Kai-Fu Lee, who resigned as head of Google’s operations in China last month, is looking to tap into burgeoning areas of the Chinese Internet market with his new Beijing-based incubator and investment fund, Innovation Works. To that end, the fund will invest in e-commerce, cloud computing software and mobile games, he told an audience at the Computer History Museum in Mountain View, Calif., today.
At Innovation Works, Lee aims to provide a home for budding Chinese entrepreneurs, one that will foster ideas and quickly bring them to market. (With over 338 million users, China’s Internet market is by far the largest in the world.) So far, Innovation Works has received some 7,000 resumes from eager Chinese entrepreneurs, Lee said. He plans to spin between three and five companies out of the incubator each year.
Though e-commerce accounted for just 7 percent of the Chinese Internet market five years ago, its share has since grown to 25 percent. Chinese web users were initially wary of purchasing things online due to fears of online scams, but e-retailers like 360buy.com and Ctrip.com have since come up with creative payment methods, Lee noted, such as payment upon delivery, to gain trust from consumers.
And Lee is “certain” that web-based software applications such as Google Apps and Amazon’s web services will take off in China, pointing to the country’s online gaming industry by way of example. Rampant piracy has rendered software virtually non-existent in the country, he explained, so gaming companies began charging people to play online, storing their game data in the cloud and sending China’s online gaming industry ballooning to $20 billion from $10 million in 1998. But people may not want to store their data in cloud, where the Chinese government can easily access it, an issue that’s been inreasingly raised as Android-based smartphones and the iPhone are set to hit the Chinese market.
When talking about the Innovation Works’ model, Lee said it’ll be a somewhat similar to Google’s 20 percent time concept. But when it comes to selecting which entrepreneurs from the stack of 7,000 resumes he’s received, Lee said that Innovation Works “will separately select great ideas, great entrepreneurs and great teams and we’ll combine them together.” He added that the incubator “will want an entrepreneur to come up with an idea, but that’s not always the case.”
Yesterday, WI Harper named Lee as chairman of its advisory board. WI Harper is the lead investor in Innovation Works, which has received $115 million total in funding from backers such as Steve Chen, who co-founded YouTube; Foxconn Technology Group, Legend Group and New Oriental Education and Technology Group.