Why do we attend so many business events and meet-ups? While the idea of a startup might be based on beginning a business online and hoping to see exponential growth by attracting millions of internet users to their product, we know that it’s human-to-human connections that actually make things happen and these are done offline. So why do we need to make connections, and how do we make meaningful connections? At Slush Shanghai 2017, held on October 13th, panelists from China and Hong Kong gathered to share their experience on connecting startup ecosystems.
The panelists were:
Eric L. Schmidt, co-founder and CEO at EventBank, who hails from US and founded China Entrepreneurs in 2003, a network of more than 20,000 business professionals in China
Carman Chan, managing partner at Click Ventures, who originates from Hong Kong and founded Click Ventures in 2015
Tony Verb, co-founder and managing partner at GreaterBay Ventures & Advisors, was born in Hungary and is currently based in Hong Kong helping the integration of different cities in Guangdong province and innovative companies to succeed across Asia
Started in Finland in 2008,the startup conference Slush attracted 3,000 attendees at Slush Shanghai 2017. Here’s an edited transcript of the panel on connecting startup ecosystems.
Why do we need to make connections? What’s the best outcome of such connections?
Eric: The first thing about connecting ecosystems is they need to grow the business and make revenue. In order to grow the business, rather than raising capital, finding new clients or working out how to get into new markets, they need new access to the market and having connections is most important to that.
Tony: Defining the term “ecosystem” is important. When you break it down and if we are a bit abstract, all human beings are separate ecosystems. What happens if two human beings connect in an open-minded and meaningful way? A baby is born. It might sound funny, but it’s an important analogy. When two companies meet, new solutions, new value, and money will be ultimately created between them. The same thing happens but on a higher level. If we are talking about startup ecosystems and cities, the same magic happens with the right people, right companies, right governments connecting in a dedicated and an open-minded way.
Carman, you have portfolio companies in US, China, Hong Kong, and South Korea. How do you connect these startups?
Carman: Portfolio companies need to expand to overseas markets and ecosystem connections are important for that. Startups need to expand to different cities within the first 1-3 years, and some startups get international clients from day one. But when they expand to a different city, they need to hire local employees and make a different team to solve the problem.
I connect the portfolio companies that have synergy together. I have a US portfolio company that does influential marketing in many countries except China. I have another influential network company in China in my portfolio, so I connected them to create international network. Another way, we have a company from Hong Kong that’s having difficulty hiring a local developer in Hong Kong, so they expanded to Taiwan to find the developer there. I had six portfolio companies who just expanded to Taiwan, so I connected them to share the information.
Eric, back in 2003, how did you connect Chinese and non-Chinese communties?
Eric: The challenge we saw early on was that the foreign community in China was not connected. In Beijing, there really wasn’t any ecosystem at all, until 2005 or 2006 when China saw a huge growth of people wanting to be an entrepreneur. Ten years ago, when we wanted to do an event in Shanghai, there really wasn’t any ecosystem, no incubator nor accelerator. There was nothing. But then, the investors were all traveling to Beijing weekly, and there was a push by the government to encourage the growth of the ecosystem to create more jobs for young people.
Tony, you have connected to governments in Nairobi and Bahrain. How do you do this?
Tony: As all governments are different in nature, you should connect to them in different ways. Let’s define the term “connection” first. It always happens between human beings. Every single good connection needs relevance and synergy between human beings. We need to create value for governments, local institutions, and citizens. Then, a government will be interested in a proposition, and then internalize the given value for their companies, and citizens—the society. To open a project or apply for government grants or any kind of support, you will need to build personal relationships with them. Only with a conversation can things start happening informally or formally between individuals, companies, and even governments.
Carman:We are also well connected to government, and we are approached by different countries, like South Korea, Taiwan, Canada, Israel, and France. A lot of startups expand globally within the very early stage, within the first 1-2 years. And the governments are in competition to find and attract the best talent and startups to their country. So they are trying to provide resources. They set up certain departments, and handle the work permits, and provide supporting grants for startups expanding to their countries. So you have to look for what kind of support they can provide you before you expand to overseas countries. Many years ago, only big companies could expand to other countries. Now startups can go to different countries and get support from the government.
Eric: Companies need to scale to succeed. So, unless they are in the US or in China, they can’t really approach $100 million in one single market. Let’s take a startup in Hong Kong or Singapore for example, they immediately have to cross borders to get to $100 million. One of the major challenges in Asia is that government to government interaction is not enough. China’s cybersecurity creates challenges for organizations going into China, and Chinese companies expanding to Asia. It’s doubling their costs. Same goes for Malaysian companies going to Indonesia. There are challenges because governments are not connecting the ecosystems, that are trying to align with those regulations. The governments actually create more challenges for these startups.
Tony: The government has such power and such a toolbox in their hands to help and block the ecosystems to connect properly. They have such a responsibility to be connected and connect.
What are the elements to make meaningful connections? Time, money?
Carman: Sincerity is important. Recently, I was interviewed by LinkedIn about how to get connected globally. This is a hot topic because its possible to go global now with very little resources. Everybody is much more internationally connected than ten years ago. There is competition for attention from your network. My suggestion is that you need to be sincere. This is the most important thing to win more attention from your network. Everybody makes more than 1,000 connections, and if you are not sincere, people won’t remember you.
Tony: My keyword is “trust”. No trust without sincerity. Trust comes with time. Trust comes from sincerity. It’s also the relevance. you need to be relevant in the relationship.
How would you advise a person who just arrived in China and wants to start a startup?
Eric: Going to any market, you have to first learn about the market. If you haven’t figured out the landscape, you can’t go to a new market. That homework should be done first and really evaluate the strategy. You need a partner, a reseller, and a market strategy. You cannot expect that the cashflow will be positive overnight so you need to be patient and invest for the long term. You have to know that if you’re moving from a smaller market to a bigger market, there are a lot of challenges.
Carman: I have more than 1,000 invitations in the queue all the time and a lot of people sending me a message. Usually, they do research before they contact me. They know who is active and who is doing what in the market. When they contact me they introduce who they are, what they have done, why they want to connect to me. Do the homework, before you connect, then connect with some people first. I’ve seen few people being successful just by doing that. One kid from the US created a first venture fund to invest in university students. In the first year, he connected with 100 universities in the US. In the second year, he connected investors and active people in Hong Kong. You always have a good idea, so do your homework. It’s about conversion rate. If you send out 100 messages, and you have 5 replies, it’s 5% conversion. It’s already a very good start.