learned to fully trust his gut. “I have my personal intuition, but I also have a nagging sense that my personal intuition is just plain wrong,” says Mr. O’Brien.

 On balance, that intuition tells him China’s a great bet. One afternoon he visits an indoor mall on Qipu Road in western Shanghai, where the purveyors of name-brand knock-offs from the once-infamous Xianyang Road Market have fled since that market was shut down. In the mall’s basement, there are shoes as far as the eye can see. “The sheer, frenetic buying activity was like nothing I’ve ever seen in my life,” he says. “It’s just one little data point that confirms what I think is happening here.”

 Shoe sales, though, are something he can see with his own eyes. Not so the user numbers and page views many of the web startups claim. In between Beijing pitch meetings, Messrs. O’Brien and Cao have lunch with James Liu, an old classmate of Mr. O’Brien from Stanford Business School and now COO of Oak Pacific Interactive.

 Oak Pacific operates one of China’s most popular entertainment portals, Mop.com, as well as a Facebook-like site (5Q.com), a news site (DoNews.com), and YouTube clone UUMe, which Mr. Liu founded and subsequently sold to Oak Pacific in 2005. Chinese companies have all sorts of ways to fluff their traffic stats, and Mr. Liu offers some pointers on how to cut through the smoke and mirrors. “The tip he gave me is to look at bandwidth utilization and the actual amount of hardware they’ve bought,” Mr. O’Brien later relates. “They’re not going to spend the money if they don’t need to.”

 But not even that tactic is failure-proof. Oak Pacific was sued by China’s Anti Malware Alliance in November because its toolbars allegedly generate forced pop-ups—a common ploy among Chinese web sites trying to inflate traffic numbers.

Government Bizarro

Traffic isn’t the only thing companies will try to inflate. Chinese entrepreneurs know full well that the average foreign investor comes to China believing in the all-importance of guanxi, or relationships (implying, usually, government relations), and they do what they can to look connected. There’s no easy way to know who really has it: “Those who say they have good guanxi, don’t,” intones Mr. Cao.

Lightspeed should know. Mr. O’Brien was about to close an investment in GMedia, the mobile 2D barcode company, and was casually surfing the web to look for media mentions of the firm when he came across something alarming: a rival Chinese company called Inspiry, with a different type of 2D barcode, was talking up its close relationship with China Mobile, the dominant, government-owned operator, and its plans to launch a service nationwide in September. “What did we miss here?” Mr. O’Brien recalls asking himself. “Who the hell are they?”

Eventually, 11th-hour due diligence concluded that Inspiry was “just puffing itself up, and has no such relationship with China Mobile,” he says. But there’s a lesson in that: “There’s so much that you just don’t know, ready to bite you in the ass around any corner.”

But sometimes startups really do have guanxi. One company Lightspeed is talking to, a mobile comics publisher, seems, for instance, to be unusually cozy with the Shanghai Ministry of Culture: not only is it the only player approved by the Ministry to publish comics for distribution on cell phones, but it also claims to have a “semi-exclusive content deal” with the Ministry.

“Chalk this one up to government bizarro,” says Mr. O’Brien. “I had heard all these stories about how media is the last bastion of control from a Party perspective, but that a government agency would pre-negotiate content rights almost as if it were a publishing entity is just bizarre!”

Lightspeed and China Speed

For a country running double-digit GDP growth, things can still move painfully slowly in China. With Mr. Cao off in Hong Kong for a month—his wife has just given birth to Ryan, their first child—Mr. O’Brien has to deal with a host of minor problems: getting the network set up in Lightspeed’s new Shanghai office, fixing the printer, picking out office furniture.

But it’s the delays in finalizing the Lucky Pai deal that vexed him in early November. “It’s always ‘next week,’” he says. It’s something he’s had to get across to his U.S.-based partners in the late-night conference calls that have robbed him of a decent night’s sleep for two straight months. “I have to build in the inevitable unforeseen delays, and never commit to dates—just talk in large generalities and vague deadlines.”

And while he’s lost no confidence in the Lucky Pai team—a trio of Yale Business School chums, all ethnic Chinese—he’s had to deal with all manner of crises. The crisis of the day? Lucky Pai’s Chinese joint venture partner’s sudden demand to be in on the action when the company lists offshore—something that wasn’t in the original agreement. A week earlier, things got sidetracked when the founders wanted changes to the terms of their equity vesting.

Frustrating as it sometimes is, Mr. O’Brien is starting to have fun. “I take personal enjoyment in being in this entirely new environment where everything is a challenge.” He says he looks forward to everyday roadblocks he’d never face in the Valley: fixing the Internet connection and using his own cash to buy a computer for the office manager, for example.

Never Gonna Give You Up

Back in Jinan, the day of the Lucky Pai signing ceremony, one official after another mounts the stage to sing the praises of Shandong province: “We believe our cooperation will be very successful because we Shandong people are very earnest and sincere,” says one. 

The cameras flash, Lucky Pai CEO Raymond Chang shakes hands with the station director, and the ceremony winds to a close. The crowd moves on to the banquet in the press room of a nearby hotel, where  the drinking gets started. Unbelievably, after a lot of boozing at the party, the Lightspeed guys, including Tony Wang, an eager young associate who’s joined them on their Jinan jaunt, are all ready for more.

“There’s no way that stuff was really 61 percent alcohol,” Mr. O’Brien insists, and he’s probably right. They join DT Capital’s Joe Tian and Intel’s John Hsin in a nearby karaoke bar, where they order a bottle of Scotch and Mr. O’Brien does convincing renditions of The Eagle’s “Lying Eyes” and Rick Astley’s “Never Gonna Give you Up.”

The next morning, Eric O’Brien and Ron Cao arrive at Jinan International for their flight back to Shanghai. It’s a surprisingly modern airport—a giant Quonset hut on a frame of white steel tubing, opened just two years ago. A thick fog has grounded all flights for the morning. Fortunately, the airport has a foot massage parlor on the second floor—an amenity common in a country plagued by delayed flights. Mr. O’Brien reclines as a young woman goes to work on his feet, and as she finishes 45 minutes later, he turns, smiles, and says, “You know, I could get used to this place.”