A generation ago, well-known Internet and tech giants with global ambitions tried to break into the Chinese market but often failed.
Those attempts have been well-documented, but conditions change when a country like China goes through its own mobile revolution.
Fast-forward to 2015, and times have changed drastically. Today, startups around the world have a real chance to break into China, no matter how global financial markets are behaving.
That generational change is a big deal — in a world where startups are judged by how fast they grow — even as they approach an IPO — the allure of the world’s largest market should draw the attention of the most ambitious founders worldwide.
Context To China’s Entrepreneurial Wave
Let’s briefly examine why and how things have changed for startups looking at China.
First, any companies listed on the Chinese stock exchanges are old-economy companies, many of which are state-owned enterprises with no “web” DNA.
Second, Chinese “native web” companies listed on exchanges in the U.S. and Hong Kong, such as Alibaba, Baidu, and Tencent, are all growing fiercely (despite recent market gyrations).
Third, out of the 1.3 billion population, over 600M have smartphones and over 700M have broadband access with a PC, while only about 10% hold retail trading accounts, meaning only a small slice of the nation is exposed to public market fluctuations. This all means that, fourth, the overall addressable market in the country is so much larger than it was a generation ago, and therefore presents that bigger opportunity to the world at large.
These forces combine to fuel a huge wave of entrepreneurship throughout China, where registrations of new startups outpace GDP growth by a factor of three and where investment money in the form of venture capital and private equity (both from within China and from other countries) fuel these companies.
The net result from all of these factors, as well as the successful, global IPOs of Alibaba, JD.com, Tencent, and Baidu (which represent four of the Top 10 global Internet companies, valued together at over half a trillion U.S. dollars) have proved any young, aspiring entrepreneur within China could succeed at the highest, world-class levels — and never needs to be born with ties to the government, nor to hail from a rich, well-to-do family.
Now that the conditions have changed in China, let’s unpack three examples to examine how other startups have tackled this new market.