Chinese Entrepreneurs and the Dwindling Importance of the American Connection
In May, the New Yorker ran a story about Gong Haiyan, a Chinese Internet entrepreneur who is unlike many of her contemporaries. The writer, Evan Osnos, had first met her six years ago. “She was nothing like the other Web entrepreneurs I’ve come to know in China,” Osnos wrote.
For one thing, the top ranks of Chinese technology are dominated by men. And, unlike others who glimpsed the potential of the Internet in China, she didn’t speak fluent English. She didn’t even have a degree in computer science.Osnos, who has lived in Beijing since 2005 and is fluent in Mandarin, is the magazine’s China correspondent. On Sunday morning, I met him over apple-raspberry smoothies at a juice bar in the capital’s ritzy Sanlitun shopping area and asked him about that story and, specifically, Gong. I was interested in the idea that not having a connection to the US might be considered a disadvantage for a local entrepreneur operating in a country as culturally complex as China.
Unlike many other Internet entrepreneurs here, Osnos said, Gong is entirely a product of a Chinese way of thinking. He considers her one of the most authentic tech entrepreneurs he has encountered in this country, “because she truly came out of a need which was very specific to Chinese social conditions.”
I asked Osnos what characterized the country’s other Web entrepreneurs. On some level, he replied, they have to be fundamentally dissatisfied and see a particular system that can be improved. But one of the key common threads is a connection to the West.
“The things that really tie them together, in my opinion, are the fact that they have this exposure to the West,” he said. Even Alibaba’s Jack Ma, a former English teacher who has never lived outside China, was exposed to a Western way of thinking by listening to Voice of America as a youngster. “It’s kind of unfashionable to say that, I suppose, but the truth is their exposure to the West has been fundamental in allowing them to imagine the possibilities.”
I was struck by that comment, because three days earlier the CFO at a fast-rising startup in Guangzhou had lamented that he missed his chance in China by going to the US to do his MBA. All the best Internet CEOs in China never left the country, the CFO told me. Then he listed some: Jack Ma, of course, but also Tencent’s Pony Ma, Xiaomi’s Lei Jun, NetEase’s William Ding, and David Li of YY.com. He might also have added Shanda’s Tianqiao Chen, Giant Interactive’s Shi Yuzhu, and UCWeb’s Yongfu Yu.
On the other hand, Osnos could easily draw on names to support his thesis. Baidu’s Robin Li, Sina’s Charles Chao, Sohu’s Charles Zhang, Youku’s Victor Koo, and Tudou’s Gary Wang were all educated in the US.
Clearly, both sides of the argument have merit. So I sought other opinions.
Yirong Xu, the founder of a leading social shopping site called Meilishuo, studied computer science at the University of Chicago and Stanford from 1998 to 2003. He jokes now that those were the worst years to be away, because that’s when all of China's biggest Internet companies were started. “I think I missed the best five years,” he told me over lunch in Beijing's high-tech Haidian district yesterday.
When Xu came back to Beijing, he took two years to reacquaint himself with the market before starting a company that built an RSS reader especially for Chinese readers. It ultimately failed, he said, because he didn’t figure out soon enough that Chinese people don’t want to wade through so much reading material in their spare time.
Ten years ago, many successful Internet entrepreneurs had returned to China after studying and working in the US. They could bring back specialist knowledge about starting a business that was helpful, Xu said. “But right now, things are changing a little bit. You cannot just open your own startup right after you come back to China. You don’t understand the country.”
The founder of Red Atoms, developer of some of the most popular mobile games in China, has a slightly different take, but draws more or less the same conclusion. David Liu also studied at Stanford and lived in Silicon Valley for two decades, working for Silicon Graphics and HP before starting his own companies. He says in today's business environment, entrepreneurs face some obstacles if they're not seen as 100 percent Chinese. “It’s not an advantage to be seen as American, because typically if you’re seen as a foreigner, employees and your customers perceive you as not really understanding them,” he told me yesterday.
And yes, even if a Chinese entrepreneur has spent only a few years in the US, they can be looked at as "American," or, as Xu told me with a wry smile, "A little bit weird."
Entrepreneurs who haven't left China tend to be better hustlers, too, Liu said, because in the US the startup environment is more benign. There's a mutually supportive risk-sharing framework between VCs and entrepreneurs there that doesn't exist in China. “It’s harder to be successful here," he said. So Chinese entrepreneurs have to scrap and do whatever they can to make things work. “If a US entrepreneur and a Chinese entrepreneur compete in the Chinese market," reckoned Liu, "on day one, the Chinese entrepreneur has the upper hand.”
Still, it doesn't necessarily have to be one way or the other. Jason Tian, co-founder of another of China's leading dating websites, Baihe, says there is room for different approaches. "Because China is big and there are a lot of opportunities, for different businesses and different backgrounds, there are different advantages," said Tian, who has never lived outside China.
He studied computer science at Beijing's prestigious Tsinghua University before starting a doomed startup during the doctom boom. After a stint working for Accenture Beijing, he and his partners started a MySpace-style social network before pivoting to the matchmaking service. "The key thing is that you find something that fits your background."
The rise local VCs in recent years does mean that having a totally Chinese background has become more important, Tian concedes. But for Chinese startups that are focused on a global market – a phenomenon that is on the increase – there are obvious advantages in having the international experience. Perhaps a more pressing problem is that many entrepreneurs, who are often from wealthy backgrounds, simply come from different walks of life than their potential customers. "A lot of entrepreneurs cannot realize that they are actually very different from 99.9 percent of the population," Tian said.
Baihe, meanwhile, has found a handy middle ground. Tian, the CEO, never worked or went to school outside of China. But his two co-founders? They both did post-graduate study in the US.