The China Startup Report

An absolutely fantastic presentation, although some of the pages aren't loading for me. As a non-Chinese startup guy who has lived in China for about a decade, my only quibbles with the stuff that loaded:

(1) As much as I love Beijing, Shanghai is better for startups that are in branding or sourcing. Shanghai has a more established local angel and VC network too, but the investment community is not very sophisticated, and even with revenues you won't get a decent valuation. Investors feed copycats because they are cheap to build and the business model is taking them public.

(2) It is not worth raising money in China.

(3) There is no culture of acquisitions and once companies establish a decent business model, the Chinese government usually intervenes in some regulatory fashion. This tilts the field in favor of larger companies and organizations like Baidu or Tencent or Sina, who tend to build-their-own as opposed to partnering.

Nailed it!

Here's a few opinions on startups in China from more than 10 years here:

* Its too difficult to raise capital on something that has no IPO potential, so don't try it in Beijing or Shanghai unless your swinging for the fences. If your not, go to a second tier city. I've recently moved to Chengdu to try my hand at a "smaller" city. I'm living next door to TianFu Software Park. If anyone wants to collaborate in Chengdu, get in touch (see my profile).

* Live in China long enough to develop strong bonds with local Chinese you want to be in business with. I would not attempt a startup in China without either a) very deep pockets or b) a local Chinese partner I trust. I'm married to my partner. As most founders will tell you, your co-founder relationship is like a marriage so choose wisely.

* Company structure - Its very complicated and expensive if you start your corp structure outside of China and eat your way inside. If you have a solid local partner, most of these problems go away. You can form a Chinese company, usually with favorable tax incentives, that you directly own no shares in but has a contract for shares and revenue with your desired non-Chinese entity. This may set off alarms for some as a good way to get ripped off down the line, but there are so many ways to get ripped off, this one isn't worth dwelling on...so choose your co-founders carefully.

* Employees - The cultural barrier is high on this one. I'm hoping that by casting a wider net and treating more of my "employees" as "partners", I may have a fighting chance. A key reason employees don't trust stock options is they have zero friends that have been favorable rewarded with them. Most get ripped off. The best way to show your going to share the wealth is to actually do it! My current plan is to have several small projects, some of them immediate revenue generating, and include a core group as partners in all of them so there's a safety net when one project doesn't pan out. We'll see. Its a new adventure.

Great slides! China is such an interesting opportunity because of how quickly the landscape is shifting there. The growth rates are astronomical. I definitely feel that startups in Silicon Valley, and the west in general, are too narrow-minded. We should be thinking about how we can build global companies, not companies just for our immediate neighbors.

I find it fascinating that web UI design for the Chinese market appears so "cluttered" by SV preferences. I've heard multiple times that usability testing has found this style more effective than the SV style of emphasizing white space.

Does anyone happen to have any such usability test results they'd be willing to share? I don't dispute the results at all; I'm just curious about checking them out. I have a feeling it's more than just "more content on the page is better for usability," and would love to understand better.

thanks for the great insights into the chinese entrepreneur landscape.

i am definitely interested in learning more about the details when and how the government becomes involved in the startup process. the reasons why companies like google and facebook have been denied entry to china (and why the chinese government supports its own versions, baidu and renren) are attributed to the fact that china does not want a US company to have access to the immense trove of data about its citizens (though other countries are ok with that). it is interesting to speculate how the internet and mobile startup culture in china will evolve as the rest of the world continues to innovate also.

I've been working on a startup in Beijing for the past year, and this is a very accurate account of how things work around here.

What's fascinating to me is that despite all the differences, the type of entrepreneur that tend to succeed in China is roughly the same as anywhere else:

"it takes months to incorporate a company, setup VIE structures..." - Yes it's a huge pain in the ass. But real entrepreneurs don't let this stop them. They ask around, get advice, and figure out how get it done anyway.

"awesome 3rd developer services are not available..." - True, but they are also not available to competitors. The good teams figure out what they need most and build it in house. The lack of these services is actually good for you, if you have the best developers.

"It's hard for foreign entrepreneurs to fit in and get trust..." The author of the slides is a "foreigner", but still met up with tons of entrepreneurs(including myself :) and investors on a relatively short trip, simply because he is a fun and interesting person.

To succeed in China, you gotta be relentlessly resourceful, good at building things, and charismatic. Not so different after all, right? : )

There's an error in slide 7, where it lists "other names to know": the Yelp equivalent in china is dianping.com, not diandian (a tumblr clone). Unlike others on the list, dianpian is not a copycat, it's started a year earlier than Yelp.

From these slides, it looks like there is even more of gap between China's 99% and 1% than the US.

Great slides!

I wonder what city has 5 Lamborghini sightings per week...

great stuff! very accurate account of what's happening here in China :)

very interesting to see the sharp contrasts in investing strategies.