Ep. 16: He Left Germany to Build a $100M USD China Fund

"If I help people in the West to make money in China through financial returns by investing in real China technology — maybe then they will believe it." - Rafael Ratzel, TH Capital

For years Rafael Ratzel went home to Europe trying to tell people what China is actually like. Lifelong friends called him brainwashed. So he stopped arguing and raised a $100M USD deep tech fund instead, because if he made his friends money in Chinese technology they would have to come see it themselves. Rafael landed in Hong Kong on the day of the biggest typhoon in HK history, age 19, with one suitcase. Eighteen years later he is Managing Partner International at TH Capital (华控基金), a Tsinghua-ecosystem deep tech VC with a portfolio that includes Zhipu AI, Aerofugia, Neuracle, and Lanxin Computing.

In this episode:

• The brainwashed accusation at a European dinner that made him pivot from missionary to fund-builder
• A one-way ticket to Hong Kong in August 2008, arriving on the day of the biggest typhoon in HK history
• A Lan Kwai Fong bar, a stranger, and a Shenzhen printing factory with chickens jumping on a five-million-euro Heidelberg press
• Six years running a one-man trading and tech-licensing business between Germany and China
• From Tsinghua MBA to passing on HNA, Anbang, and CMIG for the small fund that said no to a special package
• Twenty years of thesis evolution at TH Capital: industrials, photonics, semiconductors, and now deep tech and quantum
• Why US chip sanctions accelerated China's own GPU industry instead of containing it
• Zhipu AI: backing the Tsinghua team before they started a company, before ChatGPT existed, from an 800 million RMB angel to a $50 billion listing
• The Saudi investor who heard a Shenzhen chip valuation and said it would be 10x higher in Silicon Valley
• Why Europe drops out of the next 20 years — and why he is still proud to be German
• Cross-border M&A: the Dortmund acquisition, the SPIE Award the year after, and why his founder will never buy a German company again
• Why "auswandern" is the wrong frame, and how he stays integrated on both sides

About Rafael:
Rafael Ratzel is Managing Partner International at TH Capital (华控基金), a Tsinghua-ecosystem deep tech VC founded in 2007, managing over RMB 10 billion across six RMB funds and one USD fund. The $100M USD fund closed end of 2024 with LPs from Greater China, Southeast Asia, Europe, the Middle East, and the US. Portfolio includes Zhipu AI, Aerofugia, Neuracle, and Lanxin Computing. Rafael landed in Hong Kong on a one-way ticket at 19 in August 2008. PolyU engineering + management double major, Tsinghua MBA, MIT Sloan exchange. Eighteen years in China.

Connect:
thcapital.com.cn

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Transcript

SPEAKER_01 0:00

I always try to tell people about you know how great it is here. It's just not fair that people don't get recognition for this. During COVID, this became such an emotional debate. It ends up in almost arguments with friends. They've been lifelong friends, right? And then they get very aggressive and say, Well, you've been brainwashed and you know, this is all propaganda. I'm like, come on, man, like I don't have stakes in the in this party, right? I'm just here and tell you my experience. And people it would be so emotional at some point I decided to stop talking about it. And then I said, you know, if I help people in the West to make money in China through financial return by investing to build a fund structure where they can invest in the real China technology, maybe then they will believe it. And they are now, you know, spreading the word in Europe and they say China is not what you think it is, and that's much more powerful than what we ever can do because they're you know considered not to be brainwashed.

SPEAKER_00 1:02

Rafael Ratzl, a very German name. Yeah, we all we could speak German, but today we want to speak English because we want to bring your story to the world. Sounds good. So welcome to the podcast.

SPEAKER_02 1:14

Thank you. Welcome. There's something that uh connects us three, I guess. You we all booked one uh one uh one how do you say that? One way one way ticket all right to China. Yeah, but yours was in 2008 already. Yes, yes, yes. Walk us through your your journey and how you decide on this.

SPEAKER_01 1:34

Okay, all right. Well, I mean I I didn't think a one-way ticket was a good idea back then, but turns out uh you know it it worked out quite okay. So what happened is I uh I was supposed to go to university in Sangalen uh after I graduated from high school. And uh coincidentally, I I on an exhibition for universities, I ran into a a recruiter from the Hong Kong Polytechnic University, and he had a booth in that exhibition, and he was a very nice guy, right? So I kind of um I sat with him, talked with him, and he showed me a really nice video. And I, you know, at that time I was 18. I hadn't been to Asia, and uh and he showed me this video, which I later found out was not done by the university, but the Hong Kong Tourism Board. Okay, okay. As you know, the Hong Kong Tourism Board, they're very capable. Yeah, so I saw that video, I'd never been there, and I was totally hooked. And this guy said, uh, you know, why don't you just apply? And and you're so nice. And I thought, you know, give it a try. And I totally forgot about it until three months later I got an email from the university and they said, you know, you're accepted, you have a full scholarship. And uh and I said, Why let's go and try this, right? There was no downside. I mean, if you don't like it, you just come back, I thought. And then and then my parents who who who didn't question my decision, but they made it conditional on a one-way ticket, and they made me book a one-way ticket, they made me take one suitcase, and then when I left home, they said, Don't come back with unfinished business. And uh, and that's how I arrived and landed in in Hong Kong on uh 22nd of August 2008 at 6:30 a.m. And uh it was the last flight that could land on that day because it was the biggest typhoon in Hong Kong history. Okay, and uh and I landed in this uh in this city, and I uh in the plane next to me was sitting this like uh German seaman who was going to start uh start a journey on a on a cargo ship here, right? And I walked out of the building with him and he said, I'm gonna go and have a cigarette. And I was so shocked by this whole jet lag and and and you know humidity. I said, I'll have a cigarette with you, even though I didn't smoke at the time, right? I was like totally out of it. And uh and then I took the bus into the city, which was on lockdown. All the windows were kind of taped up and everything was shut down, and I was like, Oh my god, what did I do here? And then I arrived and booked into the student dorm, which was a 12-square meter room for two or three students together in one 12-square meter room, which was very unusual for us from Europe, right?

SPEAKER_00 3:55

And you're a tall guy, yeah.

SPEAKER_01 3:57

So I I I showed it, I showed up, I I kind of boarded, and at 9 a.m. I was in this room totally tired and exhausted, looking at my watch. Oh my god, this is another 12-hour day. And that's the only day ever I regret coming here. And uh, and then the second day I met some like neighbors and went to play basketball, and we went out to have dinner and never again.

SPEAKER_00 4:19

Yeah, so thanks to Papa Mama Ratzel being so strict, right? That's right. That's right. So, what was Hong Kong like then into back in 2008?

SPEAKER_01 4:29

I mean, it was very different because in kind of the the early 2000s, those were the heydays of Hong Kong banking, financial center, right? Um, kind of that international jet set that was arriving in Hong Kong, people going to Australia from Europe or going anywhere else, kind of just stopping over in Hong Kong, three-day uh stay. That's when Lang Kwai Fong was at its peak ever.

SPEAKER_00 4:52

But it was also the time of the financial crisis, right? Exactly.

SPEAKER_01 4:54

So so so in exactly in August or September. Yeah, yeah. Yeah. So I arrived in university, we're like, okay, this is great. And then the biggest financial crisis the world had seen, right? And then uh with that, it came like a half a year of very high uncertainty, almost like a deep depressive mood across Hong Kong. Um, but but lucky enough for us, we we didn't really, you know, we were too young to kind of understand the magnitude of that that thing. But it it obviously also had an impact on the city as a whole, right? So that the whole kind of nightlife scene and and everything was quieted down a bit for six months. But then it actually until today, it's quite surprising given how big and significant that crisis was, how fast everything recovered. Right? Because in Hong Kong, half a year or a year after, there was basically nothing to see or hear of that crisis anymore. And that's when China really took off, right? When it went from just kind of so I so when I look at China from the you know, starting from the opening in the in the 90s and this economic liberalization, I I kind of divide it into three uh types of China. And the first China is kind of I call it the decade of the Chinese worker. So everybody, when you talk about China in the West, everybody thinks about these people kind of working away in these sweat factories, right, producing stuff at low cost. And then the second decade, which or let's say the second period, which is like in the mid-2000s to 2000 kind of 15 or so, is the period of the Chinese consumer, right? And that's when it really took off. So 2010, 2012, that's when you know Ali, Tencent, all these big 2C companies went public, had like massive uh um uh uh impact globally. And and those were also the the the big days in Hong Kong, right? Like Hong Kong was just exploding in 2010, 2012, 2014. And then sort of the third decade or the third period is what I call the Chinese innovator, right? What's happening now? So we go from the the worker to the consumer to the innovator, and the and that was kind of the the the time in Hong Kong, and that's why it was such a such a kind of uh um an expansion and such a uh kind of a uh mindset of kind of of adventure, right? Everything was possible in in China in 2014-15, everything was possible, and then China started going into the world, right, with all this cross-border MA. I mean, we we talked about it, yeah, and and it just went uh it went crazy. And then Hong Kong changed a lot, right, in 2029. And I went to Beijing in in 2013 and and stayed there for 12 years until last year. Um, but then Hong Kong changed radically, right? Because China changed and evolved, and Hong Kong didn't catch up.

SPEAKER_00 7:40

So the the the Hong Kong business model didn't evolve fast enough to kind of keep track, and then you know, 1920 that the whole thing kind of but now this year and last year Hong Kong became the hotspot again for all the IPOs, like companies, mainland companies are lining up to do their IPO in Hong Kong, right?

SPEAKER_01 7:58

Yeah, 100%. So, I mean, last year I think Hong Kong had something like 400 IPOs. Yeah, it's the global leader in terms of number of IPOs, in terms of capital raised, and also in terms of kind of overall, you know, transition from uh private to public and and bringing also names out into the world for for tech companies. And a vast majority of these IPOs were tech related. And and that's the story. So when you look at Hong Kong in 2019, you had the big the big protest, right? I I don't want to go into politics, but you know, there's a reason behind that, and it's not what the Western media portrayed. You know, there were big kind of societal imbalances, there was a lot of tension in in in Hong Kong as a city, but also as a society, and and that just kind of all burst, right? Ignited or or originated from specific aspects, but it it all came out in one go, and that kind of made Hong Kong a kind of uh a little bit like the persona non grata, right, from a Western perspective. And right after that, or into that came COVID. And COVID in Hong Kong was especially difficult because it was confined to just one city for almost two years, right? It's not even like China or a country where, like mainland China, where basically you could travel between cities, it was just that one place. So it had an even bigger impact, and a lot of expats left, they relocated, were relocated to Singapore, and it was kind of sort of a a double die, like a double hit for Hong Kong. And they kind they had to work really hard to reinvent their reinvent themselves and to kind of also reinvent the business model of Hong Kong. Because Hong Kong, because when I was in Hong Kong in 08 to 2012, the the it always was the window to China, right? If you wanted to pay a factory in in Shenzhen, you had to go through a Hong Kong bank and they would like transfer it and trans transact here, and all the stuff would come to containers to Hong Kong Harbor, and you know, one of the big operators would then ship it into the world. And then China started building its own ports, right? They're not ship directly from Shenzhen, Ningbu or wherever it's made. You have their own banks, it all works. So kind of China build a door, so there's no need to climb through the window anymore, right? And then Hong Kong all of a sudden, okay, what what do we do now? And after COVID, the government worked really hard. And I think, in my opinion, did a good job to kind of work with the mainland government and to redefine their role and say, you know, what are we good at? What's our focus? And we have to move away from just being an intermediary, but what they were before, and we have to provide more value at. So why don't we help to build a capital market that is more accessible and more international than the on onshore stock exchanges? Why don't we become a center for Chinese companies going out into the world? And over the last two, actually three years, they kind of refined that model, right? They started with all these conferences, they started with bringing capital back to Hong Kong, they started reforming the stock exchange to um uh bring uh kind of access channels and new listing standards that enabled younger, earlier stage companies to list in Hong Kong, things that are, you know, were not as easy in mainland. And at the same time, they also help companies to be a center for internationalization, right? You establish a subsidiary, you work close with Shenzhen, and then from there from Hong Kong, you go out into the world. And that had a huge impact. It's exactly what China needs now. And you see it in the I mean, we we just mentioned you look at the Lianghui, so the the confrec, right, in in February, March, that clearly defined that for the next 10 years they want the Greater Bay Area, and that's also a concept of that whole reinovation, right? Or self-kind of uh adjustment of their own model. This Greater Bay Area, so Guangzhou, Shenzhen, Foshan, uh, Zhuhai, Macau, and Hong Kong, they will be the center for Chinese high-tech development in the next decade. It'll be an infrastructure hub that connects logistics, capital, and companies within one ecosystem, even though it's you know across the two special administrative regions. And they said this is going to be our equivalent to Silicon Valley, and that's why Shenzhen is, you know, has become what it is nowadays. And they've also mentioned clearly that they hope that Hong Kong can be the kind of the spearhead of this to bring that tech hub into the world, products, technology, people, and bring the world, capital, mainly capital and talent, back into this Greater Bay area. So that has led to Hong Kong just completely reinventing itself. And that has spurred this kind of growth over the last, you know, 18, 24 months that you mentioned, which is Hong Kong stock exchange, bringing all these companies IPO, and and that maybe last year was a bit too much and it'll be adjusted again, right? So they've mentioned they are readjusting the listing standards, they're checking for higher quality. Um, but you know how it is in China, right? It's a bit up and down, a bit letting loose, a bit tightening up.

SPEAKER_02 13:03

It's normal. How do you think will this look like uh in like five years, the whole Greater Bay area?

SPEAKER_01 13:10

Um will they potentially open up or if you look at it, if you look at what has what has happened over the last 10 years, you kind of it gives us an idea of what's going to, you know, what's likely to happen over the next five or ten years. And one thing is what we'll see is an even further integration. Start with logistics, right? I mean 10 years ago, if you wanted to come from Hong Kong to Shenzhen, you had to have a China visa, you had to uh, you know, get a special permit, it was like a long process and so on. Nowadays, if you're a Hong Kong permanent resident, you get a like a special card where you just go through a face scan and you go to mainland, right? You what's gonna happen in five years from now, and this already announced they are establishing a an immigration channel where with one check you get through both borders.

SPEAKER_00 13:58

I would love that. That's amazing, right?

SPEAKER_01 14:00

And it's just scan your face. So you don't no need to take out any card, the document, or anything, just walk through. Yeah, right. Uh so that's amazing. And uh and they're gonna have more checkpoints, they're gonna have, you know, now you have the cross-border high-speed train. So we'll see more and more of that integration, also in terms of uh physical kind of infrastructure. So Hong Kong has launched this northern metropolis concept, right? Where basically they're now investing, I think it's something like 300 billion Hong Kong dollars, to develop a tech and science park or metropolis in the north of Hong Kong. So new territories that border the Shenzhen area, combining both areas, correct. And they're there, they're even so they said there's a pre-clear channel, which is a footbridge over the river, which is essentially the border between the two places, where people who are registered and work there can just freely cross the border without having to go through some you know official check and just yeah, customs and so on. So you'll see more and more integration. And and and think about it long term. I mean, you you wonder why is there a need to still have a border between Hong Kong and China, right? And one key reason is if you look at the two places as an economic center, what determines the flow of goods and people, it's actually one key factor is the the the GDP on, or let's say the wealth on either side, right? So you have a discrete discrepancy or an asymmetry in wealth, which would, if you don't regulate it, it's kind of a natural flow to balance it out. Imagine of two two water water buckets, right? And then you break the barrier between them, of course, they'll kind of level out. So what they're doing now, and with the development of Shenzhen, Shenzhen is getting richer and richer, right? So at some point they'll have a similar level of wealth. And another question is the level of tax, right? So so wealth is also very much in real estate price. So at some point that'll equal out, but then you come to tax, and Hong Kong is a very preferential tax kind of framework, right? But here in in the Greater Bay Area, they're now starting to slowly adapt this, right? So in Zhuhai, I think it's already 15% income tax, which is vastly different from Shanghai or Beijing. So kind of in the in the economic sort of compartment and in the tax component, I think they'll just start leveling it out slowly. And it has to be a gradual process, right? You can just do that overnight. And at some point, I mean, I wouldn't be surprised if we don't see any border between Shenzhen and Hong Kong anymore. Um maybe in 10 years, 20 years, I don't know. But um, and and this will just become one large special administrative zone in the in the GBA, right?

SPEAKER_00 16:30

So right now you're obviously very deep inside the whole China business investing game, but it wasn't like this from the beginning. We just talked about it. You came here as a student, right? With a with a one-way ticket, uh, and your parents said you don't come home before you finish your business, and you still haven't finished your business, obviously, because you're just getting started. So, how does it start? You taught us uh before it started in Langue Fang.

SPEAKER_01 16:54

Yes, yes, that's right. So I um in Sangalen, I was supposed to study business, right? I mean, when you're 18, you don't really know what you want to study, but business sounds cool.

SPEAKER_03 17:06

Yep.

SPEAKER_01 17:06

The problem was when I applied in Hong Kong, I didn't really know how it works, and they have a little bit of a different terminology, so I ended up in engineering instead of business. Okay, yeah. Um, and uh and then I had added a second degree, so I did a double of engineering and management. But so with that background, sort of I I we were out one night in in Lang Kwai Fong, and um it was a German bar. Unfortunately, it closed down, but it was called Bitpoint because they would serve Bitburger on draft. And I'm at the bar ordering a drink, uh, a beer, and next to me is a is a guy who who kind of stands at the bar and how it goes. I could start chatting, and my friends were outside, we ordered four or five beers, so it took a while, and then he's like, Yeah, you know, uh this and that, and uh problems in Shenzhen and factories, and I was like, Come on, it's Friday night, don't worry, I'll help you sort that out, right? It's like oh okay, great. So we exchanged information, and then actually the next day he he wrote me an email and he said, Yeah, by the way, you so you mentioned you can solve this, right? So when can you do it? And I yeah, so that's how it started. How old was this guy? Uh he he must have been in his 40s, mid-40s, and I was 19, right? So maybe just 20. And and I Googled, I said, Okay, so industrial printing, Shenzhen, and what do you have to do? And and then I I just got on the MTR, I went to Shenzhen, I went to this factory, and he told me what the problems are. I didn't really understand the details, but I thought it can't be that difficult, right? So um I went to Shenzhen and I came to this printing factory, and they had, you know, they had all the good equipment. They had a Heidelberg printing machine with a uh four four plus UV plus all that other stuff. It's like it costs like five million euros, right? The machine like that. But I came in and there were all these chicken jumping around on the printing machine, which is obviously very delicate, right? Because you you press one button and it it prints like 2,000 sheets an hour, right? Yeah, um, so I went to this factory and I said, Look, I don't know how this is how this problem is going to be solved, but I'm not leaving here before it's solved. And it was a very ugly three days, but we got it solved, right? And had the guy on the phone, it was before all these video calls and stuff like that, right? So the guy on this guy on the phone is like, Yeah, but then you have to check for this color and do a bit more on that button and send me a photo, and eventually we sort it out. So, were the chicken part of the solution? No, no, it was getting rid of the chicken was part of the solution. Okay, and then I left, and and he's like, Okay, great. So, you know, how much do you want for this? And I well, you know, can you again you Google and you're like, okay, how what do you charge for this? And then in a week, and I'd gave him a number, and he's like, Okay, you should just tell me where I have to transfer it.

SPEAKER_00 19:47

You didn't have a bank account.

SPEAKER_01 19:48

No, no, at nothing like it was just personal, and uh, and then at some point, like a couple of weeks later, I get a call from somebody like random, and it's like, Yeah, we heard you're the guy in China who can fix any problem. After three days of work, yeah, that's right. And and that's how it evolved. And then I, you know, I was like, okay, well, like this is my offer. And he's like, Yeah, sure, no problem, just get it done. And then one thing led to another. I I registered a company, and more people started calling. And then for six years, I I ran my own business, which in the beginning focused on kind of outsourcing manufacturing from European companies and helping them to solve operational problems in China, and later it evolved into kind of not just being a problem solver, but actually starting to produce and own and trade products. And then the more I did of that, I worked closer with the Chinese factories and companies, and and then they started asking me to say, Well, how can you somehow help us to get technologies from Europe, right? So um I worked in a in a in a project with um with water filtration, and they were looking to export products to Germany. So we kind of we helped them with that, and then they said, Well, but we also want to license in technology for filtration from Germany to use in the Chinese market. So it became sort of a two-way street, and and that's what I did for the first part of my career, which was very much in line with uh industrial and system engineering, which I studied, so you know, process technologies, you know, you know, basic manufacturing processes, problems, problem solving, and so on. And then uh something went like one of the deals went terrible, terrible. It went all the way south, and basically I yeah, so I lost all the money I'd made up to that point, which was uh devastating at that point. But I think if you ever make a mistake like that, make it early. Yeah, because because uh you know, when you're 25, it's kind of easier to digest. And I was anyway just about to start my MBA in Qinghua. Um, we because I realized also that kind of from a business standpoint and a business understanding and management experience. I had to kind of get a bit better framework around that. Yeah, so that's how I went to my MBA. And then through the MBA at Qinghua, I met the founder of the company where I'm part of now. And then one thing led to another, and then you end up in this China technology ecosystem, right? Yeah.

SPEAKER_02 22:15

It's funny that you solved also the chicken problem, and you you were talking about the worker um phase in in China, but it's I think there are still a lot of people in Germany or in outside of China that think China is still like this. Yeah, yeah, yeah.

SPEAKER_01 22:30

100%.

SPEAKER_02 22:31

Yeah, their minds are stuck in the worker area. Yeah.

SPEAKER_00 22:34

Not even the consumer area.

SPEAKER_02 22:36

20, 20 years ago. Like you've been the working bench for so many countries for like 20, 30, 40 years, and still people think you're just a copycat and cheap products.

SPEAKER_01 22:47

I mean, I I I can tell you, so it initially, right, this made in China brand like mark was meant to kind of show poor quality, right?

SPEAKER_00 22:59

Made in Germany the same.

SPEAKER_01 23:00

100%, exactly. Right. And it became a quality trademark. Yeah. So when I I had a course in Hong Kong Polyu where I did my undergrad, and it was a marketing course, and I chose we could choose our topics. And at that time, I chose the Chinese five-year plan, which announced the China Made in China 2025 concept, which basically said we want to be in 2025, we want to be at a point where made in China is recognized for products that have technology, innovation, and good quality. Well, and it worked out, but but you know, I mean, this is all written down. Like it's so funny. The West kind of thinks China is a black box. It's the opposite, it's all written down, maybe in a very kind of bureaucratic way, but it's all there, it's all in archives, it now even online, right? You can look look up all of these plans. And and I just looked at it from a marketing standpoint, and people, and then I presented presented in class. People, you know, my teachers, okay, this is good. I showed it to people back in Europe, my friends, and they laughed at me. They said, Oh, how can you be so so naive to believe that they they can do this in 2025, all low-cost manufacturing and so on? In 2024, I went back to them and I said, Look, we're a year ahead of schedule, and the Germans are already totally scared, terrified, yeah, by Chinese EVs. We all use Chinese phones, right?

SPEAKER_00 24:24

So this is super interesting. The five-year plans. I love this topic because we wrote about it in our newsletter about the tool manufacturing machines. Always has been an industry where Germany was the strongest one, the biggest exporter worldwide of tool manufacturing machines. But 25 years ago, it it was stated in the five years plan that China wants to be the number one. Also, what date I don't remember. And last year, China actually overtook Germany in one of their core industries, the tool manufacturing machines, exporting more than Germany. New export Weltmeister.

SPEAKER_01 25:02

Yeah, it is. I mean, you know, so again, I think yesterday or two days ago, I read this. I saw the headline of this article about something, something the China miracle. That's such a nonsense, that's such a silly term.

SPEAKER_02 25:17

Or there's always a but.

SPEAKER_01 25:18

Yeah, exactly. And you're how is this a miracle? 20 years ago, they told you they'll do this, and then it's just 20 years of the very uh hardcore, diligent execution, day by day, but that's not a miracle. A miracle is something unexpected happens. They should end up not expecting.

SPEAKER_02 25:35

This is written down, yeah, exactly. Yeah, that it's funny. Like, we we um I'm also in involved in a lot of cross-board MA, and now they I talk to a lot of uh MA advisors also from here, and they tell me the same. Like, use it used to be like this that Chinese are buying technology from the West, but now they don't really care.

SPEAKER_00 25:55

I mean, we also organize this innovation tours, right? For CEOs coming to China, and this is also something it still blows my mind, you know. Like during COVID, China was a bad guy, everything was bad. Now, actually, Western CEOs they're begging companies like Xiaomi or Unitree to see them, to have visits with them, and then the Chinese company says, Yeah, we're quite busy here, you know. Um, then they tell us, show us the list. So, this is it's actually crazy, like how this happened, how fast this happened.

SPEAKER_01 26:29

And you know, so I when I met our founder in 2015, and I met and talked with him several times uh before I joined, he told me, he said, Um, I think in about 10 years the German automotive industry is gonna be destroyed by Chinese.

SPEAKER_00 26:49

I wouldn't believe it in 2015.

SPEAKER_01 26:51

No, I said, You're crazy. Yeah, how can you believe this? We invented the car. He said, just wait and see. We're looking at this from a structural perspective, and we're doing you know, a strategic long-term approach. And until today, we always pull that joke. He's like, See, I told you.

SPEAKER_00 27:08

Yeah, and this is also something I learned. I'm now old enough to say I can look back to the last 10-15 years, and this is also a period of time you need to look back, right? Yeah, so um, one lesson I learned is just zoom out more regularly, more often. Don't care about your emotions or what's happening right now, because I would never think that I the China or the world would be in a position like five years ago, but then it makes total sense. Oh, as you said, in 2008, Hong Kong was uh depressed, now they're happy, but then they will be depressed in five years again. You you don't know, but then zooming out really helps in a in approaching and and as you said, the structural analytical view on all these industries and on the development.

SPEAKER_01 27:52

Yeah, and and that's you know one of the massive advantages that the system here has. And it it it's not about right or wrong, right? I don't want to value it, but it's an advantage that the system here has over our approach in Europe because we are not willing to plan long term, and we're not able to plan long term, because by default, you have to think about the next election and you have to think about your next term as CEO and so on, right? We don't give incentivization for long-term strategic development, which is the basis of these things. You know, this EV industry in China, it's not a thing of the last 10 years. The first time this was discussed in the government and as part of their strategic industrial initiatives was in the 90s. When they and actually I'm gonna try and look this up after the podcast. I saw it sometime before, but I I didn't make a record of it. So they they discussed and said, you know, we'll it's probably likely that we'll never be able to catch up and uh exceed Western nations in traditional internal combustion engine trivetrain technology. Therefore, because that that's like a huge kind of innovation and already like a very high level of perfection, right? Therefore, we should look for alternative drivetrain technologies and develop them from scratch with fundamental research, applied research, productization, commercialization, and try to find our own domain to be the global leader and then bring that abroad. And that's what they'd started, right? Because EV, the EV cars of today are not a result of the last five or 10 years of engineering, they are based on fundamental research that was done in universities on battery technology, on drivetrain technology, on electric engines 30 years ago or 25 years ago. And CATL did not just come up with an idea of it of a great battery, right? These are things, these are technology cycles of 10 to 20 years. So the foundation of this was laid much earlier than 2015, 2016. That's just when the productization and commercialization happened. So that's why I find it I find it actually very weak from us in Germany to hide behind this argument. This is only possible because it's subsidized by the government. I mean, who's the biggest shareholder in Volkswagen? It's the local, the state, the provincial government, Niedersachsen. How how is their operation not state subsidized? It's just it's just a very lame excuse to avoid admitting that we missed the train. And that we're not addressing key issues that we have that need to be solved in the long term, which is low efficiency, low labor input, right? We're talking about four work four-day work week, we're talking about increasing pension but reducing tax. How is this supposed to work? Right? It's you don't need to be an economist to understand that that doesn't work. But nobody wants to address these issues.

SPEAKER_02 30:53

Yeah, they've they are like extremely comfortable with their situation and they don't want to change.

SPEAKER_01 30:58

That's the biggest that's the biggest problem. This morning, this morning in the spiegel. So I some I still sometimes read German news, right? And of course, you read quality news like the spiegel, and there was a video uh about this whole whale, right? And that's like stranded in in somewhere in northern Germany. Northern Germany. And they interview people who are there watching him and suffering with him. And and then one person said, Um, yeah, so I I find this irresponsible that the German government is not stepping in here and taking responsibility to save this whale and to come up with a solution. I mean, they are responsible here, and this is our mindset, right? We have this as if the government was an all-around insurance for everything living under its within its borders, right?

SPEAKER_00 31:43

No, it's not. I read a very interesting book by a German professor teaching at Hong Kong University. Okay, it's called uh it's a German book called Die Welt nach dem Westen, the world after the West. And his conclusion was the biggest problem in Europe is that nobody has a clear picture in mind what Europe should look like in 2050. And that's different in Asia and especially in China.

SPEAKER_01 32:11

Yep. I mean, you probably know that in China they have these. So we talked about five-year plans, right? They have these annual plans, five-year plans, and then you have these 15-year visions, but they also have the centennial plans. 100-year plans that were written down in 1921, the first one, which was the founding year of the Communist Party. And the second one, which was right written down in 1949, which is the founding of the People's Republic of China. And in these plans, they said, what do we want to be like in 100 years from now? And it goes exact back to exactly what you said, right? In they said in 2021 we want to be a mid-income level country, and in 2021, they hit$12,000 per capita GDP, plus minus, which is exactly mid-level income in the global community, right? And by 2049, they want to be one of the innovative leading nations in the world community. Guess where they're gonna be. Yeah, right. Exactly what you said. Nobody has any idea what do we want to be in 30 years, 25 years from now. And if we don't know now, we're never gonna make up in the next 25 years because these are cycles that take two, three decades to to kind of forge the path, right?

SPEAKER_02 33:21

Yeah, it's just the outcome of like Chinese constantly studying also the West, which is not the other way around. They are not studying enough what the people are doing here, and that's because they are, I don't know, either afraid of changing, it's arrogance and yeah, yeah, ignorance, arrogance. Or ignorance, yeah.

SPEAKER_01 33:40

Yeah, why do I need to learn from you? I'm so much smarter, right? Exactly. Yes, you have you have chickens running around the factory.

SPEAKER_00 33:47

As you said, your boss uh at the time at Xinghua University, what he did is what all the Chinese businessmen did. They study all the books, the they read all the business plans, they read everything that Western entrepreneurs and successful uh people do and write, but it's not the other way around. I don't think that anyone in Germany ever um read what is Lei June from Xiaomi thinking how or not how is he developing a strategy? They're not interested in it.

SPEAKER_01 34:22

Because also, you know, I mean, also on the government side, right? What do people so first of all, the number of people that come to China from Europe on a business or governance side, I I don't know the statistics, but I'm very happy to bet on this that the number of foreigners, Westerners, Europeans, let's say Germans, going to China for business and educational purposes as a business leader or government leader is significantly lower, even if it's adjusted to total population size than the number of Chinese going to Europe. Because over the last 20 years, I have seen met brought so many delegations from China going to Europe and wanting to see everything.

SPEAKER_03 35:00

Yeah.

SPEAKER_01 35:01

Learning, studying. And they didn't copy, they just learned, right? And on the other way around, what does the German government do when they come to China? They spend the majority of time telling them you shouldn't subsidize this, you shouldn't do these kind of violations of human rights, and then they leave and they've only put across their message that they but they they take away very little or maybe nothing.

SPEAKER_00 35:25

I mean, our Tesla, he went to Unitree. Yeah, yeah.

SPEAKER_01 35:29

At least at least, at least, yeah, yeah, yeah. So but it takes some dancing robots to get their attention.

SPEAKER_02 35:36

It does, yeah, yeah, yeah. Yeah, but I guess China will always be the bad guy. Like we we talked about it yesterday, also. Now it's China is flooding the world with like cheap products, like you know, so that all the other companies in in the West doesn't have any chance that we have to be afraid. Now China is again the bad guy because yeah, we they bring the the cheap products, yeah.

SPEAKER_00 35:57

But Germany was the the world record helder in exports, yeah. So German German products were flooding the world, exactly. We were gonna be able to in the world, right?

SPEAKER_02 36:07

Yeah, we were called the champion, and now this champion is the same, it's like, oh, it's a threat.

SPEAKER_01 36:12

Yeah, yeah, yeah, exactly. But I guess I guess it's also a good opportunity because otherwise, imagine if it wasn't like that, if there was no asymmetry in information, right? Like then we didn't have much to talk about here, or nobody would be listening.

SPEAKER_00 36:25

Yeah, yeah, it's so interesting, and so and I'm very happy that we that we talk about it. And so I would be also interested. Then you went from this um from your MBA to into the funding, into the VC in the investment side. Yeah, so how did this decision happen?

SPEAKER_01 36:43

What helped for sure was kind of the project that went bad, right? Yeah, but actually, my my point was that I very much like the idea of entrepreneurship and building something with your own initiative and in under your own uh thinking, right? But I also realized that in order to understand China better, and until today, I would I would never claim that I understand China, right? Maybe now, after 20 years, at least I know what I don't understand, which is already a huge step. It is. Um, but no, nowadays everybody's a China expert on LinkedIn, right? Like you see these guys who come for a two-week trip and then are like I'm a China China expert now. Yeah, um, so I I kind of I said I gotta work for a Chinese company for a couple of years to just see how it is from the inside. And I decided to apply to four companies and speak with the fifth, which is the one where I'm part of now. And and I went to the four companies that were at that time the the kind of the spare head of international cross-border MA, right? Um, for from the China side, including uh uh HA, the uh Anbank Insurance, and uh and a company from Shanghai called CMIG. And I decided to kind of see what they're doing, talk to them, and they were very actively recruiting foreigners at the time for very, very attractive packages because they needed people to help them do all this MA abroad and to do all the investment, the post-investment integration, and so on. And then I met our founder and he had a totally different approach. He said, you know, I'm doing a business in China, I'm investing in Chinese technology companies. At that time, it wasn't high-tech. So China didn't have high-tech in 1516, right? But I liked his mindset of you know being very specialized, having a very unique strategy, and then being disciplined to stick to that strategy. He said, We don't want to be too big. Our our so the other four all told me we the bigger the business we do, the better. And he said, for us, it's about doing business well, not doing it big. And we were a small company then, so we were at about 20 people and a small office, nothing fancy. But I liked his mindset, and he said, Look, if you want to join, you can join, but you have to join like everybody else as an analyst, and there's no special package, and it was uh uh you know, then you see what you can do. I have a platform. If you have ideas and you want to build, come and build, but there's no special treatment, and I liked that. I said, Okay, let's try this. And then the first six months were very, very hard. Um, I mean, I didn't speak a lot of Chinese before that. Um, and I went into an environment where basically we did uh as part of the an analyst in the industry research team, we're looking at you know medical device, we're looking at the first generation of kind of semiconductor equipment, we're looking at photonics at aerospace, and then you have these people kind of hammering out these hundred-page research reports on these, you know, on on on kind of uh like a composite materials in aerospace fuselage, and uh and and then they ask you on your for your opinion on this. I don't know, I don't I didn't understand much. So um, but I I I made it through that period and it was very nice because I have a until today and back then uh he he he he my mentor in the company who's the co-founder is a a very very uh um uh supportive and critical uh person and he helped me a lot. So that six-month boot camp I went through was kind of the the foundation of kind of his idea what was to make or break me. Um and uh you know, like a good old German, I said, I'm not gonna quit because of because you want me to. So I kind of just made it through. And then we started building actually uh kind of the so I started getting familiar with what we what we do, the industry we're in. So we do venture and growth capital for technology companies in China, and we have done that for the last 20 years, moving along the evolution of technology, right? So 20 years ago it was industrial manufacturing, then in 1415 it was advanced manufacturing. That's when they started with machine building, with automation, simple automation in factories. Then in 16, 15, 16, 17, it was kind of photonics, aerospace, which is you know, a lot of it is just advanced and precision manufacturing. 1718, the first restrictions came from the US, right? Under the Biden administration, and uh we started investing in basic semiconductor value chain to become self-sufficient as a as an economy, right? So it was manufacturing equipment or fab equipment, it was specialty materials in simple chip design, then in 2021, and then you moved into uh uh what's now called high-tech, right? So very advanced chips, so GPUs for AI, HBM, you have nuclear fusion um as power supply, you have you know the whole value chain of deep tech. That's what we're doing now, and and it it's great because again, from 20-year timestamp, you kind of see that evolution, yeah, yeah, and also the sanctions and the restrictions that played into the card, right?

SPEAKER_02 41:53

Yeah, huge, huge. I mean, especially when the semiconductors.

SPEAKER_01 41:56

I never understood what the US were thinking behind that effort to say we should we restrict you to buying it. It's just like, okay, well, we'll just make our own, it'll take a bit more money and a bit longer time. But actually, it just gave them more uh more drive to to come up with their own solution, both from the government side who think about it strategic, right? But also from the people. And you talk to people here, they say, What? This is ridiculous. Why would you restrict me from buying an AI chip or a GPU for my AI business? You know, I'm not working with the Chinese military, I just want to build an AI company. No, and you're restricting me from buying this chip. So, you know what? I damn well will build the best GPU here and show you that we can do it without you.

SPEAKER_00 42:37

It will take some time, but I will do it.

SPEAKER_01 42:38

And I'll do the same, right? I mean, it's also a matter of pride and just say, you know what, I don't need you. And uh, and and that's kind of that's uh what we did for the last uh 20 years, I've done it for the last 10 years, and we did a bunch of uh value creation initiatives for Chinese portfolio companies abroad. So we have bought a couple of businesses, integrated them, and then uh four years ago I decided um, you know, also as part of COVID, uh China had an even bigger image problem, right? In the world. And I always tried to tell people about you know how great it is here, living here, working here, and then how how hard the people work here, how smart they are, and also how they're just nice people. Like as a people, the Chinese are just very nice, like they're super hospitable, curious, curious, they're they have great humor, yeah. You know, it it's just like I don't know about you guys, but I never had, you know, or I cannot even think about negative times or incidences in my life here. Just in general, it's just been very welcoming. So I said, it's just not fair that people don't get recognition for this, right? And and I told people about it, but then during COVID, this became such a such an emotional debate that I had dinners in Europe or friends or circles or And you go through it and the it ends up in almost arguments with friends. They've been lifelong friends, right? And then they get very aggressive and say, Well, you've been brainwashed, and you know, this is all propaganda. I'm like, Come on, man, like I'm I don't have stakes in the in this party, right? I'm just here and tell you my experience. And people it would be so emotional at some point I decide to stop talking about it. And then I said, you know, if I help people in the West to make money in China through financial return by investing to build a fund structure where they can invest in the real China technology, maybe then they will believe it. So that was kind of the origin of this idea. And and and we said, you know, we've always wanted to be an internationally recognized fund. And at the same time, it would be a great way to show people what it really is like here. And we kicked this off in 23 and we closed our first dollar fund in 24. So we have an existing RB business which is very mature, it's a mid-market kind of mid-cap game. And then over the last years, I've built up that US dollar equivalent to that. And it's one strategy into the same portfolio. And it's great because we um the business is going very well. Um we're growing well. Uh, the investments are doing well. And last year we had our first AGM, so it's an annual general meeting where we invite all the investors. And we have investors from Asia, from Middle East, from Europe, from Germany, from Switzerland, um, a couple from US. And we invited them to come over and we presented in Hong Kong all the you know financial performance, all the figures. And then I took them for a three-day trip through China. So we did Shenzhen, Shanghai, and Beijing. And we visited, I think, 12 portfolio companies. And a number of these guys had not been to China and had never been to China looking at technology companies. And at the end of the trip, they were all very surprised. And they said, This is unbelievable. We never thought this. And, you know, we're so glad that we are part of this fund. And we can really see how this has changed China and will change the world. And to me, that was actually the best, the kind of the most satisfying outcome of this whole exercise. Of course, I mean, we're all here to make money, right? And we're going to make money, but that outcome, and they're now, you know, spreading the word in Europe. And they say, like, look, China is not what you think it is. And that's much more powerful than whatever what we ever can do, because they're you know considered not to be brainwashed.

SPEAKER_02 46:29

Yeah, yeah. Yeah, that's what we what we always say is that you have to come here and see it yourself. It it I mean, we can talk about it, and still people will not believe it until they finally see it with their own eyes.

SPEAKER_01 46:43

Yeah, yeah, yeah, yeah. What is it uh saying in Chinese? It's like uh uh du wanju and shu buru zo one one li lu. Yeah, yeah, yeah. Something like that, right? Yeah, it's like walking a thousand miles or is better than reading.

SPEAKER_00 46:57

I would also be like, Oh, yeah, yeah, hearing it one times is not as good as seeing it one time, yeah, yeah, yeah. Yeah, so what I'm interested in, I just wanted to say you were very lucky, but it's definitely not luck, or maybe a little bit luck. So you also invested in uh Jipu AI, right? Yes. So how do you know at that time that this is a good idea? Also, how do you have your senses now to determine what will be the next JIPU AI or what will be the next industry or technology that will be very, very important in the next two years?

SPEAKER_01 47:31

I think luck is always an element in life, no matter what you do, right? Um in the end, you know, I think also when it comes to personal careers and personal success, it's it's always a combination of kind of you're willing to be adventurous, willing to take risk, working really hard, and then having a bit of luck, being at the right place at the right time, right? Like just like the bar in Lancoif at that time. And here we have kind of I would say it's the same thing. Uh having an investment like that, and for us, this will be, I would say, no, this will definitely be the best deal we have ever done. Right? We started to invest in the angel round, we re-upped five rounds subsequently and it went IP in Hong Kong. So I think we we started investing at a valuation, I think, of a billion, no, eight hundred million RB and is now trading at 400 billion, 450 billion.

SPEAKER_02 48:27

500, 500 for the initial transaction or something.

SPEAKER_01 48:30

Oh yeah, 50 uh 50 billion USD. Oh, yeah, yeah. So but it goes back to what we discussed earlier. So the way we look at it and the way we approach our investments is we have a our fundamental approach is top-down research. So we look at industry fundamentals and industry development across so for every fund generation, we define these areas, right? Because as I told you, for over 20 years it's changed, right? So we cannot be, you know, in Europe you have PE funds who do automotive investment or an investment in service industry, and they do that for 20 years because things don't change a lot. But here we do technology and hard tech investment, but every four or five years, these the underlying technologies and trends are evolving, right? So from aerospace to photonics to semiconductor to quantum computing. So we define these areas for every fund vintage. So what we look at now is energy supply, computational supply, and applications, which is in the end AI, robotics, and so on. Now, within these areas, we have an in-house research approach that goes top-down and looks at within energy supply, what kind of types of energy supply do we have? Right? We have traditional energies, we have renewables, we have the new energy technologies, nuclear fusion, nuclear fission, energy storage, energy distribution. And then we break it down into very specific segments, and we did the same with Drupal. So we we invested in Drupal before the whole open AI chat GPT happened, right? And actually, we knew Drupal before it was Drupal, we knew the team of Drupal in Qinghua University before they even started their business. But as a bigger part of this application segment, we looked at how will artificial intelligence, and back then it was still kind of machine learning, artificial intelligence, not AI as we know it today, how will that evolve for the next years? And who are the top researchers or teams working on this within China? And we identified one of them, which was that team that then founded True, and they were still in Qinghu University. So we knew them, we got in contact with them, and we decided that they have the underlying basics that it takes, meaning the innovation capability, the the the the kind of scientific and technology technological knowledge, and also the kind of business drive and acumen to create something that'll be groundbreaking. And that's why we decided to back them from the beginning. And there are also a number of other companies who did similarly well, right? But in the end, our approach is not built to identify the moonshot company or moonshot deal of tomorrow. That happened and it's nice and it's great, but that's not what our business is built on. Our business is built on, and our methodology works to, in a sustainable and replicable manner, to identify companies that return three to five X across our entire portfolio and make sure that very few, if no come, if not no companies, go bust. And then within that approach, okay, you occasionally have a company that returns 10x, 20x, or like Triple, maybe 50 or 100x. But that's out of the ordinary. And and these kind of things cannot be planned. But at the same time, we were convinced that these guys can do something extraordinary. Nobody expected it to be that extreme. Also, uh, just as a disclaimer, it wasn't my deal. So it's a colleague of mine who did it. But I think you know, it's um it's a deal that shows that a systematic and disciplined approach can work, and sometimes it kind of exceeds expectations.

SPEAKER_02 52:11

Yeah. And then also like talking about Jipu and also Minimax, like they have different approaches, right? Jippu is more on the B2B side, which is also something that you focus on, right?

SPEAKER_01 52:21

Yeah, B2B and B2G, right? Going back to the debate of you know how things work here. I mean, when you talk about B2G, people think about oh, maybe they're helping the Chinese military. No, they don't. What they do in B2G, and and these are clients of theirs, are local governments, just like Shenzhen, right? Where you guys probably know better than me how efficient it is to do anything here nowadays when you go to public service outlets. Yeah. Right? Registering a company can now be done at a vending interactive kind of type of vending machine, right? And and these local governments go to Jipple and say help us to improve our service workflow for people that come to the you know municipal bureau for recycling and want to get a permit for whatever trash pickup, right? And then Jippu builds applications and helps to integrate their models into the local government workflow so that you know it can be all automated, it can be more interactive. And that's in in in my opinion, this be this is B2G, but in a good way.

SPEAKER_02 53:22

Yeah, definitely. I I would imagine this would happen in the German raus and Berlin. Greetings to provide that's really that's really great. But how do you see the these valuations of these companies now? Like like Jippu also had a loss in 2025, right? 300, 300 million or something.

SPEAKER_01 53:44

So first of all, I I think you know it when you talk about AI, I mean this bubble, yeah. I mean, of course, there's a lot of stuff happening which might not be sustainable, right? And you always have that, it's always hype. Yeah, yeah, but that's also for one reason why I told you. So we're not just looking at AI, we're actually looking at the things that enable AI, which is energy and computation, which is very important. So you you if you just look at AI, it's gonna be high risk, high reward, but very high risk. Because these valuations, in the end, you know, the question is how much of it is storytelling, how much of it is actual you know growth that can be sustained in the future. And you know, you've seen this in other industries, same in Chinese EV industry, right? A lot of over kind of overcreation, a lot of OEMs, a hundred plus OEMs, of which most of them will go out of business eventually, and it'll be the same here. So, um, I mean, how to justify a valuation of a company like that on a stock market? I think that the the the major, let's say the fundamental winners like Jerpool, like others, uh you know, their valuation compared to OpenAI or to Anthropic, right? Those guys are trading at close to a trillion dollars, which is 20 times the valuation. Of course, they also have different growth in different markets, but still, I think China as a whole in private markets and in public markets. So we looked at this in in public markets that the valuation valuation delta is something like three to five X from China, China being below the US. And from in private markets, it's something like six to eight X of valuation markup between US and China. And when I brought those investors on the AGM here to Shenzhen, we were in a company here not far from here. Um they do risk five-based uh uh server chip architecture, uh sorry, risk five architecture-based server chips for like high speed, high volume data transfers in in big data centers. And we brought our investors, and uh, one of the investors from Saudi, who also is very active in Silicon Valley, he said, sorry, I we were the company was presenting, he said, I think I might have misheard something earlier, but what was your valuation? And then he said, Yeah, nothing that much. He said, That can't be right, there must be a conversion mistake here. It's like, nope, it is. He said, Well, in Silicon Valley, you could be valued 10 times higher with the same content of what you're presenting here.

SPEAKER_00 56:16

So they're better at storytelling in Silicon Valley. Yes, 100%.

SPEAKER_01 56:20

And it, I mean, at that stage, is you know, a lot of it is is very hard to kind of quantify. So here we we see a huge markup in valuations. I think there's still a lot of room to go higher in general. Some sectors, of course, already very hyped, but I don't think that you know we're in a in a bubble scenario that is necessarily, you know, where everything is overvalued. Some things are overvalued, some things are at value, and some things are still undervalued. It's just about kind of identifying the different buckets and making sure that you build a portfolio which kind of mitigates those risks and gives you a better risk-adjusted return. Yeah, so that's kind of our approach. Um, so for specific companies, I think it's, you know, I mean, at that stage, these companies all make a loss because they're heavily investing in you know, RD. And I was at Drupal last week, Thursday, and super impressive what they've built up. Um, and they they will keep investing and they will keep making losses. Um, and I mean if you look back at it, I don't know if you there was an interview with Jeff Bezos in in with one of the talk show hosts in the early 2000s, right? And he's like, I don't understand. It's on YouTube. He's like, I don't understand your company's making a loss, and your valuation keeps growing. And then Bezos says something like, Yeah, we're really good at making losses. People believe in us, exactly. We are the best in making losses, exactly, and now you see where he is, right? Yeah, you gotta spend money to make money. Yeah, for sure.

SPEAKER_02 57:47

That's true, that's true. I mean, the public market is also very crucial right now for most of the Chinese companies, right? To just be seen also on the global picture.

SPEAKER_01 57:58

It's credibility to your customers, it's credibility on the global stage. Um, and uh and it's also more funding, right? I mean, the the private markets here still don't have enough money. I mean, there's not enough private money in private markets, which is a in in itself is a huge opportunity set, right? Because in in other geographies, the markets are flooded with money. So here you still have this valuation um uh kind of opportunity, you have uh capital benefits. So if you have if you are have if you do have capital and you can invest, you can actually get into very good deals before they become public. And and I think it's uh it it'll be that like that going forward for another three to five years, because it's been such a draught of capital over the last five years.

SPEAKER_00 58:42

And talking about the hype, also, as we said earlier, zooming out will help because AI will not be gone in five to ten years, right? That's right. So so that's also something to keep in mind. Sure, some companies will be gone, or a lot of companies will be gone, maybe the same in robotics, but uh it's definitely not a hype. So in 20, 50 years or 100 years, robots will also be here.

SPEAKER_01 59:03

Yeah, yeah. No, actually, uh absolutely. I mean, uh, this is we're now looking at what will be something like the fourth industrial revolution, right? This is not unstoppable, it's gonna evolve. The question is just in which direction and who it survives the evolution. And I can tell you, I mean, as much as I hate to say it, but I don't see Europe being part of this in the next 20 years, right? We're we're running behind. And there are very talented and smart entrepreneurs scientists in Europe, but I think we're just missing, and and there are some people who are trying to change it, and I have huge respect for them, and I think they're doing the right thing, but we're missing this structural approach. We're not giving a regulatory framework, a financial system, yeah, right, an ecosystem that can foster. It's like think about it, think about trying to grow tomatoes with in Germany without a without a greenhouse. Yeah, it'll never work.

SPEAKER_00 59:59

We are big fans of neural robotics uh in in Germany. David Rega, he I listened to a podcast to him, and he he is the founder, right? He's a visionary behind it, and he said the same thing basically. He said, German, I know Germany is the worst country in the world to build a robotics company, but I still believe and I want to change it. He said, like the ecosystem, the taxing system, the entrepreneurial mind, it's not there or it is there, but it's in a very bad state. Yeah, but he still believes and he still wants to change it. And I hope that he will still be able to do that. Yeah, yeah, of course.

SPEAKER_02 1:00:43

Yet, because as we said, there's no plan.

SPEAKER_00 1:00:46

Yeah, yeah. Exactly. So you also did a lot of cross-border, like you said, like you were like a missionary going to Germany and telling them, please, you have to you have to at least be interested in what's happening in China. But you actually made a lot of cross-border MA deals, like integrating German companies and Chinese companies. How did that work?

SPEAKER_01 1:01:07

It was very interesting, it was a lot of fun. It was very challenging. Um, we've done uh three, I would say, cases in the in the the first years at our company, and uh and that were uh that all worked out successfully, but it's a very long and painful journey. Um, and the reason is it's a there's a very significant difference of how to do business, um and again, it's nobody is right or wrong, it's just different, yeah. And you kind of have to bridge that. And that can be very frustrating at times, it can be difficult, but if you are able to make it, you can actually create huge huge synergies, you can harvest a lot of things or yeah, benefit from a lot of things that were it that's additional value created that would have been left on the table. And that's more than just a language barrier, right? It's not about translation, it's about business conduct, it's about strategy, it's about philosophy. Yeah, and um, and in 2017, we we we did a deal together with a portfolio company, and one of the most until today, the one of the most inspiring founders I've met in China. Um, his his name is Victor, and he he's his company's in Xi'an, and they went public in 2021. They're doing really well. Um, so I supported him in a in the acquisition of a company in Dortmund. So he creates or his company started in the photonics business in high-powered diode lasers. And um, so basically the laser is the light source, right? But if you the the light that or the laser that comes out is kind of very random, like very unguided, right? So it's just like an emission of laser light. And we found a company in Germany that is an expert in beam shaping, so they help to build this laser into a directed beam with a specific for a specific purpose, and together you can create a system. And he found that company, we we uh did due diligence, he acquired it, we put money in the Chinese entity to become a shareholder, and he used that money to execute the deal, and then we helped him with the post-investment integration, right? Which is actually the most difficult part because everybody can do a due diligence, everybody can do evaluation, like that stuff is almost commoditized, right? But the the the real journey starts after you acquire the business because that's when you have to kind of align both and you have to kind of create to try try to create one. And this was, I mean, that in itself is a whole podcast in itself, but it was crazy. I mean, in Germany, first of all, we got you know, not just did we uh buy the company and decided to give employment guarantees to take care of all the outstanding debt and so on for a company that wasn't doing well in the first place. But we also further invested, so we grew the number of people in employed in Dortmund. We uh, you know, we invested into the local um uh uh production and so on. But of course the media said, Oh, now come the Chinese, you know, trying to steal our technology, and yada, yada, yada. And within the business and within the company, it was unbelievable the kind of resistance you found, and not just resistance to China, resistance to change. And a company that had uh great engineers, great scientists, great, you know, a lot of people with PhDs. And the year after acquisition, it won the SPY Award on Photonics West, which is like the Oscar of the photonics industry. Just showing how how how innovative they are, when you know how smart they are. And then over many years, it it actually turned out to be like uh Victor, who's who obviously Chinese, but you know, he worked in in the US for a long time and is an amazing uh entrepreneur, but also an amazing kind of engineer and and developer. He he has built this into a glob truly grow global platform. He's one of the few people that I've met who not just bought a company, but he integrated the team to a level where his board of directors is now actually composed, I think, of two or three foreigners, even though he's a Chinese-listed company in the photonic space. So he's been really able to bring in that global thinking, global talent, and and build, and then later he acquired another business in Switzerland and in Munich again. And but also he, you know, he told me at one point he said, I'll never buy a company in Germany again. It's just not only because of the people. Yeah, yeah. I mean, it's just that resistance to change.

SPEAKER_02 1:05:47

So the post merger integration is basically part of the negotiations in the beginning. Yeah, it starts before you close the deal, right?

SPEAKER_01 1:05:55

I mean, you know, you gotta get the right people on board. You have to get the people, and then you have, you know. Workers' council, labor union. I mean, i it's a it's a headache. Yeah. So and also that's why we decided this business is not scalable, right? You cannot build a fund model around it. And we don't need to because we our bread and butter business in China is doing so well that it would be make it would make a lot more sense to bring that to the world, or let's say bring global capital into that model and just keep building, building along that. But it was a great exercise to really understand how Chinese companies work, how European companies work, and then how you can mitigate these kind of things, right? So even to understand Chinese entrepreneurs, right? I mean, I always say as a joke, sort of a Chinese entrepreneur knows exactly to the detail what his customer wants. He knows what product he wants, he knows what why he wants it, how he wants it, and he knows before the client knows what the client wants tomorrow. And that's the essence of business, right? And he doesn't mind he might not know all the details going on in the company, but then you talk to German entrepreneurs or company owners, and we've talked to a lot of them, and including some of the ones we we then acquired, and they know every cent of every single calculation of every component in every product. When we ask them why did you develop this product? Yeah, you know, we thought about the coolest and most advanced thing we could come up with, and then we developed that. Oh, how did the sales go? Yeah, and it really didn't really sell well. Said, have you ever wondered why? Well, you know, we talked to the customers and they said, We really don't need a product at that level of performance, and it's way too expensive. Yeah. And you're like, yeah, you know all the details of your own business, but you don't know what the customer wants.

SPEAKER_02 1:07:42

Yeah, we we had a friend, we have a friend also who works at BASF, right? And they do the the colors for for the cars here, and they wanted to sell like the best color that they developed in Germany for like BYD here, and they said, No, we don't need it because it's too expensive. Like people have their cars for maybe five years. We just need a color that has a life of five years, then they changed the car, so we don't need this extra 10 years exactly that you're if you're promised premium. I don't need that, so just give me a lower quality.

SPEAKER_01 1:08:16

Yep, yeah, 100%. So huge difference, right? Um, and again, it's not one is wrong or one is right, but I mean you look at the outcome, right?

SPEAKER_00 1:08:26

So Victor will never buy a German company again.

SPEAKER_01 1:08:30

That's what that's what he told me. I don't know, but uh maybe it's time to ask him again.

SPEAKER_00 1:08:34

Will you ever go to back to Europe?

SPEAKER_01 1:08:39

I think for me, you know, in in German we have this term auswandern. I don't consider myself an Auswanderer. I'm not somebody who left his place of birth or his home.

SPEAKER_03 1:08:53

Okay.

SPEAKER_01 1:08:54

Because I I also, you know, I think our the benefit of our degeneration is we live in a world that's much more flexible, it's much more fluid. I also think, and without going into a philosophical question, right? But I also think that the concept of nationality is maybe a bit outdated, right? I mean, what separates us being German from a French person that lives 20 or 20 kilometers from where my parents live, essentially with the same people, right? Of course, Europeans might be different from Americans or Asians or Chinese or whatever, but I I don't think I left my home because I'm still in a in a cultural context European. I always will be European, I will be German. Um, of course, I live in in China now and I love it. And I'm not I don't see myself moving away from China, but I do enjoy Europe, I enjoy the culture. I think Europe is a place where and I hope we can even further integrate us as a European Union and European nations and work together even closer because it's absolutely essential for our future. And I think there is no place in the world where you have such a density of high density of cultural, uh, geographical, uh, culinary, language diversity anywhere else. And that's beautiful, it's amazing, right? Because it just creates a very interesting and inspiring place to be. But it's I would say Europe for me is the the benefit of Europe is kind of quality of life, you know, lowers pace of life. So maybe at some point, and and you know, like all the culture, philosophy, and history behind it, it's important at some point, you know, maybe with family or kids, you you want them to grow up there for a couple of years to kind of also get benefit from that. But if you ask me, would I want to go back to Europe and say I'll never come back to China, there's no way. Impossible. Um, I maybe I want to live in Europe for a year at some time, but I think that I don't know if I'll make it a year in Europe.

SPEAKER_00 1:10:56

Culinary density, I would debate you on that. I think that you're right, you're right. I know what you mean. Yeah, yeah. In Asia, definitely more intense, even in China, right? Even in China, yeah. So I was just talking to a guy yesterday and he said, Oh, yeah, I'm I'm kind of um wondering like what's what's Chinese food like, and it's so different to what I imagined. I said, You don't have any there's no Chinese food. Yeah, what is Chinese food? Yeah, that's right. But other than that, it's like uh you're definitely right. Like what we also hope to do with this podcast and with everything we do, it's not to show that uh everything is better here, but also to spark innovation in our home countries and in our home region, and also facilitate exchange, right?

SPEAKER_01 1:11:39

Yeah, and that's why that's why you know I go back to Europe regularly because if we we want to build a bridge, if we want to connect people, we have to be able to be integrated on both sides. Both sides, yeah, yeah, yeah. Because and then that's the difference between you know, Auswand and emigrating or or helping to or or being part of two ecosystems, because we are here to be in both. Back in the day, emigration was I'm leaving my home because I want to find a better place, and then I don't need to go back. So that that concept in I think in our generation, or for at least for us, be maybe also because we're more fortunate than other people, is not not apply, doesn't apply anymore, right?

SPEAKER_03 1:12:19

Yeah, yeah.

SPEAKER_02 1:12:20

Yeah, the way we talk about it sometimes feels like okay, we're like pro-China. I mean, it's it's for us, it's it's convenient to live here. Like they have a great, it's a great lifestyle, but but again, you don't have to become that China fanboy or Asian fanboy. It's just like you have to understand, and that's that's something we want to do.

SPEAKER_01 1:12:38

Like so this week, uh the the reason I'm in Shenzhen today is because this week I'm traveling with a European high school through China, and I met their headmaster who who's a you know very, very forward-thinking and and and smart guy. And he said, Yeah, you know, for our best students every year, we organize an entrepreneurship trip to Silicon Valley. And I said, Why don't you do a trip to China? He said, Yeah, you know, it would be very interesting, but it's kind of very hard to know what to do. I said, Don't worry, you come here, we'll make it happen. Just tell me when you land and when you take off again. And that happened first time last year and happened again this year, and we hope to make it an annual thing. But the idea behind it was exactly what you said, right? We just want people, and I told the students every year, I said, I don't want you to go back and say it's the coolest thing I've ever seen, and I want to live here and so on. I just hope that you can go back and say, look, this is very different from what I expected, this is interesting. I might not even like it. Not everybody has to like the same thing, right? But I'm I'm aware and I will take it into consideration for my future because no matter who you are, no matter what you do, China is going to determine our future. And in order to deal with that, we have to engage with it. You can't run away, yeah. You have to engage, yeah.

SPEAKER_02 1:14:13

Rather put to participate than just close your eyes and not exactly, and then in the end, it's just the bad guy from China who just uh exactly, and we can do this free of ideology, right?

SPEAKER_01 1:14:24

I know. It's in the end, it's a mostly an economic topic, yeah. So, and I and yeah, that's why I think but I think it's starting to open up more and more.

SPEAKER_02 1:14:32

We also work now together with also university programs, bring people and startups here. They they are like they really want to see what's going on, and then we also work together with the National Innovation Center now in Vietnam, also. So they also want to collaborate and see what are the main industries and how can we adapt or you know, be one of the first movers in our industry learning from China. I think now is a good time that this is happening.

SPEAKER_01 1:15:00

100%. And I and and that's also why. So I I mean I told you before we started this. I'm I'm actually very, very happy to be here today because I I I heard about what you guys do. I think it's a very important job, a very important part of this whole ecosystem. And uh, and I think it it needs to be supported by all of us, right? Because we can't just criticize, we have to take action, we have to be part of it. And everybody is a little part, right? I help people to make money and bring capital here. You guys help to uh engage and excite people from you know visits, whether it's business leaders or students, or so so I think you know, all of that together forms a general effort to bring two parts closer together.

SPEAKER_00 1:15:43

Cool, thank you so much.

SPEAKER_01 1:15:44

All right, thank you. Good. Love it. Thanks for having me.

SPEAKER_00 1:15:47

This was amazing. Yeah, and talk to you in five years when you have your next big exit.

SPEAKER_01 1:15:52

Sounds good. No, I hope it doesn't last five years. Okay, sorry, two years. Yeah, maybe end of this year. End of this year. Talk to me again. Take care.