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Everything you need to know about building a startup in China

6:05PM | Monday, 2 June

China’s booming mobile market is creating lucrative new business opportunities for startups, according to Australian entrepreneur and Koombah cofounder Jason Lim, who recently returned from China.   However, mobile is different in China because they have a generation of people who skipped the laptop phase and moved directly to smartphones, says Lim.   “China has the [world’s] largest number of mobile internet users with 500 million,” he says.   Lim told StartupSmart the mobile boom is leading to big startup opportunities mobile gaming, social media, online video and mobile commerce.   “China is set to surpass the US mobile gaming market next year and is on track to hit $US3 billion ($A3.23b) in revenue this year,” he says.   “China has a higher penetration rate of social media than the US. WeChat has emerged as the most powerful communication app but has evolved into much more than that,” Lim says.   The stats are staggering and not only limited to mobile. China has 450 million online video viewers consuming 5.7 billion hours per month.   “Mobile commerce is expected to double in size to $51.62 billion next year. Social mobile commerce is also gaining strong momentum,” Lim says.   “Outside mobile, due to China’s existing manufacturing infrastructure, wearable-tech and Internet of Things-type products are rising up.”   Lim’s venture, Koombah, helps expats in Beijing find rental accommodation, providing a web platform for people to list and find rental property. The business model is a combination of service fees charged to renters and commission shared with its agents.   Before Koombah, Lim was a cofounder of Technode.com, an English and Chinese tech blog, which aims to bring China’s emergent tech and start-up scene to the rest of the world. TechNode manages TechCrunch China and its TechCrunch Disrupt events in Beijing and Shanghai.   Since arriving in Beijing in 2010, he has also worked for the HTC Android app store AppStoreConnect and consulted for Jiepang, one of China’s leading mobile location-based service apps.     Lim explains Beijing remains the major city for China’s tech startup community.   “Within the city, Zhongguancun is a key hub for startups due to the proximity to top engineering schools like Tsinghua University. Major incubators like Innovation Works, co-working spaces like Garage Café and venture capital firms are centred around Zhongguancun,” he says.   “Shanghai is traditionally the more financial centre of China, however many tech start-ups are popping up in the city too. Since Shanghai has always been the most international city in China, there are many foreign entrepreneurs based there. The creation of the Free Trade Zone last year is also helping to attract foreign investment.   “Shenzhen and Guangzhou in the southern province of Guangdong are fast becoming tech startup zones. With a strong background in electronics and manufacturing, many hardware startups are choosing either city.   “Chengdu in the western province of Sichuan is fast becoming a hotspot for entrepreneurial talent, especially for gaming. With better weather and a much lower cost of doing business, many entrepreneurs from the more expensive eastern cities like Beijing are moving there. The city also boasts a Hi-Tech Industrial Development Zone.”   Story continues on page 2. Please click below. Lim says the major players in China’s tech sector are Baidu, Alibaba and Tencent, which are sometimes collectively known as the “BAT companies”.   “Baidu is China’s dominant search engine with 80% market share. Alibaba is China’s dominant ecommerce company that controls 80% of all online Chinese sales and is poised to go public soon,” he says.   “Tencent is China’s dominant gaming company that also owns WeChat (Weixin in China).   “It’s important to recognise that although each company has a speciality in search, ecommerce and gaming; all companies have overlapping products and are intense rivals. The founders of each company are also among China’s richest people.”   However, despite the opportunities, Lim warns China can be a challenging and frustrating place to do business.   “Communication is something that takes time to adjust to in China. Interpreting body language and what is not said, is as important as what is being said,” Lim says.   “Showing or saving face in China is very important in Chinese culture, so when you think something is supposed to happen, there is usually an underlying reason why it isn’t happening.     “That’s why it is advisable to just go there, observe and learn what happens and how people do things. Of course, you should learn Chinese too.”   The other frustration is bureaucratic complexity.   “As a ‘communist’ country with many layers of political bodies, there is an excessive amount of process and paperwork,” Lim says.   “Policy can often change and many government departments are usually not across the new rules and laws, so you can often hear conflicting stories. Although things can be slow, money and connections can usually speed things up.”   Lim says that trust is something we take for granted in Australia.   “Here, most people would often give a stranger the benefit of the doubt. However, in China, due to historical and cultural reasons, people default to not trusting a stranger,” Lim says.   “That’s why Chinese people must always spend a long time to really get to know you before doing business with you. For entrepreneurs, it is also wise to team up with a local Chinese person you can trust, to help you navigate all the very local customs and business practices.   “The bottom line is – don’t assume you understand China without spending sufficient time there. It’s not an easy place to do business.”   Lim also warns entrepreneurs need to be aware of the visa and air pollution situation before they move across.   “To work in China, like anywhere else, you need a work Z visa. This requires a job offer from a sponsoring company. Since late last year, the government has tightened its restrictions so requires more. In Beijing, a non-criminal record must also be presented,” Lim says.   “If you are planning on just checking it out, a business visa is fine. But you should be aware that you are only allowed to stay on the mainland for a short period of usually three months at a time.   He says in the last two years, China’s air pollution problem has become increasingly serious.   “You may find yourself checking the pollution index more than the weather. If you plan to live there, you will have to sacrifice the vast blue and clean skies of Australia,” he warns.   Jason Lim posts on Twitter @jaezenlim. He also writes for Forbes about Tech in China at  http://www.forbes.com/sites/jlim.

Microsoft announces $8 million partnership for natural user interface technology research centre

12:19AM | Monday, 9 December

Microsoft, the University of Melbourne and the Victorian government have joined forces to open an $8 million research centre for social new interactive technologies that use voice, touch, gesture, gaze and physical movement.   The Microsoft Centre for Social Natural User Interface (NUI) Research will have funded positions for researchers exploring the social uses of technology that enables digital products to use physical human engagement more intuitively and naturally.   NUIs, such as Wii game consoles and Xbox Kinect, moved away from the desktop and mouse to use direct physical engagement such as capturing voice, gesture, touch and even brain recognition with sensors that interact with technologies.   Centre director Professor Frank Vetere, who also heads up the Interaction Design Lab at Melbourne University, told StartupSmart the centre would push the emerging field of NUI design towards reaching its social potential.   “The recent explosion of social media shows the extraordinary human desire to use technology for our own personal needs and interaction, so there is definitely a growing role for social NUIs,” Vetere says. “The centre is not just about the fun stuff like Facebook. It’s also the way we’re social in the workplace, in schools, in hospitals, and how we relate in public spaces.”   This is Microsoft’s first NUI centre focused on the social uses of the emerging technology. Vetere says there is ample opportunity for Australia to become a leader in this emerging tech industry.   “Clearly this is an opportunity to extend the thinking and knowledge happening elsewhere. We’ve got enormous strong support with Microsoft, so we can clearly leverage and contribute to their wider NUI work,” Vetere says.   The research centre is intended to explore the emerging field of how technology can encourage positive social and collaborative behaviours. Resources have been allocated for three years.   In a statement, Microsoft Research vice president Tony Hey said the three-way partnership was great news for achieving their goals.   “This is a world class research centre, located at a world class university in a forward thinking state,” Hey said. “I am confident the centre will open the floodgates to innovative social uses of NUI. The potential for social NUI will only be limited by our imagination.”   The 28 supported academics and PhD students will have the opportunity to spend time at other Microsoft research centres such as Cambridge, Beijing, and Redmond in the US.

Employee share scheme warning from start-up mentor, as Ollo Mobile takes out pitching prize

8:19PM | Tuesday, 6 August

Ollo Mobile has won a trip to Silicon Valley after beating nine other start-ups in the Small Team, Big Impact competition in Sydney last night.   The pitching competition was coordinated by cloud technology computing company RackSpace. Ten start-ups with fewer than 10 team members were selected to compete.   Ollo Mobile is a new device and system for panic buttons, which elderly or unwell people can use to alert family members and health authorities when they need help.   The other finalists were OpenLearning, Food Orbit, Projectia, Annexium, AuthoPay, Revolutionise, Clipp, Digital Sorbet and Geepers.   The start-ups pitched to a judging panel of Mick Liubinskas from incubator Pollenizer, Kim Heras from start-up network PushStart, Ruslan Kogan from Kogan Electronics, Chris Ridd, the country manager from Xero, and Robert Scoble, Rackspace’s international start-up liaison.   Scoble told StartupSmart he was excited to see an ecosystem beginning in Sydney, but Australia needed to do more to support entrepreneurs.   “San Francisco and New York have ecosystems, as do Tel Aviv, Beijing and Seattle. London kind of has one and Los Angeles is being built. It looks like Sydney has a good one underway. These ecosystems need to keep the geeks in town, or they leave and go somewhere else,” Scoble says.   Despite the growing ecosystem, Scoble cautions Australian struggles with employee share schemes (ESS) are a fundamental issue that needed to be overcome quickly.   “The laws here aren’t letting start-ups use their stock options and equity to motivate people to shelve their jobs at big companies and come and join start-ups,” Scoble says. “Australia needs to deal with this quickly to support your entrepreneurial talent, or they’re going to leave and take their value with them.”   The federal government announced a review of ESS opportunities in June.   Scoble adds start-ups need access to money, talent, public relations and business expertise to get their companies to the point they’re turning over billions.   “When you’re in San Francisco there is such a strong future culture, you can see it in the streets with people trying new things,” he says. “You need access to the idea that your plans are possible and a city with a great culture that encourages that.”

Microsoft creates coordinated effort to help start-ups

6:41AM | Wednesday, 26 June

Microsoft has moved to consolidate its support of start-ups around the world by creating Microsoft Ventures, a coordinated effort that aims to offer tools, mentorship, guidance and seed funding.   “By unifying our various efforts, we will give entrepreneurs a single point of entry to engage with Microsoft,” the global software giant says on its blog.   Microsoft Ventures brings together three elements – community, accelerators and seed funding.   Community will enable people to explore how to turn an idea into a business through Microsoft’s BizSpark program, which provides access to tools and resources, and partnerships with accelerators around the world.   Once entrepreneurs realise the business potential of their idea they can apply to enter 3-6 month accelerator programs with Microsoft in Bangalore, Beijing, Paris, Seattle and Tel-Aviv. Microsoft says it plans to expand its accelerators to Berlin, Moscow and Rio de Janeiro.   “At a minimum, applying companies must have a full-time founding team, a bold vision for tackling a real problem, technologically driven solutions and less than $1 million raised,” Microsoft says.   The company says it is also adding more funding to its seed investment fund, Bing Fund, to provide more support to start-ups.   “Start-ups can receive direct funding from Microsoft after achieving early business success,” it says.   “That may mean having a viable product in market with demonstrated customer traction, a full-time founding team or alignment to Microsoft domain expertise, including enterprise software, big data, security, artificial intelligence, advertising, gaming, SaaS and cloud services.”   Microsoft says that since 2008 more than 75,000 start-ups from more than 100 countries have received access to tools and resources through BizSpark and seen 114 start-ups graduate from its accelerator programs since they were launched two years ago.

How we raised $82m thanks to the ‘subscription economy’

4:52AM | Wednesday, 10 April

The founder and chief executive of Silicon Valley start-up Zuora has revealed how the company completed four rounds of funding totalling $82 million, and how the subscription economy is transforming business models.   Zuora, founded by Tien Tzuo, provides cloud-based billing and payment solutions, allowing companies to offer services via subscriptions. Zuora refers to this as the subscription economy.   Tzuo founded Zuora in 2007 after working for Salesforce.com, where he built the company’s original billing system. He also served as chief marketing officer and chief strategy officer.   Today, Zuora employs around 250 people, and has offices in the Bay Area, London, Sydney, Beijing, Atlanta and Chicago.   The company has more than 500 customers, including Fairfax, Ninefold, ServCorp and Quotify. It has also raised a total of $82 million, including a $36 million Series D round 18 months ago.   Tzuo, who is currently in Australia, told StartupSmart the company has been fortunate to raise such a large amount of money.   “Benchmark Capital led our A round, Shasta Ventures led our B round, Redpoint [Ventures] led our C round, and Greylock and Index Ventures led our D round,” he says.   “We’re fortunate that the market we’re trying to capitalise on is one that people believe in. People see that the world’s moving towards a subscription economy.   “They like us in the sense that, from an investor’s standpoint, they don’t have to bet on who has the best marketing motivation product, who has the best storage product, [etc.].   “A bet on us is sort of a bet on the sector, and so if you believe [in] the whole sector, like SaaS and cloud… then we should be able to grow with it.   “They like us because we’re a diversified bet.”   Tzuo believes the Series B round, rather than the Series A round, is the most challenging.   “It’s one of those things where the A round is sort of all hopes and dreams, whereas… the D round is where you’ve got a bunch of history, you’ve got customers, the business model is starting to form,” he says.   “The B round is kind of this tweener thing, where you don’t really have a business model yet and you haven’t figured everything out yet.”   According to Tzuo, start-ups are among the companies leading the subscription economy.   “We’re seeing a once-in-a-century transformation going on in business models and this is all stemming from the internet,” he says.   “There are a lot of start-ups in the commerce space now that offer different things as a service, [such as] the Dollar Shave Club.   “We’ve very involved in the start-up innovation space, not just in Silicon Valley but here in Australia… as well as in the UK.   “We’ve got start-ups in Berlin, start-ups in Madrid and Barcelona. We’re even talking to a company in Iceland – our first customer in Iceland.”   Zuora is also tapping into the concept of “B 2 any”, says Tzuo.   “In 2006, 2007, 2008, we saw a lot of start-ups thinking they’re going to sell to consumers and then realising the money was with businesses,” he says.   “The whole point is companies are no longer B2C companies or B2B companies… A lot of our customers now are mixed.”

The Chocolate Room to open 200 Chinese stores

3:11AM | Monday, 11 March

Australian café franchise The Chocolate Room has announced an ambitious plan to open 200 outlets in China, along with stores in Europe and the Middle East, despite having just seven stores here.

IBM picks five start-ups for SmartCamp KickStart

8:14PM | Monday, 27 August

Tech giant IBM has selected five start-ups to compete in its SmartCamp Kickstart event in Sydney, where they will receive mentoring before the winner is flown to Beijing for the finals.

Five great Olympics ambush marketing campaigns

8:38AM | Thursday, 2 August

While, in Australia, businesses are creating headlines for blaming price increases on the carbon tax, their counterparts in the UK are having to run a different kind of gauntlet.

Business Switch takes 5% equity stake in Asian start-up

6:54AM | Friday, 22 June

Sydney-based company Business Switch says small businesses should consider investments as a way to enter foreign markets, after the company took a 5% equity stake in a Hong Kong start-up.

ANZ Innovyz START names inaugural start-ups for accelerator program

5:26PM | Monday, 28 May

A marketplace for pre-loved baby items and a farm business management software provider are among the 10 companies selected to take part in the first three-month ANZ Innovyz START program.

10 quick-fire start-ups

5:32AM | Wednesday, 2 May

Starting a business used to be a rather drawn out affair. With all the planning and fund raising involved, it would be unthinkable that you could launch a company within a week.

Joe Button

9:35AM | Tuesday, 20 September

Joe Button is an online business combining new technology with the age-old tradition of shirt-making, allowing customers to design their own shirts and have them custom-made.

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