
Why China Isn’t “The Next Silicon Valley” - vaksel
http://www.techcrunch.com/2009/06/01/why-china-isn%e2%80%99t-%e2%80%9cthe-next-silicon-valley%e2%80%9d/
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megaduck
She's naive. There's no way that I'd consider doing a software startup in
China, and I live here. There's just no good way to make money at it.

First, it's damnably hard to get people to pay you for anything software
based. With the rampant piracy, nobody has ever needed to pay a dime for
anything. Convincing people to BUY software is virtually impossible. Even if
you could convince people to pay, the payment systems are byzantine at best.
Forget credit cards, you'd better be prepared to go collect cash from people
at home or work.

Advertising-based models MIGHT work, but the competition's going to be tough.
You'll be competing with corporations like Google, Microsoft, YouKu, and
others that have billions to burn while they build marketshare. However you
might succeed. Games like WOW can also make money.

Regardless, if you start making any money, it will probably be taken from you.
The government already has its fingers in your pie, because you _must_ get
licensed from the government to run a website. That means dealing with
government officials who will demand kickbacks, or might just up and seize
your business. The same goes for any partners that you have, who will
inevitably try to squeeze you out and take over any profit-making venture. The
odds of you having your business simply taken from you are very very high.

Naturally, you have absolutely no legal protection for anything. Zero. If
anything, the courts are your enemy, because they side with whoever has the
most influence and that's not you. Your employees embezzle from you? Your
competitor (or a partner) steals all of your equipment? Government officials
demand "protection" money? Too bad! Better luck next time. You can also forget
about patent, trademark or copyright protection, but that goes without saying.

I'm not even going to cover things like hiring engineers or building hardware
here, which have their own special headaches.

It's not impossible to make money here, but 99% of the time the risk/reward
ratio isn't worth it. Personally, I'm basing my company in California and
targeting the American market. We might eventually come to Hong Kong or
Taiwan, but I've written off the mainland as a lost cause.

~~~
joel_feather
This is because you do not know how to navigate properly in business in other
countries. Have you ever done business in Tanzania or Senegal or Kazhakstan or
Peru? You'll have the same problems, sometimes a lot worse.

If you cannot navigate the business processes in china, then you are not cut
out for it.

The basic issue is this - if you are starting a business in China, you start
with a core team of chinese people whom you trust, who are efficient and who
know the city. Then you hire properly - your administrative staff make or
break your business in china.

If you march in with a white face and expectations, you'll get what's coming
to you - nothing. In china, you need to do things the right way. And to do
things the right way, you need to know what the right way is. And you don't.

~~~
pchristensen
_Have you ever done business in Tanzania or Senegal or Kazhakstan or Peru?_

Would you want to start a company in any of those places?

~~~
joel_feather
You get to travel, meet new people, learn new languages and make a lot of
money. Why would I NOT want to start a business in those places.

------
paulgb
It's refreshing to see an article of this quality from TechCrunch.

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ckinnan
China has a "second-mover" advantage in that they can copy the most successful
models and technologies in the West (including Taiwan and Japan) and leapfrog
ahead. But China's development isn't that sudden-- they've embraced more-or-
less capitalism for a good 20 years. It was already insane when I was living
there a decade ago. It is an enormous and potentially great country of
ambitious, hard working people who respect business and learning. The
challenge is ensuring we make room for them in the global community, and that
their political systems evolve with their economic progress.

~~~
bitdiddle
Well actually the growth rate has been phenomenal when one considers the
starting point. I first visited Xiamen in 1982 when it was designated a
special economic zone and the changes since have been phenomenal. The rate at
which workers moved from farming to industry dwarfs the comparable rate here
in the US.

Your adjectives of ambitious and hard working are spot on. Having 1.2 billion
people has always been both China's greatest strength and it's greatest
weakness. They have been poor for so long that their thirst is now
unquenchable.

China's growth is going to force serious changes in the US if we are to remain
a competitive world player. Consider how many chinese schools teach english
and how many american schools chinese.

However I would argue that in software, americans have an inventiveness, I
call it yankee ingenuity (mickey mouse) that is unique and is part of our
culture. This is something that takes years to develop.

So perhaps there's an edge we can keep but the key will be to engage and play.
The chinese love doing business with americans because we are a good people.
They have different notions of IP but we need to recognize that much of those
are historical artifacts of western law, or as kids sharing music would say:
"unsustainable business models"

"Ici repose un géant endormi, laissez le dormir, car quand il s'éveillera, il
étonnera le monde" -- Napolean

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known
"A country is not made of land; a country is made of its people." -- Unknown

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carbon8
_"And while China gets a rap for ripping off U.S. Web start-ups now, I think
we’re going to start seeing U.S. start-ups copying a lot of elements of
Chinese entrepreneurs’ business plans...[lists some business models]"_

Interesting slight of hand there.

~~~
megaduck
Yeah. The rap is pretty well deserved, regardless of what happens in the
future.

I have a friend who's at a venture-backed startup here in Beijing (not
software). At a local startup meet-and-greet, he started talking to the
founder of a local web startup. The business model?

"We copy FriendFeed."

~~~
cmars232
I see nothing wrong with that. It's a winning strategy until these services
are mature and commoditized in China. At that point, you'll perhaps see market
pressures drive innovation. If FriendFeed doesn't want to support the Chinese
language, or doesn't support it well enough, there's a great opportunity.
Maybe they'll get bought out by FriendFeed at some point!

------
TweedHeads
...yet

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joel_feather
China is not the next silicon valley because silicon valley is an artificial
self indulgent child that sees itself as the cleverest kid on the block.

China is the guy living on the farm and working harder, doing more and just
being cleverer than the other one. When they meet at the global championship,
silicon valley will realise that it has long been fat, lazy and worst of
all...slow.

~~~
DanielBMarkham
_when they meet at the global championship_

It's 2009. The global championship is already on.

Time to start getting the newspaper delivered to the farm.

~~~
joel_feather
It's not on yet. China is a closed eco-system, it has not really entered the
playing field on the same level as the other countries.

You need to have been there to understand - china is very inwardly focused.
When it decides to focus outwards, that's when the championship will start.

Things like building influence in Africa, setting up medical programs,
developing hinterlands of their country - china is doing all this silently.
America is out there and roaring and thumping its chest, but china is silently
expanding. The global championship is on for the Americans - they are
strutting about and flexing their muscles and lifting all the weight they can
lift.

But there are other players that have not come in yet. They are waiting and
training.

~~~
bitdiddle
"china is doing all this silently"

no, actually we just haven't been listening.

