Rui Ma, Ying Lu: Special: 2021 China Tech Trends (with Tech Buzz China)

Acquired's Ben Gilbert and David Rosenthal open this special by explaining why they chose a crossover rather than a company episode. They wanted a broad China episode that was not tied to a single company, and concluded the best way to do that was to co-produce it with Rui Ma and Ying Lu of Tech Buzz China. Ben also lays out the agenda up front: 2021 trends, how two US-based hosts do their research, how their read on the landscape has changed over a decade, and a comparison of the two shows.

The framing problem is stated concretely rather than abstractly. Ben says that for a Chinese reader the volume of China news is enormous, but for an American reader it arrives as isolated items such as a stray story about Jack Ma disappearing. That gap between volume and comprehension is the stated reason for the episode: he wants to understand thematically what sits underneath the headlines.

David supplies the strongest piece of evidence that Tech Buzz is not a courtesy booking. While preparing Acquired's episodes on Meituan, PDD, Tencent, Alibaba and Xiaomi, he listened to their episodes repeatedly, treating them as research input for his own show.

They are the best English-languaged China tech podcast out there.

Rui Ma describes a path that moves between engineering, finance and China. Born in China and immigrated to the US at eight, she grew up largely in Silicon Valley, studied engineering at Berkeley, and went into technology investment banking because, in her words, she was not good enough to be an engineer. In 2007 she moved to China for personal reasons and stayed eight years, starting in real estate investing and moving through cross-border M&A and media private equity before landing at 500 Startups, which she characterizes as a very early accelerator and seed fund. She returned to the Bay Area at the end of 2015, started the podcast in 2017, and went full-time in 2020.

Ying Lu's biography is deliberately positioned on the operating side rather than the investing side. She came to the US at two from Guangxi, from what she calls a fourth-tier city, and notes that much of her extended family remains in fourth- and third-tier cities there. She says more than half of the teams she has worked with were China-based and fully Chinese, that she has been an employee and a startup co-founder in China between 2012 and 2014, and that she moved to the Bay Area in 2014, the year many Chinese apps were trying to go overseas, helping them with US business deals, offices and PR. She now has two partners in China.

The methodological claim that follows from these biographies is worth isolating, because it is the episode's answer to the obvious objection that neither host lives in China. Ying says her deep-rooted opinions and cultural schemas come from family background and early personal and professional experience, but insists they still have to put in time to gather current knowledge, and that being called a China expert is not something they can produce off the cuff — it takes the same kind of research effort as an Acquired episode.

Rui's account of the turning point is built on a scarcity anecdote. Before 2013 and 2014, she says, China tech was very small: the number of people doing angel investing in China could be counted on one hand, and there was literally a book titled Angel Investors of China containing, as she remembers it, twelve men. David's interjection about Warren Buffett working through the Moody's Manual makes the joke explicit — there was a manual of angel investors.

There literally was a book called Angel Investors of China. I think it had 12 men in it.

She then describes the reaction to her joining 500 Startups: people asked why she would do it, calling it too early, bizarre, and not a business model that works in China. Two years later there were a couple of thousand accelerators and hundreds of early-stage funds, and the social attitude toward entrepreneurship inverted — from the view that only people who could not get a real job started companies, to the view that the best and brightest would of course start their own.

It's not like I knew what policies were coming, but then two years later, we have a couple of thousand accelerators.

The evidentiary support she offers for dating the shift is the cohort of companies now public: Pinduoduo, ByteDance and Meituan all started within the last decade, with Pinduoduo founded only five or six years before the recording. Her causal story is capital flooding in combined with changed social attitudes, not policy foresight — a distinction she makes explicitly, which is a useful limitation on any reading that treats the boom as centrally designed.

One practical consequence of the pandemic is folded into this section: both hosts used to return to China roughly quarterly, and now work is primarily online. Rui adds an observation that complicates the picture of who is actually on the ground — some of the VC general partners she talks to are not based in China at all, but in Singapore or Taiwan.

Asked what their audiences should watch over the next three to five years, Rui names three areas for her insider community. First, consumer brands — specifically consumer brands being run like internet companies. Second, community group buying, which she calls disruptive, a new form of ecommerce happening in rural China that accelerated sharply last year because of the pandemic.

The third area is electric vehicles and autonomous driving, and she flags her own limited coverage of it before describing it: she says she does not have much to share on the topic at the moment. What she does offer is that many experts she has talked to think the US and China are on par, and some think China is ahead, while noting that she is more familiar with the autonomous driving front end than with actual vehicle manufacturing. That is an unusually explicit statement of where the speaker's knowledge stops, and it should be read as bounding the claim rather than supporting it.

Actually, a lot of experts I talked to think that the U.S. and China are really on par. Some people even think China is ahead in that sector.

Rui's case for domestic Chinese brands is arithmetic rather than sentiment. In developed markets such as the US, roughly a quarter of fast-moving consumer goods are foreign, non-US brands. In China, she says, foreign brand penetration is north of 40 percent, and materially higher in certain categories. If China comes to look more like the rest of the world in the relative strength of domestic versus foreign brands, the share available to domestic brands is large.