With the Beijing Olympicscurrently taking place, what better time to explore the role that China can play for today’s growth companies. If you saw the opening ceremonies - with its 15,000 perfectly choreographed performers - then you have seen just one small demonstration of what this nation of 1.5B people is capable of.
When we think of target markets, especially for new technologies, we always think of the U.S. first. Given that the U.S. is home to Silicon Valley, NASDAQ, most of the Fortune 500 and holds more VCs than any other country this makes sense. But, things are changing. Consider this:
- 1 out of every 5 people on our Planet live in China
- With broadband penetration in the low teens in China, it still has more people online than in the US (which has > 75% penetration)
Despite some social and political issues, China is a massive economic force that is impacting every industry - including tech. If you’re a Google, eBay or Facebook, consider the changes in your market when Chinese broadband penetration rates reach US levels. What will happen when Chinese internet users have free and unrestricted access to online content and games?
More importantly, what will happen once China tech turns its sites abroad? Currently, most of the activity is within China. There is a huge tech industry there with solid VC & private equity backing and credible public markets. You don’t hear too much about it outside of China. But make no mistake, at some point these companies, in their quest for growth, will look abroad. Are we ready?
In two of my five VC-backed startups, I have been exposed to this market. At Mobivox, we even raised VC$ from IDG Ventures China - a great fund that has backed some of China’s leading Internet companies including Baidu (Chinese search), Myspace China, and many others.
Here are my suggestions on how to build your China strategy:
Wait: The time to enter China is not when you’re barely off the ground in your local markets. Startups have too many things to do in order to become “real”, self-sustaining companies. It’s all about focus. However, after you have good revenue momentum, a solid product, solid financial backing and experienced leadership - you’re ready to consider foreign markets.
Learn: This market does not behave like others. You need to learn from people who have gone before you. There are lots of great books on the subject. Find books, people, anything that can give you war stories.
Get help: While I was working on our China entry strategy at Mobivox, I contacted a friend at Export Development Corp of Canada. As you might guess from its name this organization helps Canadian businesses enter foreign markets. I was quickly put in touch with a Canadian who had spent 6 years working in China, spoke fluent Mandarin and had great suggestions and contacts.
Prepare locally: Before hopping on a plane, join a local China networking organization. You see these in most cities. They are designed to help local entrepreneurs meet people and organizations from China.
Architecture: Design your architecture from day 1 to make it easy to localize for foreign markets. Friendster did this and this is likely the main reason they got funding recently. Architecture is core and internal, but in terms of localizing the application that sits on top of it, you can leverage experienced partners such as Welocalize. We used them at Mobivox and it was a good, efficient experience.
Be patient: This is especially important if you are in a regulated industry such as telecommunications. You can’t just open shop and expect users and revenue to follow. You need to understand the landscape and role of government approval in your business.
Commit: Finally, entering any foreign market, especially one in Asia, requires serious commitment. First, you need to commit money. You will need a country manager with the right connections and experience. Second, you will need to commit senior head office management attention. The CEO and other senior execs are expected to show their commitment to this market by being there. In China, Japan, and other Asian countries, partnerships are formed at the top. The CEO must build long-term, personal relationships with key partners.
So, what role does China play in your business? If you don’t think it does, I advise you to think again. Maybe not today, but if you hope to build a market leader in your space, sooner or later, you will need a China strategy.
P.S.
If you want to learn more about online China - check out this presentation.