Interview XNode EN

XNode is a start-up and corporate accelerator based in Shanghai. We basically provide corporate innovation services for multinational companies and we provide international scale-up, landing programs for startups and scale-ups from around the world. And we have a couple of location spaces in Shanghai, where we create a tech business community here in Shanghai as well. That’s what we do.

Shanghai has always been the most vibrant commercial city in China. In order to test new ideas, new concepts, new business model innovations and to apply new technologies, Shanghai is in most cases seen as the best place to be.

And what happens next, whether they move to Hangzhou, Nanjing, Chengdu, or the Northern part of China or the Southern part is a next step. But most of the companies would take Shanghai as the starting point, or the landing pad. 

Is it easy for these guys to come to China? The answer is definitely not easy. China is difficult. People don’t know much about China and it has always been seen as a black box. Secondly, the customer behavior, consumer behavior is quite different, at least from the European markets. And number three the regulatory framework, legal tax, the role of government, the public sector is fundamentally different. And number four, the whole tech ecosystem, specifically when you talk about tech, the whole infrastructure here is completely different. You cannot simple copy and paste what you have done in European countries and bring over to China. You have to start from scratch, understanding how it works in China.

It is going to be more difficult for foreign startups in b-to-c, because you are competing head to head with the Chinese locals. The locals who know better the market, the customer behavior, the locals who have access to the local clients, and who have the resources and connections. So when it comes to b-to-b, specifically in the hardcore technology side I think there will be more opportunities there. Specifically, if you have a proprietary technology that is well-protected and command certain high levels of entry barriers, then it is very likely you will create some business opportunities.

But how to do it, is not that easy, because you have to go though a process of understanding China first, knowing the Chinese customer first, knowing how to do business here first, because the practice has been fundamentally different. So actually we are setting up an 8-week program basically helping these guys to navigate through these difficulties. So before you stay and set up a company, don’t do it. Learn and test it first, with minimum costs. If you fail and you think China is too difficult, there’s no product market fit and I should go back, fine, go back. I mean, at least within 8 weeks you figured that out. For those who figure out a product market play, perfect, then after those two months, you figured out China my business plan, you know where you should go, then you start hiring people, then you start talking to local investors, then you set up an office and start doing real business.

My experience is, the VCs that we work with, and the VCs we put in touch with these international scaleups, normally they ask two questions: in general they say ok, tell me why you understand the China market, that obviously requires strong local team members. Sometimes you even need a co-founder from China. Number two, how can you prove you have your channel, the distribution channel, you can sell your stuff, because no matter how good thing you have, without being able to sell the technology or the stuff you have, it is meaningless. It’s hard for newcomers in such big massive market to build these channels by themselves within a short period of time. Normally you work with someone who already has this thing in hand. Or with someone who has the deep knowledge to build it, and we are talking to again, locals. 

I don’t think that China is a scary market anyway! So why don’t you just come and have a try? If it doesn’t fit, fine, you can try in other places, but I think to a large extend, China will create enough opportunities for young Dutch companies to explore.