Since Lu Qi left his post as COO of Baidu, speculations abound about what would be his next move.
At the age of 57, going back to highly intensive operational role seemed unlikely; also, which company would give him more autonomy than Microsoft did, where he successfully built up Bing search business?
The answer is revealed this week: Lu will lead Y Combinator’s entry into China.
Y Combinator, or YC, is widely known in China as probably the only successful incubator in the world (whether it is true or not). Its model of US$120,000 for 7% equity is well known in the tech circle in China.
Is this a good deal for Lu? Will he lead YC to success in China?
YC’s fame came from the number of successful startups coming out of its portfolio, including airbnb, Dropbox, Stripe, reddit and twitch.
Every half year, the demo day attracted attention throughout China’s tech media landscape. Companies in the portfolio were listed, analysed and commented on.
However, in the past two years, the reports were more of scepticism rather than excitement – as many of the companies enrolled were operating business models that are considered either outdated or red ocean in China.
“Has YC lost its edge” is the question repeatedly asked through China’s thriving tech blog-sphere.
To answer this, it is probably worth examining why companies apply to YC in the first place. The money is trivial (typical seed capital amount is much higher in China), and the effects (or usefulness) of coaching is highly debatable.
Founders go to YC for the same reason young professionals go for MBA – the brand name as well as the alumni network.
That’s why they are willing to accept such a low valuation in the YC equity deal. The model has no magic – it is so well known because it is the model of YC, because companies such as airbnb and Dropbox came out of such programme.
Will YC succeed in China?
We believe it is up to Lu to chart the waters, and up to how much leeway he has from the management of headquarters of YC. We are highly sceptical that the 120k for 7% model will work, as the market in China has more capital than good entrepreneurs.
However, if Lu is willing (and able) to experiment new models, there might be a chance.
Many people revere Lu not exactly because of him, but because of a common hatred to Baidu’s poor services. This admiration will wane as time goes by, and YC’s name is fast fading in China as well – Lu will need to work hard and fast to make YC work in China.
Unless he has other tricks up in his sleeves.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]