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Is There A Bubble In the Chinese Internet Space & How Will It End?
WSJ China Tuesday, June 7, 2011 Beijing

Overview Is there a Bubble in the Chinese Internet Space? Where are we in the Life Cycle of this Bubble? When will it Pop? How Bad will it be Afterwards? Q&A

Overview

Eric Jackson Biography Columbia B-School PhD in Strategy & Governance 2007 Campaign Against Terry Semel and Yahoo!

Eric Jackson Biography

The Story of Yahoo!

The Story of Yahoo!

Eric Jackson Biography Ironfire Capital Started in 2008 China tech focus since 2009 because of team here Offices in Shenzhen and Hong Kong as well as US We take long and short positions

Eric Jackson Biography

Is there a Bubble in China Right Now?

Sonny Wu, managing director of GSR Ventures: Its great to have a bubble. Richard Hsu of Intel Capital China: Bubbles are great. Ruby Lu of DCM: Were in the midst of a bubble but a good bubble. Its going to create a flight to quality. The bad companies will lose momentum or die. The market will shrink to a small base of companies. GGV partner Jenny Lee: Were advising our companies to go public now, if they can to raise money now because a downturn is coming. Chris Evdemon of Kai-Fu Lees Innovation Works: Our job is to get them [our entrepreneurs] prepared, to help them keep their feet on the ground because the bubble is going to burst.

Is there a Bubble in China Right Now?

Is There a Bubble in the China Internet Space? What is a Bubble? Black or White? Economic life cycle

Is There a Bubble in the China Internet Space?

What Do Bubbles Look Like? Typically 4 7 years from start to finish Many quick to label it a bubble at the start Ecstatic parabolic ending

What Do Bubbles Look Like?

Why The Bubbles Not About to Pop -- Yet Still many big tech IPOs to come including 360Buy, Taobao, Facebook, Groupon and Zynga Not every Chinese Internet stock is a big hit today differentiation in quality Still a lot more supply to come Macro trends still very positive and supportive Were currently at a pause

Why The Bubbles Not About to Pop -- Yet

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US Big Cap Tech Enterprise Value to EBITDA Then and Now Dot Com Era and Now
Cisco (CSCO): 27.4x then, 1.8x now. eBay (EBAY): 125.2x then, 3.9x now. Akamai (AKAM): 7,369.2x then, 6.0x now. Amazon (AMZN): 25.5x then, 2.0x now

US Big Cap Tech Enterprise Value to EBITDA

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Where are We Now in the Current Bubble?

Where are we now in the Current Bubble?

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When Will it Pop? When you start to see a lot of low quality IPOs The 3rd or 4th most popular group buying clones or video sites When stock prices appear to be 3 4x greater than their historical growth trend line When all the good US companies have already IPOed

When Will It Pop?

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What Would Risk a Faster Pop? Corporate Governance Large cap tech stock corruption Accounting scandal

What Would Risk a Faster Pop?

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How Bad Will It Be Afterwards? Large drops from all-time highs are not uncommon in this space Many companies will have raised money to keep funding themselves Many will disappear Valuations for private Chinese tech companies didnt drop all that much in 2008/9, so next time could be worse Will be a great time to invest in tech start-ups afterwards and the next bubble will begin

How Bad Will It Be Afterwards?

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Q&A

Q&A