Be the "well-digger" behind entrepreneurs

Profile of the Interviewee: Hu Xiaofan, designer and practitioner of the grand financial architecture. With 18 years of experience in financial venture capital, she has worked for China Merchants Bank, HSBC, CDH Baifu, well-known US dollar funds, and technology funds under leading internet platforms. Currently, she focuses on technology enterprise incubation, paying attention to strategic co-creation, industrial collaboration and long-term companionship.

I. Three Career Transitions in 18 Years: Connecting Capital, Industries and Entrepreneurs

From China Merchants Bank and HSBC to CDH Baifu, and then to US dollar funds and technology funds under internet platforms, you have been engaged in the finance and venture capital sector for 18 years, and each of your career transitions spans a wide scope. If you use one main line to string all these experiences together, what would it be?

Hu Xiaofan: Looking back, the main line is actually very clear: at different stages, I have been continuously building a system that connects capital, industries and entrepreneurs.

In the early stage of my career, I worked at a number of leading financial platforms, and long-term interacted with high-net-worth clients, entrepreneurs and investors. Over the 18 years, I have gradually formed a set of methodologies for identifying people, evaluating matters and allocating resources. It is somewhat like an iteratively updated "large model", which helps me judge what kind of people can achieve great undertakings, and what kind of structure can seize opportunities.

At China Merchants Bank and HSBC, I learned to view asset allocation from a long-term perspective, understand the overall structure of clients first, and then discuss specific products. When I joined CDH Baifu, I further realized that trust comes not only from interpersonal relationships, but also from clear and robust structural arrangements.

Later, I moved to an investment institution and participated in the construction of the fundraising system, starting to connect capital with business scenarios and strategic resources. After that, at the technology fund under the internet platform, I gained a more specific understanding of industrial collaboration: industrial resources flow into innovative projects, and the new products and new technologies developed by the projects in turn feed back to the industries.

These experiences make me convinced that real opportunities are not just about catching a market boom, but about building a structure that can seize opportunities in advance at the critical stage of industrial transformation.

That's why I now devote my energy to technology incubation. Our incubation and investment strategy focuses on industries where cutting-edge technologies may bring disruptive changes, finds the right people, and builds great world-changing enterprises together with them. At the same time, we are also opening up the closed loop of "incubation, investment, fundraising, management and exit", so that incubation, investment, fundraising, management and exit are interconnected to form a sustainable cycle.

II. Grand Financial Architecture: Strategy as the Guide, Capital as the Tool, and Architecture as the Outcome

You often mention the concept of "grand financial architecture". When many people talk about finance, the first thing that comes to their mind is capital itself — where the money comes from and where it is invested. Why don't you only talk about capital? What exactly does this set of architecture refer to?

Hu Xiaofan: I summarize it into three layers: Strategy as the guide, capital as the tool, and architecture as the outcome.

Strategy determines the direction, and the architecture must be subordinate to strategy; the value of capital lies not only in input, but also in connection and leverage. A single transaction ends once it is completed, but a reasonable collaboration mechanism can last for a long time and continue to play a role.

What this set of architecture aims to solve is the problem of how to effectively allocate ecological resources: how to connect scientific research achievements from universities with real demands, how to open industrial scenarios to innovative projects, how capital can support long-cycle R&D, and how talents can create value on suitable platforms.

Therefore, grand finance is not to build a new capital system completely separated from industries, but to take the real economy as the foundation and industrial demands as the starting point. Only when capital enters real scenarios, serves real businesses and supports real innovation, can it generate sustainable value. In turn, finance can help enterprises improve their operation capabilities and expand growth space through the collaboration of strategy, capital, organization and industrial resources. This is also what I mean by "building grand finance with the approach of the real economy, and enabling industries in depth through grand finance".

I often take Danaher as a research sample. Many people pay attention to its M&A capabilities, but I think what is more worth learning is that it relies on a set of replicable operation and management systems to complete track transitions time and time again. What the "grand financial architecture" wants to do is similar: to precipitate into a set of collaboration tools that can be reused across projects and businesses, and help all parties in the ecosystem jointly create long-term value.

III. AI and Trends: Judge the Direction of the Era First, Then Choose the Entry Point

In the past two years, AI has almost become an unavoidable topic for investors. Some people compare it with the Internet, while others worry that it is just another market boom. Why do you judge that AI belongs to the fourth industrial revolution? Facing such a major trend, how do you choose the entry point?

Hu Xiaofan: The judgment criterion is to see whether it truly promotes the leap of social productivity. AI has been implemented in thousands of industries and created a large amount of new quality productivity, so I believe it belongs to the fourth industrial revolution, not just a short-term technical boom.

It will be clearer if we compare it with the Internet. The Internet mostly improves efficiency through information connection and supply chain reconstruction; AI is a underlying technological change, which can generate content, participate in reasoning, deliver results, and then give birth to new product forms, industrial opportunities and productivity.

From the perspective of industrial progress, AI is moving from technical dividends to industrial dividends. For entrepreneurs, the key is not to chase concepts, but to deeply integrate AI with industries, and build the capabilities of commercial realization and self-sustainability from the initial stage. The valuation logic is also changing accordingly: in addition to profits and revenue, we also need to look at the founder's cognition of the future, the capability of commercial implementation, and whether the enterprise can solve world-class problems and key technical problems.

My decision-making sequence is: first see whether the entrepreneurial direction conforms to the general industrial trend and national strategy, then look at the people, and finally look at the technology.

A trend is not short-term popularity, but the joint force formed by technological evolution, industrial demands and the long-term demands of human beings. The entry point is not necessarily the earlier the better, it depends on whether the technology can be implemented, whether the scenarios are clear, and whether the project can form a sustainable business closed loop.

It can be understood in this way: the trend determines the ceiling of the undertaking, the entry point affects the cost and efficiency of entrepreneurship, and the founder determines how far the enterprise can go in the end. For the entrepreneurial team, what they need to attract is not just product experiencers, but also enablers who can bring resources. Only by truly understanding how products are used and how industries operate can we judge whether an innovation creates real value.

IV. Identifying People and Evaluating Matters: Aspiration, Mental Strength, Energy, and Competence Last

You just said that the founder determines how far the enterprise can go in the end. When it comes to specific people, how do you identify an entrepreneur who can navigate the trend? Do you have your own set of judgment framework?

Hu Xiaofan: Identifying people requires a framework, but you can't be bound by the framework. When I evaluate entrepreneurs, I mainly look at four dimensions, in the order of: Aspiration is more important than mental strength, mental strength is more important than energy, and energy is more important than competence.

Aspiration refers to the pursuit of undertakings that goes beyond short-term interests. Entrepreneurs must be willing to change the industry, redefine the industry, or even create a new species. Such a grand vision should not only be kept in mind, but also be dared to speak out, so that it can become a common belief that unites the team and connects resources.

Mental strength is the spiritual core for facing long-term uncertainty. When encountering setbacks and not getting positive feedback for a long time, whether a person can still move forward depends on mental strength.

Energy is not only physical strength, but also concentration, resilience and the ability to output stably for a long time. Entrepreneurs should reduce unnecessary consumption and focus their life energy on things that really matter.

Competence is of course important, but it is easier to acquire through acquired learning. The AI era brings knowledge equality and information equality, which greatly lowers the threshold for acquiring capabilities. What determines the upper limit of an entrepreneur is often not only the capabilities he currently possesses.

On this basis, founders also need three abilities: identifying people, evaluating matters, and keeping a low profile: being able to find people who can truly walk together; being able to grasp the essence in complex situations and dare to take responsibilities; being able to stay true to the original intention and avoid unnecessary disputes and internal friction. Furthermore, founders need to be able to attract, retain and influence people, so that the team can move forward for the same vision for a long time.

V. Focus on Incubation: Provide the Truly Missing Capabilities at Critical Nodes

Incubation is different from pure financial investment, and post-investment often requires in-depth participation. However, too much participation may interfere with the judgment of the founder. How do you grasp the boundary between deep accompanying and maintaining restraint?

Hu Xiaofan: For start-ups, money is only one of the necessary conditions. Whether talents, scenarios, orders, industrial experience and long-term capital can be connected behind the capital often has a greater impact on the growth quality of a company.

The problem of many start-ups is not that the direction is wrong, but that the system has not been built yet: the strategy has not been broken down into executable milestones, the talent structure is unreasonable, the capital planning is disconnected from business development, and industrial resources cannot be connected.

Therefore, the core of long-term accompanying is to bring the methods we accumulated in large institutions into entrepreneurial enterprises, with the capabilities of large companies and the standards of listed companies, to help enterprises establish strategy, organization and execution systems.

Entrepreneurs position us as their first strategic partner. Entrepreneurs have product capabilities, and we have understanding, connection and mental strength. We not only invest money, but also invest time; what we incubate is not just a project, but also the cognition and entrepreneurial spirit of the entrepreneur. We are not afraid of the stage from 0 to 1, and are willing to write the first check for the dream of disrupting the world, helping them build great world-changing enterprises.

But the boundary must be clear: The incubator cannot start a business on behalf of the founder, but provide the capabilities that the founder truly lacks at critical nodes. We often say that we want to be "the entrepreneur behind the entrepreneur", which does not mean standing in the foreground to make decisions for him, but participating in strategic co-creation and core team building when the enterprise starts, calibrating the direction together when the strategy wavers, supplementing organizational capabilities in key battles, and helping to connect suitable resources when capital and industrial resources become bottlenecks.

The faster the industry changes, the more we need to help founders grasp the main contradiction and handle complex matters with ease, instead of increasing their management burden. The steering wheel is always in the hands of the founder, and what the incubator needs to do is to fill the position accurately.

At the current stage, what directions do you focus on? What kind of entrepreneurs are those you are willing to accompany for a long time?

Hu Xiaofan: At this stage, we focus on the scenarios and implementation applications of AI in vertical fields, as well as AI-native, inherently global start-ups. No matter whether the entrepreneur is already ready to start a business, or only has an idea for the time being, as long as he has a sense of mission and is willing to use AI to improve an industry or create a brand new species, he is worthy of our long-term companionship.

VI. Industrial Incubation Methodology from the Practice of Embodied Robots

It is easy to talk about methodologies, but when they are actually applied to a start-up, they often have to go through the tests of forming a team, finding products, financing and even capital shortage. Can you talk about how this set of incubation methods is implemented combined with a specific project?

Hu Xiaofan: We once participated in the early establishment of a vertical embodied robot enterprise. The founder has been deeply engaged in this vertical industry for many years, and has long-term accumulation of industrial scenarios, customer demands and industry pain points. Before the company was established, we worked with the founding team to study the strategy, jointly formulate the strategic positioning, build the core team, position the first product with self-sustainability capability, and also participated in the early investment. After the company was established, we also assisted in promoting cooperation with some strategic-level customers.

We found and facilitated the first several important financings for the company, and assisted in introducing individual industrial investors and market-oriented industrial capital. This makes us more clear: Financing is not only about connecting capital, but also about connecting orders, scenarios, industrial experience and the possibility of long-term collaboration.

The enterprise also went through the most difficult stage. During that period, we and the founding team jointly contributed capital to advance funds for the company, which was used for salary payment and daily operation. Taking responsibilities together in difficult times let us truly see the aspiration and mental strength of this team.

After that, the enterprise introduced new institutional investors, and alleviated the short-term capital pressure through appropriate bridge arrangements. This process makes us pay more attention to the applicable boundaries of different capital tools: equity financing supports long-term growth, and prudent debt arrangements can help enterprises win time in special stages, on the premise of fully understanding the enterprise's operation rhythm and solvency.

At present, this enterprise has gradually grown into a representative company in the vertical embodied robot field, and has basically achieved break-even in operation. In this process, we are not only the people who discuss strategies with the founder, but also the people who drive with the two wheels of capital and industry to help it build an ecosystem.

This experience allows us to summarize the incubation methodology into four links.

Strategic Co-creation: Before the company is established, we jointly study the trends, scenarios and industrial endgame with the founder, make comprehensive judgments from the perspectives of business, products and capital, and think clearly about why to do it, for whom to do it, and what kind of enterprise it will eventually become.

Product Self-sustainability: Starting from real industrial problems, we prioritize positioning products that can be delivered, can verify value, and have self-sustainability capabilities, run through the business closed loop first, and then gradually increase investment. For embodied robot enterprises, we should not only look at orders, revenue or valuation, but also verify whether the products can create sustainable operating value.

Industrial Capital: Introduce appropriate shareholders according to the stage of the enterprise. In the early stage, capital that is willing to share risks is needed; in the product verification stage, individual industrial investors who understand the industry are needed; in the large-scale stage, market-oriented investors who can bring orders, scenarios and industrial collaboration are needed. The capital structure itself should also serve the industrial strategy.

Ecological Co-construction: Vertical field embodied robots are new species that may change the world, but the upstream and downstream of the industry are still being improved. Incubation cannot only stay on one project, but also connect core technologies, key components, manufacturing capabilities, application scenarios and long-term capital to jointly promote the maturity of emerging industries.

This set of methods is currently being tested in other technology projects. By the way, family AI emotional companion robots are also a direction we pay attention to. What can be migrated is not a certain product path, but the structural capabilities of strategic co-creation, product self-sustainability, industrial capital and ecological co-construction. Some investors who once participated in early projects together are also continuing to pay attention to our new explorations. Walking together across multiple projects, what precipitated is not only investment returns, but also trust built on common values.

Jensen Huang, CEO of NVIDIA, once emphasized: "Intelligence is only a functional tool, and character, humanity, compassion, generosity, these are the real superhuman abilities." This is especially true for emotional interactive technology products: Intelligence determines what products can do; and what values, character and compassion the creator has, and what kind of life experience he has, determine why the product is made and in what way it accompanies people.

This kind of exploration also reminds