http://online.wsj.com/public/article/0,,SB114731156985249787-VT7WYMY69KOwTXHuOcpqynDZKgY_20060517,00.html?mod=regionallinks
SHANGHAI
-- Three years ago, Jason Jiang was an unknown Chinese entrepreneur with an
offbeat notion to sell ads in elevator lobbies. Then he persuaded the money men
to back him.
Jason Jiang.
[whnews.cn] |
Today, Mr. Jiang's company, Focus
Media Holding Ltd., has a market capitalization of almost $2.9 billion. Its
share price has quadrupled since the company's initial public offering in July
on the Nasdaq Stock Market. Mr. Jiang has amassed a personal fortune of more
than $700 million, including a 25% stake in his company.
Not long ago in China, getting rich fast was suspect. But Mr. Jiang, 33 years
old, is a celebrity in China, where he is one of a small group of young
entrepreneurs pursuing the nation's rising consumer class, rather than relying
on its traditional economic role as a center of low-cost manufacturing.
The Shanghai native's name is on a list of top-10 "IT Young Spirits" posted
on a Web site run by the Shanghai Municipal Committee. China's state-owned
newspapers feature profiles recounting his rise to wealth.
For legions of private-equity investors and venture capitalists coming to
China to make a buck, Focus Media's trajectory serves as a wishful template for
deals in a country where spectacular economic growth often hasn't translated
into spectacular investment returns.
By paving the way for other start-up companies, Mr. Jiang says, the country's
new entrepreneurs "will inject new dynamics into the Chinese economy."
Mr. Jiang is the only child of a middle-class couple. His father was an
accountant, and his mother managed a state-run grocery store. He attended a
teachers' college in the city, preparing to become an elementary-school
instructor. While a student, he wrote poems and recited them at public readings.
An avid debater as a first-year student, he would engage upperclassmen in
discussions on philosophy and literature, recalls Alan Ji, a college friend who
is now Focus Media's head of public relations. He later was elected president of
the student union.
Mr. Jiang first became acquainted with advertising in college. To earn pocket
money, he began selling print ads for an advertising company, and he quickly
became its top salesman. After graduation, he founded an ad firm that worked
mainly with Internet advertisers.
He left that business to found Focus Media in 2003. Mr. Jiang figured the
emergence of newly affluent Chinese required advertisers to find better ways to
target customers, many of whom put in more waking hours at the office than at
home. His idea was simple: Sell advertisements on a network of electronic
billboards installed at elevator lobbies in office buildings in Shanghai,
Beijing and other cities.
In 2003, Mr. Jiang still was struggling. Rapidly burning through seed capital
from Softbank China Venture Capital, Focus Media was operating at a net loss for
the year and sorely needed more money.
So Mr. Jiang on Christmas Day flew to Beijing to visit the senior partner at
CDH Fund, a private-equity firm. He showed up on a freezing afternoon without an
overcoat, recalls Wu Shangzhi, the CDH partner. Waving away concerns that he
would catch a cold, Mr. Jiang began an explanation of his business strategy.
[Mr. Wu says the young entrepreneur spoke passionately. He also displayed an
understanding of the potential shortcomings of his business model, including the
challenge of sustaining growth once the company had contracts with most major
office complexes in Shanghai and Beijing. In Shanghai, it already claimed 70% of
the market.
Mr. Jiang addressed such concerns by explaining that the company was
establishing franchises in secondary cities in China, such as Changsha and
Tianjin, with the hope of buying and integrating them into the parent company
once they became financially viable. He asserted that the company had moved to
profitability for November and December, even while posting a loss for the year.
What convinced Mr. Wu was Mr. Jiang's willingness to share the risks he was
asking investors to take. He pledged that the company would post a net profit of
$10 million the following year and said the fund could ratchet down its
commitment if that target wasn't met. "If I don't achieve what I set out, I will
suffer," Mr. Wu recalls Mr. Jiang saying.
By the end of the meeting, Mr. Wu agreed to invest even more money than the
entrepreneur sought. Mr. Jiang was looking for a little more than $6 million,
but left with a verbal commitment for $12 million.
Revenue grew quickly in 2004, and Focus Media wound up beating Mr. Jiang's
$10 million earnings target by several million dollars. The results enticed
other backers. That November, Goldman Sachs Group Inc., venture-capital fund 3i
Group and United China Investment Ltd. provided $30 million.
So far, Mr. Jiang's company hasn't slowed down. Focus Media reported $68.2
million in total revenue last year, compared with $29.2 million in 2004,
although a buying spree of rival advertisers this year and a temporary tax
exemption, which may expire next year, have caused some analysts to question
whether the company can maintain its pace.
Since last summer's IPO, which raised about $171 million, Focus Media's
investors have reaped big profits. In January, the company raised about $295
million in a secondary offering on Nasdaq that yielded about $40 million for Mr.
Jiang and more than $100 million combined for Goldman Sachs and CDH, the company
says in regulatory filings.
Mr. Jiang is considered so important to Focus Media that its prospectus cites
the possibility of his departure, while unlikely, among "risk factors" for
investors.
Today, Focus Media's office is a whirl of activity. Slightly disheveled in a
white button-down shirt, Mr. Jiang entertains visitors and discusses at length
his goals. He lives alone, next door to his parents, in Shanghai's financial
district. Most of his friends, he says, are business associates or company
employees.
His one indulgence: a foot massage almost every evening about 10, at a parlor
near his home. The hour-long respite, he says, makes it possible for him to
resume work afterward and concentrate late into the night.
During a recent foot massage, Mr. Jiang said he thought about getting out of
advertising, perhaps moving into films. A fan of the Chinese blockbuster "Hero,"
which recounts events in China in the third century B.C., he says that someday
he would like to weave Chinese legends into a movie extravaganza.
That is a plan for far in the future. "I like to do one thing at a time," he
says, "and when I do, I focus on it."
