Events Jul 07, 2016

Mercurr was once again at the Shaker to talk about internationalization, although this time, to focus on China. Thomas Nanterme, co-founder of Mercurr, invited experts who are familiar with the region to talk about the slowdown of traditional sectors (tourism, retail) and the new opportunities for start-ups there. The panel was composed of Shangaivest’s co-founder and Angelvest’s co-host Bruno Bensaid, Harris Corps’ representative Bruno Marengo, Nest VC’s French managing director Ethan Pierse and Jumo Group’s representative Achille Watrelot.

Shangaivest is a Franco-Chinese company that encourages investments between Europe and China. As for Angelvest, it is the first business angels’ association implemented in China. It has undertaken more than 40 investments since 2008. Nest VC is a start-up accelerator from Hong-Kong that has many offices around the globe. And Jumo Group is a company specialized in marketing and digital in China.

China is not spoken about in the singular. We talk about Chinas. In the plural. There are disparities and high animosity between Hong-Kong and China due to different currencies, yet there are disparities within China as well. Indeed, the 22 Chinese provinces actually represent 22 different markets, since each of them is more or less the size of France.

Is Hong-Kong a relevant port of entry for French start-ups?

According to Bruno Bensaid, Hong-Kong and Shenzhen, the “Chinese Silicon Valley”, are not the best ports of entry anymore for a start-up that wishes to conquer China’s markets. Hong-Kong’s government’s strategy did not pay off. Indeed, even though it managed to encourage initiatives and innovations without major financial consequences and to attract many start-up accelerators, the island’s lack of major universities to train engineers is eliminatory. Moreover, the majority of investments are usually directed to traditional large companies at the expense of early stage start-ups.

Ethan Pierse has a more nuanced point of view about Hong-Kong. Even though few Chinese start-ups are located there, the island remains an important port of entry to Chinese markets with many international start-ups. Hardware start-ups usually go to Shenzhen but Hong-Kong is still a major region for conducting business.

For Bruno Marengo, Hong-Kong is not the main port of entry. Hardware businesses should go to Shenzhen while start-ups specialized in digital should go to Beijing, the real Chinese Silicon Valley. However, cities like Shanghai, Nanjing or Chengdu are growing fast with large universities and hubs of innovation nearby. In general, Hong-Kong should not be likened to China though since the two regions are not necessarily in amical terms.

Once you have found the perfect location, how to implement your business in China?

Bruno Bensaid advised the audience to be realistic about conquering markets in China and insisted on the fact that implementing a business is no easy task. The “toolbox” provided by the Chinese government for start-ups usually serves big Chinese companies more than start-ups. The solution is to have at least one Chinese employee on the team to help you with all the administrative procedures. Besides, it is crucial to go beyond prejudices towards China which suffers from a false reputation of being a country of espionage and copycatting. China is actually a genuine breeding ground for innovation.

For instance, when the Chinese company NineBot acquired Segway, the latter was in decline. Today, Segway recovered completely with the creation of 10 new products (gyropodes). Ninebots simply suggested to add new innovative products to a traditional poorly exploited technology.

However, Bruno Bensaid advises Western companies to be careful and not to provide their whole supply chains to the same Chinese factory. Indeed, many Kickstarter projects have never seen the light of the day because innovations were stolen by Chinese constructors who were initially part of these projects.

Last but not least, Achille Watrelot insisted on the necessity for start-ups to be aware of the wideness of China. Given the disproportionate Chinese market, start-ups need to revise their ambitions upwards. For instance, WeChat is not just a chat service, it also provides taxis, food, payment, etc. When Ubisoft launched a store on the platform, it doubled its sales. The Singles’ Day, the Chinese celebration of being single, represents $13 billion of online sales whereas Black Friday “only” represents $3 billion in the United States. Therefore, China may be a mecca for start-ups that assimilate the local culture and that are not afraid to enter the market aggressively.

 

 

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