Entrepreneurial Combat in China
Every week I speak to some of the most brilliant minds building, investing in or analysing the near future. I will be publishing notes from these conversations regularly. To stay in touch for good, sign up to my email newsletter.
I was lucky to speak with Kai-Fu Le, a Chinese startup-investor and globally-recognised expert in AI, on entrepreneurship, and AI in China.
China is home to 82 of the world’s tech unicorns, companies which have reached $1bn in value or more. The market is exploding with technology firms like Bytedance, SenseTime and iFlytek growing rapidly to approach the scale of Tencent and Alibaba, which between them are worth close to $1 trillion.
Going light vs. going heavy: Some of the largest US-based companies, including Instagram, Groupon and Uber take light-weight approach to growing their business. Chinese companies, such as DiDi, take a heavy-weight approach, offering not only point A to point B transportation, but also car leasing and loans, drivers insurance, gas stations and car repair. This can create much deeper and more valuable businesses. As an example, China’s PinDuoDuo, a coupon site which has a “going heavy” model, is valued at about $30bn. Groupon, its “light” American peer is valued at $2bn. Kai-Fu added:
From an American’s perspective, it seems like you’re not focused. But from a [Chinese] perspective, this is how you build barriers of entry.
Gladiatorial mentality: Relentless focus on domination is deeply seated in Chinese values and culture. In the Ming dynasty, for example, the founding emperor, Hongwu, was known for saying: “Build high walls, stock up rations, and don’t be too quick to call yourself a king”. The ambition, desire to strategize, and think multiple steps ahead are part of the Chinese business practice.
Then [aspiring entrepreneurs] see role models like Jack Ma who was not this top school graduate but he still made it to the top. It really gives everybody hope that entrepreneurship is the future.
The government’s lead: Chinese government has played a substantial role in accelerating progress in entrepreneurship. To further depict government’s power to move things forward, Kai-Fu took me back to Beijing of ten years ago, when the government decided China would be the world’s leader in high speed rails. With billions of dollars invested in the railway network of more than 37,000km, with speeds between 250–350km/h, China today by far leads globally with its most extensive high speed railway network. When it comes to entrepreneurship, Kai-Fu trusts that a national initiative to accelerate entrepreneurial spirit has led to changing the perception of entrepreneurs across the country:
The massive entrepreneurism and innovation campaign that started about four years ago, has led to about 7,000 incubators and accelerators throughout China. While not all the incubators have been successful, it has led to a change in mentality from the previous risk-adverse mentality.
Join me next week for the second part of this discussion with Kai-Fu Lee. If you want to skip ahead and listen to the discussion, you can find it on iTunes, Spotify, Overcast, Breakeror Stitcher.
And in the meantime, take a second to reflect: what do you find most interesting about the Chinese approach to entrepreneurship? I’d love to hear your thoughts.
