Here’s a few observations here from my many journalistic travels and interviews in China and India during 2012.
1. The rise of the serial entrepreneur. Those who struck it rich with their first startups are now going back in for another try, this time with more cash of their own and with lessons learned. It’s a phenomenon that jumpstarted Silicon Valley and has now spread to Asia’s tech hotspots.
2. The arrival of the angel investor. Serial entrepreneurs are turning to angel investing as a way to seed lots of startups. The jury is still out if these first-time investors can make good bets, but early signs indicate that they are applying their skills to this new artistry. Check out Shanghai’s AngelVest as an example of how this model works.
3. Going private. With stocks trading low, several company founders raised enough private equity finance to take their companies off US exchanges and private again. Witness Focus Media, and a lot more in the cue. When and where the companies are re-listed is a trend to watch.
4. Survival of the fittest for venture firms. Those with a good track record and investment returns raised new funds, such as GGV Capital, which raised a fourth fund. Those that couldn’t get traction have gone silent or shifted their management teams. It’s a natural weeding out of venture firms in Asia, following a pattern that happened in the U.S. a decade earlier.
5. Venture club deals. Venture capitalists are hedging their bets by grouping together and investing in deals that seemed destined to be big winners. Particularly favored are deals that have earlier angel financing say from a big name like Lei Jun.
6. Too litte money chasing too many deals. With venture capital tighter this year than the prior go-go cycles, the tides have turned once again in this cyclical business. Entrepreneurs that did have the upper hand in negotiating favorable deal terms now find that the VCs are dicating the terms.
7. Cash squeeze for startups. With founders often unable to raise more finance at a higher valuation than the previous round, many have chosen instead to stretch their existing cash by economizing. Those that are the most frugal will come out ahead. It’s a bit like the dotcom boom and bust period, but with less drama.
8. The big get bigger. Consolidation is underway as sector leaders such as Baidu, Alibaba and Tencent acquire smaller, innovative companies. Startups without a distinct advantage have little chance of breaking through with the giants owning so much of the real estate already.
9. Mobilizing innovation. The perennial cloud, as in computing, and the mobile Internet got plenty of startups going in Asia. While these market sectors captured the majority of startup action, other fields lost their allure as too many entrepreneurs jumped into the same space at the same time without a competitive edge. Think social commerce.
10. The IPO dead end and promise. Lots of successful businesses that started up in China over the boom years of 2005-2008 might have gone public by now. But now as Chinese stocks have tumbled, cashing out with a stellar IPO is just a dream — at least for now. Look for the dozens of Indian startups that have scaled over the past few years to explore the IPO route, and perhaps even catch China’s lead.