Photo: AP/Sang Tan
Entrepreneur Bowei Gai sold his last company, a mobile business-card reading app called CardMunch, to LinkedIn earlier this year. Since then, he’s been able to pursue some of his other interests.Like the Chinese startup scene.
Here’s his presentation about what he learned→
Last month, Gai visited China to research the startup scene and culture. He wanted to see if there might be any good opportunities there for Silicon Valley entrepreneurs and investors.
Last night he posted a presentation of his findings, titled The China Startup Report, on Slideshare. It quickly became the second most popular presentation on the site. He gave us permission to post it here as well.
His takeaway: entering the Chinese market is like starting your first company. For instance…
- Competition is insane. In the U.S. a good idea might spawn a few imitators. In China, there’s almost no limit. rumour has it there are as many as 5,000 Groupon clones and at least 100 different Android stores. Tactics can be vicious, including buying negative reviews about competitors and outright theft of intellectual property.
- Chinese users have a completely different baseline of experience. In China, some Internet users have never even SEEN an email message because they’ve spent their whole life on QQ Messenger, the most popular IM network.
- Setting up a company is a “nightmare.” If you’re a foreign company and want to raise U.S. funds, you have to set up a chain of subsidiaries in different countries to get the funding to flow right, get an Internet Control licence from the government, and set up trusts for any employee you want to grant stock options.
- Technically, startups there are way behind. There are few reliable cloud infrastructure services like Amazon Web Services, Heroku, or Google Apps — you have to host everything yourself — and developers are a generation behind on technology.
- Startups spend a lot of money on office space. Most Chinese tech workers still prefer working for a big company, and prefer working for cash over equity. So if startups don’t have a big beautiful office, potential hires will assume their prospects are dim and won’t come to work for them. Home offices and loading docks are out of the question.
- Ugly Web sites perform better. Most Chinese Web sites look ugly and crowded by Western standards, but testing suggests that these sites drive better conversion and clickthrough rates than the slick and clean Web 2.0 sites favoured in the U.S.
- Angel investors from outside don’t have a chance. Nobody trusts anybody outside their immediate circle, and there’s already plenty of money flowing around from Chinese sources. The only way to succeed is to immerse yourself in the culture.
With all that in mind, Gai said it’s still worth checking out the Chinese startup scene. But you should know (or learn) the language, focus your visit on Beijing (which has about 10x as many startups as the second-biggest scene in Shanghai), and leave your American arrogance behind.