Why China Is The Place To Build An Internet Startup For The Future: Chinaccelerator Managing Director

This post is part of our series Say Hello To China’s Expat-preneurs, where we will talk to a mix of foreign founders and tech veterans who have tackled China’s growing tech space and won. Stay tuned over the coming three weeks as we talk to foreign founders from Beijing to Shenzhen about what it takes to thrive in China. You can follow our updates at @technodechina, or check back here for new stories in the series.

China is notoriously difficult for foreign companies and entrepreneurs to penetrate due to culture and language hurdles. However, the market is becoming increasingly attractive for expat-entrepreneurs thanks to growing local innovation ecosystems. Some of the foreigner entrepreneurs are still weighing the pros and cons of starting a business in the country, William Bao Bean, the managing director of Chinaccelerator, believes that China is the to-go place to build a successful internet startup for the future.

William’s approach to China doesn’t resemble the “import and adapt” strategy attempted by global internet giants like Facebook, Google and Yahoo. Instead of introducing established foreign companies to Chinese market, William believes the key is inviting the innovation process to China. He joined Chinaccelerator, a global venture accelerator based in Shanghai, which helps entrepreneurial teams coming from all parts of the world to take advantage of proximity to the Chinese market.

While China is infamous for copycats, William pointed out that China is also the largest mobile first and mobile only market in the world. There are 649 million internet users in China, and a consumer’s first internet experience is often mobile instead of PC, especially in rural areas.

“Their internet experience is different form someone in Europe and the U.S., so the requirements and the user experience has to be different.”

As a US-born Chinese, William first came to China 20 years ago to improve his language. He started his career as an equity research analyst and then as a technology investment analyst, working for investment institutions like Softbank China & India Holdings and Singtel Innov8, successively. William then joined SOS Ventures, a US$235m accelerator focused venture capital fund, and became the managing director of Chinaccelerator, China’s early-stage startup accelerator.

Three Generations Of China Startups

As a startup and tech veteran who closely witnessed the development China’s internet market during the past decades, William shared his insights on evolution of Chinese internet companies overtime.

The first generation of China internet companies start very small and it takes them a long time to grow. These firms want to build very big companies, whenever something new came up they will build a mini company inside to build that, whether be mobile chat, video, mobile games, typical 1.0 companies are BAT, which build mini companies attacking every different part of the market.

That’s very different from the U.S. and Europe, where internet companies focus on one sector and try to be the best at it. Chinese companies start by focusing and solving one problem, but over time they start to attack all the problems, as a result it is not startup friendly for big companies to compete with small ones. U.S. entrepreneurs will leave their startup for a while and start a new start or become an angel investor or both. Whereas the CEOs of Chinese internet companies continue to run company and invest in startups within their company.

The second generation of Chinese startups emerged six to seven years ago. Instead of building an empire of everything, they are solving specific problems, going after specific verticals, while facing tough competition from the first generation. With good execution power, some of them managed to went public.

China’s third generation startups solve new problems unlike first and second generation companies which address rather simple questions. Third gen startups not only provides a base platform services, but to solve individual consumer problem.

For the first and second-gen startups, they just have to show up and perform better than someone else and they will be the vertical winner. But it is rather difficult for third-gen startups to survive the tough competition. When everybody has money, it is more difficult to find talent, you need to differentiate not only a good product, but also a good team, not only just co-founders but also members, so company culture becomes more important, which is not such a big deal in the past. Team identity became more important in third-gen startups.

Leadership of Chinese vs US Founders

US startups have a strong sense of team identity and culture that is created not only by CEO but everybody in the team, whereas in Chinese companies it’s more about the personal identity and culture of the CEO. But company culture and identity will be more and more important for Chinese startups in the new erafor maintaining staff.

In general, there are two types of CEOs in Chinese startups: godmother CEOs who take care of you, and you look up them, they are generous kind people who lead you and employees follow them; and godfather CEO, a criminal boss who leads through fear, people follow the CEO because they are afraid of him of her. “I hope that Chinese entrepreneurs could learn a third style.” he said.

Building a Company with Lean Startup Approach

“I guess the biggest problems that foreigners have when they come to China is that they think their way is right and other people’s way is wrong, and it important to understand there’s more than one way to do things”, said William. A lot of international companies and entrepreneurs come to China, they think they have the solution while in fact the market does not like their solution.

“If one is to succeed in China, the lean startup approach is very important. When you identify a problem, you come up an solution, then you test it in the market, you let the market to validate your idea.”

“In the US, we have three steps in firing at your goals, getting ready is your strategy, aiming-tactics, firing-execution. China places more importance on execution. Their method is running around and see what you hit. Don’t spend all your times on your tactics.”

Quick Questions

What do you love about China?

Best thing about China is people. China is not one people, one country, but different people with different identities from many cities and even cultures. The internet has allowed that diversity to come out over the last decade. Most foreigner’s don’t think Chinese people have huge amount of freedom, but the fact is that they do have the freedom to be who they want to be.

What’s your personal motto?

My motto is to help people. My job is to focus on very early-stage companies and try to be as helpful as I can. My ability to work in China is based on reputation for being someone who works really hard to helps entrepreneurs get from start to traction. When a company becomes big I am less helpful, because they will have a different set of problems that I don’t have the skill set to help. But in the very early days, I can can help a company to get their strategies right, and get their execution down and to grow, and get the product to market fit.

Image credit: Chinaccelerator, ShutterStock