As the consumer market expands, China is a country capable of both under-serving and over-saturating its tech hungry markets. While eastern city hubs see a slowdown in smartphones and laptops, third tier cities are fast consumers of new services and products. At the same time, China’s regional neighbors Japan and South Korea boast high-speed connections, but smaller populations.
So how do we go about approaching such a complex market? Despite having common ground as global tech hubs, the Chinese ecosystem and Silicon Valley are like night and day. How should investors approach China? How can East Asia learn from Silicon Valley and what does the future of the Asian market look like?
We put these questions to our panelists at our Technode Demoday on September 25th in San Francisco Gary Gong, Executive Vice President of the Institute for Information Industry, Chen Zhao, head of Plug & Play China, and James Jung, CEO of Besuccess shared their ideas on the current status of Asian startups.
Plug and Play China, jointly founded by Sias International University and Amidi Group, helps global companies enter into China expand their businesses in the market. Besuccess is a Korean techblog, helping Korean startups reach out to the global market. Based in Taipei, the Institute for Information Industry is an NGO that promotes industrial applications, R&D, IT professional development as well as market research.
Why should global companies invest in the Asian market?
Chen Zhao: China household’s disposable income and demand for mobile devices is increasing. China’s strong point is in the quick and easy adaptation of social media and e-commerce to the market, which can be observed in from the popular usage of QR code scanning in mobile consumption.
James Jung: Korea is fast in customer service. Thanks to the sophisticated internet infrastructure, Korean customers are accustomed to fast internet speeds. Huge data consuming applications like live streaming music apps or game apps works seamlessly even in the subway. Another characteristic of Korean users is that they are willing to pay online. Korea’s in-app purchase rate is one of the highest in the world. However, as they have very high standards for products or services, it is crucial to set detailed strategies for product, customer service and marketing in order to survive.
What aspects of the Silicon Valley ecosystem do you want to adapt to your countries?
Chen Zhao: In China, conglomerates and government are supporting startups, and angel investors are increasing. However, the problem of China’s ecosystem is that big companies try to copy startup’s ideas, adapt it with their technology and know-how. Silicon Valley is different, however, when they see a new and innovate service and product, they are willing to acquire the product and the team.
James Jung: Korea has Chaebols, or the country’s family-run conglomerates. Big corporates like Samsung, LG and the Korean government are now launching a number of accelerator programs to support startups, but still we’re lack of big success stories. It’s because Korean startups tend to heavily depend on the Korean government or a conglomerate’s grants, rather than creating a new ecosystem by themselves. Silicon Valley tries to build a business that stands by itself. The Korean startup ecosystem needs Silicon Valley’s independence.
What does a Silicon Valley startup need to prepare when entering into Asian market?
Chen Zhao: There are two ways to enter China market. First, cooperate with big companies. As a startup and a big company establish a joint venture company, the startup can work with the big corporate’s local team, which can eliminate potential risk factors in cultural differences. Second, hire a country manager to run the subsidiary in China. Currently, Uber and Airbnb are running their business that way in China. It’s important to give the authority to a subsidiary in China so that it can run the company independently.
James Jung: Strategies vary with the size of the company. If it’s a small sized company, it’s important to find a person who understands Korean culture and services, since it involves promotion, events and online marketing strategies. If it’s a big company, you’d better find an influential partner. Uber had to partly withdraw business in South Korea, because there had been strong opposition from taxi driver’s union and government. So companies should find a partner who can respond adequately to these restrictions and talk to decision makers in government, for those restrictions and laws hugely depend on the government official decisions.
What are the emerging trends in Asian startups these days?
Gary Gong: In Taiwan, many young students jumped into startups, and now we see more and more R&D centers and task forces running. The entrepreneurial visa was implemented in Taiwan in July, to let foreign entrepreneurs stay in Taiwan for their business. Now about 60 million USD sized government funds are supporting tech startups, and there are now many startup hubs to help founders make their prototypes.
James Jung: 60% of Korean startups are now offering on-demand and O2O services. Examples include food ordering service Baedal Minjok, real estate information service Jigbang and more. Along with this, Virtual Reality is showing high growth in the area. The industry trend in Korea is not so different from that of Silicon Valley’s. I believe there will be more and more concierge services that are based on Artificial Intelligence.
Chen Zhao: Chinese startups distinguish themselves in IoT, distribution, logistics, fintech, travel, healthcare and media. Chinese startup show the differences in trends in different locations. Beijing is strong in O2O, as you can see from on-demand massage, healthcare and car washing services. Shanghai is highly developed in finance, and there is a lot of business-related software. Now famous for being manufacturing hub for hardware startups all over the world, Shenzhen is an IoT hub for connected-homes and the connected-car industry.
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