Harry Wang on Linear Capital: Lessons from Transitioning from Tech to Investing

Xiaoxianjun

Not long ago, Harry Wang, founder and CEO of Linear Capital, was invited to an online sharing event co-hosted by Harvard Ventures and MIT Chinese Entrepreneurs Organization (MIT CEO). At this event, Harry shared his journey from engineer to investor, his insights from years of tech investing, his views on the current venture capital industry, and advice for international students. Below is a transcript of the event.

I'm very glad to be here sharing with you all today. I hope my story and experience can inspire some like-minded people.

Linear is a young investment firm, founded by engineers, run by engineers, and oriented toward engineers. We care deeply about tech investing. I used to be an engineer myself, and Linear's investment team all comes from STEM and technical backgrounds.

Our biggest distinguishing feature is our focus on frontier technology — discovering it early, getting in early. China has many excellent investment institutions, and plenty of people are surely better than Linear at judging commercial prospects. What makes Linear distinctive is that at the early stage, we can access, understand, and bet on opportunities where technology meets industry. The founders of our portfolio companies can also resonate with us. But we don't just look at how impressive the technology is. What we care about most is whether the technology can bring tenfold, hundredfold efficiency gains to industrial upgrading. We want to see "black tech" land in industry and make a huge contribution to industrial upgrading. This is what we often call 3F: frontier technology, frontier productivity, frontier lifestyle, all for a better society. To put it another way, we discover early-stage technology startups that can solve pain points in industrial upgrading, build bridges between startups and industry, and let solutions using frontier technology bring massive improvements in productivity and efficiency to industry — bringing paradigm shifts that improve more people's lives and build a better society.

We believe China's tech investment and entrepreneurship market is enormous. Since Linear's founding in 2014, we've invested in over 120 companies. Representative portfolio companies include Kujiale, which holds absolute market dominance in home design; Horizon Robotics, currently a leading automotive chip company in China; and Sensors Data, which does excellent work in data analytics, among others. We were among the earliest investors in all of these companies. Getting in early and leading rounds remain our investment style to this day.

Personal Journey: My Years at Facebook Showed Me How an Engineer Becomes an Entrepreneur

I started undergrad at Zhejiang University in 1999, then went to Ohio State for a PhD in machine learning. After two years, I realized I wasn't very interested in ivory tower life, and with Silicon Valley's influence, I went to make my way there. Later I studied management science and engineering at Stanford. For work, I first joined Yahoo, then Facebook. When I joined Facebook it was about 100 people; when I left in 2012 it was roughly 4,000. Witnessing this company go from a few hundred million in valuation to a hundred-billion-dollar company, and watching Mark Zuckerberg transform from an engineer who would blush speaking at all-hands meetings to someone who could perform with ease at congressional hearings — this experience showed me how an engineer grows into an entrepreneur. It also gave me more insight later when investing in supporting engineers with decent educational and work backgrounds to become entrepreneurs.

Looking back now, as an engineer or product manager at the time, you often couldn't see that technology and product were just one of the core drivers pushing the company forward. Equally important were the company's direction, vision, leadership, and so on. Technology and product serve the company's goals. Strong technical ability is only one necessary condition for success as a tech professional. We say tech entrepreneurship has two major hurdles: technology productization and product commercialization. Many people from technical backgrounds tend to think too highly of themselves, but to actually get something done, you ultimately need a team.

So in retrospect, as an engineer back then, I probably couldn't see the pressure and responsibility on Zuckerberg's shoulders. A company's CEO must meet comprehensive demands and withstand difficulties when they arise. This is what we often refer to later when evaluating teams — we can most easily see technical and product capabilities, but what's harder to judge is the founder's vision, how they conduct themselves, their ability to lead a team, and so on.

Later I did some reflection on my Facebook experience, and after leaving, I wrote it all into the book The Facebook Effect. At the time, doing talks at major Chinese tech companies and discussing these ideas gave me excellent opportunities to exchange with outstanding Chinese tech professionals. This became the foundation for founding Linear.

After leaving Facebook, I first did some individual angel investing, then formally established Linear in 2014. I had some thoughts at the time that I can share with you. For example, why should we start a fund? China's best investment institutions include HSG, Hillhouse, IDG, and others — how exactly would we be different? And in those areas of difference, could we actually become the best?

This relates to what I mentioned earlier: to do something, you need a vision, plus sustained, continuous investment and passion to support that vision. Otherwise, if you only have enthusiasm without vision, it's hard to persevere.

What was the specific direction? We invested in some projects in our first fund, then did a retrospective — which of our investments performed well, and what did they have in common? Summing this up, we determined our direction: we would do what we loved and were good at — tech investing.

From our perspective, we believe data intelligence is frontier technology that can actually land; from a longer view, the backdrop of frontier technology development combined with China's overall industrial upgrading is an era-defining opportunity. Technology is one line, industrial transformation is another line — can these two lines resonate? What Linear aims to do is grasp both lines, seeking opportunities where they dance together like tango and create high returns. This is the historical foundation and formation process of Linear Capital.

Today, we're already on our fifth fund, with assets under management exceeding $2 billion. Looking back, it's still what I said about vision, and doing what you're good at and love. Investment firms of course need to make money, but if you're only in it for the money, it's hard too. We genuinely hope to support these tech professionals and help them achieve technology productization, product commercialization, and scaled growth.

Insights on Tech Investing: We Love Breakthroughs from 0 to 1, and Projects That Can Bring Massive Efficiency Gains to Industry

As I mentioned, the essence of our tech investing is seeking massive productivity gains — finding points where we can bring tenfold, hundredfold efficiency improvements, creating value for industry, which then converts to commercial value. This is a closed loop. However, when we invest, the company often hasn't yet proven commercial value. After we invest and accompany its growth, we can advance this process of realizing commercial value. In this situation, we have many considerations from an industrial perspective and thinking about industry problems.

For people in industry, their thinking often resembles that metaphor: when you ask someone using a horse-drawn carriage what they need, they won't say they need an automobile — they'll say they need a faster horse. The change we expect from frontier technology, what we call categorical difference, is that it brings leverage effects, even paradigm shifts. I also hope to inspire those who want to do tech entrepreneurship to think from this starting point about what value your technology can bring to industry.

There are two types of companies Linear likes to invest in. The first is breakthrough from zero to one — something no one else has at all, but you do. The second is achieving tenfold, hundredfold efficiency gains for industry. Classic early-stage investment theory in Silicon Valley is PMF, Product-Market Fit. Linear believes that before PMF comes TPF, Technology-Problem Fit — technology solving a specific problem. This is where Linear's view of technology differs from other peers.

In the tech industry, everyone now understands the importance of AI and data. But AI and data deal with correlations; they don't answer causal relationships. Understanding causality requires mechanistic models — comprehension of the underlying principles of things themselves. Each domain has its own logic. For example, we invested in a company called Akenong that helps farmers make planting decisions — predicting and deciding when to water, apply pesticide, weed, and so on. This company now serves a substantial scale of farmland. When we invested, a key concern was whether their technology was feasible and why. To answer this, our team went to Xinjiang and Henan, spending three days in Akenong's partner fields, studying how their technology combined with crop mechanistic models.

So what I want to say is: with your excellent educational backgrounds, consider going to the field more often — we say let our investment team "go down to the countryside" — to do research, rather than staying only in the ivory tower.

Here I can offer some advice leaning toward personal life philosophy. You're all young. If your life lacks some difficult choices, objectively speaking, it's hard for life to have brilliant highlights. Life will certainly have difficult choices. When you encounter them, congratulations — your life has gained more possibilities for becoming interesting. The reason they're difficult may involve risk, but it also means innovation.

I once gave a TED talk on a related theme. High-risk choices may also have high returns. One very important thing is: doing something may have some unavoidable risks. If you truly want to do this thing, you need to make adventurous decisions. But this doesn't mean throwing all caution to the wind. You can gather information and calculate what cost you might pay at each step — what I called in that talk taking a calculated risk. If you're interested, you can look it up.

Linear's View on the VC Industry: The Industry Will Consolidate, Valuations Will Adjust, But Tech People Must Stay Firm in Their Convictions

Recently we also shared our views on the VC industry with our LPs and portfolio companies. Overall, China's USD funds will reshuffle in the future; fundraising will become more difficult. Good projects haven't decreased, but good projects that can actually raise money will be very scarce. Good institutions will focus on fewer good projects, concentrating more ammunition for them and helping these fewer, better projects find more ammunition. Company valuations will adjust in the future.

But I want to emphasize something that doesn't change: for tech entrepreneurship, the most important things are still those fundamentals I mentioned earlier — what problem your technology solves, what value you hope to bring to industry.

Advice for Young International Students: First, Be a Reliable Person; The Core Is Practice

Many people also ask my advice for young international students. From the perspective of someone who's been through it, I've made some difficult choices before. Whether or not you return to China, join a big company or start a company, the most important thing is first to be a reliable person, rather than rushing to show off your highlights. This is a pitfall that people graduating from prestigious schools easily fall into.

Second, while demonstrating your strengths in a team, also learn to let the whole team demonstrate their strengths. This is an important insight whether for my own entrepreneurship or for observing entrepreneurs' growth. Of course, when we invest in a team, most of the time we still weigh the founder and CEO's background and capabilities more heavily. But whether they can learn to let more people in the team play to their strengths matters a lot.

Third, there are also many entrepreneurs who are personally very charismatic and have leadership ability. You can directly join them and learn from them, such as the opportunity to join Apple under Steve Jobs back in the day. It's just that all choices have a return on investment behind them — you need to put in effort and pay a price.

The core is practice. Join a team that's genuinely doing things, and you can learn and grow quickly, feeling that what you're doing has real impact on society and industrial upgrading. Here let me advertise for Linear's portfolio companies and some ongoing projects: we have the Linear Fellow program for international students, university faculty, and tech company employees. We also have portfolio companies doing tech-industry landing that are actively hiring. You can find this information on the WeChat public account "Linear Capital." We hope to have more multidimensional interactions with you all, and welcome you to contact us.

(Scan the QR code to apply for Linear Fellow)

Q&A

Q: The metaverse is a very hot topic right now. How do you see the commercial value of AR, VR, and MR in the next 3-5 years, and on the consumer side?

A: There was already a wave a few years ago. In the past year or two, Oculus shipments reached 20 million units, giving AR, VR, and MR a boost, plus with Apple reportedly entering the market, people are more confident. But everything I just mentioned doesn't have concrete applications yet. Personally, I think it's still just the beginning. We believe AR, VR, XR will develop, but on the consumer side, for it to become a lightweight, easy-to-use device with rich applications, it still needs time.

In some specific scenarios, such as in cars — projection screens, intelligent navigation, making the car a new usage scenario — AR can improve the driving experience in this context. But we're relatively conservative on the consumer side; in the near term, there are some technical shortcomings to overcome. We recognize this opportunity, but view the entrepreneurial timing and opportunities within it cautiously. Linear's investments still lean relatively toward underlying technology.

Q: Many people here come from technical backgrounds. Harry, you yourself transitioned from engineer to investor. What should young people currently in tech who want to do investing later pay attention to now?

A: This is a very good question. We often think about this too. What do people from technical backgrounds have an advantage in doing, but without being constrained by the engineer's perspective? How do you turn a technical background into your advantage? This is also a process of soul searching. We have people from different STEM backgrounds join us. What I emphasize is: care about truly fundamental scientific questions, pay attention to details, understand why technology works — this is the advantage of people from technical backgrounds. Understanding and appreciating this pleasure of understanding technology can help you communicate with founders from similar technical backgrounds. You'll have more common language, more resonance. Of course, beyond the positives, you can also foresee problems they'll encounter in the future. Technology productization and product commercialization start from technology but go beyond technology. Having invested in so many companies landing technology in industry, the perspectives we've accumulated, our understanding of problems — some things don't have fixed answers, but often it's us and the entrepreneurs repeatedly discussing and refining together: go-to-market strategy, how the earliest customers were acquired, and so on. These give us better understanding of a technology's prospects, and simultaneously let us form our observations and impressions of the founder's technology product thinking — for example, whether the founder has this awareness, what room for growth there is, and so on.

So for people from technical backgrounds, preserve your love for technology, your enjoyment of discussing problems. This way you won't fall into the rut that investing is just about business models and profit models on the surface — the latter alone would be pretty boring. This is a fairly distinctive aspect of Linear, and also the source of Linear's unique perspective and culture.

Q: Regarding entrepreneurship and career planning, you just mentioned difficult decisions and risk-taking for tech entrepreneurs. Can you elaborate on how Linear judges entrepreneurs, and how entrepreneurs can discover opportunities to start companies?

A: We have something we call 3P3C. This is our model, our way of looking at things. For reference — it may not apply to everyone.

Professional: You first need to be among the best in your field.

Passionate: Where does your passion come from, and is it lasting?

Persistent: Look at Steve Jobs's experience — entrepreneurship is nine deaths and one life. Can you persist?

We place very heavy weight on character, Authentic — the most important manifestation is being Consistent, having what you think, say, and do align.

Cruel in decision-making, but being decisive doesn't mean being impolite.

Credible — this is high praise, requiring long-term contact to judge a person's character and so on.

As for how entrepreneurs find opportunities. I think you can focus on the passion part I mentioned — pay attention to where your passion lies, what you're willing to spend time on. People don't develop huge interest in something for no reason. Entrepreneurship of course should leverage major trends, but more important is figuring out why you're interested in this thing. Also, one method I mentioned earlier is joining a good team, being among excellent people to feel your interests and growth.

Q: What is Linear's current investment layout? Do you look at aerospace projects, and what's your view on the biopharma field?

A: We say Linear focuses on eight domains, investing in what we call AI+ — the combination of artificial intelligence with specific industries. This is the common thread of our past investments. In aerospace, we've invested in two projects in the past: Origin Space and Wefly, which does eVTOL. These are what I mentioned as leaning toward zero-to-one projects. Second is the 1-100 I mentioned earlier — technology bringing tenfold, hundredfold efficiency gains to industry.

In biopharma, we've already invested in quite a few projects. The overall direction is: this field has massive amounts of genetic data to capture and analyze, with enormous amounts of data that need to combine with massive experiments, high-throughput experiments. Some of our invested projects have increased the efficiency of doing experiments by tenfold, hundredfold. The core logic remains technology combined with industry.

About Linear Capital

We are currently recruiting talent to join our investment team, with multiple positions open. For details, please click here.

Linear Capital is a professional investment institution focused on "Data Intelligence" and "Frontier Technology."

Linear Capital currently manages ten funds with total assets under management of approximately $2 billion.

We focus on early-stage projects in "Data Application," "Data Infrastructure," and "Frontier Technology" application areas. Our investment stage focuses primarily on leading angel to Series A rounds, with typical investment amounts of $3-8 million or equivalent RMB per project.

We have made early-stage investments in over 120 entrepreneurial teams including Horizon Robotics ($3B), Tongdun (>$1B), Kujiale (>$1B), Sensors Data, Tezign, Rokid, Guandata, Agile Robots, and others. The combined valuation of Linear's invested projects is approximately $20 billion.

In the near term, Linear Capital is working to become the best "Data Intelligence Technology Fund," and in the long term, gradually build itself into the most influential "Frontier Technology Application Fund."