The best place in China for foreign companies to start would be in Shanghai. But Shanghai hardly represents China. On many levels from a market standpoint and the way businesses are operated. One good thing about Shanghai for the Chinese market is that there are a lot of international brands there. So a lot of the accelerators and VCs work with corporations to help find deal flow. They help to make introductions to startups. Therefore they can work with the brands there, hopefully, give them an innovative edge as well. Then from there, they have a greater opportunity for success or even be acquired.
Get a founder that has worked in China
The startups that have a greater success in China that are multinational/international companies often have at least one founder who has worked in China for a period of time. They are able to help them understand the culture. Also they help with relationships and help to have the networking capabilities. But then also it gives them a little bit more stability to build on and to pivot from. More so than just coming in very fresh. Uber is an interesting case of a company that didn’t exist in China. They came in and had many challenges in regards to staffing, finding the right leadership, making the right moves and then being able to keep up with their spending and acquisition of drivers. I think if they could do it over again they would choose a different path. Actually, they may be very happy they exited China.
Take localization very seriously
I have seen multiple companies that have come into China that have been pushed by their investors to go to the China market for higher evaluations. That is a very big problem. On the localization side, Airbnb recently also had a pretty big challenge. They did a renaming and rebranding campaign, but they actually got the Chinese name wrong. That is a very little thing but it turned into a very big problem for them. So, therefore, take localization very seriously. Take the business model very seriously. Business models need to be interpreted for the Chinese market more so than being directly translated. You don’t have the same channels, you don’t have the same partners, you don’t have the same resource acquisition. China is very different so your business model might not work so doing a pilot in China may help.