Dr. Gang Lu is the Founder & Chief-Editor of TechNode.com (formerly known as MOBINODE.com), independent Asia/China Internet business observer and adviser, known speaker, Open concept/technology Evangelist, co-founder of OpenWeb.Asia Workgroup and co-founder of kuukie.com.
Gang: I started a blog at the end of 2006 and it was called MOBINODE. At that time, I was doing my PhD on Mobile and Wireless Network, studying in the UK. I had the chance to meet with the CrunchUK editor, and decided to start blogging about Techcrunch China as a hobby.
Early 2007, I joined a French company called NetWise, as the business director. There, I got the chance to meet with many local entrepreneurs, and media personnel and discussed about the difficulty of finding Chinese speakers regarding Internet Services for our International Conferences. While there was a tremendous interest in the huge market potential for China, there weren’t too many experts largely due to the language barrier. If so, most of the discussion fell onto the censorship problem and government intrusions. And if we were talking about Chinese startups, the focus became discussing about the copycat model. It was hard to find discussions about the real local startup scenes and that’s why I began blogging about it in English to really spread awareness.
It’s interesting because you have to understand the culture behind it. During the end of 2008, I moved back to China to partner up with some friends who co-published my blog posts into Chinese, which were then cited by several Chinese media portals. I realized with the accelerating tech startup communities in China, there need to be an independent tech media. And what became a hobby, now became TechNode.
Gary: In terms of talking about censorships and copycats, I received a lot of these referenced when reading articles about Tech China in the US. And that seem to become what the West’s perception of how Chinese startup scene is. I tried to think of it another way, that there is just a lot of learning going on, and learning about how to best fit and adapt as well as application onto specific culture.
So are there places like Silicon Valley in China? Where are these places? And what is the Chinese government’s role in entrepreneurship in China?
Gang: With long gross startups, Beijing’s Zongguancun area, Shanghai, and Guangzhou would be the Tier One tech hubs in China. Hangzhou and Shangdong would be the Tier Two cities, where the local government provides incentives and offers policies for these science parks to encourage young entrepreneurs to set up companies there. Many incubators, government officials, and angel investors are trying to help these young aspiring entrepreneurs.
When I visited US’s Silicon Valley, its much different atmosphere in terms of startups and entrepreneurs’ way of feeling. Most of these Chinese startup founders are very stressed largely due to lack of options in exit strategies. For example, US startups either become a big player or they can be acquired. In China, however, it’s difficult for startups to be acquired by major companies because if the bigger players find your technology to have potential, they would begin building their own version to compete.
Gary: Do you think this would change, or do you think this would be the pattern going forward?
Gang: It is starting to change, unfortunately not so soon. Everyone is part of this tech ecosystem, thus it’s very difficult to initiate change. It would have to begin with the bigger and more successful companies as well as the spirit of the young entrepreneurs. But the situation is still not so good.
Gary: How is the tech entrepreneurial spirit in China and is it being promoted throughout the universities?
Gang: Yeah, the government is really encouraging the graduates to set up their own businesses. However the government does not have enough experience to guide them along except by providing cheap and affordable office spaces in these tech hubs. And especially young startups really need the mentorship from experienced professionals to learn how to build their business and grow fast.
Gary: What kind of ideas is stemming from the Chinese entrepreneurs? What is your outlook into the future of Chinese tech startups?
Gang: Most of theses startups are still eager to copy the American models. While running our annual
startup award, we try to find the most innovative startup. But the reality is, most of the startups are voted by local users, and more than 80% of these startups, you can find a similar model in Silicon Valley.
How to tell a Silicon Valley startup is famous around the world? Just count how many copycats there are in the world.
Gary: Yeah Haha like there are 500 Groupon clones globally. They work in a more local, niche, or cultural specific market. Even though there are a lot of clones in China, you can start to see the difference. If you compare Facebook to RenRen, regular users can tell tiny features are not the same. And with that you can tell there are a little innovations going on and how it’s being applied to the Chinese culture.
In America, we use iTunes regularly; while in China, it’s mostly a streaming and downloading music market. There were a few Americans that try to replicate the iTunes business model in China and they were unsuccessful.
Gang: It depends on how you define innovation. If looking local entrepreneurs, you can definitely find micro-innovations. While the framework is copied, there are different strategies being implemented on the marketing and business development side. There is awareness on the local user experience and how they interact with the tech products.
A good example would be Weibo with 140 Chinese characters (or words). And it is doing much better than Twitter because there are some better features. The tweet messages and comments become similar to a thread, like a conversation; a feature offered since the very beginning of Weibo. This plays to the Chinese user experience because we are very acquainted with BBS (bulletin board systems), forums and discussion boards.
Gary: Many famous Chinese authors are utilizing Weibo as their storyboard platform.
Gang: That’s because with the Chinese language, 140 characters (or words) can express much more.
Gary: Yeah, definitely much more expressive such as in Chinese poetries and Chinese expressions, which ultimately lengthens the substance of the message. And this cannot be done so easily in Twitter with 140 English characters.
Gary: Greater China Business’s mission is to promote US businesses to enter the Chinese market. One way would be using ecommerce platforms to promote their product oversea. Maybe you can talk to us about the ecommerce platform in China?
Gang: Not just the younger generation are using Taobao ecommerce platform and Alipay, a PayPal service. People over age of 40 and 50 are being more familiar with this ecommerce market. And it is growing really fast.
If looking at B2C platforms like 360buy or Dangdang.com, the biggest issue is that it’s not a very sustainable business model even though there’s a huge volume of transactions. This is due to the highly competitiveness structure of the local market. While these B2C operators do offer discounts, it’s still not a very healthy return.
Many startups are primarily working on more social ecommerce, and online-to-offline model. Social ecommerce would be recommendations from the online communities. Online-to-offline model would be providing coupons and/or location-based recommendations.
Gary: There seems to be a lot of startups in the consumer mobile applications, are there any investments being made in the enterprise application market such as IaaS (Infrastructure-as-a-Service), PaaS (Platform-as-a-Service), or SaaS (Software-as-a-Service)?
Gang: No, there aren’t many enterprise applications yet because the Internet is still considered more entertainment-centric in China. Maybe the younger generation are starting to use services such as Dropbox or cloud storage, which is still more of a niche market or for-geeky’s. Majority of the companies are still not familiar with the SaaS model. It is still a freemium driven culture thus it’s harder to reel in pay customers.
There is definitely a potential for it. The Internet is still relatively young in China and it’s a learning curve. It is beginning to change and evolve, such as some users are starting to be more willing to purchasing copyrights contents online.
Gang: Pony Ma has had reference to me the difficulty in starting a Tech Startup now as oppose to 10 years ago. It’s a totally different story. While there is more funding for startups now, the competition is even much tougher than before.
To be successful, the two factors I believe would be the execution and having a great team. It really requires a having great team, who believes in and executes the founder’s vision.
The local startups are reading more and more Western media such as Techcrunch everyday. And they understand the values behind these ideas and aspiring to the same.