Winston Ma - The Hunt for Unicorns

The right of Winston Ma and Paul Downs to be identified as the authors of the editorial material in this work has been asserted in accordance with law.

Registered Office John Wiley & Sons, Ltd., The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom

For details of our global editorial offices, customer services, and more information about Wiley products visit us at www.wiley.com.

Wiley also publishes its books in a variety of electronic formats and by print-on-demand. Some content that appears in standard print versions of this book may not be available in other formats.

Limit of Liability/Disclaimer of Warranty

While the publisher and authors have used their best efforts in preparing this work, they make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives, written sales materials or promotional statements for this work. The fact that an organization, website, or product is referred to in this work as a citation and/or potential source of further information does not mean that the publisher and authors endorse the information or services the organization, website, or product may provide or recommendations it may make. This work is sold with the understanding that the publisher is not engaged in rendering professional services. The advice and strategies contained herein may not be suitable for your situation. You should consult with a specialist where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Library of Congress Cataloging-in-Publication Data is Available:

9781119746607 (paperback); 9781119746614 (ePDF); 9781119746621 (epub)

Cover Design: Wiley

Cover Image: © metamorworks/Getty Images

“State-owned investment funds are the new frontier investors, larger in size, influence, and power than the traditional Wall Street of investment banks, asset managers, and hedge funds. They are the “unicorn-makers” behind the scene. Offering a series of in-depth case studies that combine broad perspectives on the tech investment world with specific national examples, this highly original book examines a vital and increasingly important relationship between governments and globalizing VC tech markets.”

– Anthony Scaramucci, Founder & Managing Partner of SkyBridge

“Ma and Downs' clear and expansive insights into these disproportionately important and yet little-known institutions will prove critical, both to practitioners in the field of investing as well as to the general public seeking answers to the big picture questions of why the new unicorns transforming their lives arose from the modern financial system.”

– Russell Read, CFA, Ph.D, former CIO for CalPERS, GIC-Kuwait, and APFC

“The private sector doesn't have the answers to a growing list of the world ‘s problems. It is the State, working through powerful institutions such as sovereign wealth funds, that has taken a key economic and investment role. Investors need to understand these state-controlled wealth funds - what they do and how they do it – and this book provides a timely update that fills a gap in the literature on global finance.”

– Dato’ Seri Cheah Cheng Hye, Co-Founder and Co-Chairman, Value Partners and Non-Executive Director, Hong Kong Exchanges and Clearing Ltd

“Sovereign Wealth Funds (SWFs) lie at the intersection of finance, politics, macroeconomics, international relations. This book not only constitutes perhaps the most in-depth and insightful investigation of sovereign investors to date, but the book starts a broader debate over globalization and state economic intervention in the context of world digital revolution. Invaluable to European governments and businesses, in particular, as the EU strives to become the third tech pillar of the world next to the US and China.”

– Pierre-Yves Lucas, Head of Cooperation Mongolia, European Union and former Adviser to the CEO of the SWF of Kazakhstan

“A book that, against the backdrop of the world-altering coronavirus epidemic, provides a thoughtful guide to the role sovereign investors play in the world-changing digital transformation – and how one accelerates the other.”

– Margaret Franklin, CFA, President and CEO, CFA Institute

“This is a story about Time Machines.”

– Ajay Royan, Co-founder with Peter Thiel of Mithril VC Funds

To Angela – I love you dearly

– Winston Ma

To Rebecca, whose support has been invaluable .

– Paul Downs

This is a story about Time Machines.

No, dear reader, you did not stumble upon the science fiction aisle at the bookstore. You are, however, holding a chronicle of the hunt for their closest earthly cousins.

In this timely book, Winston Ma and Paul Downs bring to light the oft mysterious world of transformative technology startups and the burgeoning sovereign wealth funds who invest in them. Together, these constitute a group of builders and investors who have emerged as two of the biggest forces reshaping the world as we know it. Their origins are diverse, but their evolution has many parallels. And their future, and ours, is intertwined in more ways than anyone anticipated.

Over a nearly two-decade career in tech and investing, I have come to appreciate that every great technology startup is in fact a Time Machine, the fruit of a tribe of mad-genius progenitors intent on hurtling us into the future. Most fail, and almost all are unprecedented by popular opinion. When they succeed, however, they famously remake whole industries for a generation or two.

As this book goes to press, seven of the ten largest companies on earth by market capitalization are tech giants domiciled in the United States and China: Apple, Microsoft, Amazon, Alphabet, Facebook, Alibaba, and Tencent. Even a decade ago, that list would have been significantly varied to include energy, financial, and industrial leaders such as Exxon, ICBC, GE, and Citi. Today, the only non-tech companies in the top-ten are Berkshire Hathaway, Visa, and Johnson & Johnson.

Largely ignored by Wall Street after the 2000 Dotcom Bust, these startups managed to thrive with the quiet backing of a new generation of investors, themselves often startup founders who took pride in being founder centric. There was, and is, a strong element of community spirit among the best founders and their funding partners — you paid the favor forward, and in turn found yourself working with kindred spirits conspiring to brilliantly pull forward the future. There exists an equal measure of what one might call constructive paranoia, that no matter how successful one's enterprise might become, there is always lurking a competitor that mustn't be underestimated. After all, the venerable Microsoft and Apple had to be completely reinvented before they could take their spots on that list. Amazon, for its part, is famously obsessed with “Day 1”. As founder Jeff Bezos emphasized in his 2016 shareholder letter, “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”