Calvin is particularly passionate about transforming China into an innovative powerhouse that can unleash its entrepreneurial talent. Calvin shares his views on how China can harness this talent and notes the apparent differences between the US and China start-up environment.
Fail Fast, Grow Faster
I think one key challenge for China is around innovation and appetite for risk, to develop not just risk-tolerance but actual real acceptance for failure. To get to real innovation we need smart, capable people to be comfortable with risk but unfortunately it’s made long standing economic sense for smart, talented people to take safe corporate jobs. Social pressure also plays a part in the Chinese market, if you fail in your start-up; it would have a measurable cost to your career development that it would not have in the US. In Silicon Valley, if you were to apply for a job at Google or Facebook and said you spent the last 12 months on a failed Y-Combinator start-up, it is actually to your credit. But in China, if you were to apply to a large corporation, it would be to your detriment, so one key issue is not only getting potential innovators comfortable with risk and real failure, but fostering an entire corporate culture that is open to taking chances.
Get Comfortable with Risk
Where I think there are opportunities, is for people like myself and my partners who have the ability to accelerate innovation. We can help and support the founders to become more comfortable with failure, and not only measuring them on the results of the trial, but the process itself and the learning accomplished during this process.
Unfortunately in China, because the market is so competitive, we find that people judge the 2,000 Groupon clones by who’s got results, and not who’s learning and growing. If I am risk averse with my capital and willing to pay a higher valuation on the company that is most successful, yes I should wait for results. But if I’m looking to activate real innovation, then I need to build capacity in the entrepreneurs and not just pick the horse that has already won. So part of that is around acceptance of the possibility failure and conveying skills and learnings that entrepreneurs around the world are sharing very freely now, like customer development and concepts around minimal viable product that can help companies avoid or mitigate these challenges of starting up.
For example if we look at start-up X, success is not predicated on executing a plan or vision they had from day 1. Rather, their ability to succeed is based more on their ability to pivot, be nimble and modify what they are offering to the market so they find a true market fit. On a portfolio basis across the whole market, it’s not easy to pick start-up X. I think we can help build start-up X’s while more risk averse investors don’t even bother. They wait until startup X is at a later stage and just pay a premium.
I believe there is a huge amount of entrepreneurial talent that is being under-utilized and under-appreciated. If I could take the most talented teams from that tier, with the right amount of coaching and support, I could not only build the next Facebook, but the first Facebook, leading to a set of outcomes much more rewarding in terms of overall ecosystem of innovation and start-ups in China. Just as PayPal did in the US, this kind of company is also more likely to spawn generations of start-ups where the middle managers and product managers could go on and build billion dollar companies of their own.
Be Light and Nimble
Another challenge in China is that companies have a “when in doubt, throw more bodies at it” approach as well as a cultural bias in the market place that a start-up with 30 people is better than a start-up with 3 people. I think that is a problem for companies that are still searching for product market fit. If you are executing on a clear market vision based on an existing model than it should be all about speed of execution, when you’re not thinking about product changes, iterating or learning from the market means having more people is better because you’re just building to spec. But, if you are company that is still looking for product market fit, having 30 people is actually a drag. It doesn’t enable you to pivot to where the real market opportunity is. It slows things down, and more people means more communication, more bureaucracy, and more overhead in any kind of change. Moreover, the basis for hiring these 30 people when you have plan A in mind is challenged when market drivers indicate you need to switch to plan B. The entire set of skills, experience, competency, and buy-in of your current staff is geared toward plan A, and shifting a large group to plan B might not be possible. There are lots of famous cases that are based on having a small team, such as Odeo transforming into Twitter, which had a very small team.
Factors of Silicon Valley’s Success
One of the main cultural factors for the success of Silicon Valley is an anti-establishment or contrarian perspective. There is a disproportionate amount of the populous which is very left or very right, such as the stereotypical Berkeley hippies or libertarians, or Peter Thiel and much of the PayPal mafia. It is accepted that people do not fit into establishment models, power dynamics or entirely respect authority. This skews attitudes towards always finding a work-around to non-traditional, non-conventional ways of doing things, people are willing to try different things because they think of things differently. It’s like that Robert Kennedy quote about asking why not. In China, education or knowledge transmission is different. There is a teacher in the classroom that conveys uncontestable knowledge. This has been great for the high social status of education and teachers, but less than ideal for fostering the people able to challenge and innovate.
If you look at what has made Silicon Valley such a centre for innovation, there are several key components. One is the academic strength of Stanford and Berkeley – nearby institutions of higher learning endowed with great funding and talent, as well as a centre for significant hard science and R&D. Stanford, in particular, enjoyed early support from the US military (Steve Blank’s secret war of silicon valley), hence directing a significant amount of research into electronics which can, for instance, be tapped to become the basis for a start-up eco-system.
Other determinants of innovative environments are shaped by the amount of early stage capital, political and cultural contexts, even the degree of liveability. Do these factors converge in China? Sure, you can find the best technological facilities and academic institutions. But as far as the desirability of lifestyle in Beijing and the cultural willingness to think outside the box go, let’s just say they are part of the challenges facing the Beijing startup ecosystem’s development.
Calvin’s call for China to become more innovative and suggestions for how it gets there, are very interesting and definitely challenge the status quo. I also agree there is a need for China to move up the value chain and create more, rather than just be the cheap manufacturer for the world. If you feel inspired to innovate and learn from the seasoned entrepreneur himself, please contact Calvin at @calvinwuchin.