I wrote an opinion piece in VentureBeat a few years back titled, “Attention U.S. Startups, Don’t Ignore China.”
The punchline —
Virtually every startup should have a China strategy.
Fast forwarding to today, startups in the U.S. are starting to back off in China. This assessment isn’t based on data; it’s more anecdotal and a vibe I’m feeling in Silicon Valley.
Even if it doesn’t touch a startup’s business, the escalating tariff war between the U.S. and China still impacts the thought process. Given the number of tugs on a startup’s priorities — not the least being survival — it’s easy to conclude that China should move to the bottom of the list.
Though I understand the logic, one could also make a case that no international market on the planet is going to be more important than China over the long haul. The sooner a startup establishes a China strategy and an associated communications strategy, the sooner it starts making progress.
With that as the backdrop, I’ve refreshed the column that appeared in VentureBeat.
Thanks to the sheer buying power in China, what happens in China will increasingly impact the United States and other markets around the world. While entry into the WTO was a milestone, I view the International Olympic Committee’s award of the Olympics to China in 2001 as the real tipping point.
Unfortunately, the evolution of a U.S. startup typically goes something like this:
- Create proof of concept
- Get money
- Build the product
- Market the product in the United States
- Get more money
- Solidify and/or diversify product offering
- Start scaling in the United States
- Get more money
- Explore global markets
As result, startups don’t start thinking about China and the global scene until a good two years or more into their life cycle, when they should be thinking about China right from the get go.
This doesn’t mean you need to buy Rosetta Stone for Mandarin or uproot your entire company for a move to China. It doesn’t even mean opening a small satellite office in China.
Instead, it means taking the time to study your space in China. Who are the players? Who’s winning? Why?
This way, you can intelligently factor China into your long-term strategy.
While Activision isn’t a new venture, it’s still revealing to look at an experiment conducted a few years ago. The company took the Call of Duty franchise and dropped around $50 million to create a version tailored for the China market. But the pricing model is where things got interesting. While U.S. consumers spent up to 60 bucks for the latest installment of Call of Duty at the time, the version for China went for substantially less.
They literally gave away the game.
Games consoles like the Xbox generally dominate PC gaming. Not so in China, where consoles take a backseat to PC gaming thanks to the McDonald’s-like presence of internet cafes. Activision figured revenue would come from selling the add-ons — Need a better bazooka? Done with a few Renminbi — that help players perform in the game.
Yet the move by Activision isn’t just about China. This is a global play.
The biggest market for the vast majority of tech products has been the United States.
Unfortunately, the Bill of Rights does not guarantee life, liberty and the pursuit of home-field advantage. The reality is that the mantle of the single largest concentration of tech buying power is migrating to China.
The crossover in mobile phone units has already occurred, with China being the first country to tip 1 billion mobile subscribers, and it’s only a matter of time before the revenue follows suit.
Even if it doesn’t make sense for your company to establish an office in China, you still need to anticipate how China’s ripple effect will impact your global opportunity.
We embarked on our China homework in 1996 and ended up planting our flag in Beijing in 1999. I remember sharing with the Silicon Valley team that we couldn’t be a strong company in Asia unless we were strong in China.
I no longer believe this.
I now think being relevant on a global basis requires strength in China.
Regardless of expansion plans, you should make a point of periodically traveling to China. Talk to people. See what’s going on. It’s only by being on the ground and absorbing the scene through osmosis that you can start gaining a feel for the market. I still get a kick out of this candy store in Shanghai in which the marketing function decided the name should have a “healthier” bent.
Physically being in China also accelerates the relationship-building. If you don’t start building your network of contacts in China now, by the time you need them, it’s too late.
I can speak from first-hand experience that trips to China aren’t combat duty (although the flights in United coach come close). Even after making countless trips through the years, I learn something every time I’m in Shanghai or Beijing.
That’s precisely the point.
The success or failure for any startup largely comes down to the learning curve.
And China should be part of your curriculum.