When in Doubt, Copy

Sing, “If You Can Make it There, You’ll Make it Anywhere”…

…and Other Learnings from Entrepreneurs in…

China.

A story shared by Isabelle Roughol, International editor at LinkedIn.

A few weeks before markets crashed and the word China came to be systematically juxtaposed with “crisis,” “devaluation” or “slowdown,” I went on a study tour of Beijing, Shanghai and Hangzhou. The picture our group was presented with was quite different: a booming economy where opportunities abound if only you could sustain the pressure. You’d expect the people we met – tech executives, entrepreneurs and venture capitalists – to be upbeat about the economy. They live in a world where success depends largely on believing you’ll succeed. But it’s also true that as much as China’s slowdown is real, the growth rate it does experience – 7% in dubious official data, 6.3% according to economists’ consensus – would be the envy of any US or European government. There are real entrepreneurs creating things at a speed that boggles the mind. Here are a few things they taught us.

When in doubt, copy.

Our study group met with Baidu, Xiaomi, Alibaba, Tencent and more. Nothing has felt entirely original or unseen in Silicon Valley. In fact, a fun game to play is to mix and match Chinese companies with their US inspiration: Alibaba is the Amazon of China, Baidu is Google, Xiaomi is Apple, Didi Kuaidi is Uber, Sina Weibo is Twitter, Renren is Facebook… It’s called the C2C, or Copy to China, model.

Some companies go so far as to copy US sites to the pixel. Exhibit A: Jianshu is (nearly) Medium. But that model is on its way out: the biggest companies may have been inspired by US counterparts, but they quickly morphed to better fit the particular Chinese market. The failure to adapt to local idiosyncrasies is one reason, though by no means the only one, why so many US companies (Google, ebay, Amazon…) failed to make their mark in China. It’d be a gross underestimation of Chinese entrepreneurs to think they can only copy. And why reinvent the wheel? First you catch up, then you pass. They’ve done all this in a decade or so. Where will they be in 2025?

You don’t know what fast means. The Chinese market is so insanely competitive, if you haven’t implemented your idea within a couple months of having it, someone else has. One entrepreneur we met was developing 20 apps – 40 really if you count the iOS and Android versions – and has already created, piloted and ultimately killed another 20. When we talked, one B2B app he built was just a few months old and on track for $15 million revenue this year.

The pressure matches the opportunity: Six-day workweeks seem to be common, not just for founders but for employees as well, and I suspect a few must have laughed at the outrage following the Amazon work culture piece in the New York Times several weeks ago. Remember that? Par for the course here. Which is why I say, if you can make it there, you’ll make it anywhere.

You know nothing about scale either. You don’t build an app for a couple million users; you start with a couple million users. One app with 300,000 active users was casually referred to as “a pilot.” Tencent acquired up to 200 million (!) mobile payment users during Chinese New Year by building a digital version of the traditional red envelopes. China is one of two, maybe three, self-contained Internet markets. Everywhere else, you have to build international in from day 1 if you hope to appreciate and experience scale.

In China – the other two would be the US and India – the domestic market will keep you busy a while. One sight really brought this home: looking down on the city from the Shanghai World Financial Center, I had in my sights more living souls than in all of Australia.

Your users may be here today, gone tomorrow. Over and over again, we were told that Chinese users are sophisticated, pragmatic and open to new things. Even older users will send stickers on WeChat or sell their wares on Alibaba. (Caveat: we visited urban China and the Chinese people we met were very much the 1%. There are three Chinas: the international metros like Shanghai and Shenzhen, the tier 2 and tier 3 cities home to the manufacturing masses (Nanning), and rural China.) There is little friction to trying something new – and little friction to leaving one app for the next best thing. To succeed, you must be hot, new and in front.

You can never throw too many people at a problem. While showing us around Baidu, our host sheepishly admitted the company only started with 70 employees. When a Tencent app isn’t really popular anymore, they don’t kill it – they keep two people on staff to maintain the app until it dies its own slow natural death. Everyone’s eyes – especially the product managers’ – in the room widened: do you know what we would do for two more headcounts on our products?

This may not last much longer though: a Shanghai venture capitalist told us the war for talent is heating up. Wage inflation is high, and so is turnover. (The economic slowdown may temper this.) A developer here already costs half of what they do in Silicon Valley: cheaper sure, but not cheap enough to hire blindly.

Nothing’s so different as it looks. If you’re an older tech company, you’re wondering how to move your desktop business to be more mobile and social without compromising your legacy revenue lines. If you’re an upstart app, you’re rushing to capture more of the market before your competitor does. And if you’re in the transport business, Uber is your biggest nightmare. Ha! Different language, same problems.

Do you have experience building tech companies in China? What else would you point out to an entrepreneur moving into the Chinese market?

With thanks to all our Chinese hosts for organizing a fantastic trip and to the many colleagues who helped me put together my thoughts and let me read their notes.

This article was first featured in Entrepreneurship, International Trade & Development, Summer 2015.

Alastair
MaxCo Advisors
December 15th, 2015

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