• Save
Startup In China
Upcoming SlideShare
Loading in...5
×
 

Startup In China

on

  • 27,411 views

Provides insights and a ‘stepping stone’ to daring Singaporean and other foreign start-up companies with innovative products / services that want to get in the Chinese mainland market.

Provides insights and a ‘stepping stone’ to daring Singaporean and other foreign start-up companies with innovative products / services that want to get in the Chinese mainland market.

Statistics

Views

Total Views
27,411
Views on SlideShare
26,315
Embed Views
1,096

Actions

Likes
192
Downloads
0
Comments
10

28 Embeds 1,096

http://sgentrepreneurs.com 403
http://sbin.cn 381
http://www.slideshare.net 116
http://startupvietnam.com 30
https://tasks.crowdflower.com 26
http://www.linkedin.com 22
http://www.techgig.com 16
http://nakedtokyo.typepad.com 15
http://startupvietnam.myalexandria.info 14
http://www.opensourceforce.org 14
http://localoutsider.com 13
https://www.linkedin.com 9
http://www.chinawebradar.com 9
http://www.techinasia.com 5
http://static.slidesharecdn.com 4
http://pinterest.com 4
http://10.150.200.57 2
http://translate.googleusercontent.com 2
http://www.localoutsider.com 2
http://www.lmodules.com 1
http://www.pinterest.com 1
http://www.kaixin001.com 1
http://softwareoutsourcinginchina.blogspot.com 1
http://json.parser.online.fr 1
http://blog.yam.com 1
http://www.indypendance.com 1
http://typndel.wordpress.com 1
http://twitter.com 1
More...

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Startup In China Startup In China Presentation Transcript

  • Bringing your start-up to the Chinese market …
  • Agenda
    2
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Workshop’s Purpose
    To provide insights and a ‘stepping stone’ to daring Singaporean start-up companies with innovative products / services that want toget in the Chinese mainland market.
  • Speakers
    3
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Chris Evdemon
    易可睿
    Tina Wu
    吴天
  • A little quiz to start with …
    4
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Who is involved in a TMT-related business?
    Who wants to take their business to China?
  • China: Current Market Status & Trends*
    1st Session
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    5
    * with a little disclaimer …
  • 6
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Growing faster than everyone else …
  • 7
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Growingin a very “Chinese” way…
  • 8
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Heavily skewed towards the Eastern provinces …
  • 9
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Services sector rapidly catching up …
  • 10
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Retail (i.e. consumerism) is booming* …
    * … in the midst of the financial crisis!
  • 11
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    The whole world owes China …
  • 12
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    The whole world owes China …
  • 13
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Money keeps flowing in …
  • 14
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    And money has started pouring out …
  • 15
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    And the average Chinese citizen keeps SAVING …
  • 16
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    The stock-market ‘bubble-d’, burst and now what?
  • 17
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Chinese society is getting older …
  • 18
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    A strong middle class is emerging …
  • The world’s most intriguing consumer market …
    19
    • China offers today the world’s most rapidly growing and one of the most attractive consumer markets.
    • Although only accounting for approximately 4% of global retail sales, China accounts for approximately20% of global growth.
    • Consumer spending accounts for ~70% of U.S. GDP, 60% of Indian GDP but only ~35% of the Chinese GDP in 2007.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • … but also a unique set of challenges …
    20
    • Most consumers are still predominantly price sensitive and initially have a sense of mistrust for anything new.
    • Most consumers do not care about brand, although more and more people are starting to have brand awareness.
    • The consumer market is still very fragmented for most product / service categories.
    • Top tier cities (e.g. Beijing, Shanghai, etc.) are already becoming very competitive. The new potential is in 2nd and 3rd tier cities.
    • Middle class Chinese have only just started to pay attention to diet, fitness, and a healthy lifestyle.
    • Women have only just started to buy accessories, cosmetics, fancy lingerie, etc. in order to enhance their sense of well-being and self-respect.
    • “Newly rich” social class phenomena.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China’s corporate world is divided into …
    21
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China’s corporate world is divided into …
    22
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China’s Venture Capital market is heating up …
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    23
    • Already 2nd largest VC market in the world but still almost 1/5th of the U.S.
    • 2008 is a historical high – 2009 will be a test, with Q1/Q2 already signifying considerable slowdown (<2.5 billion raised and <1 billion USD invested in total).
  • © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    24
    The financial crisis is changing the game …
    • Fund raising amount and number of new funds as well as total investments amount and deal numbers in 1st half of 2009 have fallen sharply, in line with with the U.S. and Europe.
    • Current crisis will slow down but not greatly hurt the VC market in China as the fundamentals of the Chinese economy are still strong and investment opportunities are still there.
    • There is a major shift from offshore USD funds to domestic RMB funds, from a 70% - 30% split in 2008 to 30% - 70% in Q2 of 2009.
  • … but where is Early Stage?!
    Source: FENWICK & WEST LLP
    • In China, very little attention to early stage (which according to Zero2IPO is defined as all deal sizes below ~7m USD!), furthermore …
    • Traditional industries still account for almost 50% (!) of the VC money invested in China.
    • In the U.S. Series A and B rounds typically account for over 40% of total funds invested.
    • In the U.S. information technology attracted 37% of 2Q09 investment (and healthcare industry ~40%, the first time on record that quarterly investment in health care exceeded investment in information technology).
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    25
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    25
  • 26
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    … and where is my trade sale exit?!
  • 27
    Improving (?) local IPOmarket …
    • Lack ofdomestic IPO exit was one of the most critical obstacles in RMB investment up until the last couple of years.
    • However, the stock markets in Shanghai and in Shenzhen continue to rapidly improveespecially in terms of shortening post-IPO lock up, transparency, etc.
    • Government is also soon launching a genuine Growth Enterprises Board (GEB), termed as “China’s NASDAQ”.
    • Shenzhen’s SME board has already proved to be an exit option for VC investment in China for potentially more than 10x returns in a period of 3-4 years.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 28
    Distinction between USD and RMB Funds
    • Distinction of USD offshore entity investment and RMB onshore entity investment is a particular phenomenon in China.
    • Foreign VCs use offshore USD fund to invest into China deals’ offshore holding entities with all equity activities happening outside of Chinese jurisdiction.
    • Local VCs use RMB fund to invest into deals’ PRC entities and seek local divestment.
    • Major trend shift in the past year, from USD to RMB.
    • A lot of local governments act as LPs in RMB funds!
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Entrepreneurship
    Today Chinese entrepreneurship is in transition.
    Few home-grown role models although gradually a new class of serial entrepreneurs is emerging.
    Older generation is risk averse but grass-roots entrepreneurship from young people in their 20s and even early 30s is rapidly improving, especially in the TMT sector.
    A number of Chinese entrepreneurs dubbed “returnees” (from Australia, Europe and America) with prior, overseas entrepreneurial experiences (who understand the role of private equity capital, different forms of financing and shareholder rights) are coming back to start their own companies.
    29
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Investment Environment Concerns
    Legal issues – a lot of regulations (new, neither mature nor tested).
    Local government as an LP – what are the implications? Pressure.
    Entrepreneurship is still a new concept for local graduates, there is risk aversion and family pressure towards ‘secure’ jobs.
    Innovation is still predominantly university and government driven.
    Image of VC in the eyes of young Chinese entrepreneurs is that of a cash provider, no more (no appreciation of added value).
    Deal sourcing and closing is still “guanxi”-based: “only with people I know personally” or “through my network”.
    Vast majority of VCs go for the ‘low hanging fruit’, i.e. later stage, lower risk, higher transparency, pre-IPO type of investments.
    30
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China’s 2009 …
    31
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 32
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    What is the government spending on this year?
  • Venture Opportunities & Setup in China
    2nd Session
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    33
  • Where are the opportunities?
    Education (online / offline)
    Consumer Internet / Mobile VAS:
    e-Commerce
    Internet communities
    Mobile applications
    Gaming
    Online advertisement
    Technology:
    Enterprise software
    Logistics technology infrastructure
    Retail - franchising / licensing networks
    Healthcare Services / Medical Devices
    Infrastructure
    Energy
    Cleantech
    34
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 35
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    A major shortage of skills …
    Source: McKinsey
  • … but increasing investment in education …
    36
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    English language training (and other foreign languages) and certification.
    Local university entrance examinations’ tutoring.
    Foreign university entrance examinations’ tutoring.
    Computer skills training and certification.
    Professional skills training and certification.
  • China’s New Digital Generation
    “One Child Policy” (80后and 90后), today in the age range of 12 - 29 years, ‘obsessed’ with the internet but highly suspicious of most online content.
    Beneficiaries of the “Reform” and opening up policies, today in the age range of 29-38 years of age, easily grasp the opportunities provided by the internet and enjoy its diversity.
    The age range of 39+ years old typically do not adapt to digital services and usually just use simple mobile voice services, SMS and some news services.
    37
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Digital Entertainment
    In China, there are not many alternatives for affordable entertainment.
    The media / music / cinema industries are still in their infancy and tightly controlled.
    Internet is thus filling a gap.
    Consequences:
    Social networks, digital creations, interactive TV are all booming in China.
    Online advertising is also taking off.
    Digital music sells more than “offline” music, most of it via mobile phones.
    A distinct Chinese Internet pop culture is on the rise, both with “user-generated” and/or “interactive” content.
    38
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • The Chinese Internet
    39
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    • In June 2008, the number of Internet users in China reached about 253 million, putting it ahead of the United States as the world’s biggest Internet market.
    • This is still only ~19% of the total population.
    • 70% of China’s Internet users are 30 or younger.
    • High-school students are, by far, the fastest-growing segment of new users.
    Source: Netpop Survey (Nov 19, 2007)
  • Chinese Internet
    China has turned into a Web 2.0 powerhouse, with:
    large influx of venture capital
    overseas-educated returning talent, but also
    low entry barriers (if any)
    Several thousand Internet startups.
    Many copycats from overseas (‘Copy-2-China’) but …
    Chinese internet has its own aesthetics.
    Internet remains a low-trust environment due to poor measurement.
    Online advertising includes both brand advertising and paid search but is still not developing as rapidly as widely expected.
    Today, less than 5% of China’s advertising spending goes to Internet (predominantly CPM).
    It is not about your technology innovation, your product or superior UI, it is about your ability to market and monetize it.
    40
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Internet
    Local players won the top spot in all the main Internet sectors.
    Baidu (search engine) and QQ (IM) enjoy a strong lead in their sectors in terms of market.
    No foreign company operates directly in the online game sector (mostly due to Chinese regulation).
    Emergence of payment systems like Tenpay (from Tencent/QQ) and AliPay (from Alibaba), and billing by mobile operators make online payment easier.
    Websites are required to get a license (Internet Content Provider or “ICP” license) and to filter some politically-sensitive and illegal keywords.
    41
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Internet
    Source: +8* Plus Eight Star
    42
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Internet
    43
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China Online Trends for 2010 and Beyond
    Social networksare a business but cannot survive on ad revenues alone. Mobile social networks are the future.
    Online communitiesare not just a teen phenomenon. Focused, target group communities are being formed and have economic effects.
    E-commerceis here and will be the main growth segment for the next few years. Mobile commerce is still at a nascent stage in China but will also grow rapidly in the next few years.
    The amount of information available online is overwhelming. Privacy is becoming a luxury.
    Online gaming is already the most popular “21st century” form of entertainment and it is just getting started! Mobile MMORPGs are also around the corner.
    3D environments will start integrating with 2D - is this the definition of Web 3.0? Several new worlds for kids, for teens, for the fashion-conscious, for socializing, for brands, for education, etc. have already started and/or growing rapidly this year.
    44
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China Online Trends for 2010 and Beyond
    The new mass media. Last year, Korea and Australia were reportedly the first country to have its population spend more time online than watching TV. Who’s next?
    Online startups will face a strong dose of realism. You will have to show not only usage but also revenues. Copycats will no longer get automatically financed unless they have proven business cases – it is time to innovate.
    It is finally here - the impending launch of the wireless 3G mobile networks in China. China Mobile is set to launch their 3G TD-SCDMA network in Q3. Unfortunately, the TD-SCDMA is a China-only standard;3G handsets from other countries will not work on the China Mobile network. China Unicom however does use W-CDMA which is a global standard and compatible with the Apple iPhone 3G.
    Welcome to the “Age of Convergence”! E-commerce, SNS, virtual worlds and online games are coming together, blurring the frontiers between categories, web and mobile, online and offline.
    45
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Mobile Market
    Over 0.6 billion mobile users.
    Mobile content providers are under tremendous pressure.
    Due to operators’ policies working in a self-serving mode, mobile CPs have been declining steadily since 2005, undergoing major changes of strategy.
    China Mobile and China Unicom are more or less using content providers as free research centers: once a CP achieves some success with a service, operators will replicate it and launch their own version.
    The trend today for CPs is to find new distribution channels and business models independent from operators, working with manufacturers and media companies.
    China Online Trends for 2010 and Beyond
    46
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • A very competitive sector with shrinking revenue sharing …
    • What is the effect of China Mobile’s “Mobile Market” going to be for mobile application
    • formally launched in Beijing on 17/8
    • connecting mobile phone manufacturers, applications developers with China Mobile's users
    • one hour before the launch there already were 9,246 registered developers in the community
    • What is the effect of the iPhone (finally formally entering the Chinese market in a 3-year deal between Apple and China Unicom) going to be?
    • What is the effect of the oPhone (launched earlier this week by China Mobile) going to be?
    • The market is still dominated by low-cost, “山寨” devices.
    Finally here!
    47
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Mobile Internet Market
    In Feb’09 CNNIC announced that there are over 117 million Mobile Internet users in China.
    This is more than double from a year ago.
    34% of China’s mobile Internet users are active mobile Internet users everyday.
    Data charges are going down.
    74.6% of China’s mobile Internet users are male.
    70.8% of mobile Internet users are under 19 years old, vs. 35.6% of Internet users.
    Similar to Internet usage, mobile instant messenger is the most popular mobile Internet applications, with about 31.2% penetration rate.
    About 6.6 million users are using mobile music services.
    About 39.6% of users are reading Mobile Newspapers, which is a service by China’s mobile carriers.
    48
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Gaming Market
    China has an estimated 120 million unique online gamers.
    Gaming industry is expected to have a 3-year CAGR of ~25% and grow from $2.85 billion in 2007 to $6 billion in 2011.
    Although 76.6% of games are free-to-play and only 23.4% are pay-to-play games, the Top 25 Chinese games in 2007 sold over $1.4 billion in prepaid cards.
    Virtual items provide main source of revenue in free-to-play games.
    49
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Chinese Gaming Market
    • Online game publishers provide distribution to the content providers.
    • The game publisher:
    • prepays the content provider
    • pays IDC for hosting services
    • issues the prepaid cards to regional and inner-city distributors
    • pays for marketing & promotion
    • pays the internet cafés
    • The game publisher distributes gaming revenue accordingly:
    The current ‘next big wave’: SOCIAL GAMING.
    50
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Tencent
    Tencent operates the world’s largest IM service (~300 million accounts vs. MSN’s  250 million) and casual gaming portal. For numerous Chinese users, QQ is synonymous with Internet. QQ has significant social impact.
    Starting with a simple IM for Chinese users, QQ evolved into an array of services ranging from blogs, avatars, virtual items and pets and online games.
    Tencent’s revenues were in excess of 1 billion USD in 2008 (Facebook x3), most  of it coming from non-advertising services, with an amazing ~40% in net profit (Facebook is still loss-making)!
    How can they make users pay for Internet services? Digital goods, micro-transactions, VAS.
    What are the successful business models at work to achieve such results?
    51
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Tencent
    Source: +8* Plus Eight Star
    52
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Taobao
    2008 transactions over 120 billion RMB
    more than 90 million users
    much larger than Xiaonei (now 人人) and kaixin001
    Taobao users are not as active as SNS users but ARPU is much higher
    What is next?
    Social shopping.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    53
  • 54
    Setting up a legal entity
    Carefully select your local legal advisor.
    As a foreign entrepreneur, there are 3 forms of business available:
    Joint venture with a Chinese partner (JVC)
    Equity Joint Venture
    Contractual Cooperative Joint Venture
    Wholly Foreign-Owned Enterprise (WFOE)
    Representative Office (RO)
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 55
    Setting up a legal entity
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 56
    Setting up a legal entity
    Before incorporating, remember:
    Changing the type of business organization is long and costly
    Once the venture is declared to make business in a specific industry sector, very difficult to change
    There are always grey areas, and the regulations are being updated on a weekly basis.
    Law enforcement in China is not very strong in many areas, including contract law, IP law, etc.
    Foreign investment in certain sectors is subject to industry-specific regulations.
    Telecommunications: the stake of the foreign investors in the telecom enterprise can not be more than 49%.
    Insurance: property and personal insurance are possible but companies need permit to engage in large commercial risk insurance, all-inclusive policy insurance, etc.
    However China is compelled by WTO to change its legislation in protected sectors.
    After being issued a Corporate Legal Person Business License, a foreign-invested enterprise (FIE) must apply for registration of foreign exchange with the State Administration of Foreign Exchange (SAFE) at the place of its business registration.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 57
    Restructuring into an offshore holding – the “SINA structure”
    Offshore holding entities set up:
    • At the time of founding a company, Chinese founders set up an offshore holding company, usually in the Cayman Islands and a full subsidiary in Hong Kong. The Hong Kong entity’s fully owned subsidiary (WFOE) in China is the operating unit.
    • WFOE process can easily take 3+ months and requires considerable initial registered capital.
    • Lately, increasingly Chinese founders set up and operate a PRC entity first. Then, at a time seeking foreign VCs investment, the local entity goes for offshore restructuring. The founders set up a SPV in Cayman, with the shareholding structure mirroring those of their local company in China. Then, with share swap or acquisition, convert the local company into a WFOE.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Restructuring into an offshore holding – the “SINA structure”
    Investment
    CAYMAN
    HONG KONG
    OFFSHORE
    IN CHINA
    Contract
    Licence(s)
    LOCAL COMPANY
    WFOE
    Transfer Pricing
    Source: +8* Plus Eight Star
    58
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Resources in China for Singaporean Start-Ups
    3rd Session
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    59
  • 60
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    At what stage should you be before coming to China?
  • Preparation
    Initial strategic decisions are a crucial component for a start-up company’s success or failure.
    Preparatory trip(s). Spend significant amount of time in China.
    Develop “guanxi” (关系) or social capital networks to access information and to establish and maintain business relationships.
    Choose the right local partner(s)!
    61
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Preparations
    Where to search for potential partners?
    Build your own network. You are not alone.
    Alumni associations.
    Entrepreneurs’ organisations / clubs / BBS:
    www.cyzone.cn(all over)
    www.it5g.com (Beijing)
    www.oowork.com (Beijing)
    China Entrepreneurs (http://www.ce-online.cn/) (Beijing /Shanghai)
    www.riceboxchina.org (Beijing)
    BASE (www.facebook.com/group.php?gid=5504465643) (Beijing)
    www.eonetwork.org (Beijing)
    www.hysta.org (Silicon Valley / Beijing)
    www.mobilemonday.net (Beijing / Shanghai)
    Web Wednesday
    Beijing (www.facebook.com/group.php?gid=131317025051)
    Guangzhou (www.facebook.com/group.php?gid=26970847358)
    www.cleantechthursdays.com (Beijing)
    62
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Preparation
    Select and setup the right legal structure: SINA vs. joint venture. Establish a clear pathway to exit.
    Implement corporate governance and shareholder rights.
    Manage intellectual property.
    Study and learn from best practices in foreign markets,
    bring your ‘know how’ from Singapore,
    add your own “secret sauce”, but
    understand the Chinese local marketand
    adapt your business model to the local Chinese context.
    This requires both ground level knowledge and a sense of history.
    63
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Preparation
    Competition analysis. Assume it is already done. Find out who, how, where, etc.
    Research, comprehend and ‘navigate’ the complex political and regulatory environment to your competitive advantage.
    Add managerial and technical value to grow the local team that most likely does not have much international experience.
    64
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Preparation
    Where in the value chain is your place in China? (in Singapore it is easy to do the whole thing – in China you have to carefully select your position)
    Location: Beijing vs. Shanghai vs. 2nd tier cities. Government lobbying? Customer facing? Cost basis? Talent hiring?
    Can you get local government incentives?
    Brush up your Mandarin!
    65
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • 关系
    Business of any consequence is rarely done between strangers.
    Social capital in the form of “guanxi” is vital as a source of information and as a basis for influencing business behavior in every aspect of your major deals in the local market.
    It is a discipline that takes time to develop and provides a foundation for the successful execution of your plan.
    However,
    “guanxi” is often misunderstood and overstated outside of China;
    continuous progress in the availability (and quality) of information is gradually de-emphasizing its importance.
    66
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Beware of these risks …
    67
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Beware of these risks …
    68
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Early Stage Investors in China
    Good and experienced venture managers are a scarce resource in China.
    Good and experienced EARLY STAGE venture managers are a VERY scarce resource in China.
    Good and experienced EARLY STAGE venture managers that:
    have previous own start-up / operational experience, and
    truly work ‘hands-on’ with the team(s) to add value
    are a VERY VERY scarce resource in China.
    69
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Early Stage Investors in China
    Make sure that you select investors that ADD VALUE, as a minimum and indicatively investors that can help you in:
    screening and recruiting management team members,
    instilling a sense of corporate governance and intellectual property,
    helping you enter the Chinese market for access to further capital or distribution of products and services,
    installing and maintaining financial controls,
    restructuring and/or spin-off of non-revenue generating projects,
    improving productivity through reducing product costs and streamlining production operations.
    70
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Early Stage Investors in China
    71
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Early Stage Investors in China
    72
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Zhong Guan Cun (中关村)
    Zhong Guan Cun (in Beijing’s northwest corner) is still China’s best approach to a Silicon Valley ecosystem.
    Clear priority to nurture hi-tech innovation start-ups and create an early stage investment environment.
    Surrounded by about 50 universities incl. Tsinghua and Beida (北京大学), over 1,000 research institutes, 150 incubators and &gt;10,000 hi-tech start-ups!
    73
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • TsinghuaScience Park
    25 hectares of land with 690,000 m² for office space, training facilities, conference center, R&D facilities, etc.
    One of the best incubators in China.
    About 200 start-ups under incubation.
    Incubator for “returnees” start-ups.
    Focus on:
    Biotech and Life Sciences
    Software
    IC Design
    Digital TV
    3G Mobile Communications
    Strong government support and fundraising opportunities.
    74
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • … and look who’s in the neighbourhood …
    75
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    TsinghuaScience Park
  • Perceptions of Singapore
    Integrity of the government (good reputation) vs. pro-U.S. and anti-communist political position.
    Strong economy vs. ‘Little Red Dot’ (one of the four Asian dragons, but not mentioned much lately).
    ‘Garden City’ (clean environment, beautiful landscape, tourism).
    76
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Perceptions of Singapore
    Chinese ethnic group which shares little in common with Mainland Chinese.
    Over-patriotic youth believe Singaporeans are descendants of Chinese and hence the consequences …
    77
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Perceptions of Singapore
    Suzhou Industrial Park (mixed feedback).
    Singapore’s education has strong brand in China, despite some recent hiccups.
    Little else associated with Singapore brand.
    78
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • When to use or not use your Singapore connection …
    How to take advantage of Singapore’s brand?
    Integrity and quality of service
    Chinese culture but also gateway to the U.S. / European / ASEAN markets
    Particular industry expertise, e.g. education / training
    When to avoid focusing on Singapore?
    Mass market product branding campaign
    Corporate PR strategy
    Guanxi with local government / stakeholders
    All the above need a local approach instead!
    79
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Resources Available in Singapore
    Government Organisations
    IE Singapore / SPRING / EDB / IDA
    Quasi-Government Associations
    Business China / 通商中国 (www.businesschina.org.sg)
    Associations / Networks
    30,000+ Chinese nationals studying / working in Singapore
    HuaSing Association / CSC / PRCSU / SGCSSA
    www.huasing.org / www.sgchinese.org / www.sgcssa.org
    Incubators
    iAxil, Thymos Capital, etc.
    80
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Singaporean start-ups already or on the way to China …
    81
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • China Accelerator in Singapore
    82
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    • Assist in conducting local market research.
    • Arrange China business trip(s).
    • Provide temporary working space during China business trip(s).
    • Provide administrative support during China business trip(s).
    • Introduce to potential local market business partners.
    • Introduce to potential customers.
    • Introduce to potential local investors.
    • Mentor China entry process.
    • Assist in all local legal & accounting affairs.
  • China Start-Up Examples
    83
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    Software Development Outsourcing
    Direct Marketing Solutions
    3D Virtual World / SNS
    Senior Citizen Services
  • ECitySky
    Founded in mid 2007 in Beijing with $115,000 USD start-up capital from the three founders as well as family and friends.
    The company is developing China’s first truly 3D, fully web-based, immersive SNS / virtual world technology platform.
    In May 2008 the company raised $400,000 USD from angel investors.
    Currently in private beta-version.
    VIEW THIShttp://www.tudou.com/programs/view/gcU2Rl1XDH0
    84
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • ECitySky
    85
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
    • Technology platform company in China to serve the booming 3D Virtual Worlds market with an innovative B-to-C business model.
    • Non-theme specific; unlimited potential consumer applications.
    • Technology innovation – Founders with Microsoft (gaming division) / Google experience.
  • Aug.’07
    The Founders
    May’09
    May’08
    Nov.’07
    86
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Ethos Technologies
    Founded in the beginning of 2005 in Beijing with $20,000 USD start-up capital from three founders.
    The company is a software development outsourcing provider with its main (back-) office in Beijing and front-offices in Oslo, Stockholm and Helsinki.
    For 2008, revenues where 40 million RMB and net profit was 1.5 million RMB.
    87
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Ethos Technologies
    88
    The Founders …
    … and their “family”!
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Ethos Technologies
    89
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Ethos Technologies
    90
    Agile Development
    • New trend in software development.
    • Dynamic and flexible – but requires close communication and collaboration.
    • Frequent iterations allows for learning in the project execution.
    • Increases quality and throughput time – reduces risk.
    Global Delivery Model
    • The world is flat – potential to source services globally.
    • Leverage capacity and cost levels in remote locations.
    • China is emerging as an alternative to India, large talent pool and better infrastructure.
    • Need to bridge culture and communication issues.
    +
    Ethos’ Agile Global Delivery Model (AGDM) is “the best of both worlds”.
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • Ethos is moving ahead of competition by combining Agile and Global Delivery Model
    Onshore suppliers
    Onshore competition has evolved through process innovation in Agile methodologies over the last years
    Offshore suppliers have captured the share of the market that can easily be supplied by traditional Global Delivery Model.
    Traditional Offshoring
    Ethos Technologies
    Flexible
    Rigid
    Onshore
    Offshore
    91
    © 2009 - Eastern Bell Capital Partners Pte. Ltd. - All Rights Reserved.
  • “70% of success in life is showing up”Woody Allen
  • THANK YOU!谢谢!