You can’t succeed in China unless you have an unfair advantage. But if you do have one, the rewards are huge. That was a key take-away from the experts at the recent MEF Connects China held during GMIC Beijing…

Thinking of expanding your business into China? Be careful. This is the advice from a VC that specialises in taking overseas companies into the region.

“95 per cent of companies do not belong here.”

These sobering words come from William Bao Bean. He is the MD of China Accelerator, a $200m VC fund that focuses on financing start-ups in mobile-first countries.

“We specialise in bringing Chinese innovation out of China and international innovation into China,” he says. 

Bao Bean believes the opportunity in China is huge. But it’s not for everyone.

“To come into China you need an unfair advantage. And most companies do not have an unfair advantage,” he says. This is, of course, because of the singular nature of the Chinese market. Yes, it’s home to a vast mobile-first population with growing economic resources. But at the same time, it is dominated by powerful platforms that keep tight control on what users – and content partners – can do.

Bao Bean says: “Three of the top six internet companies in the wold are Chinese. But they run walled gardens, so it’s hard to do things like real time bidding or even buy advertising at all. Therefore it’s difficult to monetise your content… you’re competing against companies that have local knowledge plus more money than you. It’s a lot easier to go South America or South East Asia.”

The mobile-first nature of the business in China has tipped the balance heavily in favour of these giant platforms. Boa Bean adds: “The companies we invest in, under 10 per cent of them have a website or an app. It’s a huge risk when you build a business on someone else’s platform. When they change their policies, they can shut you down on a whim.”

Bao Bean delivered his cautionary message at MEF Connects China, which was co-located with GMIC Beijing in April. 

But he was also keen to stress that – for the right companies – China is a massive opportunity. One fertile area is what he calls “commerce optimisation”

He explains: “In WeChat you can buy anything you look at or click on…so on the one hand you can monetise through social, but on other there are not solutions to optimise that. AI, machine learning, algorithms, marketing platforms – they don’t have a lot of history here. That’s where international companies can come in and do pretty well.”

They may need to hurry however, as local developers are learning fast. Wei Jiang, CMO of Google Greater China, told the MEF Connects audience that the old view of China as a copycat is becoming out of date. 

“It used to be that China copied ideas from the rest of the world and implemented them. People used to joke that C2C meant copy to China.

But we have picked up on the trend that there is real creativity and innovation coming out of China now. Developers are stepping on to the global stage.”

Join us at the 6th annual MEF Global Consumer Trust Summit in San Francisco on June 23rd to discuss the drivers in the mobile ecosystem when it comes to Privacy & Security. Showcasing a clear shift from simple compliance to business-critical, the Summit provides pragmatic insights, discussions and guidance on the value of Consumer Trust to businesses’ bottom-line.

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