Behind China's startup surge: meritocracy and 'growth hacks'
LAGUNA BEACH, CALIF.—A tidal wave of cash has helped turn China’s internet startups into formidable superpowers rivaling their U.S. counterparts. But venture capitalists argue that a unique set of forces are also spurring the startups’ ascendancy.
Behind China’s rise is a mobile-first mind-set among entrepreneurs who preach meritocracy, have easy access to centralized personal data and are adept at so-called growth hacks to aggregate supply and demand quickly, said venture capitalists at The Wall Street Journal’s WSJ Tech D. Live conference on Wednesday.
China’s tech giants like Alibaba Group Holding Ltd and Tencent Holdings Ltd. are being followed by fast-growing startups like Beijing Bytedance Technology Co., owner of China’s top news-aggregator app, and online services company Meituan Dianping. They are not bound by legacy ways of doing business in the U.S., the venture investors said.
It starts with China’s tech culture, which has a meritocratic system that rewards success and speeds the growth of startups, said Connie Chan, an Andreessen Horowitz general partner who focuses on China. She said she often recommends young tech workers to go to China if they’re looking for a fast promotion track. Clear milestones mean techies can get promoted—or fired—very quickly, she said.
“I find it a lot more egalitarian than the U.S. both within the venture community as well as within startups,” said Ben Harburg, managing partner at Chinese venture firm MSA Capital. Mr. Harburg said many of the companies his firm has invested in have female founders, both in consumer companies and hard sciences. “You see a lot less of that fratty, bro-ey culture,” he said. “To me it feels a lot more meritocratic, less about connections.”
Ms. Chan said Chinese internet entrepreneurs tend to build companies faster than in the U.S. because they focus solely on building a mobile app—versus also on a desktop site—simplifying their ability to jump into multiple local services, from ride-hailing and food delivery to movie tickets.
They also think of more creative ways to quickly aggregate supply, she said. In the U.S., if a startup offering restaurant reviews wanted to add reservations to its app, it might build a sales team, go to each restaurant and try to secure deals.
In China, Ms. Chan said, a company might let people submit reservation requests that trigger an automated phone call to the restaurants, which can accept or reject the reservation by pressing “1” or “2” on the phone. Over time, by aggregating enough diners, the restaurants themselves demand a more direct relationship. In food delivery, companies in Southeast Asia didn’t sign deals with restaurants or food stands, she said. Instead they jump-started the business by having delivery people stand in line, which in turn caused the businesses to forge partnerships.
“No monopoly is safe” in China, said Mr. Harburg, enabling a fluid and dynamic market in which there isn’t as much consumer loyalty, thereby breeding competition and propelling startups.
Mr. Harburg said it is also easier to get personal data in the health sector, an inefficient industry in the U.S., thanks in part to strong privacy protections. He said a startup that he has invested in was able to sign deals with dozens of hospitals for quick access to 300 million patient records.
“A lot of data is much more centralized in China,” he said, so a huge supply of data may be accessible when starting a business.