STARTUP

Is China The Tech Beachhead For Expansion in Southeast Asia?

How Southeast Asian start-ups can adopt the China strategy

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BY Ezra Ferraz - 23 Feb 2017

PHOTO CREDIT: Getty Images

With a name like Chinaccelerator, the start-up accelerator based out of Shanghai could lead one to believe they focus only on the Chinese market, but this idea cannot be further from the truth. The accelerator wants to focus on Chinese start-ups with cross-border appeal, as well as other Asian start-ups who see a foothold in China as a beachhead to other regional markets.

The beachhead strategy means focusing resources in one key market first and dominating it, before moving on to other bigger markets.

Indeed, the decision to even be located in Shanghai was made to serve this goal.

“We selected Shanghai and not Beijing (the most active digital start-up hub in China) for a digital accelerator because Shanghai is one of the key locations selected by companies for their Asia Pacific headquarters,” says Oscar Ramos, the program director of Chinaccelerator.

Chinaccelerator is a 3-month residential program during which start-ups address needs across key areas, such as localization, strategy, product-market fit, customer acquisition, retention, and monetization. In addition to the in-house team, there is also a network of 240 mentors to help and guide the co-founders. After the acceleration is over, start-ups become members of the Chinaccelerator alumni network and can stay in the office for 3 more months, during which they could get help for more long-term needs, such as fundraising and forming strategic partnerships.

 

Paths in and out of China

According to Ramos, every batch has companies from Southeast Asia interested in the Chinese market. Some, like Fashory from Singapore, find success in China. Fashory is an app that connects independent fashion designers with consumers who want fashion that is unique from mainstream brands.

“Fashory landed in China, launched eight weeks later, and by the 12th week went from zero to US$36,000 in weekly sales,” says William Bao Bean, the managing director of Chinaccelerator and MOX and general partner at SOSV. Fashory also earned a top 5 ranking in the App Store to boot.

Others, curiously enough, take the opposite path. After launching in China, they move elsewhere after getting better traction in other markets.

“An interesting example is BitMex, a U.S. company that today is the number one Bitcoin exchange in the world, that relocated to Hong Kong after the program,” says Ramos.

That some companies take this path is no surprise to Bao Bean.

“99% of international start-ups don't belong in China. Locals have a better market understanding and better ability to raise capital. China is the number two market in the world for VC investment—meaning no foreign company is ever going to be better funded, even UBER,” he says. Hence, it is important that the accelerator focus on international companies that have a competitive advantage in areas, such as adtech, education, fintech, and cross border commerce, and are difficult to clone.

Ramos says that the participating companies must also learn to follow their users.

“One of the key components of the program is to help founders think strategically with real data and filter their opinions through their users’ feedback. Certain business models require strong commitment for growth in specific markets. Expanding too fast might result in a poor experience for users in different markets,” he says.

Bao Bean also feels that a data-driven approach is crucial when expanding, if only because relying on our own skills can lead us astray.

“The biggest problem with international start-ups and even corporates is that what makes them a winner in their home market, their experience and domain knowledge, can be a liability when they go into new markets. Gut instinct and pattern recognition, developed over years of failing and succeeding, is suddenly more likely to send a founder in the wrong direction than the right,” he says, adding that their approach overcomes these biases and even leads entrepreneurs to make discoveries that hadn’t occurred to them previously.   

Chinaccelerator is itself expanding, in a manner of speaking. According to Bao Bean, they are partnering with venture capitalists and accelerators in Southeast Asia and even South Asia to help recruit start-ups with an interest in China. Interestingly enough, the greatest help that Chinaccelerator can give to start-ups considering China is convincing them otherwise.
“Our biggest value can sometimes be to tell a company that it doesn't make sense for them to enter the Chinese market,” he says.