Yesterday, both James Liang, the Chairman of the Board and co-founder of Ctrip.com, and Jane Jie Sun, Chief Financial Officer of Ctrip.com, came to Silicon Valley, giving us a great presentation of ctrip’s success. Orrick at Menlo Park is the venue.

As I have noticed when I was in China recently, the travel industry there will have a very good growth because of the firm demands from both domestic and overseas. The business is very good enough at non-holiday seasons. As China’s revolutionary travel consolidator and the biggest online travel site, Ctrip provides travel services to more than 15 million members. The upside potential is tremendous considering the total population in China, not to mention both Olympic this year and World Expo in 2010. The ctrip.com is very easy to use. The search is fast. There is virtual hotel tour, bundled with map. The only tiny hurdle that I can see is that membership requires a local cell phone number, which prevents foreigners from booking their travels when they haven’t visited China before.

During the presentation, James and Jane showed us how they run ctrip. Ctrip has robust and smooth workflows for both online and off-line booking and custom support. It is a click and brick business model. Ctrip people try to manage business in a very scientific way. They are utilizing 6 Sigma. Ctrip philosophy is around customer, teamwork, respect, integrity, and partner. All these are not that surprising, given both James and Jane’s background. No wonder ctrip can become that successful.

After the event, I add two stocks into my must-own list: ctrp and hmin. Well, it is a no-brainer for me.

Media Coverage:

• Ctrip: The Chinese Are Coming — SeekingAlpha.com
• B11 Mingpao, January 26, 2008 (Chinese)
• World Journal, January 26, 2008 (Chinese)

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In Oct. 6, he returned to Silicon Valley to share his China story. His speech, full of wits and inspirations, led to laughs and applauses from the audience. As his retirement plan, Min wants to contribute to China growing economy. With over 20-year experiences in high-tech industry, Min was lost at beginning. Due to the fact that China doesn’t have a credit system, many times, people didn’t treat him seriously simply because either his car is not good enough or he doesn’t have a designated driver. After two years, however, he touched the pulse of China’s economy like no other.

Min believes in service sector. More specifically, he singled out the top 5 areas

1. Financial service, including banks and insurance companies
2. Health care service
3. Education for college entrance exam, and Chinese learning
4. E-commerce
5. Media

I concur with two examples. Insurance is definitely hot. China Life Insurance (LFC) has a whopping 100% return if people jumped in later June. Similarly, the leading English education company in China, New Oriental Education & Technology Group (EDU), generates another 100% return since late January.

As an investor, Min is interested in companies having online-offline business models, resided in a market with size around 100 billion RMB and without any dominant player. The company must have a good team. He favors low-tech companies with high-tech flavor. He noticed that the typical time-to-IPO is a very short 3 year average, which is very ideal for investors. VC industry is also booming in China with Zhejiang Province alone having more than a hundred local investment funds. When talking about China bubble with average PE of SSE around 50, Min likes the economy to have some sort of bubble. He notices that the whole US IT industry has improved tremendously after previous Internet bubble in 2000. Without that bubble, the industry wouldn’t have made so much progress and without bubble bust, the industry wouldn’t mature dramatically, leading to a more solid booming beyond the industry itself. The recent boom is led by NYSE with P/E ratio of Dow Jones Industrial average still around 17.

As a philanthropist, Min donated $10 million to his alma mater, Zhejiang University, setting up Zhejiang University Innovation Institute, International. He has a lofty mission to drive innovations that affect common people’s every day life. One good area is green-tech. He believes that solar panel cost will be driven down by Chinese manufacturing industry to be compatible with oil and coal within 2 years.

Finally, Min shared his keys to the success during the Q&A section:

1. Optimistic
2. Persistent
3. Grateful
4. Team spirit

And don’t forget B2G (Business-to-Government), if one wants to do good business in China.

There are a lot more in this 3-hour event. I cannot list every good point mentioned by Min. One thing is sure by Min that there will be a lot more opportunities coming out in the next 5-10 years. These who surf well in the China wave could definitely accumulate a lot of fortune. Though, it is equally important to succeed for a good cause, like what Min has done.

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Web 2.0 is a phrase coined by O’Reilly Media in 2003 and popularized by the first Web 2.0 conference in 2004. It refers to a new generation of Internet full of social-networking sites, wikis and folksonomies. Given the successes of 2.0 from companies like YouTube, MySpace, and Facebook, it is understandable that people want to jump ahead of the game, catching the next wave, even by speculation. There is an interesting diagram worth noticing, called 2007 Web Trend, which includes Web 2.5 applications.

Fortunately, our seasoned speakers shed lights on the 3.0 myth.

• Internet was created to connect people together, which has been carried on as the fundamental base from Web 1.0, 2.0, to 3.0.
• Internet connectivity is important. Watch out for technology advances, better availability, and policy improvements. For example, 2.0’s success is partially based on broadband network.
• Web standards are important. More importantly, who will drive the adoption of standards? Obviously, open source society will play a major role.
• Web technology will further expand into everyday life, which will largely change social behaviors of human society. Apple iPhone could be a good start.
• Browsers and browser like applications will prevail with enhanced security capabilities as they control both content delivery and application delivery.
• New business models and new ecosystems will be created for 3.0, just as Google Adsense and virtual currency from online gaming and virtual worlds for 2.0.
• Web 3.0 is still in its infancy. The judgment call will be made by Internet users. As a good example, there are 400 copycats of YouTube in China. Only the ones that satisfy the end users the best will eventually survive and prosper.

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At June 30, Mr. Duan shared his investment philosophy in one of HYSTA Distinguished Speaker Series by a fireside chat with Jack Xu, VP of Engineering, eBay Inc. Their friendship was traced back when Jack was CTO of Netease.

Here are Mr. Duan’s investment theories:

• Investment means to understand what one plans to invest. Duan did very well in Netease since he has plenty of knowledge in the game industry. But, he missed Apple big time simply because he didn’t play with iPod early enough. He also didn’t do well in FreshChoice since he intended to learn how US corporates operate.
• Investment means to buy cheap. Duan believes in one of Carl Marx’s economic theories that value determines price, and price fluctuates around value. He is definitely a value investor.
• Fast is slow. Mr. Duan is so in belief of this theory that his eBay id is actually fastisslow. Here, slow means to invest and fast means to gamble. It is important to be rich once in one’s life!
• It is always hard to dig the first bucket of gold. Since Mr. Duan has no intention to win Nobel prize, he couldn’t give any tips on how to be rich fast.

Since the whole chat was carried out in Chinese, I am not sure that my understanding was 100% original. However, Duan’s words DID calm me down a little bit in this fast paced Valley where the only dream is to become rich within an extremely short period of time.

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Here are my notes:

• It is expensive to run a company in US, but the return is also more lucrative.
• Generally speaking, labor cost is cheaper in China but not true for skillful engineers.
• Successful business models from US Internet companies form a good start point for their Chinese siblings but that’s far from enough.
• Google AdWords is a good way to lure customers to the site but it is not the only way, and it is not necessary the best way. Most time, it is not.
• Chinese companies face more challenges to keep company secrets.

The moderator was Richard Lim, who is a veteran VC. He felt pity that Google Adsense came out too late. Otherwise, one of the companies that his firm invested could be saved during bubble bust since the company had fantastic page view growth. In that sense, Google’s eco-system helped Web 2.0 boom.

Overall, it is an interesting panel discussion for these that have strong entrepreneur spirits in their bones to enjoy!

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in 1999 as a B2B trading company, Alibaba survived the Internet dark age, and becomes a leading Internet player in the world. In 2003, Alibaba launched consumer ecommerce site Taobao, which eventually became the dominant C2C platform in 2005, surpassing eBay China. In August 2005, Yahoo! Inc. paid $1 billion in cash for a 40 percent stake in Alibaba, along with its China assets. In 2007, Alibaba entered business software service area by announcing Alisoft.

John Wu, full of wit and humors, gave us a deep inside look at Alibaba’s successes.

• Be cost conscience: Alibaba was among the earliest to cut cost in 2000 with the bubble bust on the horizon. Being local, they started to leverage Chinese high-tech workforce long before outsourcing became a hot topic in Wall Street.
• Be adaptive: Localization is the key to the success of international companies while, most of the time, it is easy to say than get done correctly. It is fatal to be ideological. The success of Alibaba’s B2B and C2C platforms are deeply rooted in its understanding of Chinese culture.
• Think out of box: When Alibaba entered C2C market in 2003, Eachnet (or eBay China) conquered more than 90% of the market. Out of the box, there were more Chinese who wanted to trade via some Internet C2C platform and who were not on Eachnet yet.
• Stay paranoid: In IT industry, only paranoids could survive. It is important to stay ahead of competitors. Through the Yahoo-Alibaba deal, Alibaba could leverage Yahoo’s technologies to support its further growth.
• Catch the China wave: Given its population and growth rate, China’s potential is still not fully fledged. A rich China means more ecommerce. There are bigger waves coming.

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