Kai-Fu Lee Leaving Google to Start Chinese Venture Fund

The Wall Street Journal, with others following in quick succession, reported earlier today that Kai-Fu Lee, president of Google Inc.’s China operations, is resigning from the company after struggling unsuccessfully to get Google to the top of the search mountain in China.

Although Google is the web-search leader in most geographic markets, it ranks a distant second to Baidu in China. In 2005, Google plucked Kai-Fu Lee from Microsoft to head its Chinese operations. His mandate was to take Google to the top of the Chinese search charts. Although he had some success in helping Google close ground and establish improved relations with the Chinese authorities, he probably didn’t achieve as much as he or Google anticipated.

When Google extracted Kai-Fu Lee from Microsoft, litigious animosity ensued, with Microsoft filing suit, Google parrying the thrust, and the two companies eventually coming to a settlement, terms of which were not disclosed.

Many believe that Kai-Fu Lee’s defection from Microsoft was the trigger for Microsoft CEO Steve Ballmer’s chair-throwing meltdown. That’s not true, though the tantrum came to light as a result of the legal fracas between Google and Microsoft. In actuality, Ballmer went into his splenetic, furniture-vandalizing frenzy when Mark Lucovsky, then a distinguished engineer at Microsoft, informed Ballmer that he was leaving Microsoft for Google.

In addition to throwing a chair, Ballmer vented his anger at Google in a potty-mouthed, gangster-movie rant worthy of Martin Scorsese treatment:

“Fucking Eric Schmidt is a fucking pussy. I’m going to fucking bury that guy, I have done it before, and I will do it again. I’m going to fucking kill Google.” ….

How does one kill a company, exactly? Ballmer might want to ask the Nortel board of directors for advice on that one, but I digress and need desperately to get back on track.

So, now that Kai-Fu Lee is leaving Google, it’s logical and reasonable to wonder why he’s leaving and where he’s going.

Lee answered the first question, regarding why he’s leaving Google, as follows:

“With a very strong leadership team in place, it seemed a very good moment for me to move to the next chapter in my career.”

Okay, taken at face value, that indicates his motivation had more to do with the appeal of his next venture than with any problems Google might be experiencing. So, what’s that next venture?

Those who had been briefed on Lee’s next move disclosed that he would be running a venture capital firm that would invest in startup companies launched by Chinese entrepreneurs. That seems to have been confirmed in subsequent reports.

I can understand the move. It’s probably an aspiration that Lee has nurtured for some time, waiting for the right opportunity to pursue it. The timing is right, especially now that the Chinese government is fully committed to growing a consumer economy that will lessen its dependence on tapped-out American consumers.

There’s no doubt the Chinese authorities will be more supportive of Lee’s new venture than of his role leading Google’s China operation.

2 responses to “Kai-Fu Lee Leaving Google to Start Chinese Venture Fund

  1. None of the analysis I’ve seen of the “Kai-Fu Lee leaves Google” story points out the obvious: he received a very sizable grant of stock options when he joined Google in 2005, and that grant vested over 4 years. The 4 years is now complete, Kai-Fu Lee is a much wealthier than he was before, and now there’s not much motivation to stick around at Google because he won’t be seeing that kind of money from Google ever again.

    Why none of the pundits who discuss this story have pointed this out just indicates the sorry state of punditry. The timing of Kai-Fu leaving has everything to do with a 4-year vesting schedule and little to do with anything going on at Google.

    • The vesting of Kai-Fu’s stock options is an interesting piece of the puzzle. I think it’s valuable information, and I’m pleased you brought it forward.

      That said, can it be his sole reason for leaving, having nothing to do with Google? Let’s consider. His options may have vested, but options vest for employees and executives all the time, and those individuals often choose to remain with their employers. After all, they can qualify for future bonuses, additional options, and they can receive improved compensation if they are valued by their employers. From everything I’ve seen, Kai-Fu was valued by Google. There’s every reason to believe Google would have attempted to keep him in the field if given the chance.

      That means Kai-Fu Lee left Google not just because his options vested and he was able to cash out on his original employment agreement. Perhaps, as you say, he might not have seen that sort of wealth from Google again. I’m not sure that’s entirely true, but it’s possible.

      Even so, past is past, and Kai-Fu clearly was looking ahead. In making his decision to take his act elsewhere, he was comparing the appeal of staying at Google with the attraction of starting his own investment fund/incubator. Without knowing the details of his remuneration at his new job or what Google might have paid him to stay, we cannot say with absolute certainty that he definitely will make more money in the next few years with his incubator than he could have made with Google. That might be true, might not.

      What seem incontrovertible is that he found the overall appeal of the new venture more attractive than remaining in his role at Google. Was his decision entirely about which option offered more money over the next four or five years? I don’t know. It’s possible, but the available evidence doesn’t necessarily support that extrapolation to the exclusion of all others. No matter what he decided, he already was and remains a relatively wealthy man. I’m sure his retirement fund is in good shape.

      The only thing we can conclude with certainty is that the appeal of the new job, for him, outweighed the appeal of remaining with Google.

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