Is the Asia Pacific region (APAC) really the next Silicon Valley? What does it offer tech entrepreneurs from Europe? What do you need to set up a business in China? How do you crack a language barrier? What are the rules of the game? If these are questions that keep you from looking at China as a market, we might give you a helping hand. Jan Smejkal, the Startup Grind Community Director China & APAC, shared his answers at the Startup Grind’s Prague event.
He candidly spoke about the ground realities of setting up a business in China, breaking the walls of communication, exploring an absolutely fresh market and even applying for funding there. We have jotted down for you the essence of the one hour chat.
Jan, originally from Czech Republic, lives in Shenzhen, China, and runs his own online business. He also helps with the launch of a venture for Rocket Internet in two markets. He is passionate about entrepreneurs and startups and is building one of the largest startup communities in APAC through the Startup Grind events.
The answers were edited for clarity and comprehension. This story is brought to you in cooperation with the Startup Grind Prague.
China has a high middle class population of over 200 million people with a willingness to spend and has one of the largest e-commerce markets. The education sector is big in China as well. “Parents will even reduce eating in order to pay for the education of their kids,” says Jan. And, of course, gaming. People in China are totally into gaming with Tencent being the largest gaming company. “China is also a huge market for blockchain and Bitcoin.”
China has its own solutions and applications that are not used in other parts of the world. In the western countries, we use probably five apps to do all our business. “In China, they have just WeChat – a social media platform used to send files, order a cab, pay money to someone, and much more.” You cannot use Facebook, LinkedIn or Google. WeChat is a closed ecosystem, someone needs to invite you to be a part of it. “If you attend an event in China and exchange business cards, no one will use them to contact you. Who wants to connect, will do so on WeChat. People are addicted to mobile phones and want to buy and try new things.”
Thanks to the huge population, there are loads of data available which makes algorithms for all the technology solutions work much better. China invests a lot in AI and develops things much faster compared to the west. This is because of the government support and the money being pumped into startups. Jan explains: “China has one of the largest VC funds with about 300 billion USD being poured into entrepreneurship. According to their latest five year plan, the government wants to support entrepreneurs with innovative ideas.” That can be a great sign for entrepreneurs thinking about exploring China as a market.
Jan believes that in China, they want to get the best talent and technologies to either adapt them to their needs or learn from them to create their own smart cities. “It really depends on who you are, what kind of company you have and what you want to do. There are different competitions that you can apply for. You can pitch in China and if you win, you get some money to start or you can set up a company almost for free! They will help you with everything in the setting up process.”
Different cities provide different opportunities. It’s best to know your business well and choose the city accordingly, because one cannot switch the city easily. “For instance, if you win a competition in Shenzhen, you cannot set up a company in Beijing as it’s a different government, with different kind of funds and they compete with each other as well!”
Shanghai is an international city with expats and foreign companies, thus making life easy at the beginning. “In contrast, Shenzhen is a new city for manufacturing units, very close to Hong Kong. If you are a hardware startup, Shenzhen is the city for you.” Beijing is a startup city with good universities, thus most of the good talent is located in there. For the financial industry or blockchain, one has to travel to Shanghai, the financial hub.
Mandarin language can pose challenges for foreign startups. “You don’t need to speak the language, but business can take place only when people trust you. To build this trust, you need someone to help you make the initial introduction with the locals,” says Jan. The best way to do this is to find a partner in China who is proficient in the area of your business. A partner who speaks the language can explain the idea in simple terms to the locals and is of great help. Building good long term relationships does take a while but is worth it.
Although working, living or setting up business in China seems challenging, it is definitely not impossible. If you have in mind expansion to the Chinese market, listen to the complete fire side chat with Jan Smejkal:
Photos: Startup Grind Prague.