How to Successfully Start a Startup in China

The Chinese Market

Around 5 years ago being an entrepreneur and being a startup in China was not looked upon as a positive career path.  Support started to come from the Chinese government to encourage entrepreneurship.  There was a very large wave of new startups that started to come out.  They were primarily focused on O2O businesses which unfortunately has also been one of the biggest declines of VC funding.

One of the biggest failures in China recently have been in the O2O space.  But I think the scale if you look back, if the Chinese startup ecosystem has developed in 5 years, look where it is at today.  If you are starting a business today and developing a product.  You need to be thinking how it might someday work in the Chinese market.  If you don’t, reconsider how you are developing your product.  You need to understand or at least following what is going on in the Chinese market regarding WeChat, Weibo, Baidu, etc.

Get Familiar with WeChat

If you are familiar with WeChat you would understand that it is a bit of a swiss army knife.  A swiss army knife for marketers, consumers, small businesses.  I think it has revolutionized how commerce is done in China.  It has helped usher in a cashless society.  There are cases in China that if you go into a small shop, you can’t actually buy anything if you don’t use WeChat or AliPay.  From a marketers standpoint, I think that it created a pretty large bubble with influencers.  There are a number of money influencers that are using WeChat as a viable business on its own.  But it has given marketers an opportunity to reach Chinese customers in the past that they wouldn’t be able to.  So there is the value being shared on both sides of the platform.  From consumer to the marketer, brands, as well as societal as well.

Challenges

When foreign startups decide to enter the Chinese market.  They need to come in with the right mindset about the Chinese market itself.  If you are coming there to build your product and try to acquire customers the same way you have in the past in other countries.  The cost structure of acquiring customers is going to be very different.  That is even if you have gotten past the localization cost.  As well as being able to find enough users to come on to your platform or your product and use it.  But I think for founders and the management team, working in China presents its own challenges.  Some of these challenges include: talent acquisition, having enough mentors, supporters, and ecosystem around you that are going to be able to help you out when you need it both in advice as well as support. Then I think finding partners will be another challenge.

Succeeding in China

A lot of the businesses that gain success in China quickly is because of Guanxi, it is not a fake term it still exists and it still drives a lot of the investments and deals that are being done.  So because those ecosystems are often not so open, western startups or brands coming from Asia into China need to rely on ecosystems from people from their own country or within their same industry to help them survive.  Unfortunately, the survival rate is very low for startups coming into the China market.  What I’ve noticed the most from startups failures in China was the burnout from the founders and the burn rate of cash, these seem to be the two main things that impact a startups success in China.  To learn more about entering the Chinese market please visit my site here.

Rudy Wimmer
Rudy Wimmer

Since 2008, as the Managing Partner for CBi China Bridge, Rudy is responsible for empowering the organization to reach its full potential, strengthening the ability for the company to deliver beyond expectations. Creating and enabling the culture of China Bridge to drive our clients to “Their Next” through an insight-based approach to innovation and design strategy.

No Comments Yet

Leave a Reply

Your email address will not be published.

STARTUP RADAR 스타트업 레이더, 등록번호: 서울, 아04879

발행인: 주식회사 스타트업 레이더 김동혁 // 편집인: 서해

발행소: 서울 송파구 정의로 8길 13, 6층 (문정동)

발행일자: 2017년 12월 19일 전화번호: 070-4771-5148

청소년보호책임자: 서해