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  • Writer's pictureLeo Wang

The poorest angel investor

Updated: Dec 1, 2023

This investor who was born in Huawei has made an "early angel" model - an investment earlier than angel investment. Each investment amount is only 10,000 to 15,000 USD, and he gets 2%, 3% of the startup company's equity. He uses his abundant resources to provide companies with various services including designing business models, introducing VCs, etc. This can even be understood as him becoming the co-founder of a batch of companies

A year ago, Leo Wang would never have imagined that he could make an angel investment with 15,000 USD. Since 2007, after resigning from a large company, he has been running mobile Internet gatherings one after another in Shanghai, Beijing and other places, making friends of all kinds, but without a fixed income.

A year ago, he invested 15,000 USD in his first startup with almost all his cash deposits at that time. Today, the former Huawei employee "Leo" is a shareholder of 50 mobile Internet startups. The book value of one of the companies has allowed him to recover all the 650K USD investment he and his friends invested.

This is a very new business model. He named it "PreAngel", which literally translates to "early angel" in Chinese - an earlier investment than angel investment, and each investment amount is only 50,000 or 100,000 yuan to obtain 2% or 3% of the equity of the startup company. But Leo Wang will use his abundant resources to provide various services to the company, including designing business models, introducing contacts, etc. This can even be understood as him becoming the co-founder of a batch of companies.

Leo Wang laughed at himself and said that he was probably the poorest angel investor. He has been questioned and even despised by many people. Someone, after rejected by Leo, even sent him a private message saying: "If you don't have money, don't invest, fool!" However, his achievements in the past year have impressed angel investors such as Dayang, Mike Cai, and Green Pine Capital. Prestigious individual angel investors and institutions have provided him with 5 million USD to establish a new fund.

Every day I want to go to bed early and lie down at 11 o'clock, but it's 3 o'clock when I finish working every day, but I am still excited. I think I really love the career of angel investment so much!" Leo Wang posted on his Weibo (Twitter equivalent in China) wrote above.

Accumulate connections

Leo Wang has been working in Huawei’s business and software departments before. In Huawei, which mainly sells communication equipment, this is not a core department, but he has accumulated a lot of experience and connections here.

In 2003, he left Huawei and worked for a Telecom Value Added Service Provider company (SP), which was a company specializing in PHS-related services invested by Wu Ying of UTStarcom and SoftBank SAIF. "At that time, the mobile Internet, or telecommunications value-added services, were still in an era of money grabbing and hidden deductions." Leo told Global Entrepreneur. Here he is responsible for researching foreign new technologies and emerging WEB2.0 business models, including newly emerged companies such as Facebook and Linkedin. Unfortunately, the unhealthy mobile Internet environment in China at that time prevented many of his ideas from being implemented.

After that, he joined a mobile phone chip company, Chipnuts, founded by a team of returnees. In July 2007, he resigned again, and in August he started a SNS project and began to put his dream into practice. However, the project ultimately failed due to various reasons.

The failure of this entrepreneurial venture brought Leo a discovery: At that time, he encountered great resistance in the angel round funding of the project. He went through all the troubles and exchanged 20% of the shares for a loan of 30,000 USD. After the project failed, he paid off the loan. He thought that this shortcoming of domestic angel investment might be an opportunity.

But this is just an idea. What really changed destiny was the Mobile2.0 Forum he founded. Leo said that he did not think of holding a forum at first. Because he knew a lot of people, after his business failed, his friends often asked him to help introduce various resources. "One day I suddenly received many phone calls, asking me to introduce this person to that person, so I said I would just hold a party in the evening. Come on, call everyone out." Leo Wang recalled that more than 20 people came that night and had a great time chatting in the bar. This kind of gathering is the prototype of the Mobile2.0 forum.

The first forum in October 2007 was based on the Android operating system. For this new thing, many people thought it would be the future of smartphones. At that time, Leo Wang invited Andy Tian, head of Google China's Android business, to come over, and the forum gained enthusiastic popularity.

There is no stopping this. Before 2010, he basically did nothing else but hold forums one after another. These forums were centered on various branches of the mobile Internet, including mobile games, mobile advertising, mobile SNS, etc. It was during this period that mobile Internet became a hot spot for global entrepreneurship and the new favorite of venture capital. Against this background, the Mobile 2.0 Forum was packed to capacity.

This time of organizing forums allowed him to accumulate a wealth of connections. He is familiar with people among operators, mobile phone manufacturers, chip manufacturers, SP companies, large Internet companies, and mobile Internet entrepreneurs.

However, during that time, he was still in the "thinking" stage. He had neither found a good profit model nor thought of possible areas of operation. I only occasionally work part-time as a consultant for large companies such as MediaTek or Qualcomm and get some consulting fees. At the same time, he also serves as a consultant for many entrepreneurs. “It’s just like helping.” What Leo Wang refers to is helping startups design business models, introduce resources, etc.

It was this unintentional help that brought him a "gold mine" in the future. Since then, more than 10 startups he has helped give him stock options. Among these companies are well-known mobile Internet companies in the future, such as CamCard, ShangMail, VIVA Reading, etc.

Creation of Business Model

But the options given by these companies do not give people a sense of peace of mind. "I didn't take the initiative to ask them for these options. Others took the initiative to give them." Leo said that sometimes it is difficult to sign the contract, but it is not Steady verbal commitment. After that, he began to try to change the passive option acquisition into an active investment to obtain equity.

In early 2011, Leo Wang invested in his first project in his life, an engineer community called Gurudigger, which is similar to the engineer version of Facebook.

The investment process was straightforward. He first met with the entrepreneurial team, initially promising to help them secure funding. He then sent an email to the team, essentially saying that since 2011 he had been planning to try investing, focusing on very early-stage products, investing small amounts in each team, taking minimal shares, and using his resources to help these teams expand. Gurudigger would be the first project invested in by this fund, later known as PreAngel.

Leo and Gurudigger’s entrepreneurial team hit it off. "At that time, I thought what they were doing was very interesting, and the financing money was not much and not expensive." Leo Wang said that he personally invested 15,000 USD in this startup, accounting for only 2% of the shares. This was almost all of his cash at the time.

After some of his friends learned about this, they suggested that he simply ask his friends to raise funds and invest in a group of such companies in this way.

In fact, for most startups, they do not lack this investment at all, and most people are interested in the resources Leo has. He plays the role of more like a co-founder, helping the entrepreneurial team in various aspects such as defining strategic direction, product design, finding the next round of investment, cooperating with industry giants, attracting talents, marketing, media and public relations, etc.

Thus, a model called "Pre-Angel" was born. A group of friends came to contribute 1 million yuan. Then invest in 10 to 15 companies and only be a small shareholder holding 2% or 3% of the shares.

Leo said, even though he only invested 50,000 or 100,000 yuan, it is very different from free options. "First of all, I have invested real money in cash, so in theory I have the right to cash out at any time. Then, I have to participate in the company's major decisions, and I have to sign contract. In addition, my name needs to be included in the government registration papers, so that rights and interests are protected by law.

In one year, he has invested in about 50 projects, all of which are mobile Internet entrepreneurial projects, including Lewa, Moqu, Weijing, Travel Tao, Touch View, Kuaishuo, Tianlaiyin, Yike, Julu Mobile, Time Stream, Time Difference Network, Car Booking Network, etc.

Due to the large number of projects, when he invests in a project, he usually decides to invest after talking with the entrepreneur for an hour or two, without even having time to do too much due diligence. "Usually you can roughly tell whether this person is reliable or not after chatting for one or twenty minutes, and you can prove your judgment later by chatting with him." Leo Wang concluded that early investment is an investment in people. If you invest in the right person, even if their first project fails, you can still invest in subsequent projects. Therefore, entrepreneurial projects of old friends or entrepreneurial projects recommended by old friends are usually the most reliable.

Among these 50 projects, the most successful one currently is Lewa, which produces the domestic Android operating system. Leo invested 100,000 yuan in Lewa in April last year, accounting for 2% of the shares. Lewa has recently received a strategic investment of nearly 50 million from Tencent, Green Pine Capital and other companies. The book return for Leo Wang from this project has exceeded 4 million - making it possible to recover almost all of the total cost of 4 million previously invested. But there are also 3 or 4 projects that are dead or almost abandoned.

According to the model, 50 projects require a lot of energy for post-investment management. But Leo Wang does more of "passive management": he doesn't usually care about the entrepreneurial team, just waiting for them to come to him when they encounter special difficulties. Even so, he often has to face some very annoying things.

He gave examples: 1) Team A ran out of money and asked you to borrow money; 2) Team B and Team C had misunderstandings and quarrels with each other when working together, so they asked you to reason; 3) Team D complained about Team E poaching other employees; 4) You introduced publicly listed company F intends to invest in your team G, but the terms require that team G is not allowed to cooperate with other listed company H that you are also familiar with!

I still prefer people who are calm and able to withstand all kinds of things that happen. But young entrepreneurs often have various problems." Leo Wang said.

Look for opportunities

After having the experience of investing in 50 projects, Leo Wang concluded that the biggest opportunity for mobile Internet to explode is the upgrading and transformation of traditional industries. This kind of space exists in almost all traditional fields such as education, medical care, fitness, beauty, catering, car rental, real estate, tourism, etc.

After finding the space, you also need to find the right person, the kind of entrepreneur who really knows what he wants to do.

As the Internet industry has created a large number of cases of getting rich quick in the past 10 years, many entrepreneurs have fallen into misunderstandings. Many entrepreneurs believe that starting a business is about telling a story, raising money and then going public. Their typical approach is to go to the United States to copy a proven business model, attract a group of users, and then hold rounds of meetings with investors to tell stories and raise funds... The result is , many entrepreneurs forget the essence of business from the beginning.

“Entrepreneurship is about doing business.” Leo said that when he chooses investment projects, he usually requires a clear business model. Most of these projects deal with traditional industries, such as helping restaurants and gyms increase the number of customers. It is relatively easy to start from Traditional merchants receive money so that they can survive first.

In China, a phenomenon that cannot be ignored is that Internet giants such as Tencent and Baidu often control the most attractive fields that require the most users. In those fields that need to develop users first and then find business models, entrepreneurs are often not at all Tencent’s rivals. There is a metaphor for an entrepreneur. If you compete with top boxing masters such as Tencent and Baidu, you will often be beaten to a bloody head. But in a village where you don’t know how to practice martial arts, as long as you can punch two punches, you are a master of boxing. The most powerful people will be respected by people.

Some entrepreneurs have outlined the "second best" way to start a business, that is, in some areas that are not noticed by giants such as Tencent, such as the massage industry, catering industry, barbecue industry, breakfast industry, hairdressing industry, and housekeeping industry. , flower delivery industry, textile industry, adult products industry, modern breeding industry, organic fruits and vegetables industry, personal care industry, car repair industry, and find ways to use the Internet to change these traditional fields.

This coincides with Leo Wang. He also believes there are substantial business opportunities in these areas. "Many people say that the mobile Internet is sluggish this year, but I see opportunities everywhere." What he wants to do is to split into various fields such as catering, car rental, fitness, and beauty. Every field It is possible to grow a large company.

His judgment on the mobile Internet has been recognized by investment giants such as Dayang, Cai Wensheng and Green Pine Capital. Not long ago, these investors jointly invested 5 million USD in him to establish a new PreAngel fund.

Changes in fund magnitude will also bring about some changes in investment models. This fund has some fixed investment conditions: the most expensive one is to invest in a company with 100,000 USD for 10% of the shares; the investment agreement will require that the project must give priority to angel investments from Green Pine Capital or Mike Cai for future refinancing, ensuring that The investment priorities of this fund’s LPs.

I have concluded that investment and early-stage investment are at least 70% luck, and only 30% rely on your efforts. In the end, it is luck. The luck component is too important." Leo Wang concluded, doing The most important thing is the mentality of early investment. "If it succeeds, it will be done. If it doesn't, it doesn't matter."

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