SULP speakers: Have a China strategy!

By the end of the Startup Launchpad Spring 2018 conference, startup founders were walking away largely with a singular message that could be summed by a quote from Brinc CEO Manav Gupta on the first day: “It’s China’s century and we are living in it.”

The claim is a bit dramatic, of course. We are thankfully not living in a unipolar world of technology and innovation. If anything, innovation has been democratized, which is evidenced by the very international crowd drawn to Startup Launchpad. Innovative ideas in tech are coming from all over the world these days.

The point about China is well taken, though. Startups must understand China’s startup ecosystem these days just as they must understand Silicon Valley’s. For foreign startups, this means having some connection to the Pearl River Delta region, also known as the Greater Bay Area under an initiative to connect Guangdong cities (including Shenzhen and Guangzhou) with Macau and Hong Kong.

While many Chinese startups are based in Beijing and Shanghai, Guangdong is where the manufacturing happens. Shenzhen’s border with Hong Kong has been especially convenient for foreign companies looking to take advantage of Mainland China’s supply chain resources and Hong Kong’s international ports and capital.

Things continue to change fast both in the tech industry and in China. The speakers and panelists at SULP had many interesting things to say on these topics, but here are five important lessons to take away from the conference:

Startups will want to be involved in the Greater Bay Area in Southeast China in some way

China’s Greater Bay Area Initiative brings together 11 cities in the country’s southeast region. China’s Guangdong province already plays a pivotal role in global manufacturing. Any hardware startup that’s serious about staying competitive is already involved in Guangdong in some way. Soon, though, it won’t just be hardware startups.

The combination of Guangdong, Hong Kong and Macau means the region will soon play an outsized role in many areas. In addition to advanced manufacturing, the region will be an important player in innovation, trade and finance by 2030.

Brinc CEO Manav Gupta noted the innovation that’s already happening in China. The country already has nearly as many unicorns as the U.S. It won’t be long before China surpasses the U.S.

Many people around the world are already enjoying the fruits of Guangdong’s innovative labor. Shenzhen’s DJI is the world’s biggest drone company. Gupta also pointed to Makeblock, GJS Robot and Bear Electric Appliance as innovative companies that have seen impressive growth recently.

It’s not just Guangdong, though. TechNode founder Gang Lu mentioned the grit of the Camera360 founders, none of whom speak English. The Chengdu-based company has 3 million users because the founders were aggressive by jumping into the market and developing their product as they went along.

Companies across China are also utilizing new technologies to challenge traditional retail models, as China marketer and author Ashley Dudarenok explained at the conference. The mobile payments boom in China is now well-understood, but emerging trends like the use of RFID and augmented reality in retail settings aren’t talked about as much.

These latest tech trends tend to emerge in China’s first-tier cities before expanding. This means Shenzhen, where many of China’s AR companies are based, is an early beneficiary of all this new innovation.

China’s biggest supply chain advantage today is not cost, it’s speed

During a panel discussion on the first day of the conference, HAX managing director Duncan Turner told the audience that cost efficiency no longer applies in China. The real advantage is speed efficiency, which shouldn’t be underestimated. Speed is critical when it comes to innovation and staying competitive.

Any company that doesn’t have a China strategy is missing half the problem, Duncan said. Alan Cuddihy from PCH International had a similar message. Regardless of where a startup is based, companies need to understand and interact with this part of the world.

This includes understandingly how rapidly products are assembled and deployed in China. Shenzhen is especially famous for its iterative innovation, in which companies copy and build on top of others’ ideas so quickly that intellectual property almost becomes irrelevant.

This isn’t an argument for foregoing patents, which are important for any startup. Patents won’t sustain early growth, though. That will come from understanding both how to leverage China’s supply chain velocity and how to compete with all the startups in China doing the same.

Increasing diversity can help startups avoid costly mistakes

The Women in Tech panel took on the responsibility of promoting diversity. While the panel primarily focused on the issues facing women in the tech industry, the panelists pointed out that diversity of all types is important to keep a company healthy. Having a product designed for one specific type of person is severely limiting for a company.

Taiwan Startup Stadium general manager Holly Harrington noted that many of the automated tags for her photos uploaded online work well for most of the white people in her photos but rarely for the Taiwanese people. There are multiple examples of how modern consumer technology has failed to properly serve people who aren’t white and male, something that would likely be addressed early on in a product’s development when a more diverse staff is working on the project. These mistakes can be costly when revealed publicly through consumer complaints, as was the case with Google Photos a few years ago.

The panelists were careful not to rely on stereotypes that paint women one way with a singular set of skills that can advantage a company. However, they did draw on research that suggests women generally have high emotional intelligence and are more cautious risk-takers.

Having more women at the top does have real advantages. One analysis from the Peterson Institute for International Economics concluded that firms with 30 percent female leadership were as much as 15 percent more profitable than those without any female leadership.

The specific reasons for why this might be the case today may never be known. By definition, generalizations about people are always wrong, so they have no business being involved in hiring decisions. Seeking diversity, though, is both morally and financially a good move. Startups should be thinking about this early on.

Don’t get distracted by the tech; tell people why they need the product

The genius of Apple has always been that they’ve been good at convincing consumers they need Apple products without going head-to-head with competitors over tech specifications. Most iPhone users probably don’t know what kind of hardware their smartphones are packing because they don’t have to.

In a panel discussion of entrepreneurs who all graduated from the Thunderbird School of Global Management, the speakers emphasized this point. Matt Frary, founder of SmarterChaos.com, told attendees to focus on the value of the product. Dollar Shave Club grew by promising consumers cheaper, easier and better quality razors. It was a simple message that made the company hugely successful, eventually leading to a $1 billion acquisition by Unilever.

Before marketing, though, startups need to understand the market and whether they’re solving a real need. Listen to early users to know if the product is something people like and if it can be improved. Also do research to avoid marketing blunders like one Ibtikar Fund co-founder Ambar Amleh caught.

Amleh recounted a story of a company that helped women in the Middle East discreetly shop for lingerie, something they’re apprehensive about doing in public. The company unfortunately used an Arabic word for bra that in Saudi Arabia is used to refer to suicide vests. These things can be easily tested and corrected, Amleh said.

Blockchain is a powerful protocol, and innovators have only scratched the surface

Blockchain is a relatively young technology. The full potential of the protocol hasn’t even begun to be realized. FundersToken CEO Jack Chu likened blockchain to TCP/IP. In the early days of the protocol, before the World Wide Web existed, no one realized what it could become. Now it powers how people communicate with all their favorite websites and apps, powering an entire digital economy.

Blockchain’s usefulness lies in its tamper-proof ledger that helps establish trust between parties that don’t know each other. The importance of this technology is clear, but entrepreneurs haven’t had time to create disruptive innovations around the technology yet. The future will no doubt see many surprising uses of blockchain that will prove incredibly useful for businesses and consumers alike.

One use advocated by FinFabrik CEO Alex Medana is the tokenization of real assets. This means people can link a digital blockchain token to a physical asset like a home and allow anyone to track its ownership history. With the right regulations in place, this can upend the way certain assets are bought and sold, eliminating the need for middlemen who exist solely to verify the integrity of a sale.

Skepticism about blockchain isn’t derailing the technology, either. VeeShop founder Wendy Wang noted that while Bitcoin trading recently became illegal in China, blockchain development is not. Many startups in China want to be involved with this technology. The Chinese government likely acknowledges the potential here and doesn’t want to completely hamper this innovation within its borders.

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