MAI knowledge

Recent observations-China

December 2, 2016

At MAI Capital, the team recently returned from one of our regular trips to China. As part of this we were lucky to meet with some great Australian companies. This was a great chance to catch up with some brilliant entrepreneurs who had successfully made their way from Australia to China. These conversations were insightful to highlight both the incredible opportunity, but sometimes challenges, that exist in expanding into new markets.

So here are 5 things to consider when thinking about entering China.

1.       People as a channel

The virality of the market in China is something that is impossible to understand until you are there experiencing it firsthand. If you are able to find product market fit, things can spread incredibly quickly, through channels such as WeChat and QQ. The nature of the market is that if something takes off, even outside the big four cities, it can quickly reach a market far greater than Sydney or Melbourne. To anticipate this founders need to be prepared to scale fast. The density of the population also allows you to focus on a few suburbs of Shanghai or Beijing for example, and still access a market large enough to enable meaningful experimentation of product features and sales channels.

2.       Don’t just hang out with the expats

There are well developed networks of expats who can provide support and a great sense of community. This can be especially important for your mental health in a market where the culture and language is different to a founder’s native one. This can increase the isolation that many founders and CEOs of startups already feel. However, the benefits and acceleration to your business of having the right local team cannot be stated enough. Adding local skills and knowledge instantly brings a different perspective and understanding which can accelerate product market fit and market insight. In the words of one startup we met with: “If we were to do anything different, it would be to hire a local far earlier.”

3.       There is some great talent in the market

To the point above, there is some incredible talent for hire in China. Engineering talent especially, can be of high standard. That said, if your company is made up of Australian founders, or still based in Australia, spend the time to get the right cultural fit with your staff. This is important for any business but especially crucial for one with teams distributed across countries with differences in work cultures and norms.

4.       Be in it for the long haul

One thing several Australian entrepreneurs we met remarked upon was that they were surprised at the time it took to build trust in the Chinese market. When looking at any new market, be prepared for it to take some time to build relationships with partners and gain the trust of your customers. You can’t just move to Shanghai for 6 months and expect to get instant traction.

5.       There are resources out there to help you

Going to China doesn’t mean that there aren’t resources out there to assist the transition. Aside from the regular resources available to expats, there are accelerator programs such as Chinaaccelerator, coworking spaces such as Xnode and more recently the Austrade landing pad program which has been established for startups. To their credit, many of the startups we met with had taken advantage of these and remarked that it made the transition easier.

While this list is by no means comprehensive, these are a few of the takeaways to keep in mind. We are keen to hear from you if you are looking to take a startup overseas or have any learnings from doing it firsthand. Hit us up at info@maicapital.com or find us on twitter (@mai_capital).   

At MAI Capital, we work to bring Australian stories to China. We understand that it takes more than capital and a WeChat account for success. We are always looking to engage with early stage companies with an eye to China within our focus sectors: Health, Agriculture, Education, Logistics and Clean Technology.



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