Chinese Startups: How they differ from US | Hacker News Reader

Chinese Startups: How they differ from US

venturebeat.com

53 pointsulugbek9 comments

Nice to see someone addressing the problem of early stage companies in China. As I was reading through the differences in China vs. the US, I was struck by the similarities to Japan as well. People are much more risk-adverse here and having a startup, to put it mildly, is not usually a source of pride, at least until you have serious funding. This also makes it difficult for B2B startups to gain traction.

A friend of mine told me that Japanese companies look for the following in vendors: 1. have they IPO'd? if not then, are they 2. funded by a big VC? and, failing that, have they at least 3. won some award?

It all comes back to a lack of desire to reward innovation despite its obvious risks and wanting to play it safe by requiring external validation.

This can be good, in a way, because it forces entrepreneurs who still decide to operate in this environment figure out the needs of what we in the US would call the "late-majority" on the technology adoption curve (which is also usually about half of the largest part of any given addressable market).

I'm guessing (though only guessing) that some of these things are also true in China. Perhaps it's very different in B2C.

I am not familiar with B2B, but I had the impression that the B2C companies in the area of technology and manufacturing have been mostly founded by high-net worth individuals, and scalability has been a function of enlisting the help of provincial leaders and state-owned banks.

> It’s like Y Combinator

....

> a $115 million fund in order to create five successful Chinese startups a year

The funding levels imply it is less like YC and more like a standard VC. With those numbers -- even assuming 50% overhead, and five years of five startups each -- that's over $2 million per startup. YC starts at $17k to $20k per startup.

$2 million is an astounding amount of money in China. You can get engineers for $10-15K a year, and designers, sales, and marketing people for a lot less. Equipment can be a little more expensive than the U.S., but office space is dramatically cheaper, as is virtually everything else.

I imagine that the high level of funding is to impress the hell out of potential partners and new recruits. For a variety of reasons, many people in China will shy away from a new and risky business. In order to get employees and partners on board, you need to give the impression that you are large, in charge, and not going anywhere.

The problem is that from my experience trying to hire here, it's extremely difficult to find good engineers.... Cheap engineers are dime a dozen, but quite a few I've interviewed can't even do the fizzbuzz test.

And of those that could most were needed a lot of hand holding to do any basic tasks (and some of those were people with 3 years experience, I can't imagine how they could have provided any value to the company they were working for)

I doubt you could get top notch engineers in Beijing for 10-15k without giving up equity. I think if you go work for Microsoft in Beijing, you can make 40-50k. It's really not that astounding - have you seen real estate prices in Beijing?

I think you just proved my point. While Beijing definitely has advantages, there are other places in China where you can do business for a heck of a lot cheaper. An order of magnitude cheaper.

Even in Beijing, you don't have to get a massively expensive office in Wudaokou or the CBD. I'll also guarantee that you can get pretty good Tsinghua and Beida graduates for 15k, although I'll concede that finding talent is one of the top challenges in China.

Microsoft China spends money like it's going out of style. They're not really a good baseline, although they are a magnet for talent because of the big brand name and outsized salaries. You can get in bidding wars with them if you wish, but it's not strictly necessary.

Bottom line is that the only reason to spend that kind of money is to impress the hell out of people. However, that kind of impressiveness is necessary, which is why you almost certainly need such a large investment.

I'd like to say that all these points are valid for India as well particularly the 3rd point about Failure not being an option. I started an ecommerce startup (bad decision) with a friend of mine (again bad decision) whose parents were keep pressuring him to pursue "MBA" instead of doing business. Parents in these societies have lot of say in the future of their children and thus are very apprehensive about risky career options.

Venture Beat should try visiting the links they publish in their articles.

Kai-Fu Lee's Innovation Works is www.innovation-works.com not www.innovationworks.org

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