Today, entering the China market is the holy grail for many global tech companies. It’s a huge market that any business would love to get involved in. However, it’s also challenging market where the players should map out thorough strategies to penetrate it. With China’s internet giants actively scoping overseas markets for the latest technologies, there have been a few success stories, one of which was EyeVerify, which received investment from Qihoo360 last year. With EyeVerify’s team based in Kansas City, the deal was achieved with support from Alliance Development Group (ADG), functioning as their business development team in China.
Founded in 2001, ADG executes strategic China business development, corporate development, and market expansion initiatives for global technology companies, working deeply within the Chinese tech ecosystem. ADG has been around for 14 years in Beijing, helping over 70 companies since its founding in 2002. ADG’s clients vary in size from multinationals with large teams in China to middle market companies to startup solution providers, including market leaders such as PayPal, Nuance and IBM. The first ten years for ADG were mainly focused on helping telecoms companies understand the local market and to set up partnerships with service providers like Huawei. These included clients such as TCS promoting A-GPS platforms, PCTel selling network testing solutions, or Convergys with interactive messaging and voice solutions. In 2011, ADG strategically pivoted to focus on the fast-growing mobile internet sector.
Today ADG worka with hot technology software companies like Fleksy, EyeVerify, OpenMobile, Canonical (Ubuntu Mobile OS) and Graphite Software. These companies are typically looking for strategic distribution partnerships through cooperation with device manufacturers and internet companies, or are looking for strategic investors who can assist them in China or globally. Qihoo’s investment into EyeVerify was a good example of this trend. TechNode interviewed ADG’s General Manager Chris DeAngelis about overseas companies entering China market and his advice to them.
Who are your clients and why can’t they enter the China market themselves?
ADG’s customers primarily come from the U.S., Canada and the UK. Our clients are overseas companies that understand the value we provide and who accept a fee-paying model. Over the years we experimented with success-fee models but learned that if companies are not willing to get the support which is often needed to write a monthly check then they are probably not serious about the market and won’t be prepared when things start moving forward. China is a hard market and we need partners that are willing to invest along side of us. Success in China requires much more than a network or introductions; it requires persistence and a local presence hitting the streets every day. It always shocks us that so many companies will say China is their most critical market yet will assign only a third of one guy to cover China from the other side of the world. Flying in and out rarely leads to any success. We believe our model provides a way where they don’t have to go all in until they can gain real traction.
What is the competitive edge of ADG in helping foreign tech companies enter the China market?
We provide an alternative model for entering the China market that I have never seen elsewhere. For example, you can try hiring a local sales guy to get you started, or maybe you can find an experienced “China hand”, or you can reach out to the accounting or consulting firms. But the fact is, they don’t provide much beyond some basic introductions, some general advice and they definitely can’t provide an experienced team that can hit the ground running, and support your changing needs as you grow. A new company can lose a year just trying to understand Chinese business practices and how to manage the cultural challenges.
Another major difference with ADG is that we recognize that to be successful you need to be Chinese, and that’s why we only have one foreigner on our team in China. Other companies that try to offer similar services to overseas companies are 80% foreign, which means they can communicate effectively with their clients but can’t offer real value on the ground. We have a unique model where we act as part of our clients’ teams but still represent ADG and our own brand. Our model is very hard to execute which is probably why no one else does it. It has taken us years to figure out how to quickly integrate ourselves into effective members of our clients’ teams considering they all have different products, cultures and demands.
On the other hand, what is the current status of China companies going global?
It is happening very quickly and in subtle ways beyond what everyone sees with Alibaba, Tencent and Xiaomi. There are companies like Cheetah Mobile, whose utility apps are already showing real success outside of China. APUS is another impressive company in the launcher space – in six months they gathered 90 million users, with over 90% outside of China. And of course there are the smartphone OEMs that are starting to have success building their own brands outside of China, like ZTE, Huawei, Lenovo, TCL (which is unique in that it sells 90% of their phones outside of China) and OnePlus, which has recently gained a lot of press coverage.
There will be local competition since there are preference for local suppliers that challenges US/global tech companies, what are the strategies to manage it?
In our experience these types of preferences for local products mainly affect big companies that sell products across all market segments and therefore often compete directly with local vendors. This can be difficult. because Chinese customers often don’t need the best in the world and ok is good enough. For us, our clients are typically No.1 or 2 in the world in their product niche. If we offer a product that is the best-in-class and the customers see and need the value, they will buy it. They will still negotiate a tough price but what is lost in price can often be gained in volume.
How do you help US/global tech companies to protect their intellectual property (IP) in China?
This is a somewhat controversial topic. I would say to most smaller companies that if you are afraid your IP will get stolen in China, it means that you probably cannot do business in any part of the world either. The best way to protect yourself is to keep innovating and to choose partners that are concerned about protecting their global reputation. Finding the right partners is critical. There are many companies in China that now understand it is better for them to buy or partner than to waste years trying to do it themselves.
Image Credit: ADG
Editing by Mike Cormack (@bucketoftongues)