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It’s a dream for nearly any international start-ups: Enter China.

The country’s massive population of more than 1.3 billion, of which 730 million are currently connected online, is attractive to almost any enterprise looking to expand and scale. But, China is a big enough market for any local player to redesign a solution that’s localized for its own demographic, making it hard for foreign start-ups to access.

Ninety-nine percent of companies who want to access China as a foreign company, shouldn’t,” said Oscar Ramos, Program Director at Chinacelerator, an accelerator that helps connect startups across China’s borders. The 1 percent that Ramos said might have a chance, need to ask themselves what makes them better than any existing company in China.

Program Director, Chinaccelerator. Oscar Ramos. Photo Courtesy China Accelerator.

Program Director, Chinaccelerator. Oscar Ramos. Photo Courtesy China Accelerator.

Start-ups that do good are very well funded and run and operate extremely fast,” Ramos said of China’s ecosystem. “For a long time Chinese companies have been copying things, they’re very good at doing that.

 

The Chinese user is very different

We’ve seen companies coming to China and adapting to the value proposition to a different type of demographic,” said Ramos. “But afterwards they realized they were more successful in Southeast Asia where they can leverage their acquisition channels that they’re more familiar with.

Platforms like Google and Facebook are common forms of getting new users for many start-ups, both of which are blocked in China.

In fact, an estimated 96% of online traffic in China goes to Chinese servers, according to China Internet Network Information Center.

Challenge all your assumptions,” Ramos said. “Everything that works in other markets, you need to be open to changing.

 

There are opportunities, after all

When it comes to a competitive advantage, there’s several industries growing fast, in which there’s a lack of expertise in China, according to Ramos. This includes health care, education, fashion and food. Not only are they opportunities to enter and scale in China, but Ramos said, being a foreign brand is actually an asset in such industries.

He also adds both augmented and virtual reality are also in demand right now.

 





But it’s a two-way street.

Just as there’s limited cases of any big foreign company successfully getting into China, it’s not often you hear of a Chinese start-up making it big on a global scale. Although, currently, half of the top biggest unicorns are based in China, they may not even need to scale to continue to grow.

“It’s the same problem Chinese companies face when they want to expand internationally. They get used to their local consumer that has a very specific requirement and they’re very different than foreign customers and what they need.[1]

 

Here’s why some start-ups are leaving Silicon Valley

Salvador Dauvergen, a serial entrepreneur from California, bustled around a co-working space in Bali, Indonesia on a Monday morning greeting familiar faces. He was wearing a t-shirt, shorts and flip flops — or as he referred to it, the Bali business suit.

His surrounding is casual, even by entrepreneurial standards, with open-air work spaces overlooking a rice field, hammocks and a room for air conditioning. Outside of the office is a street — filled with inexpensive massage places and fresh smoothie shops — which leads to the Monkey Forest.

Burnt out by Silicon Valley’s lifestyle, Dauvergen recently relocated to Bali to begin his next start-up in the food industry, about which he’s hesitant to offer specifics since he has yet to launch.

I have the same work day in terms of hours, but my stress level is incredibly lower compared to back home,” he said. “I talk to a lot of my friends in the start-up world and tell them this is the new frontier.

Dauvergen said he thinks there is “app fatigue” in the U.S., which is one of many reasons he set his eyes on Southeast Asia for his next venture. While his long-term vision is tapping into Indonesia’s vast 257 million population increasingly coming online, he’s also thinking about the new lifestyle.

Getting to a meeting from Oakland to downtown San Francisco is a lot of stress,” he said. “Everything else there is so much more complex and here life is easier.

The cost of living, deployment, marketing is substantially lower,” he said of Bali. Similar to when he was in California, he still outsources to contractors outside the U.S., but being in Indonesia has an added benefit: He’s now on a similar timezone with many of his developers in Asian countries, he said.

 

It’s not just remote islands to which entrepreneurs are flocking.

After receiving doctorates from Stanford, MQ Wang and Tony Zhang formed tech start-up Zero Zero Robotics, and based the company in Beijing. The company’s flagship product, drone camera HoverCam, is marketed and sold around the world and recently just announced a partnership to sell in Apple stores. While the start-up has an office in Silicon Valley, its headquarters are in Beijing, with more offices in Shenzhen and Hangzhou.

A few years ago, Wang and Zhang likely would have stayed in Silicon Valley — but not today.

Global venture funding was down 23 percent last year, but fell 28 percent in Silicon Valley, according to a report by PwC and CB Insights/MoneyTree.

Meanwhile, the share of unicorns — companies valued at more than $1 billion — located outside the U.S. has gone from 30 percent in 2013 to 58 percent last year.

Still, Silicon Valley obviously maintains an appeal for many would-be entrepreneurs, as it offers deep funding and talent reservoirs that are largely unrivaled. But as people now have unprecedented access to technology and resources from just about anywhere in the globe, that preeminence may be increasingly less important. [2]

 

China Internet Statistics 2017

As of July 2017, there were 751 million internet users in China, a figure which increased by 19.92 million in the first half of this year. China internet penetration rate has reached 54.3%, 1.1 percentage points higher than in 2016.

The number of mobile internet users in China rose by 28.3 million to reach 724 million at the end of the first half of 2017; mobile internet users also accounted for 96.3% of internet users (non-exclusive), up from 95.1% at the end of 2016.

As of June, 2017, internet users made up 26.7% of the population in rural areas, a decline of 0.7 percentage points from the end of 2016; there were a total of 201 million rural internet users. Meanwhile, in urban areas, the percentage rose by 0.7 percentage points to 73.3%, with a total of 550 million users, an increase of 19.88 million.

While rates of internet penetration are rising in both rural and urban areas, the difference in penetration between the two remains high. In rural areas, the internet penetration rate is 34.0%, a full 35.4 percentage points lower than in urban areas.

In terms of network usage among internet users, the urban-rural gap is smallest in instant messaging, where the rural penetration rate is only 2 percentage points lower than urban, but when it comes to business transactions, mobile payments, news, and similar applications, the gap is much higher; food delivery services have the highest gap, at 26.8 percentage points. [3]

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

Smartphones are the top devices for internet access in China in 2016 with over 95% users, followed by desktop computers (60.1%) and laptops (36.8%).

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

China mobile internet users totaled 695 million as of Dec 2016, an increase of 75.5 million from Dec 2015 and 95.1% of total internet users.

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

Beijing, Shanghai, and Guangdong are the top 3 regions in China with the highest internet penetration rates of over 74%.

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

The top 5 categories of internet applications in China are instant messengers, news, search engines, videos, and music.

Chart Courtesy China Internet Watch.

Chart Courtesy China Internet Watch.

Rural areas have 201 million internet users, accounting for 27.4% of all China internet users.

60.1% and 36.8% of China internet users connect to the internet via desktop and laptop respectively; mobile devices 95.1%; tablets 31.5%; and, TV 25%.

Mobile online payment users continued to grow in 2016 and reached 469 million, an increase of 31.2% YoY. The proportion of China internet users making mobile online payment increased to 67.5% in 2016 from 57.7% in 2015. 50.3% of China internet users use mobile devices for payment in offline retail stores.

China internet car-hailing users reached 168 million, an increase of 46.16 million or 37.9% from June 2016.

45.3% of Chinese companies deployed online sales activities; 45.6% online purchase; and, 38.7% online marketing. The number of public listed internet companies in China reached 91 with a total market value of 5.4 trillion yuan. The combined market value of Alibaba and Tencent exceeded 3 trillion yuan in 2016.

 

This Article Curated by Benang Merah Komunikasi’s Editorial team.

We consider to take journalism ethics and contents reposting etiquette seriously, that you can find here about media ethics. We do curation article for our audiences, not for search engine bots. By addressing this growing area of concern we hope reader can be smart to filter and understand between content plagiarism and content curation method.

References Sources:

[1] Taken from Why foreign start-ups fail in China written by Uptin Saiidi for CNBC.

[2] Taken from Here’s why some start-ups are leaving Silicon Valley written by Uptin Saiidi for CNBC.

[3] Taken from Whitepaper: China Internet Statistics 2017 written by China Internet Watch.

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