At the Venture Capital panel at ChinaBang, Calvin Chin of Transist, Andy Tsao of Silicon Valley Bank, Harry Man of Matrix Partners, and Akio Tanaka of Infinity Ventures enlightened us on two of the hottest things in tech — China and Games.
Domestic monetization for startups is noticeably difficult, despite China being a potentially huge revenue generating market, with a mere 1/6 of US users being able to spend as much as all of US. However, overshadowed by the Tencent empire, independent startups face a number of marketing and economies of scale related obstacles that hinder their adoption.
We’re “seeing many portfolio companies building mobile games and mobile applications that are based out of China but can generate 80-90% of revenue internationally,” says Andy.
Rekoo is a Beijing-based game company with most revenue heeding form Japan, apparently with many other companies sharing the same business model. According to Tanaka, China is advantaged by “better teams than Japanese developers” and years of experience from subcontracting firms such as Facebook.
While some companies are investing heavily in a potentially profitable market, Rekoo is profiting from the same business model as their manufacturing counterparts. Back in 2009 when social games were popularizing in Japan, Tanaka explored investments in both Chinese and Japanese social game developers. Before deciding where to put his money, Tanaka asked himself, “If it’s easier to generate revenue in Japan, then why don’t we take a Chinese team and make money in Japan? It doesn’t always work, but there are instances where it can.”
Is this a sustainable business model? Using foreign cash to build a company with Chinese characteristics is not as easy as ABCs.
“People build what they think will get funded,” says Tanaka, and in China this translates to copying successful foreign business models. It’s important to remember to localize.