Editor’s Note: Here’s a story from our archives we feel is relevant even today and deserves your attention
Chris Adams has spent over five years working with startups as a social media consultant and provider of digital marketing services to drive sales and scale business fast. He is currently focussed on helping Chinese companies expand globally using a ‘social-first’ marketing approach to enter new markets and drive sales.
As a Director at TCG, a global social consultancy with a new base in China, Adams has had valuable exposure to the inner workings of the country and wider region’s startup scenes for the past few years.
Around two years ago, after helping startups in London with backings of between £200,000 (US$321,500) to £300,000 (US$482,000) to develop, scale and bring their ideas to market, Adams realised the growing potential of the startup scene in Southeast Asia.
With his keen interest and background in social media, having spent nine months as Head of Social at Berkeley PR and five months as a Senior Consultant at Rabbit (among others), the Asian market lured him with its mobile- and social-first approach.
Social- and mobile-first for Asian markets
“Asian markets are ahead in social,” Adams tells e27. “They do things so much more intuitively, and the social aspect of business is much more ingrained in their culture. They do a lot more by voice messages and social platforms.” Market research firm GfK reported earlier this year that smartphone sales in Southeast Asia grew by 43 per cent to 18 million units worth US$4.2 billion in the first quarter of 2014.
Also Read: Is social media working for you?
For the past 18 months, Adams has been working to help Chinese companies expand globally, including into advanced economies; something they are keen to do for a number of reasons. Joel Backaler, Author of China Goes West, lays out some of the top reasons in a Forbes article, which include the need to diversify into new markets, to access advanced technologies, to incorporate global management expertise, and to acquire established brands.
Even with bigger companies in the region, Adams preaches the philosophy of “working like a startup in order to expand quickly and scale as fast as possible”. He is a believer in retaining the startup characteristics of agility and leanness.
“The Chinese companies I’m involved with are primarily looking to Western markets such as Europe (France, UK, Germany), the USA and Russia,” Adams says, adding, “They see English-speaking markets such as the US and UK as being incredibly lucrative.”
But many startups in the region are going about it the wrong way.
“They’re setting up all their channels first, building factories, readying all that infrastructure and then realising the market’s not ready for them. Of course it’s not ready… They need to enter the market on a level that builds the brand first, and that is something that is very alien to Asian companies. The value of ‘brand’ to them is much lower because brand is not a physical, tangible product,” states Adams.
Jumping on the Alibaba bandwagon
Following the record-breaking IPO of Chinese e-commerce titan Alibaba in the US that now values it at US$230 billion (dwarfing even Twitter and Facebook), there has been a trend of e-commerce startups in the region trying to jump on the bandwagon, with Nasdaq reporting just recently that “China’s fast-growing e-commerce market is attracting more competition” post-Alibaba success.
“One e-commerce company we’re working with at the moment is trying to break through because it has seen Alibaba’s great success,” Adams says. “But where it’s going wrong is that it is not doing market research and thinking about building a brand before it sells. It’s a big problem. The firm has got all its sales platforms and websites set up, and the team is wondering why it’s going wrong, why they’re not getting sales.”
For startups not just in Asia but around the world, unrealistic expectations abound. “Because there are examples of companies like Alibaba getting valued and growing at such a high rate, there’s a perception that it’s easy to do,” Adams says. “People think that if they are a lean and agile startup with a four to five member team, and can change quickly, then it’s easy to scale and grow.” But, as many in the industry know, startup success rates are typically down at around 25 per cent.
Filling gaps in the market: invent or innovate?
This leads on quite naturally to a key question that almost every startup is faced with: how do you find that million (or in some cases billion) dollar idea that will ensure you end up in the successful 25 per cent? Do you do something completely new or take something that has already been done and make it better?
“Some people have the perception that as a startup you have to offer something completely different and try and be new and innovative,” Adams says, “and that that’s the only way to do well. But if you look at the startup RocketLabs in Germany, they basically take something and make it better… It’s about making something that solves a problem or an issue for a customer, and doing it really well. Bring both of those together and you’ve got yourself a really great model for success.”
The problem is when startups spend so long on an idea that they become too attached to it. “Then it doesn’t work and they spend and waste a lot of money chasing it. Attachment to an idea is important but you’ve got to be able to disconnect, which is one of the reasons you bring more people onto the team that aren’t founders. It gives you that disconnect for someone to be able to say, ‘Look, this idea isn’t working, we’ve got to change it’,” says Adams.
As many in the startup scene will attest to, building and retaining the right team is vital. The Young Entrepreneur Council recommends looking for shared values, meeting regularly with your startup’s members, thinking through worst-case scenarios and putting aside egos.
WeChat and QQ, not email
Adams does not necessarily have one startup idea for Southeast Asia that he would recommend above all others. For him, having the right people involved is always far more important than the type of service or industry you are aiming for. But whatever idea you latch onto, he reiterates the importance of making it social- and mobile-first.
“The reason that we like Asia and China so much in the startup scene is because it’s all about mobile… Now in meetings everyone’s typing up their notes on a smartphone, communicating on WeChat and QQ. It’s the same for talking to clients, they don’t want to use email. They’re on mobile messaging platforms first,” notes Adams.
“In Asia, business is all about the relationships. In the UK, you may be able to get hired based on your credentials, but it’s not the case in somewhere like China. The fact is that mobile lends itself more to that way of working; it creates proximity and closes that gap. Your mobile is closer to you at any given time (hence platforms like WeChat and QQ),” he says.
“It’s a more intimate way of talking than email. It all lends itself more to the Asian way of business and putting relationships first. That’s key. Any tech startup here needs to be mobile-first anyway because that’s the way you can build the best relationships and get the right funding,” adds Adams.
Finding your startup’s ‘FireChat moment’
Before I sat down to talk with Adams, I was struck by the idea of startups finding their ‘FireChat moment’. For anyone who has followed the off-the-grid messaging app’s role in the Hong Kong pro-democracy protests these past weeks (which at its peak claims to have connected some 33,000 protesters on the ground), they may have an inkling at what I am getting at.
FireChat’s moment of fame came when its mission aligned perfectly with the needs of a very large and active audience. It filled a gap in the market that was not being amply served by other mainstream cross-platform messaging applications such as WeChat and WhatsApp (i.e. being able to communicate with people nearby without a data connection fast and efficiently, instead using WiFi Direct and Bluetooth).
Adams comments, “The key word is ‘virality’. How does something go viral and what is it all about? Too many startups try and think of the next best thing that’s going to go really big. The problem of startups thinking like this is that there’s not a lot of things that catch on really quickly. There is no equation, there is no answer to how do you make something viral. It’s luck, but it’s also realising that luck is when preparation meets opportunity. You’ve got to prepare and understand what may happen in the future, yes, but it’s also about finding the right opportunity to sell in or to launch. It’s the combination of prediction and launch timing that is really key.”
Growing a startup in Asian markets as a foreigner
Speaking as someone who came from Western markets, Adams is in a good position to be able to comment on the difficulties of growing a startup in the region as an outsider. And he is quick to admit that it’s certainly not easy.
“It’s difficult for foreigners to build successful startups in China, which is why you don’t hear about a lot of success stories. The reason it’s hard is because they haven’t built the relationships here, they don’t have people on the ground… People from the US and the West are scared, they don’t want to spend the time building relationships because it’s not a lucrative business from their standpoint, there’s not a direct return. With a company that wants to expand as fast as possible, they’re not prepared to spend R&D money on building relationships. So the number one issue that Western companies have when trying to conquer the Chinese and Asian markets is that they’re not prepared to do that,” says Adams.
Looking beyond China; Hong Kong as a gateway
Japan, Singapore and Taiwan are all countries in the region that Adams would be considering next if he didn’t have his eyes so firmly glued to China, Brazil and India due to their roles as the world’s top emerging markets (though a recent report by Bloomberg ranks the top five ‘best emerging markets’ for 2014 as China, South Korea, Malaysia, Chile and Thailand). Then there’s also Hong Kong.
“(Hong Kong is) a very Western culture, whereas China is all about relationships. When I’m in London in Old Street, around the startup scene, it’s all about meeting people and sharing ideas. When I’m in Hong Kong, because it’s very Westernised, I can walk into an office in startup mode and talk with like-minded individuals. People are very open to that attitude in Hong Kong. However, in China you need that way in before you can have an open talking relationship with someone,” he says.
Adam’s advice for any startup looking to enter China: Go into Hong Kong first. “Don’t try going into China first because you’ll spend too much money on R&D… In Hong Kong, you will likely meet someone there who can introduce you to someone in China… It’s a way of going into China without spending lots of money, it fills that gap. Also, if you are someone who is successful and doing things in Hong Kong, people will be more likely to speak to you in China because you’ve got those relationships and that cultural fit,” says Adams.
Is the state machine failing startups?
Adams had a few observations on the increasing presence of tech giants like Tencent as investors into accelerator programmes in the region, something that he sees as a very positive development helping to fill in funding gaps left poorly serviced by state governments.
As an example, in the UK there are increasing calls for more active government support for “disruptive innovation” from startups. These sentiments are likely shared by many tech startup bodies in Asia as well who want to see their own home states doing more to nurture talent.
“The state and government in so many countries have completely failed to service for a startup need or culture,” Adams says. “The state fails to deliver because it doesn’t think in terms of being agile and lean, instead it’s a very old-fashioned model. The way more and more startups are being pushed to succeed and invested in is when the bigger corporations with lots of money come in because they’ve got business departments looking for the next best thing. Governments don’t think like that. Governments work around bigger businesses that are already making money. The government in the UK is the same… There’s just so much legislation and legals to go through.”
Fortunately, startups in Southeast Asia are not short of funding opportunities. Between April and July alone, eight new major sources of funding for startups in Southeast Asia sprang up. These included the Singapore government (US$50 million), GREE Ventures (US$50 million), Softbank (US$70 million), Monks’ Hill Ventures (US$80 million), Cyberagent Ventures (US$50 million), Rakuten Ventures (US$100 million) and Spark Labs (US$30 million).