starting up in china

STARTING UP IN CHINAELI BILDNER

PRESENTATION DELIVERED AT GENERAL ASSEMBLY IN NEW YORK CITY, JANUARY 9, 2012

CONTENTS

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

Introductions

WHO AM I AND WHAT AM I DOING HERE?

Fulbright research on SMEs in rural

China

Work for this foundation in Hong Kong

Co-found Transi.st in Shanghai

grow up in Montclair, NJ(go Cougars)

Tech meets impact

WHAT WE DO

Seed investments and incubation of social enterprises, with focus on intersection of technology and social innovation

Growing China’s top SEs

A fellowship program for seed-stage Chinese social entrepreneurs, offering

training, mentorship and investment opportunities

Calvin ChinBill

SchoenfeldScott

Ballantyne

WHO WE ARE

!

David ChenSimon Huang Eli Bildner

Hi.

FRONT MATTER

The Chinese start-up scene...has a frenetic feel similar to those early dot-com boom days. “I’ve worked in Tokyo and in Silicon

Valley during the dot-com bubble, and that was intense,” he said. “But it’s not even close.”

-NY Times Dealbook

“The pressure to take a job with a large prestigious company, or even the government, remains a big

hurdle for startups by young Chinese professionals born as the only child of their aging parents.

Americans, in contrast, live with the epic stories of Bill Gates, Steve Jobs and Mark Zuckerberg

dropping out of college to chase their dreams and become billionaires of companies that literally

changed the world.”- Frank Yu

“China’s users are too busy enjoying the Internet they have, rather than lamenting the one they don’t.”

- Andrew Lih

“There are three kinds of lies:lies, damned lies, and Chinese statistics.”

- Unknown

(Source: Kaixin/Sinosplice/John Pasden)

“WHAT CAN SAVE OUR COUNTRY?”

Public poll posted on Kaixin (social network) after Wenzhou train crash

in July 2011. Respondents could select up to five options, ranging from “equality” to “science & technology”.

Just 1% of respondents select “the economy.” The response of 73% of

those polled:

There is no hope. I don’t want to save it anymore.

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

LARGESTInternet user base in the

world

DO NOT APPLYThe same rules

IT’S COMING

Like it or not

PROBLEMSWe’ve got

MEET CHINAWhy start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

(Eli Bildner 1/9/12)

THREE DIVIDERS

URBAN RURAL

Beijing & Shanghai: 15-20% of jobs;

~2.5% of population

Rural China2001: 64% of population2011: <50% of population

(Source: McKinsey)

PRE-R&O* POST-R&O

Came of age during cultural revolution

*”Reform & Openness”

Prize stability; the “iron rice bowl”

Parents of the 1-child policy

Came of age in a new era

The “Post-80s” vs. The “Post-90s”

Children of the 1-child policy

4-2-1 generational structure

HAVE-NOTS

(Source: Adrian Fisk/Chinasmack)

HAVES

The real divider is not where you live, but how you live.

China is one of the most economically

inequitable places in the world.

And in a connected world, everyone is

striving for the same

Stuff.

Guo mei mei. “After I watch TV I have a lot of thoughts, but no way to realize

them.”

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

互联网 ≠ Internet

互联网 is a giant intranet

World average:

China:

5.6 MBS

1.8 MBS(and often much slower on foreign sites)

(Source: Technode)

互联网 is booming

0

100

200

300

400

500

600

20072008

20092010

2011

M users

(Source: China Internet Watch)

1/2 of the populationAnd yet, web users comprise less than

(Source: China Internet Watch)

Less than 10% of urban Chinese shopped online in 2006. In two years, nearly half will

Q2 web revenue = 62.2B RMB77.5% YoY surge

互联网 is young & active

of Chinese internet users are between the age of 10-4080%

80% of Chinese social network users are between the age of 20-34

18.7 average number of hours spent per day...and then there are the 网友

互联网 is mobile

of Chinese internet users access the mobile web66%

互联网 was always 2.0

0%

25%

50%

75%

100%

NewsSearch

EmailMusic

IMGaming

BlogEcommerce

USA China(Sources: Google, CNNIC, iResearch, Calvin Chin)

互联网 was always 2.0

0%

25%

50%

75%

100%

NewsSearch

EmailMusic

IMGaming

BlogEcommerce

USA China(Sources: Google, CNNIC, iResearch, Calvin Chin)

Web 2.0

It’s just...differentActivity US China

Send or read email 92% 55%

Use a search engine 92% 84%

Get news 76% 79%

Use a social networking site 65% 50%

Do online banking 61% 33%

Play online games 36% 68%

Send instant messages 46% 84%

(Sources: China internet watch, Tech Rice, Pew)

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

互联网A Clicking Tour

Search is where the internet begins for many in China, where some users have trouble typing due to a bothersome input method (“pinyin”).

Baidu: 78% of China’s search market

78% market share in Chinese search

(Source: Tech Rice)

BIDU 42.2B market cap

TAOBAOTaobao is one of China’s e-commerce kings, holding 31% of the country’s B2C market.

It also provides an example of how foreign companies can screw up royally in China: In 2003, EBay held 90% of China’s online auction market. Today, almost all of that belongs to Taobao.

An ugly website? To American eyes, perhaps. But most Chinese would demur. In China, the mouse click is king.

10% of China’s B2C market.

...And a good example of how different a market China really is.

Where else would a huge e-commerce site send you a confirmation email with the cell phone number and name of the deliveryman?

Or allow you to pay by cash on delivery?

360Buy.com

7 steps to becoming a 网友（“netizen”)

1

2

3

(Eli Bildner 1/9/12)

4

5

6

7

...or you could just use the Tencent weibo English UI

“China only has one firm that is capable of becoming China's Facebook: Tencent. The two (Facebook and Tencent) may be

dissimilar in outward appearance, but the core of each is closely related: the social graph.”

- Keso

Shanzhai culture

One of China’s highest-profile internet radio apps. Available only on “jail-broken” IPhones.

Space to breathe.Space to vent.

Space to laugh.

(Click)

“WK” = “Wukan”. “535” = “Tiananmen”

(Click)

SOLVE

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A PROBLEMS

You should startup in China if you want to

the environment

1)

food & product safety

2)

economic & social inclusion

3)

education

4)

FURTHER READING

@ECSELfellowsTech RiceTechnodeChina Internet WatchiChinaStocksTwitterSinica podcastMichael Pettis/Seeking Alphathe 5-year plan (KPMG series)Startup digests

Eli Bildnereli@transi.st

Why start-up in China?

1 system, 2, 3, 4 countries

Why 互联网 ≠ the Internet

HW: A clicking tour

Starting-up in China

Why start-up in China? (2)

Discussion/Q&A

多谢！