Having recruited a team of ten, we completed our MVP by July 2016 and full prototype by October. In the same month, we were introduced to Yixia Technology, the US$3 billion market leader in short videos and live streaming in China, who ended up acquiring us by the end of November. Those eight months from March to November were a roller coaster ride filled with pitfalls and near-crashes but ended on a high note. As China’s tech world may seem distant and mysterious to many in the West, I hope to share some of the lessons I picked up from my journey thus far as a tech founder in China.
- Foreign/non-Chinese founders are severely handicapped. The U.S. may welcome foreign founders with open arms, but this isn’t the case in China. Firstly, foreigners are not allowed to hold shares in Chinese companies and must resort to VIE structures to circumvent this. Secondly, many VCs have unspoken rules against investing in foreign founders. The rationale is that if you did not grow up in China, you won’t know it well enough to play the game, because China is a semi-closed market with its own unique culture, rules and inner-workings. (Spencer and I grew up in Hong Kong, yet even that is considered too “foreign”.) Rare exceptions apart, foreign founders only stand a chance in China if they partner up with locals.
- Opposing takes on UI & UX. Design thinking in the West emphasizes a simple and clean UI delivering a thoughtfully crafted UX that delights users. In China, users value information density because it suggests more functionality, whereas simplicity is often regarded as not doing enough. The more features, the more information, the better — this results in apps that are often visually overwhelming and overly complex. (E.g. Chinese dating app Momo allows the user to find jobs and rent flats without leaving the app.) For these reasons, the UX often suffers. In fact, most Chinese designers aren’t trained to optimize for UX — their job is often just to decorate screens assigned to them by product managers overseeing the wireframes. Under such a boxed framework, no higher up design thinking goes into interactions between pages, screens or buttons, resulting in products that are just purely functional. If you look at the most prominently used email clients in China (e.g. QQ Mail), their interface resembles html pages from the 90's.
- No shame in copying. Expect your product to be copied ferociously by competitors, from nimble startup teams to large incumbent internet companies. China’s internet scene is built upon copying proven products of the West, and there’s no shame in that. VCs actually prefer that. First copy and localize, then innovate. Many hugely successful mobile products in China followed this formula, from WeChat to Didi to live streaming apps. There is cross boarder copying, and then there is local copying. When Instagram copied Snapchat Stories last August, it became quite a scandal in the U.S. In China, taking so long to copy is the scandal.
- Execution is more important than the idea. More so than the idea, execution is what wins you market share in China. After Periscope and Meerkat introduced mobile live streaming to the U.S., clones started to appear in China, giving birth to a new and enormous live streaming economy. And app makers went crazy - at the peak, more than 2,000 live streaming apps competed against each other in China. (Imagine 2,000 Periscopes clones in the U.S…) Even e-commerce and hardware companies started making or integrating live streaming into their apps. With such fierce competition, the original idea becomes totally irrelevant — it all comes down to execution: Can you raise more money than your competitors? Can you secure more partnerships? Can you reach new users faster? Can you serve better content? Yizhibo checked all of those boxes and became one of the eventual winners.
- VCs in China need a monetization plan. When building something cool in the U.S., e.g. a social app, you can get by with “I’ll figure out how to monetize after I get a ton of users.” (E.g. Even Yo got funding.) In China, VCs need to know today how you’re going to make money. They are uncomfortable with the lack of a monetization plan. I believe this has something to do with the contrasting spending cultures: Americans are used to borrowing to spend and paying off their debts later (fund me now and I’ll figure out my cash flow later), where as Chinese people save before they spend (figuring out their cash flow first).
- Get used to fraud. It pains me to say this, but fraud is everywhere in China. Decry it all you want, but you’ve still got to be smart and defend yourself against it. I’ve seen signed contracts being altered with ink erasers. I’ve seen fraudulent resumes. I‘ve seen performance data from apps being magnified by 100x. Protect yourself against being cheated by working with parties who share important mutual connections with you, thus putting their reputations on the line. (And because of this, always network!)
- Harder than you think to get a Chinese user to download a new app.Yes, China has nearly 700 million smart phone users today, but because apps are so multi-functional in China (as I mentioned in point 2 above), and because one can fulfill most of his/her daily needs via WeChat, it’s a lot more difficult than you’d think to persuade someone to download an app just because it’s cool. Chinese consumers need a big reason or incentive to download a new app, and many apps resort to paying actual money (in whatever form) to acquire new users.
- About employees. a) Most employees in China value cash over equity. Equity will not close you the deal. Cash will. b) Manage employees like you manage a production line. Employees need structure, clear deliverables and due dates. They can be brilliant minds, but they aren’t used to working with freedom and flexibility, and don’t expect them to think outside of the box. The Google type of “smart creatives” described by Eric Schmidt are still rare in the tech talent pool in China. c) No such thing as work life balance in China. Tech employees work really, really hard. Overtime is expected. No overtime is a perk.
The saying goes that “0 to 1 happens in Silicon Valley, and 1 to 100 happens in China”. I hope for more 0 to 1 stories from China, and for more “smart creatives” to emerge. It’s exciting times there. I’ve had an amazing experience thus far and will be pushing myself for more.