Profile: Tsing Capital's Don Ye

Today, investment crossover between China and the US is so pervasive that it’s sometimes jarring to consider how recently these two worlds were seen as incompatible – even by progressively minded venture capitalists. But for industry players like Don Ye, a parallel career trajectory has made this macroeconomic twist of fate seem almost biographical.

Ye, the founder and managing partner of US-founded and China-based firm Tsing Capital, remembers the late 1990s in California as time and place where the simultaneous eruptions of internet technology and the Chinese economy brought the future into focus. This was the context that sparked the ideas that would eventually define Tsing as a cross-border investor aimed at holistic, globally relevant problem solving. 

“When I was working for Asian-founded VC firms in San Francisco, I used to receive calls almost every day from delegations in China looking to learn from Silicon Valley,” Ye says. “I could see that the water was almost boiling, but not quite boiling yet.”

You have to put yourself on stage, speak out about it and then listen for echoes of interest coming back to you

Sometimes the picture was too big to see without stepping back, however. Ye contemplated the investment opportunities of the time in terms of titanic superlatives; the world’s most advanced economy and its biggest market were separated by the widest geographic and ideological divides. The sheer scope of this backdrop left many VCs nonplussed.     

“I felt the pulse on both sides – the Chinese community and the venture capitalists in San Francisco – but international investment had never been a topic for Sand Hill Road firms,” he says. “I wrote a few emails to some big-name VCs to try to help them invest in China, but nobody had any interest. One of the answers was ‘we don’t invest in start-ups any further away than 50 miles.’”

Ye started his career in China with CITIC Group, offering consulting services for international investors seeking to enter China. By 1990, he moved to Silicon Valley and took up similar duties with a firm known as Interpac International.

This experience quickly translated into more involved work with VC firms and by the end of the decade, Ye had joined WI Harper Group covering cross-border investment in Greater China. He was one of the first venture capitalists from mainland China to find work in Silicon Valley. Crash-and-burn bankruptcies and meteoric growth for start-ups were the rules of the day, providing invaluable lessons on the delicate arbitrage of technology investment in a transitioning environment.  

“I still remember the day that Yahoo listed,” Ye says. “It was an unbelievable day but also very sad because the company was sold at a very low valuation. That was a wake-up call because it unveiled the internet as the future of the investment industry and it helped give me a solid background for taking advantage of the ups and downs in different sectors.”

He adds: “On the other hand, Tsing Capital has nothing to do with sectors – it’s more my personal understanding of the world. I’m more of a fundamental-thinking person.”

Aiming high

A penchant for analysis from a higher altitude may have derived from Ye’s academic background in humanities, a rare starting point among science and engineering-educated VCs. In 1983, Ye was one of the first graduates in China in the field of international collaboration and investment, receiving his degree from Beijing’s University of International Business & Economics. He completed his education entirely within China, subsequently earning an executive MBA from Cheung Kong Graduate School of Business.

“The turn of the century got me thinking a lot about the fundamentals of the future and which areas were going to benefit from changes in investment and business down the road,” Ye says. “That’s when it became clear that the environment and energy were the two pillars on which everything in the world was built. But environmental issues are more complicated than people imagine because it really comes down to cost.”

The establishment of this thesis represented a turning point for Ye in a number of ways. Most visibly, it helped introduce a new brand of impact and for-profit investing to environmental sciences and laid the groundwork for the creation of Tsing in 2000. At a personal level, it prompted a move back to China.

Around this time, Tsing was taking shape under the name V2V Ventures, signifying the connection of Silicon Valley to the “village” of Zhongguancun, an early tech hub in northwest Beijing. In 2000, Ye began a period of back-and-forth living and working between the two countries to promote the project. But it wasn’t until 2002 that his family, including his wife and two children aged six and eight at the time, also relocated.

Being based in China was considered essential to making the project work, and initial efforts were pursued as a joint venture between Tsinghua University and the firm set up in Silicon Valley. The planning was based on an understanding that earlier technology investment from the US into Asia had focused on Japan, Taiwan, Singapore and Korea. Now, a new vision was required.

“When we started out in China, I believed we had to do something different from the US because almost everybody was in IT and internet industries,” Ye says. “I saw China and the US as yin and yang, with the US providing technology and capital. Obviously in return, China would provide the world’s largest market but, at the time, another phenomenon triggered my thinking – the world factory.”

The idea was that as the world’s busiest hub of manufacturing and industrial output, China was also the world’s greatest polluter – an equivalence that, despite being logical and evident, was not always politically easy to speak about. This epiphany, however, foreshadowed one of China’s great philosophical strengths in the age of environmental politics: pollution was identified as an obstacle to continued economic and social progress, and would be addressed as such.

The challenges of practically acting on this outlook were largely associated with the fledgling nature of many of the underlying drivers. In 2000, mainland China still ranked only seventh globally in nominal GDP, and was considered well behind Taiwan and Hong Kong in terms of investment appeal. Furthermore, the concept of a venture fund with a “triple bottom line” based on financial, social and environmental impact had no concrete precedent.

“At the time, environmental investment products were not yet considered sensible and marketable, so I hadn’t seen anybody doing this before me,” Ye explains. “The main reason that environmental investment has never been a mainstream area is it’s so hard to find enough LPs for those kinds of funds.”

After a year and a half of legwork, Tsing secured its first LP commitment from a third-generation Hong Kong family office in 2001. Meanwhile, the difficulty of staffing a first-of-its-kind fund was at least partially met by inviting Tsinghua University’s environmental engineering team to join as advisors. A dearth of quality investment opportunities, however, continued to betray the immaturity of the market at the time, with only a dozen or so potential transactions surfacing in a given year. 

“You have to put yourself on stage, speak out about it and then listen for echoes of interest coming back to you,” Ye says. “It’s a lot harder when you are the first to do it. There were hardships on all fronts including getting investment, knowledge and deal flow – and we were bootstrapping everything.”

Balancing act

The firm’s first China Environment Fund (CEF) was launched in 2002, predating popular use of the expression “cleantech” by at least a year. Subsequent CEFs were floated in 2005, 2008 and 2012, with the most recent vehicle achieving a first close last month. Fund V is targeting a $300 million corpus for investments combining traditional environmental technologies such as waste management systems with cleantech plays including power storage and emerging internet-connected fields.

The mandate is in keeping with the inclusive approach to sustainable technology that the GP markets as “sustaintech.” Targeting under this philosophy is characterized by the application of emerging technologies such as the internet-of-things in energy efficiency as well as a focus on globalization and cross-border synergies.

Tsing’s operational expansion across the past 17 years has also emphasized internationalism, with the firm now based on five continents and pursuing an intuition that regions such as Africa could represent a similar cleantech opportunity as China did in the 1990s. Last year, Tsing came full circle with the re-opening of a Silicon Valley office and a fresh swath of US investments.

The idea of bridging Eastern and Western markets while also combining existing and emerging technologies under an environmental remit is only part of the balancing act, however. Ye’s most successful and unique gambit to date may actually be energizing not-for-profit ideals with the competitive instincts of a Silicon Valley survivalist.  

“Tsing receives a lot more money from investors looking to do good than from those looking to do well, but we’re trying to be a balancer of those two worlds by achieving as much of a financial return as possible while maximizing environmental and social returns,” he says. “Before Tsing, doing well and doing good were always totally separate.” 

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• Topics
• Greater China
• North America
• GPs
• China
• USA
• Tsing Capital
• Cleantech