China VC: The naming of firms

Morningside Venture Capital officially became 5Y Capital about six weeks ago, but the re-branding process began in 2018. The new name signaled a new independence, but the firm also saw it as a statement of values and so wasn’t about to rush into anything.

“The name derives from Wuyuan Road, the location of our Shanghai office where we started the whole thing. We then added the water radical to the character ‘yuan,’ so the name translates into English as ‘five sources.’ It also means that we have five partners [though the firm now has six] and so the name reflects the collaborative nature of investing,” Ken Shi, founding partner of 5Y, tells AVCJ.

The firm engaged branding consultants and the Chinese name was chosen from a list of more than 100 candidates. As to why they didn’t simply use the pinyin Wuyuan as an English name, Shi credits his younger colleagues. “Wuyuan has no meaning in English, whereas 5Y is simple, easy to remember, and cool,” he says. “They liked it.”

Abandoning a well-known brand – at least in venture capital circles – is a big step, but one rooted in the firm’s origins. Shi and Richard Liu started working for Morningside Group, the family office of the Chan family, founders of Hong Kong property developer Hang Lung Group, in 1999. They were responsible for China’s technology, media and telecom (TMT) investments, building a track record based on the likes of Ctrip, UCWeb, and Xiaomi.

On launching their own business in 2007, Shi and Liu had few LP connections. However, they managed to raise a $150 million debut fund in part because the family office contributed two-thirds of the corpus. Gerald Chan, chairman and CEO of Morningside Group, came in as a partner and investment committee member. This enabled the new outfit to leverage Morningside’s credibility and know-how as well as its brand.

But it’s hard for a VC firm and a family office to coexist under the same name. The former needs media exposure to support deal sourcing efforts; the latter prefers to remain below the radar. Moreover, the VC firm raises third-party capital while the family office pursues deals using its own resources, creating general confusion. LPs asked Morningside Group if it would take their capital. Entrepreneurs sent TMT business plans to the family office – which mainly focuses on biotech and life sciences – and vice versa.

“As we did more deals, we were occupying more of Dr. Chan’s time with investment committee meetings. In 2018, he suggested that his presence was no longer required because we were a mature institution with good returns. He thought that we deserved our own brand,” says Shi. He adds that Morningside Group remains the largest LP in 5Y’s funds.

The rebranding hasn’t completely excised the confusion. When Morningside Group was announced as one of the participants in a $62 million Series A raised by US-based Tallac Therapeutics, several mainland media outlets assumed it was 5Y.

Pinyin problems

5Y isn’t alone among Chinese venture capital firms in agonizing about its name. It is an issue that every spin-out must confront, along with the inevitable questions about brand identity and values, the interconnection – or not – between Chinese and English versions, and unintentional – or intentional – similarities to others in the market.

Chuan Thor spent more than a decade with Highland Capital Partners, establishing the firm’s China business, before departing in 2016. He called his new firm AlphaX Partners – alpha for returns and X for technology because there is a focus on deep tech. Finding a Chinese version of AlphaX proved impossible, so Thor opted for something unrelated: Feidian.

“Feidian literally translates as ‘boiling point,’ which is a metaphor for super passion. It came from our team’s pet phrase – ‘We won’t do anything that has no boiling point,” says Thor.

Incongruity can be problematic, which again raises the prospect of using the pinyin Feidian as the English name. Thor notes that an LP might make a reference call to a second Chinese GP, ask about AlphaX, and that GP will say they’ve never heard of it, despite being familiar with the Chinese name. It is arguably an even greater problem with IPOs, when prospectuses are in English and a small place in history might be at stake.

The problem is unique to venture capital firms. Start-ups can invest in marketing to establish brand recognition as a genuine business-building exercise. It’s hard for VCs to justify doing the same.

Achieving consistency between English and Chinese names was the objective when Banyan Capital rebranded as Gaorong Capital in 2018. Xiang Gao, a founding partner, tells AVCJ that gaorong is a kind of banyan that can live for over 1,000 years. The tree is known for its vigorous vitality and ever-expanding network of aerial roots. “It’s like the relationship between the fund, portfolio company and LP, weaving into a unique network,” he says.

It is not unusual for names to speak volumes for investment style. Shunwei Capital, for example, roughly translates as “act according to the big environment.” It is readily associated with an expression coined by Lei Jun, the firm’s co-founder: “Even a pig can fly if it stands at the center of a whirlwind.”

While pinyin can work as an English name, the effect is often hit and miss. Yunqi Partners is a combination of ‘yun’ and ‘qi,’ which mean cloud and start, respectively. Cloud signifies a new generation of IT such as cloud platforms and cloud computing, while start has an obvious connection to start-up. However, the name resonated with the firm’s founders mainly for its homophony in Chinese – luck.

Yunqi also has its drawbacks, though. “It’s not good for LPs because it’s hard to pronounce,” says Yipin Ng, the firm’s founding partner. He is thinking about switching to an English translation.

Sky9 Capital, meanwhile, had the opposite problem. Its Chinese name relates to the cloud and the English version represents a partial translation. The metaphor is popular because clouds create rain, and rain nourishes the earth, symbolic of an early-stage strategy. Nine was chosen because it is the largest number in Chinese and relates to the meaning of height and vision. 

But the literal translation – Cloud9 Capital – failed to find favor with Ron Cao, the firm’s founder, who dismisses it as an allusion to fantasy and unreliability. He questions whether the inconsistency caused by cloud and sky can ever be resolved. He also felt that using sky in the Chinese name was not appropriate, because it sounds too pompous.

“We are just a venture capital firm; we can’t be named after the sky,” Cao says. “We want to emphasize our creativity, not give a sense of superiority.”

Rather than look for ways to reconcile Chinese and English versions of a name, some managers just confront the issue head-on. Ince Capital is a case in point, given its name is a combination of the two languages. “In” stands for internet, investment and intelligence, while “ce” is pinyin for the Chinese word for strategy.

J.P. Gan, who launched the firm last year, explains that he deliberately wanted to bring together East and West. Few people pronounce it correctly – some call it letter by letter, others pronounce like the English town or English former football player of the same name – but Gan claims to be happy with what he’s got.

The firm’s Chinese name comprises two characters with the same meaning that are pronounced like the English name. After consulting a Fengshui master, Gan added the water radical to character “ce” to make it more distinguishable and harder to copy.

Life’s too short

The branding inconsistencies that come with different names in different languages can be a headache for managers, but they might fade with time. Sequoia Capital – like many US venture capital firms, it took its name from nature, in this instance a genus of tree native to California – arrived in China in the early 2000s and its English name was difficult for locals to pronounce. Two decades on, the brand is widely known, and the name is less of a mouthful.

A quick fix to pronunciation problems is abbreviation. However, this can create a host of new problems, as Wei Zhou has discovered. After leading a spinout of KPCB’s China TMT team in 2016, Zhou settled on China Creation Ventures as a name for his new shop. The idea was to emphasize the country’s capacity for innovation.

“For years, China copied US business models, but between 2010 and 2015, we started to see more local innovations such as mobile karaoke companies. Since then, the market has transformed, and China is known for technological as well as business model innovation,” says Zhou. “One of the reasons we left KPCB was the global investment committee readily approved copycat investments but found it hard to understand a Chinese innovation. China Creation Ventures is better at supporting things created in China.”

The firm switched to an abbreviation – CCV – in keeping with global styles as evidenced by KPCB and GGV. However, CCV is easily confused with CVC, shorthand for CVC Capital Partners (known as Citicorp Venture Capital before completing its own spinout in the 1990s). In addition, corporate venture capital is often referred to as CVC.

Zhou tells AVCJ that he considered China Creation Capital, with the abbreviation CCC, but the problems remained. CCC could be confused with 3C products, the catch-all name for computer, communication and consumer electronics products.

Not everyone is taken with abbreviations. While Vision Knight Capital is sometimes referred to by LPs as VKC, the firm staunchly refrains from doing this itself. However, Vision Knight does have another story to tell.

The firm has two Chinese names and an English name, with no correlation between them whatsoever. Vision Knight is known as Jiayu in Chinese – “jia” is taken from the Chinese name for Kerry Center, the Shanghai building in which the firm is headquartered, and “yu” comes from the name of a neighboring building. The idea is that people shouldn’t forget their place of birth, while the two characters together mean “better managing the horse,” a metaphor for operational improvement.

The English name followed, drawing on the notion of a visionary fund with a knightly – or chivalrous – spirit. However, during the business registration process, it emerged that Jiayu was unavailable. A Fengshui master was called in and devised a second Chinese name based on the pronunciation of the English name. He also ended up investing in the fund.

Both Chinese names are still in use, though the more recent one is only used for registration purposes. David Wei, the firm’s founding partner, doesn’t care about the disconnect.

“A name should reflect your original intention, and even reflect your strategy. It is very important for us because we can explain to LPs why we chose it," he says. "In contrast, a 2C-focused start-up never has the chance to explain its name. That's why they tend to choose simple names that are easy for consumers to remember."

Two’s company?

While business registration requirements can stop two firms alighting on the same Chinese name before it's too late, the same is not necessarily true in English (although legal wrangles over the rights to English names have happened outside of China).

Last year, Tim Li, previously a managing director in Goldman Sachs’ private equity business, established Inspiration Capital Partners. “Inspiration is the first name that came to me. It means that entrepreneurs and investors can inspire one another. It’s a very positive,” he explains. But then Yong Zhang, ex-cleantech head at Qiming Venture Partners, set up his own firm – Inspiration capital. “It means to inspire new ideas and technologies,” he says.

The firms have different names in Chinese and neither seems bothered about the similarities in English. Li observes that they pursue very different strategies and are unlikely to end up looking at the same deals. Li’s Inspiration is a mid-market private equity firm that writes checks of $30-100 million for healthcare, consumer and financial services companies. Zhang’s Inspiration is VC firm focused on cleantech and advanced manufacturing.

For his part, Zhang claims that branding is not a priority – it takes up too much bandwidth and doesn’t fall within his sphere of expertise. “We will focus on our investments,” he explains. “We have decided internally not to make an effort to promote our brand.”

Nevertheless, this approach goes against the grain in China venture capital. Having spent years as the capital providers hidden behind the start-ups they back, managers are coming to terms with the fact that the asset class is increasingly mainstream. This is not solely a China phenomenon. More money is entering venture capital globally and many start-ups are becoming famous before they enter public ownership. 

“Some people might think that brands are not important, but from a developmental perspective, VC has gone from being a marginalized investment category to one that is well-known,” says Shi of 5Y. “There are more VC-backed IPOs in China, especially for technology companies. When an investor participates in an IPO, they are recognized by the market and priced in. Brand will increasingly make a difference.” 

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• Topics
• Greater China
• Venture
• GPs
• China
• 5Y capital
• AlphaX Partners
• Sky9 Capital
• Yunqi Partners
• Gaorong Capital
• Ince Capital Partners
• Vision Knight Capital