RISE Venture 2019: Should Your Startup Have Global Strategy on Day 1?


Nick Stocks, White Star Capital (China)
Edith Yeung, Proof of Capital(Singapore)

As an entrepreneur in Asia, you’re operating in some of the world’s fastest-growing markets. For both founders and investors, a key question when considering your startup’s growth strategy is your vision for tapping the international market. But should every startup have its sights set on conquering the world? Is it OK for a startup to target a single nation, particularly if that nation’s markets are large and fast-growing, as in China?

On the Venture stage at this year’s RISE conference in Hong Kong, VC veterans Nick Stocks (White Star Capital, China) and Edith Yeung (Proof of Capital, Singapore) weighed in on the puts and takes of going global, and whether that strategy is right for every startup. Here is what the Global From Asia team learned at the session:

Not every startup can (or should) go global. Consider who your customer is.

When VCs size-up a startup’s plans for global expansion, they first look at how the local culture and regulations of your home market shape your current business. These factors will determine whether your home market represents the ceiling or floor of your growth. Using China as her example, Edith pointed out that, to date, relatively few Chinese startups have globalized their presence with success.

She attributed this to the fact that certain types of customers and markets lend themselves to a single-nation strategy. Whereas B2B startups in China might have a future abroad, B2c startups tend to stay within the country’s borders because of the uniqueness of the Chinese customer.

Edith Yeung (EY): “It’s not that they [Chinese startups] don’t want to [go global], it’s just that there is such a big cultural difference…. Then it depends on whether they are B2B or B2C businesses. On the B2C side, I think it’s hard to build a product where you don’t really understand the culture and behaviors. Let’s say they’re a social media startup, or in transportation. You do actually really need a great understanding of local knowledge to be able to build certain types of consumer-focused products.

So, is there a way around it? Edith pointed to Toutiao, one of China’s largest mobile platforms of content creation, aggregation and distribution underpinned by machine learning techniques.

EY: The prime example would be ByteDance, which of course started with Toutiao, which is China-only…. But they are a great example to learn from, because they developed a super-local product for different countries, such as India, where the product actually goes by a different name [Helo].”

Regulations matter, too, and the regulatory environments of your home market might make it difficult for your partners to do business with you. Edith pointed out that the uncertainty and opacity of Chinese regulations around cryptocurrencies has forced most blockchain startups and VC blockchain funds to look outside the country.

If your vision is global, your company’s culture (and team) must reflect that.

Your company’s culture also matters a great deal. At White Capital, Nick and his team look to invest in startups where going global is top-of-mind, and that means hiring the right team, with the right competencies, right out of the gate.

NS: “We look to see: Who they have hired? Who [on the team] has that expertise when it comes to internationalization? You might be thinking about scaling up in 12 months in a different country, but you really need to start preparing for it today.”

Equally as important is the culture of your organization. Edith cited that for Chinese startups she has met with, hiring international workers can be a challenge due to a mismatch in expectations over corporate culture.

EY: “I was having conversations with companies here [at RISE] that are thinking of working on a B2B and wanting to sell to international customers. And I think that many of them are having a very hard time for hiring…. I actually absolutely think the cultural difference between Chinese running the companies versus non-Chinese is very different. It’s not just 996, it’s 24 by seven days a week… My previous company… Dolphin Browser, had a very tough time hiring, the non-Chinese, because they just couldn’t stand it anymore. They don’t accept that kind of lifestyle.”

Hardware: Ideal for internationalization

If your business is hardware, you need to be thinking globally (your supplier invoices mean you probably already were). Both panelists singled out the hardware market as ideal for the international business plan, both because of its obligate global supply chain and for being what Edith described as culturally “colorblind.”

EY: “It really doesn’t matter where things are made as long as it’s a great product. If you think about your iPhone, it literally touches hundreds of components and parts, with luscious support from Taiwan and Foxconn. That’s the great and prime example everyone should learn from.”

NS: “I think with hardware, it is far easier to do through the distribution channels that you can use. You don’t need to have a physical presence on the ground, you can go through resellers of distributors through wholesalers.”

If you’re going global, VCs want to see a plan for category leadership first.

Obviously, the purpose of venture capital is to help scale promising businesses. And while not every business is right for the global market, if your plans include international expansion then know that some VCs aren’t too fussed if you don’t yet own your home market. At White Star Capital, Nick said, their philosophy is to target startups chasing category leadership, both at home and on a global level.

NS: “At White Star, we really stopped looking at home market definitions. For us, you can be French, and from day-one you’re competing with an American startup, a Chinese startup, a German startup. The barriers to execution are extremely low…. If you want to be a global player you need to act like it, you need to think like it, and you need to execute towards that.”

The tech ‘cold war’ between China and the US will continue. The outcome is unclear.

The panel moderator, Bloomberg tech columnist Tim Culpan, pointed out that, in the startup space, especially in apps and internet solutions, we have seen relatively little crossover between the US and Chinese market. This is due to several factors. A number of US companies are directly blocked from operating within China due to regulatory reasons, compounded by cultural issues and the ongoing trade war. The result, the panelists agreed, was that relatively Chinese companies that have seen great success in the US and vice versa.

That said, Nick was positive on the long-term outlook, citing the strength of underlying demand between markets in the two nations. He cited the success of drone Chinese manufacturer DJI in his comments.

NS: “I think that at a consumer and business level there will be a demand for that technology and those products. Whatever happens between the governments can try to control it to a certain extent, but I think if you have that undercurrent of demand, it’ll be very hard to stop it.”

What’s your take on developing a global strategy, and what issues do you believe are most pressing to startups trying to enter the Chinese market (or break into the US from China)? Let us know in the comments!

About the Author

Francisco Baiocchi

Francisco is a multimedia journalist based in Hong Kong and Rio de Janeiro

Global From AsiaGlobal StrategyRise Conference 2019Rise Venture 2019Startuptech cold war

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