Silicon Valley’s mantra to move fast and break things is spreading to tech startups around the globe. Perhaps nowhere is that more evident than in China, where competition is fierce and the scale of potential users is huge.
While “breaking things” may be part of the creative process, the chaos—and opportunity—of China should be navigated carefully in a startup’s early stages.
Here are three tips to help expat startup CEOs test their ideas in the increasingly complex Chinese market.
Beta Test your Product with Expats for Quick Feedback
As expats, it’s relatively easy to relate to the trials and tribulations of other expats. Expat communities are often empathetic to the challenges of working in a foreign place, and can be more willing to help out a fellow expat in need.
“In cities like Beijing and Shanghai, you can simply walk into popular expat cafes and ask for 10 minutes of their time to try your prototype and get valuable feedback,” says Guan Wang, CEO of Amanda Chinese Learning, a company that develops mobile apps for Chinese learners around the world. The company has six full-time employees and is based in Shanghai, China.
The Amanda Chinese team working in Shanghai. PHOTO: Guan Wang
Your ultimate target audience, however, is probably the mainland market. While expats are a great initial community to target for quick feedback, make sure that you are also talking to local users as well.
Use WeChat 0700.HK -0.93% for Mobile Marketing
Millions of Chinese use mobile-messaging platform WeChat (also known as Weixin). Similar to WhatsApp, WeChat’s user base has grown to roughly 500 million monthly users since 2011.
For a startup, WeChat can be a great tool to connect with users: Companies can create official accounts and promote their services through targeted ads and community engagement. Nike NKE -4.99%, for instance, used WeChat to create a training regimen for runners. Followers could share their training goals, which would be used as data to make a custom training schedule. Using location-based services and WeChat’s interface for ease of sharing, Nike created a unique social and interactive experience.
WeChat’s monthly active users, as compiled by Tech in Asia. (*= Tencent, owner of WeChat, re-evaluated the way it calculates monthly active users for WeChat in Q4 2013.) CHART: Tech In Asia
WeChat is a particularly valuable testing ground for expat startup CEOs because it has been adopted enthusiastically both by expats and locals in China. Brent Deverman, founder of ShenzhenParty.com, asserts that “WeChat is the fastest growing social media platform for ShenzhenParty.com—we are seeing 7% monthly growth on our ‘Shenzhenparty’ account, with an even demographic split between Chinese and expat followers. It’s become the primary communication and marketing channel for our audience.”
ShenzhenParty.com is a platform for solving the life problems of English speakers living in Shenzhen, China. In 2014 it helped more than 600,000 people find information about Shenzhen. Around 1% of these users have become followers on their WeChat account.
Startup Founders Can Lower Operating Costs in Second-Tier Cities
While startups in first-tier cities such as Shanghai and Beijing may grab headlines, there are many exciting ventures being built in second-tier cities such as Chengdu, a city of some 14 million people in west China.
While raising capital may be more challenging, second-tier cities are ideal destinations for early-stage startups to test their products. Once you gain some early traction, you can quickly make the decision about whether to continue operating or relocate.
A company based in a second-tier city might have an easier time retaining talent as well.
“By basing yourself in a second-tier city, you are eliminating the need for talented employees to live in a congested and polluted first-tier city, while also significantly lowering your overhead costs,” says Michael Michelini, cofounder of Unchained Apps, a Hong Kong company that produces a series of mobile apps, including Chinese learning (WCC Dictionary), task management (TaskLabels) and social media (Social Agent).
Michael Michelini (front right) at Startup Weekend in Xiamen, China. PHOTO: Michael Michelini
Second-tier cities also have a lower cost of living and are attractive to startup founders because they may face far less competition in their industry. Some companies and employees also enjoy the slower pace of life in second-tier cities. In general, these cities can have a more relaxed atmosphere, which can be particularly important to potential employees who were born and raised there.
Attracting and retaining top talent is notoriously difficult in China, so eliminating some of the deterrents helps. “Startups in China are seeing talented individuals flock to Silicon Valley or take safe six-figure salaries at corporate tech companies,” notes Jack Chen, vice president at J&J Capital, a Taipei-based family fund that focuses on early-stage angel investments, late-stage pre-IPO investments and strategic partnerships. J&J Capital has 15 employees with offices in Shanghai, Singapore, Taichung, and Taipei.
Michael Park is the founder and CEO of LipSync, an on-demand translation startup, currently in beta-testing, based in Hong Kong and San Francisco. Article by Michael Park for Bbj.com