Innovation Works Pitch Deck Teardown: Analyzing China's

Introduction and Ecosystem Overview

Slide 1: Title Slide

The presentation is titled "Angels, VCs and Fundraising in China" and was delivered by Chris Evdemon in November 2010. At the time, Evdemon held multiple roles: General Manager of Incubation Programs at Innovation Works , Director at the Business Angels Network South-East Asia (BANSEA), and a founding member of the China Business Angels Network (CBAN). The slide includes the Innovation Works logo and a confidentiality notice.

Slide 2: The Startup Needs

This slide asks, "What does a start-up entrepreneur need?" The answer provided is an "early stage Ecosystem." The components of this ecosystem are listed as: Market (major opportunities), Entrepreneurship (talent and skills), Incubation (turnkey services), Early Stage Investors (angels and early VCs), and Innovation (a culture of innovation). A visual of a chain with one golden link emphasizes that these elements are interconnected.

Slide 3: Silicon Valley vs. China

Using imagery from Aydin Senkut, this slide explores what makes Silicon Valley special and why it matters to China. It lists four pillars: No Success Without Failure , Adaptability , Elite Universities , and Successful Entrepreneurs acting as Mentors/Angels . Red 'X' marks over the China flags suggest that in 2010, these cultural and structural elements were still developing or missing in the Chinese market.

The Mechanics of Venture Capital

Slide 4: The Venture Lifecycle

This slide provides a standard J-curve visualization of the venture lifecycle, from Idea to Maturity. It maps specific funding sources to stages: Grants (up to $1MM), Angel Investors ($10k - $1MM), Venture Capital ($500k - $20MM), and Investment Banks/PE ($10MM - $100MM+). The Y-axis tracks Revenue/EBITDA, showing the "valley of death" before the growth phase.

Slide 5: Cap Table of a 'Big Hit'

This is a highly detailed data slide showing the hypothetical equity evolution of a successful startup. It tracks Founders, Seed Accelerators, Angels, and VCs across five stages: Seed, Angel, Series A, Series B, and IPO. Key figures include:

Seed: $100,000 total investment, 90% Founder stake. · Angel: $550,000 total investment, 78.1% Founder stake. · Series A: $3,000,000 total investment, 52% Founder stake. · Series B: $10,000,000 total investment, 39% Founder stake. · IPO: $100,000,000 total investment, 32.5% Founder stake.

The slide notes that the final Enterprise Value (Post-Money) at IPO is $600,000,000 , resulting in a 3904x multiple for the founders' initial stake.

Slide 6: Angel Investors Defined

This slide defines Angel Investors as wealthy individuals investing their OWN MONEY in amounts ranging from $10k to $1M . It compares the U.S. and China markets, noting that the U.S. had a $19B Angel market and $28B VC market (over 30 years of history), while China's Angel market size was a question mark with less than 10 years of history. Logos for Google, Facebook, and PayPal are shown as examples of companies that started with angel backing.

Slide 7: Local Angel Activity in China

The slide notes "Very limited local angel activity in China..." and contrasts a "Western Mindset vs. Local?" It highlights two prominent local figures: Zhou Hongyi (Founder of 360) and Lei Jun (Chairman of KingSoft). It credits Lei Jun with helping companies raise more than $150 million in follow-up capital and mentions his investment in UCWeb.

The Venture Capital Landscape

Slide 8: Venture Capital Defined

VCs are defined as professional managers investing OTHER PEOPLE'S MONEY . The slide breaks down the typical fund structure: a 10-year limited partnership where LPs expect a 30% net IRR , and GPs receive a 2% management fee and 20% carried interest . Charts from Zero2IPO show VC fundraising and investment trends between 2002 and 2009.

Slide 9: The U.S. Model in 2010

This slide argues the traditional VC model in the U.S. seemed "broken" because it cost very little to start an internet company. It highlights the rise of Seed Accelerators (Y Combinator, TechStars) and Superangels (Ron Conway, Marc Andreessen, Dave McClure). It notes that returns for traditional VCs were "not good enough" due to the efficiency of capital in modern startups.

Slide 10: China's VC Market Recovery

Data from Zero2IPO shows China's VC market recovering after the 2008 financial crisis. By H1 2010, investment reached $5,827.94M across 61 new funds. The slide states that China was the 2nd largest VC market in the world but still only 1/4th the size of the U.S.

Slide 11: The Shift to RMB Funds

A critical trend identified here is the shift from offshore USD funds to domestic RMB funds. In 2008, the split was 70% USD / 30% RMB. By 2009, this flipped to 30% USD / 70% RMB . The slide attributes this to the global financial crisis and the strength of the Chinese domestic economy.

Slide 12: The Early Stage Gap

Despite the overall market size, this slide asks, "but where is Early Stage?!" Data shows that in Q2 2010, Early Stage deals accounted for only 2% of domestic VC investment, while Expansion Stage (46%) and Development Stage (52%) dominated. It notes that in the U.S., Series A and B typically account for half of all funds invested.

Challenges and Structural Realities

Slide 13: Scarcity of Early Stage Managers

The slide claims the VC industry in China is in its "infancy." It highlights a severe shortage of "hands-on" investment managers with previous startup or operational experience. Most VCs were chasing "low hanging fruit"—later-stage, lower-risk, pre-IPO investments.

Slide 14: Early (?) Stage VCs in China

A logo cloud slide featuring firms like Sequoia Capital, IDG Capital, Matrix Partners China, Gobi Partners, and SIG . The question mark in the title suggests that while these firms are active, their commitment to true early-stage deals was debatable at the time.

Slide 15: The Exit Problem

This slide identifies a lack of Trade Sale (M&A) exits as a major hurdle. China ranked 16th globally in cross-border M&A sales in 2007, far behind the USA and UK. The slide states that negligible M&A activity takes away a vital exit route for early-stage investors.

Slide 16: The IPO Market

Conversely, the domestic IPO market was improving. The launch of the Growth Enterprises Board (GEB) , termed "China's NASDAQ," provided a new exit path. In Q3 2010, a historical record of over 100 VC exits was reached, with 83.8% of exits coming via IPO .

Slide 17: Legal and Structural Challenges

This slide illustrates the complex WFOE (Wholly Foreign-Owned Enterprise) structure. It shows how investment flows through Cayman/BVI and Hong Kong entities into a WFOE, which then uses contracts and transfer pricing to control a local Chinese company that holds the necessary operating licenses.

Advice for Entrepreneurs

Slide 18: Selection Criteria

Evdemon advises entrepreneurs to select investors based on "Smart Money." Criteria include: Value add , Domain expertise of the GP, Portfolio synergies , and a Track record of exits . He notes that the due diligence process, while a "pain," is ultimately beneficial.

Slide 19: Preparation for Fundraising

Fundraising is described as a "non-stop process." Founders are told to prepare a one-paragraph pitch, a one-page executive summary, and a slide deck. The slide includes a chart from Aydin Senkut showing the fluctuation of Seed Round Valuations from 1995 to 2006, peaking at $4.55M in 2000.

Slide 20: The Integrated Roadmap

This slide provides a template for a combined product and fundraising timeline. For a Series A round of $2,000,000 in Q4 2011, the company is projected to need:

1,500,000 Registered Users. · 150,000 Daily Active Users (10% DAU/Registered ratio). · 30 Headcount. · $75,000 monthly operating cost.

Slide 21: Contact Information

The final slide shows the Innovation Works office and provides Chris Evdemon's contact links, including SlideShare, Twitter, and Sina Weibo.

What Works in This Deck

The primary strength of this deck is its transparency regarding market data and financial modeling . In an era where venture capital in China was often opaque, providing a slide like the 'Big Hit' cap table (Slide 5) offered immense value to founders who didn't understand how dilution worked over multiple rounds. The deck also excels at contextualizing the Chinese market against the U.S. standard, helping entrepreneurs understand why they might be struggling to find early-stage leads despite the headline-grabbing billions being invested in the country.

Furthermore, the legal structure diagram (Slide 17) is a masterclass in simplifying a complex regulatory requirement. By clearly showing the flow of capital from offshore entities to local operating companies, the deck demystifies the "VIE" structure that was (and remains) a cornerstone of Chinese tech investment.

What is Missing

Because this is a thematic presentation rather than a company-specific pitch, it lacks a specific product demo or unique value proposition . However, even as a thematic deck, it omits a deep dive into sector-specific trends . While it mentions that traditional industries accounted for 50% of VC money in China (Slide 12), it doesn't elaborate on which tech sectors were most promising beyond a general nod to "internet platform companies."

The deck also lacks real-world case studies of failed exits . While it mentions that M&A is a "negligible" exit route, it doesn't provide examples of companies that were forced into sub-optimal outcomes because of this structural deficiency. Finally, there is no mention of valuation methodology beyond the historical seed round chart; a slide on how 2010-era Chinese VCs were actually pricing deals (e.g., P/E ratios vs. user growth) would have been a significant addition.

What a Founder Should Copy

Founders should look closely at Slide 20 (Preparation for Fundraising) . The integration of product milestones (Alpha, Beta), user metrics (DAU), headcount, and fundraising stages into a single table is an excellent way to show investors that the management team understands the relationship between capital and growth. It moves the conversation from "we need money" to "we need this specific amount to reach these specific operational targets."

Another element to emulate is the Investor Selection Criteria (Slide 18) . Founders often take the first check offered, but this deck correctly identifies that the background and domain expertise of the specific GP championing the deal is often more important than the brand name of the VC firm itself. Using these criteria to vet potential investors can save a startup from a misaligned board of directors later in its lifecycle.