Launching In China? Plan + People
By Lei Xu, Xoogler & Entrepreneur
Editor’s note: Could a new people-centric operating paradigm help tech startups not only succeed in China but also redefine globalization itself?
This Summer, I spent months traveling across China to understand what it takes to start a tech company there.
By talking to friends, founders, and investors I learned about the state of the industry but also what the future hails. In this post, I’ve summarized three of the key questions to ask if you’re ready to embark on that adventure in China. It centers on why focusing on the people-part of your business is a critical component to making it a success.
Before we get there though, I think it’s important here’s a short prelude that will answer one question you should be asking by now…
Why Launch in China?
China is capturing the curiosity and attention of many business leaders.
The country, with a current domestic market of 1.4 billion people and bourgeoning middle class, is also set to be home to the world’s largest economy by 2029.
Its tech hubs, including Beijing, Shenzhen, Shanghai and Hangzhou, are powering an economy that’s now the world’s second largest after the US and accounted for half of the top ten global VC financings in Q3 2017.
Any list of the world’s biggest tech companies already includes a roster of Chinese names. Even Mark Zuckerberg is learning Mandarin!
Getting back to our topic in hand, if you’re ready to launch in China, here are three reasons why I think the people-factor matters in your decision-making:
1. Think Like A Jedi…Commit
When I heard the founder of Airbnb and Uber talk about their China strategy, one thing stood out. A half-hearted attempt to enter the market doesn’t work. It’s either the number one priority this year, or it shouldn’t be done. Focus.
As you start to hone your strategy, first clarify your commitment. China isn’t the realm of the “plug-n-play” solution.
Second, make sure to include people in your plans. In particular, don’t underestimate the huge differences between Chinese and Western culture. That extends to people’s tech habits, internet usage and beyond.
A good product manager — and by extension any business lead intent on cracking the Chinese market— needs to understand the psyche and motivation of their users. So what if the user is nothing like you? It pays to spend time immersing yourself and your team in the culture of your target users too. Hone a targeted strategy designed just for this market.
Factor in the time it takes to do that. From talking to dozens of expat founders in Beijing and Shanghai, I found the median time to truly blend in and think like a local is about 18 months. It doesn’t pay to rush your launch.
A classic example of this is MSN Messenger… It was the early 2000s and MSN Messenger was a formidable force battling Chinese upstart QQ by Tencent, a precursor to WeChat. To make history short, QQ won with distinction. Not because Microsoft lacked the talent but because every proposal by the local Chinese product team had to be approved by Seattle, which preferred global consistency to building features tailored to Chinese users. QQ had none of that handicap. The result was a product Chinese at its core.
A China strategy that’s not a top company-wide strategic priority is handicapped from day one.
2. Hone Your People Localization Strategy
While many startups pay attention to their product localization strategy, in my experience very few spend time thinking about the repercussions of not localizing their people too.
The chances are, your China strategy requires a local team. However few US-based startups transplant their specialist teams to Beijing from day one. Why?
Some founders I spoke to found large-distances typically had a corrosive impact on trust between colleagues. Several friends mentioned the difficulties of partnering with cofounders and other key team members while being separated by an ocean. Their team, its dynamic and culture was to some extent dependent on localization too. Technology or no, subconsciously physical separation mattered.
That granted, while keeping a team close at hand seemed like good business sense, ultimately the startups I spoke with found they started to suffer by not factoring in people. The main reason: cultural norms differ, even in business. For example, while coffee chats may get the deal done in the US, it may be hotpot followed by playing Hold’em in China.
Knowing this from the outset- — and having a strategy in place that thinks about people — will save lost opportunities in the long-run.
I’ve found that Chinese founders and investors care about personal relationship much more than their American counterparts.
The cultural norms of doing business are simply different. In China there’s a saying, “we only do business with friends.” People mean it.
So where to start? First, your local team needs to actually be local. Next they need autonomy.
China moves at a perhaps unsustainably fast speed today, think “9/9/7” or to translate: 9am-9pm, 7 days a week.
That office can’t wait for a micromanaging headquarters to catch-up. That office will need your trust and respect to act autonomously.
Otherwise small differences of opinion, cultural norms getting lost in translation or a late localization strategy can hamper your growth and maybe the success of your startup altogether.
3. Bake Culture-Fit Into Your Product
Something very cool is happening. We’re moving away from the singular model of, broadly speaking, “sell an American product/service to Chinese customers” and hope it sticks.
The next generation of startups are considering the cultural use case for their products and services with a global audience in mind — before they launch.
Why? It’s a no-brainer; the more homegrown a product or service feels, the likelier the success.
I recently met founders redefining what it means to expand to, or work with, China as a tech company. Here are the ones that stood out to me.
- VIPKID (Beijing) — connect Chinese kids who want to learn English with US-based teachers using video-based tutoring session;
- Musical.ly (Shanghai)— social network app for music videos, popular with teens in US and Europe;
- Wish (San Francisco)— retail Chinese products direct to US and European consumers;
- Strikingly (Shanghai) — web, mobile and WeChat page builder for US and Chinese businesses;
- Castbox (Beijing)— popular podcast app in the US;
- VeeR VR (Beijing) — app for 360º videos, popular in Europe;
- DJI (Shenzen)— a leader in consumer drones.
To summarize, it’s an exciting time to do business (the right way) in or with China. Tech startups looking to boost their chances of success are shifting to a new operating model focused on building a truly global company — and product — in the process. That entails thinking about people and their culture as much as product. Who knows what this new age of multicultural tech startups can yield?
Lei Xu is a Xoogler.co community host and former YC founder, with a passion for product, operations, and data.
He is currently exploring product opportunities covering SF<>Beijing, as well as consulting for startups.
