A Venture Entrepreneur in China: Building U.S.-China Venture Partnerships
Tharon Smith, Class 15
In 1997 the New York Times was covering two significant moments in history: President Clinton's non-traditional and somewhat controversial efforts to re-establish U.S. relations with China,1 and the extraordinary rise in early-stage technology investing in Silicon Valley.2 These two events would continue to generate growth through investment returns from technological innovation and opportunity, given the major economic changes occuring in China far into the future.Unbeknownst to me, these events would also have far-reaching consequences for my life and career. As an overachieving, somewhat under-challenged Clark-Atlanta University sophomore studying finance and marketing, I could never have imagined in 1997 that I would end up the Founding Partner of an investment management company building cross-border venture partnerships between the United States and China.For executives, policymakers, entrepreneurs, and investors, China remains one of the most difficult economies to engage with, mostly because traditional Western ideas of business are quite different from those of the domestic Chinese—and, frankly speaking, quality time invested, on the ground, is highly valuable but incredibly scarce. This article highlights some of the unintended circumstances that initiated my journey to China and my fascination with their economic growth, more than 15 years ago.
A Grand Plan Makes a Detour
My grand vision for my professional career at age 18 was to become a chief executive for the Coca-Cola Company, the largest and most globally recognized brand on the planet. I had it all figured out: I would build out and develop Coca-Cola's corporate marketing and sales strategy into South America. This would be an easy road for me, as most would agree I could pass for Latina, and as a southern California native I was familiar with the local Mexican culture and customs and had studied elementary and advanced Spanish. My undergraduate education would provide me with a traditional skill set to analyze the South American market and execute the daily routine work that would be required to do the job. Plus, South America had pretty stable relations with the United States and we were entering the high days of NAFTA.The course of my life changed dramatically, however, due to a small administrative hassle. As course registration sometimes goes, and partly due to the unique cultural experience of being a scholarship student at a historically Black college, I found myself standing in line for more than eight hours to register for my foreign language courses. When I finally reached the front of the line, I was told I would be put on a two-year waiting list for Spanish. This was totally and completely unacceptable! I marched in to see the Dean of Students and politely suggested he take my case under consideration. After some thoughtful discussion and uncomfortable rounds of "no" and "we cannot make an exception," he gave me two options: Arabic or Chinese.Not sure what to choose and wanting more information, I reached out for resources. The "Internet" had just arrived, and people were signing up for their first non-corporate email accounts. (To put this in perspective, the domain "google.com" was registered in September 1997 and the company was not founded until a year later.)3 I searched the "world wide web" using AltaVista and Dogpile, looking for interesting information and current events to help me make a decision. All the most exciting news highlighted two things: the gold rush to technology companies in Silicon Valley and the reopening of China.
The Discovery of Entrepreneurs
Something special was happening in Silicon Valley, and it involved "entrepreneurs." As far as I was concerned, I was an entrepreneur—I had already successfully managed a series of lemonade stands, bake sales, cake-walks, craft expos, children's plays, talent shows, high school dances, and athletic team competitions, all to make money. I had been a leader in my peer group since I held my first elected position in the 7th grade, and held board positions in student leadership through my senior year. I had also managed to raise money for activity groups, charitable causes, family outings, and community events. Yes, I was an entrepreneur—then and now.As a curious and goal-oriented college student, I wondered what was going on in Silicon Valley, exactly. After in-depth searching for information, I found that back in northern California, south of San Francisco, entrepreneurs were not focused on baked goods and lemonade but instead were growing companies out of new innovative areas like integrated circuits, information technology, systems integration software, semiconductors, microprocessors, personal computers, and even genetic engineering. Entrepreneurs with wild and untested ideas were flying to Silicon Valley for the opportunity to build something different and non-traditional.
The Start of an Affair with China
Having never really looked to China for anything other than paper-making and fireworks, I began to investigate what was going on in China, exactly. The United States was indeed making strides in warming up its diplomatic relationship with China, and I found that Chinese institutions and universities were engaged in very similar, Silicon-Valley type activities—only in China, they had far less regulation and legal frameworks around "venture capital" and its development of entrepreneurship. China was in the beginning stages of permitting private ownership and still several years away from high-tech entrepreneurship.
A Question Changes My Life
In 1997, I wondered: could I go to China and do what everyone was doing in Silicon Valley? Although it wasn't even on the radar for most people at that time, this question was the catalyst for the next 15 years of my life.Impassioned with a purpose, I relentlessly pursued every opportunity to learn, study, and understand China from multiple, rapidly changing dimensions. I wanted to get to know China economically, culturally, politically, and globally. (The world would soon begin talks about its entrance into the WTO and export relationships with other countries.) I enrolled in elementary courses in Mandarin, and found my days increasingly filled with China-related interests. All my other class requirements were easily executed, so I increased my language-lab time and learned about things like calligraphy, ancient art, and family living in China.My focus was now entrepreneurship, venture capital, and innovation in China. I wanted to see how someone like me could carve out a niche to participate in China's growth and development as a partner in this space and foreign place.
The First of Many Trips to China
After receiving a distinguished language study scholarship to improve my Chinese, I was invited to become a fellow of the Institute for International Public Policy (IIPP), an elite and highly selective program for future U.S. ambassadors. Through this scholarship program I set out to travel to China for the first time in 1998, having never before traveled outside the United States. I wondered whether Delta even flew to China (direct flights did not start until 2008).I spent a full semester in Beijing taking classes in economics, finance, and advanced Mandarin, but the real learning occurred outside the classroom with history, lifestyle, culture, local customs, and social beliefs. There were only two other U.S. students in my program and we received the warmest welcome from the Chinese through eating together, traveling together, exchanging gifts and stories, and sharing in the entire experience.For Americans, Chinese people can come across as cold at first meeting, but my first series of interactions with the Chinese in 1998 was overwhelmingly warm and inviting. As one of only two foreign students in my program, I was greeted with grand curiosity and interest in sharing experiences. Speaking the language fluently is the best way to break the ice, and since I had already worked hard to learn the language, I was quickly invited by Chinese students to participate in various traditional sporting events, cultural trips, and family dinners at the other students' homes nearby.The Chinese have so many different ways to show their kindness. One time in particular stands out in my memory: one student had arranged and treated me to a weekend getaway at her mother's factory where we got to sleep at the plant, have meals with locals, and take in the spectacular natural wonder of the mountains.Once during Chinese New Year I was invited to the home of a very close friend, and even though her family lived in a tiny apartment with only two rooms—one her bedroom and the other for her parents—they made arrangements to fit three adults in one bed so I could sleep in the other. Her father was a chef and we cooked traditional meals together; her mother had a fruit farm and we visited the countryside together. There was no shower facility in the apartment and the hot water had to be carried up five flights of stairs, but without fail, every morning we had tea and warm milk. Over the course of the week we celebrated with numerous family members and friends, and I was even gifted a "red envelope" signaling I was part of the family. Experiences like these become possible through fluency in the language, openness to the culture, and willingness to really live in China.
A New Educational Path
After my study abroad, I returned to the IIPP Strategic Leadership Institute at the University of Maryland College Park, which offered me global conflict-resolution training and insight into the world of U.S. defense strategy and diplomacy. Perhaps unintentionally, IIPP became my training ground for developing venture partnerships with China. Here, I acquired an invaluable skillset including negotiation, the identification of opportunities, the management of difficult situations and people, and practice working toward a peaceful outcome.Combining my global experience and exposure to international affairs with a tri-disciplinary Master's degree in Business, Politics, and Economics, I focused on major cross-border business investment decisions and the impact of political and economic change. Working for the Overseas Private Investment Corporation in Washington, DC, I had the opportunity to engage with very specific risk-management issues in areas like Argentina, Africa, and Europe.However, I wanted to get back to China and OPIC had a hard mandate that would not allow investment projects in China. "What—no China projects?" I was indignant. If I could not operate from the "investment arm of the White House" to forge venture partnerships with China, then I would have to build those partnerships myself.I enrolled in an economics doctoral program in California and focused my research goals so that I could help build a thriving partnership platform for venture capital investment and early-stage company development in transitional China. This pioneering work led to a somewhat competitive invitation by the Chinese Government to live in China and work with Fudan University on building out this platform.
Growing Roots in China
I spent four years on the ground in China establishing connections and then nurturing those connections into roots. I engaged with investment professionals; local, domestic, government-backed provincial- and municipal-level venture firms; science and technology parks; innovation centers; and Chinese entrepreneurs.To establish and nurture relationships in China requires spending large amounts of time on the ground sharing in local experiences together. As a result of my almost six years living in China, I have spent hundreds of hours traveling, drinking, singing karaoke, cooking, shopping, entertaining, and being entertained by, with, and for the development of local relationships.One key element to my success in this effort is that I listen and engage. So many of the top executives and powerful decision-makers are eager to share local mythical stories, local historical events, or the importance of a natural setting in China. I found it a privilege to hear those stories and learn more about the embedded culture in China as a result.These efforts to grow roots in China enable "guanxi," an often misunderstood concept in the Western minset. To earn guanxi, one must put others first. Guanxi is not the same as Western social capital—it is about reciprocity. I am honored to have guanxi with my Chinese friends and associates. I have been extended powerful relationships and given the opportunity to develop new relationships further because of my ability to do for others. Most importantly, I have been available to fill requests for friends who are in need of something in particular. I was once called upon to arrange a speaking engagement for one of my venture partners, and it was not easy to accomplish; however, I was glad to do it, and now he is happy to help me in a similar way. This is guanxi.Becoming intimately connected in China is no easy feat, and requires patience, time, and persistence. I had to spend years getting better acquainted with the director of the Venture Capital Research Institute and learning what their needs were. Once that relationship was well rooted, we established an annual exchange program where we invited Chinese domestic venture capitalists to the United States and traveled around meeting U.S.-based VCs, visiting national research institutions, and even meeting the NASDAQ and NYSE leadership. As a team we also toured all over inner and coastal China eating and drinking with founders, CEOs, and political leaders dedicated to the growth and development of a domestic venture capital industry. These relationships were cultivated through long time-horizon, visionary discussions; repeated interaction; and aligned goal-setting for future cooperative innovation.
A New Vision, in Pursuit of an Old Question
I decided to leverage the in-depth intelligence; country-specific strategic understanding; well-cultivated, high quality network; and cultural acumen I had gained over 15 years of work with and in China. The result was a new advisory company and venture fund vehicle called The Strontium Group.The Strontium Group today is an investment management and advisory firm focused on developing cross-border partnerships for innovative, early-stage companies operating in the U.S. and Chinese economies. The Strontium Group is actively fundraising its flagship $38 million U.S.-China Venture Partnership Fund to accelerate growth and opportunity for seed-, small-, and early-stage companies. We are poised to become a leading cross-border platform for early-stage venture partnerships globally and I am proud to be the Founding Partner/Entrepreneur.
Looking Back, Looking Ahead
Today I can share with great enthusiasm that the answer to the question I have been pursuing for many years is "Yes!" These days I have the honored privilege to work every day with energetic and future-building entrepreneurs in the United States and China, the Middle East and North Africa (MENA) region, Latin America, and Africa. It is humbling to have the opportunity to provide coordinated, high-tech solutions to the largest emerging economies, to build sustainable partnerships with government agencies and regulatory organizations, to invest private capital into game-changing enterprises, and to share in market rewards globally. I am excited to continue to build this further!My experience building the foundation for The Strontium Group taught me that the most valuable assets we have to offer are strategy, networks, and intelligence. Individuals eager to engage with China long-term should have an in-depth understanding of changes in the economic development internally and how those changes will affect global markets. It is vital to clarify whom you know on the ground and how well you know your domestic partners—this is invaluable to success in China. Over the next 10-20 years, I expect China to continue to improve its internal engine of growth. The greatest opportunities for foreign investors are at the forefront of innovation through cross-border venture partnerships.
Tharon Smith
As founder and managing director, Tharon is currently splitting her time between New York, Shanghai, and Palo Alto to further her efforts to build The Strontium Group. She is working on due diligence, deal sourcing, deal screening, investor introductions, and strategic fundraising for Strontium Capital's flagship fund. Working on projects in other emerging economies, such as Columbia, Africa, and the MENA (Middle East and North Africa) region, she is building the foundation for a global venture enterprise designed for wealth creation and development.
1 e.g., John M. Broder, "Clinton Defends China Policy," New York Times, 25 October 1997, p. A6; Opinion, "China Turns Another Corner," New York Times, 19 September 1997.2 e.g., John Markoff, "A Gold Rush from Software Reinvigorates Silicon Valley," New York Times, 13 January 1997; Edward Rothstein, "Heroes of a New Genre Seek Their Fortunes in the Kingdom of Silicon Valley," New York Times, 31 March 1997.3 Google, "Our History in Depth," para. 3 and 5.
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