5 tips all expats should consider before launching a startup in China

4. Use your foreignness to your advantage

Being a foreigner in China can suck, especially if you don’t look East Asian, because you can stick out like a sore thumb. But as Chinese philosophy goes, there are few absolutes, and for every pro or con, there is an equally powerful opposite force at work. There are a few foreigners who have figured out to use their Western background to their advantage. The reasoning is very simple — just as Chinese people are reluctant to deal with foreigners, foreigners can find it difficult to deal directly with Chinese people. Sometimes, doing business can be so fraught with tension that it is necessary to have someone to manage the process, and occasionally, such opportunities can scale to become very large and valuable businesses, depending on the size of the market you target, its growth trajectory, and the complexity of the problem you are solving (your value-add).

I highly recommend finding a market or product where being a foreign founder is actually an advantage, and trust me — beyond the obvious English education, luxury ecommerce and overseas travel subsectors, there are still plenty of opportunities waiting to be uncovered.

5. Go back home (more) often

If you have followed the above four points of advice you probably have created a business that really leverages your inherent unfair advantages by identifying a market opportunity where your Western background adds more value to your customers than a local Chinese founder would. Most likely it’s something cross-border or global in nature, but in any case, not solely concentrated on the Chinese market, where your competitive advantages can become competitive disadvantages.

Yet there is still one more thing that I think often trips up expat founders and is not necessarily intuitive or obvious. This kind of startup, as much as it is set up for commercial success, often does not fit the investment criteria or even understanding of a mainland Chinese investor. It also would not register on the radar of an overseas investor, mainly due to geographic distance. So if you’re seeking investment, there is virtually no alternative to showing up in person to fundraise.

Yes, that’s right. Buy a plane ticket and fly wherever you need to go to shake hands and grab coffee. As much as tech investors are into the newest remote communications tools, there is just no substitute for meeting in person and developing an unquantifiable gut “feel” for the founders.

Plus, you can safely assume that the high-quality and high value-add investors you’d want in your round are going to be mostly busy enough with local deal-flow that they wouldn’t take a second look at something that is tens of thousands of miles away. However, if you fly in and show up, you will have a higher chance of getting a meeting and building rapport. Don’t underestimate the importance of building relationships early, and I mean this for both customers and investors.

As a foreigner, one of your biggest advantages, especially if you come from a country with a large tech investor base such as the US, is that you will always have a significantly better shot at fundraising than a local Chinese person… in your home territory, that is. Don’t underestimate this advantage, because the number one reason startups die is because they run out of money, and money typically comes from one of two avenues — customers and investors, both of which ideally you can find and connect more easily with “back home.”

Plus, very few people I know, especially the “global nomad” generation, spend enough time with their families. I know I am definitely guilty of the same!

In conclusion

To sum it up, if you are an expat looking to start a business in mainland China, and you are not bilingual and bicultural, I believe that it is not the end of the world if you can say yes to the following 5 questions:

• Am I doing something where I have industry expertise or deep domain knowledge?
• Am I doing it with a trustworthy and competent local Chinese co-founder, whose network and knowhow complement mine?
• Am I going to be able to leverage my Western background and build my company in such a way that I will be able to recruit and retain talent better than local competitors?
• Am I in a business where my foreigner status is an advantage, particularly in selling and business development?
• Am I doing enough to also be relevant and well-networked “back home” for investors and customers to understand and trust my business?

Expats and foreign-trained talent in general have played, and I wager, will continue to play, highly strategic and valuable founding or executive roles in Chinese tech companies. Very few people realize that the incredible stories of both Alibaba and Tencent are the pairings of a local entrepreneur with a Western-thinking and Western-trained co-operator.

While Joe Tsai, who joined Alibaba, and Martin Lau (president) and David Wallerstein (Head of International) of Tencent may not have been founders from day one, they have been instrumental in creating the mammoth successes of these companies, and it was their foreign background, skill-sets and perspectives that allowed them to see and capitalise on opportunities less visible to purely local teams.

All that being said, the number of successful expat entrepreneurs in China remains scarce and it is not an easy endeavor. But then again, startups never are.

One of the most well-known and applauded expat entrepreneurs is Fritz Demoupolous, co-founder of Qunar, now a $3-billion publicly listed company. When I sat down with him for dinner at a recent conference, I told him of my intent to write this article, and my cautious stance towards expats wanting to make it big in China, in part fanned by all the “go East, young man” rhetoric in the past two years. He responded: “I don’t know about that, Rui. I think there are still opportunities. It just takes thought. It always has.”

I would agree with that, and I hope this piece helped form a framework for how you might approach doing a tech startup as a foreign entrepreneur here. Good luck to all entrepreneurs everywhere, and do drop me a line if you’re doing something thoughtful in China.

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This article by Rui Ma originally appeared on Techinasia, a Burn Media publishing partner..

Image: Romain Guy via Flickr.