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Investor who gained 200 000% on Alibaba bets big on smart cities

‘Think before you act, aim before you shoot.’
Image: Qilai Shen/Bloomberg

In 1999, Benson Tam decided to help out his buddy Joe Tsai and orchestrated a $500 000 investment for his then-untested startup. That company turned out to be Alibaba Group Holding, which revolutionised online shopping in China and debuted 15 years later with the world’s largest initial public offering, yielding a 200-fold return for Tam and his partners.

In contrast with his decisive bet into Alibaba, Tam has spent the better part of the past decade studying and planning for what he believes will be the transformative trend of the new century. Now, his Venturous Group is preparing to step into the limelight, raising $131 million to help bankroll China’s so-called New Infrastructure plan: a multi-trillion-dollar vision to lay the foundation for the country’s future by building everything from intelligent cities to sprawling ultra-fast networks. It’s a vastly longer-term bet than the rocket ship that was Alibaba, but Tam believes the payoff could be similar in magnitude if he plays his cards right.

“Think before you act, aim before you shoot,” said the methodical 57-year-old, adding that he read 400 books and tested the waters with several personal investments in the seven years before launching his new venture.

Tam’s Venturous is the product of a three-decade career during which the veteran has backed other early internet giants and helped pioneer venture investing and private equity across the world’s No. 2 economy. His journey into finance began in 1989 as an investment banker at S.G. Warburg in London. The Asia IPO boom two years later brought Tam back to his hometown of Hong Kong, where he shepherded companies going public for East Asia Warburg, followed by stints working on private equity at Hellman & Friedman Asia and Electra Partners Asia.

The successful bet on Alibaba, made jointly with Fidelity Investments, led him to co-found Fidelity Growth Partners Asia in 2002, where he played a key role in growing assets 200-fold to $4 billion in just a decade. Tam’s signature investments also include AsiaInfo Holdings, which built China’s first national broadband network and became one of the first Chinese tech listings on the Nasdaq.

Tam’s early experience taught him the value of personal relationships and the Hong Kong native moved to Beijing in 2002 to befriend mainland entrepreneurs. One of his key goals in his early days as a venture capitalist was to be invited by startup founders and fellow investors to weekend parties. Even today, Tam still attends team-building activities at his investee firms. “Capital is not all about money. It’s not all about numbers. It’s ultimately about people,” Tam said.

Now, his Beijing-based Venturous Group has raised $131 million from financial institutions including Fidelity as well as billionaire families in its Series A round. He’s seeking another $100 million by the end of this year to digitalise buildings, transportation and other urban facilities in China, an initiative backed by President Xi Jinping himself.

Under Beijing’s infrastructure masterplan, China will invest an estimated $1.4 trillion over six years to 2025 to lay fifth generation wireless networks, install cameras and sensors, and deploy artificial intelligence technology that will enable cutting-edge solutions such as autonomous driving and internet-connected smart homes.

Savio Kwan, the first chief operating officer at Alibaba, says Tam is uniquely positioned to lead China’s next tech boom. “It looks as if it is lucky to be there early. But it is not,” said Kwan, who invested $10 million into Venturous. “To be early means you’re well prepared and you’re learning from your past experience.”

It was precisely a missed opportunity that transformed Tam into a better investor, according to Kwan. In 2002, when Alibaba was trying to raise a third round of $5 million, many existing backers — Fidelity included — took a wait-and-see approach. Kwan and several others like co-founders Jack Ma and Tsai ended up putting in $1 million of their own money to close the round, an investment that ended up generating a 40-fold return in the following two years. “That must have affected Benson in a sense that he wants to go for the long term,” Kwan says.

Liu Tianwen, the founder and chief executive officer of iSoftStone Information Technology (Group), is among entrepreneurs who have benefited from Tam’s patience and unwillingness to write off troubled startups. When the software firm struggled to raise capital during the 2008 financial crisis, Tam not only doubled down on Fidelity’s investment but also helped bring in more investors. Since then, sales of Beijing-based iSoftStone have climbed to nearly 13 billion yuan ($2 billion) in 2020 and the company is set to float on China’s Nasdaq-style ChiNext board this year.

“Some investors eye an immediate return, but Benson has a vision for the long run,” Liu said.

Venturous Group makes concentrated bets — pouring nearly all the capital it’s raised so far into seven startups including iSSTech, an iSoftStone spinoff that provides big data and cloud computing services to urban planners. It has also invested in Zhuyou Hotel Group, a Chinese hotel chain dedicated to serving tech-savvy millennials.

Tam sees investing as only a starting point to capture the smart city market and his ambitions extend to creating a vast ecosystem around his portfolio firms — a move straight from the playbook of tech giants like Alibaba. Venturous Group is in advanced discussions with a British engineering conglomerate to form a joint venture in China, which will equip buildings with smart sensors and other advanced technologies, Tam said, declining to provide details.

“One thing he appreciates is longevity in the value he brings,” Kwan said. “This manifests itself in his interest in wine. If you pick the right kind of Château, then you pick the grape, the land, and the wine maker. In the long term, you will see the increase in value.”

© 2021 Bloomberg

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