Since I got home from China last week, I’ve found myself in a lot of conversations where phrases like “the next Silicon Valley,” or “just like Silicon Valley used to be,” keep coming up. But while China is swimming in capital and littered with start-ups, I’m going to argue it’s not the next Silicon Valley. In fact, it’s something far different than I’ve ever seen before.
If you think about it, Silicon Valley doesn’t really move as fast as people say it does. Sure, the rest of the U.S. business world may feel out-lapped by the pattern of companies going from nothing to billions in a few years, but those start-ups are mostly the outliers. For every wunderkind smirking on the cover of a magazine, there are far more entrepreneurs who slogged away for thirty years before ever getting their Nasdaq moments. And there are even more who slogged away for longer and didn’t.
And even the breakout Googles and Facebooks of the Valley had the clear benefit of building their companies on top of decades of infrastructure build-out. I mean “infrastructure” in the sense of technology infrastructure—the chips, routers, open source stack, etc.— but I also mean it in the sense of Valley infrastructure that makes it possible to come up with an idea at breakfast and have a company by noon. It’s taken decades of continual boom-and-bust cycles to create the complex fabric of venture capitalists, angel investors, lawyers, term sheets, accounting methods and best practices that a newby entrepreneur waltzing in the Valley today has the luxury of taking for granted.
What makes China so staggering is that everything that happened to corporate America over decades—think the television and media studios build out of the 1950s, the greed of the 1980s, the dot com bubble, the build out of physical and IT infrastructure, current Web 2.0 and CleanTech innovation—is all happening to China at once.
Imagine: At the same time eCommerce is getting sea legs, TV Home Shopping is also getting hot. Online ads are growing not because people are TiVoing through commercials—both TV and online ads are growth markets at the same time. Ditto for entertainment and piracy: While Hollywood sees the Internet as a threat to its cozy legacy business, China’s entertainment industry is just now building amid a world where piracy is already rampant. No one assumes anyone will buy a CD, so they just look for other ways to make money. The wonder of China right now isn’t just the size of the market. It’s the rate at which dozens of “old” and “new” economies are all maturing amid one another, and the hyper-network effects that such economic progress is having throughout the country.
As for China’s start-up ecosystem , it’s working to build its own Valley-like infrastructure, but it doesn’t have the luxury of growing it steadily over several decades. Experts say there’s at least $20 billion in venture capital sloshing around the country right now. It’s probably double that if you count angels and unofficial or very local funds, says Rocky Lee of DLA Piper, a law firm that represents much of that venture money in China.
That’s why calling China merely “the next Silicon Valley” misses the singularity of what’s happening there. The Valley has never been like this, and I don’t say that to knock the Valley. In many ways, our steady development has been healthier. But it’s also a lot less electric. In the next ten years or so way more money will be lost amid the China chaos, but I’m betting way more money will be made too.
It reminds me of the distinction between start-ups who develop products in “parallel” and those who develop them in “serial.” In the former, you raise a bunch of money, hire an army of coders and develop your whole vision at once. In the latter, you build one product, prove that one works and can make money, then raise more money to develop a second. Typically in a time of economic plenty and investor froth everyone pushes for parallel. When the funding and revenues get tight, the serial approach comes into vogue. Parallel is always more exciting; serial is always more rational.
Silicon Valley tends to develop start-ups in “serial waves,” if you will. There are always outliers and waves can coincide in timing like CleanTech and Web 2.0 did, but investors and entrepreneurs tend to jump on dominant high-growth bandwagons and ride them until a few billion companies come out of them and many more fail. Then they wait for the next wagon.
China, as a country, is developing in parallel. The wagons are running constantly and going in nearly every direction. It’s a time of chaos that can burn people out, but it’s also one so unique in the history of modern economics that many ambitious people can’t ignore it. That’s why most transplants from the West who survive their first two years in China tend to stay for more than ten.
Given all this, China is a lot more inwardly focused than other places like Israel and Europe where start-ups have to be global from day one to have a big enough addressable market. When it comes to the Web and mobile, the biggest surprises will likely come from local, non-English speaking entrepreneurs, maybe even those outside the largest cities. They probably don’t read TechCrunch and may not even know where Silicon Valley is on a map. But that won’t matter, because their local market will necessarily develop very differently than ours.
And while China gets a rap for ripping off U.S. Web start-ups now, I think we’re going to start seeing U.S. start-ups copying a lot of elements of Chinese entrepreneurs’ business plans, whether it’s unlocking the value in virtual goods, experimenting with alternative online payment methods or developing more social forms of e-commerce, where like-minded friends shop together.
You always find the best ideas within atmospheres of constraints. It’s why some of the best companies are started during recessions. It’s why Israel was such a surprising hot-bed for Nasdaq IPOs in the late 1990s. And it’s why Chinese Web companies have come up with other ways of making money than just slapping ads on a site, because they had to.
I’ll be going back to China in October, and I’m learning Mandarin in the meantime. Because odds are the next great grinning Web coverboy may not speak English. (And for the commenters who keep complaining that India isn’t getting enough TechCrunch love, calm down! I’ll be there most of November.)
Hey! Awesome! I can get like 1000 Chin workers to work in my factory and have no worker’s rights, no safety regulations, no OSHA, nothing!
Hell, if one of them gets cancer and dies, I can just grab another from the fields!
Man, I love manufacturing in China! They rock!
Hey, don’t count yourself as part of Valley, coz we don’t do the nasty thing like you.
I totally agree with this article. China won’t ever be able to achieve some of the Sillicon Valley aspects like a strong community bond.
http://www.twibeo.com
The micro blogging site for the web community.
China itself has a bigger community bond than Silicon Valley. There’s a strong nationalistic streak running through and through. Doubt Silicon Valley or anywhere in the “what have you done for me lately?” culture in the US can compare.
True, there is an inseparable bonding in all Asian countries and China is no exception to this. The Chinese may lag behind in English, but when the world comes to China for taking its picture as web coverboy, China will open up and gradually greet the world in English. This is because, many Chinese are keen on learning English and channels will open for them soon.
Exactly!
Nationalism is not community, it is personal identity. Not the same.
And no, no one is going to copy China’s virtual goods, or ’social’ shopping networks. Why? Because they only work in communities that have just discovered mass and internet media. There’s no >there< there.
James said…
China won’t ever be able to achieve some of the Sillicon Valley aspects…
I agree with that assertion based on a very fundamental human nature and that is respect for individual rights. Silicon Valley succeeds because the rights of the individual is embedded in the law while China is a totalitarian state where as the government at any stage can loot/seize your business anytime they want and there is not much the owner of the business can do about it, since the state can manufacture the evidence to charge the owner with certain violations. A system that allows free enterprise will always be more prosperous compared to other systems that don’t allow free enterprise and don’t protect individual rights. This is the main difference. The US law protects individual rights while in China, it is not.
What’s this “rule of law” you speak of? Obama just decreed the terms of Chrysler and GM bankrupcies.
The secured bondholders got boned like Jenna Haze in a gangbang scene.
Such quaint notions. We no longer have “rule of law”, we have “hope and change.”
I thought I will comment, but then realized it would anyway be *censored* to the Chinese audience..
It is obvious you were brainwashed by some politics propaganda. You are free to express your political views here all day but I do not think tech people here are interested in that.
I don’t want to understand it. If you want to say something it is just your notion. Then someone else pop up and say sometimes against your point of views.
Who dare to say America is better than other countries for the bloody imposed taxes, stock scams, and selfishness of the government. There is no hope unless we are on the top of the food chain. So long people.
Ever since corporations were granted the same rights as individuals, the notion of individual rights, as was pointed out to Benjamin Franklin, rests on who can afford a printing press. The individual rights of corporations will always outweigh those of individuals. Where corporations support the government by political contributions, the comparison comes down to the advantages of government in service to big business or in service to big brother.
I’m going to have to go with the success of the USA in this one.
Sarah your article exposes a considerable lack of business acumen as well as technological understanding. You do yourself and TC a disservice. Challenge yourself by trying to write an article where there is no reference to yourself, farm league.
Interesting article. My big question is; given that there is a boom in China and there are many startups, are they innovating ie. Do the startups create new ideas or do they copy the West and make it better? Would they have created Twitter, or come up with a cloud computing concept, blackberry, iPhone, google, Apple etc etc. exportable to the west. Is the observation one of mass innovation and creativity historically associated with the valley?
Sarah, great job writing this article…
I second this assessment. Great intelligent commentary.
(insert token Sarah cheerleader comment here)
China will fold in on itself because of the corruption, greed, and abuse of the lower class. Plus they really know how to take advantage of westerners which hinders westerner’s motivation to continue the investment stream.
Learning Mandarin will be similar to learning Japanese in the early 80’s – impressive but not necessary. But then, the Malay who washed my car in my company’s carpark (3 times a week for $20/month) spoke 6 languages.
India should pass China in the next decade but they also need to rein in their own corruption, greed, abuse of lower class…
USA will fold in on itself because of the corruption, greed, and abuse of the lower class. Plus they really know how to take advantage of developing nations which hinders motivation to continue the repayment stream.
“Learning Mandarin will be similar to learning Japanese in the early 80’s – impressive but not necessary.”
good points.
Wasn’t Japan supposed to rule this decade/century? Wasn’t amerikkka predicted to fail since forever (about 1 million times during the 70s)? Wasn’t the EU supposed to rule the world with Soft Power? What happened to the celtic tiger? What happened to Dubai? Why does China continue to buy US bonds and peg it’s currency to the almighty dolla? Is C the new IC which was the new BIC which was the new BRIC? These were all fadish prediction of the past 10 years. Let’s see if the hype pans out.
Third. Great article and very well written.
I didn’t think the article was so hot. China’s a developing country. Also, what did you find worth copying in Chinese business plans? No way would I spend 10 years in China, not even 2. I think that’s pretty much guaranteeing yourself cancer. I’m just saying.
Rah rah rah
hah hah hah
Another nice article, Sarah. Interesting observation and perspective.
…and???? Where is the dialog/comment/discussion?
Good timing with this article. The 20th anniversary of the Tiananmen Square massacre is this Thursday. I went to China in 1986, but I am in no rush to go back. I’d personally prefer not to send my money to the Chinese government and support their autocratic rule. It’s pretty depressing when you can’t find a nice wool sweater that wasn’t made in China, even those of “prestigious” brands. I wonder if the TechCrunch site is blocked by the Great Firewall of China.
1. Techcrunch is NOT blocked by the the great firewall, while a few other popular sites are.
2. Many of us who sat on tiananmen square in the “summer of 89,” and who had the opportunity to live abroad for a number of years are now back here in China.
3. Don’t think you are really missed here for not visiting, so no worries. Can’t help you with your sweater depression though. Sorry.
hah… great insight
too bad for bluevoter
If you sat in on the summer of 89, I’d think you should be pretty disappointed with your government. So what are you mouthing off about?
Marc, the “I’d think you should be” attitude is exactly the problem people like you and our dear friend bluevoter has. The world is pretty big, people are very different, and history and politics are complicated.
Let us geeks focus on making people’s life better with technology. Don’t try to mix politics with EVERYTHING, especially with things you never experienced and don’t know much about.
BTW, I was only “mouthing off” some facts in case you failed to notice.
Be cool, have a cold red bull and go back to coding… would ya?
Really, it’s kind of ironic that these clueless Americans are pointing their finger towards China while their own country is creeping towards less freedom and greater corruption. Right under their noses.
Agree with George and JB. Nice article from Sarah
I agree with JB. America is rapidly becoming a police state. UK is pretty much there.
Only difference between the two is the US corporations are emptying the treasury before the lights go out.
Either way, buy gold.
George you are so wrong…. Politics is a huge part of life (Some philosophers even look at human as a political being not tech-being). Different people and culture doesn’t mean there is a different morality (doing wrong in one place can’t be right in another). Politics is in EVERYTHING – judging the amount of experience doesn’t mean shit. China needs to make changes in human right and in other areas. It is sad that so many coders (like you?) are saying only 0/1 world… (I’m not saying everything is bad in China but the people in China need to have some deep inside inspection)
I wont comment on the Chinese as people, but their government is sure a vicious snake…I wonder if people there even care about how the world sees them..Most Chinese I know are not even aware of the wars that their country fought, the unnecessary land disputes that their country is engrossed in Tibet and elsewhere..
One country I wouldn’t miss if it vanished one day…
Different people and culture CAN mean there is a different morality. Because what is morality to western countries? It’s built on Christian ideals so much that even non-Christians in these countries subscribe to it in some fashion
I wonder if many people in America care about how the world sees them, too…
It amuses me that any article related China always gets a massive traffic boost from haters like Anand. But high hit counts only mean writers will write more articles on China – giving China such a massive mind share and dominate media attention.
The more negative PR about China, I am happy..Now you happy?
“…Many of us who sat on tiananmen square in the “summer of 89,”
Us as in _____ not you! Or were you one of the guards? I know people who were there on the 4/5-June-89 and they speak of the time with horror and utter and bitter anger.
Don’t try and lump yourself into the scene when you were most likely in nappies at the time.
The sad thing with the Chinese government is this is probably a paid post. Hundreds and hundreds of party members typing on the web trying to “influence opinions.”
I love China, don’t get me wrong. But the sad thing is “truth” is hard to come by.
And the sad thing is whenever you hear something that does not agree with you, we must be paid by Chinese government, brainwashed… etc. It is pretty amazing. Why don’t you just accept the “truth” that there are people will have different point of view, different value?
"What makes China so staggering is that everything that happened to corporate America over decadesâthink the television and media studios build out of the 1950s, the greed of the 1980s, the dot com bubble, the build out of physical and IT infrastructure, current Web 2.0 and CleanTech innovationâis all happening to China at once."
excellent article; I do wonder if the differences you mention could be compared to the differences between the organic development of British transport infrastructure compared to that seen in the USA or indeed any of the legal/medical institutions developed in this seemingly organic way – it didn’t stop younger countries learning and adopting them and in many ways doing it better!
Super article Sarah. Any plans to come to Japan?
Sarah, I think you misunderstood the dynamics of China businesses. Many businesses in China operate in a parallel mode. Things are moving very fast. Given the sheer size and the number of entrepreneurs, my bet is that it is going to be multiple times larger than Silicon Valley. You cannot really see it locally because they are all over the country.
Timely and valuable article. China has the ability to throw $ and people at any given situation at such levels that critical mass is reached very early. Key will be the continued development of their domestic market as the middle and upper classes continue to grow. While in Beijing several years ago, one local scientist mentioned that China had over 1500 scientists focused on embryonic stem cells alone, at one company (really a state agency that was ‘privatized’). Key to follow – will a wealthier population begin demanding greater political freedom? Will the government be more flexible in allowing political freedom? Time will tell.
Brilliant story. I’m interested to hear your take on the obvious elephant in the room though: How does China’s communist government factor in? What happens to central government power as the economy grows?
Sarah,
Nice article though I wish you gave real examples of Chinese companies that are inwardly focused, those who are using alternative methods of payment, virtual goods, etc.
You maybe saving that for your book though so I guess I’ll have to wait for it to be published.
Well, most Chinese companies are inwardly focused. Take a look at Tencent if you want great example of alternative payment methods and virtual goods and you’ll see what Sarah means. In fact, download a copy of QQ (the im made by Tencent) and try it out yourself. and because they are so inwardly focused I’m not sure if the English version is as fully featured as the Chinese one, and most features I use are in Chinese only. Here’s the link: http://www.imqq.../download.shtml
I agree with this. Tencent QQ is the no-brainer answer to your question.
QQ makes a lot of money http://www.jlmp...=147930_0_5_0_M
and almost all of it from non advertising sources, something its US counterparts struggle to do
As someone who just returned from 3 years in China, working in the web space, your “change in regulations” point is spot on (as is your localization point), but you just have to adapt if you are going to do business there. It’s just the “doing business in China” overhead (which is why local are companies are so tough to compete with when there are limited barriers to entry, such as anything web related).
The “death penalty” worries on this forum are laughable. Look at the cases. Almost invariably they involved massive fraud, usually fraud that resulted in the death of Chinese citizens (e.g., fraudulent baby formula, drug regulator fraud, etc.), and none of the cases, to my knowledge, has ever involved a foreigner, nor involved anything in the information/tech industry.
P.S. Spent some time in India too (admittedly not as much). Sorry, but there is no comparison. China is on a whole other level.
Good article! Here’s an example of maps: http://guangzhou.edushi.com/
Great insight Sarah
Please, please, please
don’t learn mandarin
don’t go to china/asia
& hope others won’t follow!
seriously though.
Why do you think the big boys/pedigree silicon valley VCs can’t survive in China then?
No, the reason why China is different from Silicon Valley is because you have a corrupt government willing to do anything for anyone who gives them kickbacks, i.e. send the police to steal the competitor’s server hardware. Also, the government does not care at all about copyright infringement, so basically you can go ahead, blatantly copy someone else’s idea, same name, logo, even stolen code, and as long as you know a few guys at the chinese government you can even have your competitor shut down without a problem.
yes, you are correct. people like stealing stuff but it does not limit to Chinese. There are about so many truckers in the U.S. and I believe less than 5% pay for the DVD movies or music. There you go the money that are not made from US companies. The only difference between Chinese gov and U.S. gov is the packaging on actions. They both do dirty things for their whole benefits. Grow up kids.
That’s a statistic I’ve never heard. It’s even more alarming than the notion of truckers watching DVDs while driving. Hate to be sticky, but can you offer a source to back it up?
Your notion of different packaging is apparent in that the US passes incapacitating laws to lock up corporate copyrights while China refuses to police copyrights at all.
I just got back from Beijing (regrettably missed the TC meetup), and everytime I go there it blows my mind- the mix of old infrastructure dev going on at the same time as new media.
One thing I will add is that the culture is vastly different. There is very little ‘credit’, or even reputation, which greases the wheels of Silicon Valley. A lot of beginning entrepreneurs have to work off of family investments, or from personal savings. In a country where no one has social security numbers, it’s very hard to reliably lend money, or even tell which companies are legitimate. It’s the most capitalist society I’ve ever experienced; to the point where there are so many businesses, it’s impossible for the government to shut down dishonest ones (which there is an influx of).
This really only makes it possible for VCs to lend to large firms right now, ones with lots of assets and low liquidity. I do think that this will stabilize at some point within the next two decades, it will just take time.
One good insight here worth pointing out is that the Chinese notion of “guanxi” (relationships built over time) is less of a quaint, folksy small-town type phenomenon than it is a way to protect yourself from getting screwed in a place where you cannot trust anyone due to rampant fraud, unpredictable civil and criminal law enforcement, and corruption related to both.
When you hear Chinese talk about the importance of guanxi in their country, realize that it’s because they have a hard time trusting outsiders because they can’t even trust each other.
Interesting article. I heard Zhan Ye (President Game Vision; Strategic investment for Giant Interactive – Chinas leading online game developers) speak last week.
He mentioned that the Chinese are masters of developing B grade games but lack the A list creative talent required to compete with games coming out of the US.
I wonder how long it takes before Chinese companies start offering rediculous dollars to grads and other valley talent to jump ship and setup camp in China?
>start offering rediculous dollars to grads and other valley talent to jump ship and setup camp in China
But why wouldn’t they just develop the games in the US then anyway.
Thanks Sarah! Electric article and while we know this is what’s happening there, you made it come alive. I’ve got no problem with learning mandarin but I do have an issue with convincing my other half that we’re moving to China
This is a great article, and something MGS should take notes on. You are spot on talking about China right now. They are hot, and are evolving like nothing anyone has ever seen. They are IMO in a better position than the US because they have less legal hurdles to overcome. If Google was based in China the legal battles they face today would be non-excistant.
“No one assumes anyone will buy a CD, so they just look for other ways to make money.” – They are already on a forward thinking track, unlike the US which is ass backwards.
China owns the Silicon Valley and owns USA so I don’t know why you are looking for a new Silicon Valley in China. NB: I think it’s more important to write a book about how to reduce your public debt because in America you have great ideas but less and less money…and China it’s the opposite, so it’s very simple to predict the end. Facebook or Youtube or Twitter are perfect exemples very cute, very famous but produce no money
Indeed, Chinese money is the gasoline that keeps Silicon Valley and the U.S. motor running as of now.
When the money flow dries up (and it will), the era of Chinese century will kick into a new gear like you’ve never seen before.
I predict that most of the new tech names in the next 20 years will emerge out of China, not U.S. or Europe.
China will not replace Silicon Valley, but it will make more money if Silicon Valley keeps constant and stays in the valley. Been in China for 4 years, I have two observations about China:
1. The speed bringing things to the market. I guess this is Sarah’s main point. One time I chatted with a person sitting next to me on a flight from China to Toronto, he said “It is not cheap labor that makes China rich, it is productivity.” Looking ourselves, I could not agree more.
2. Learning the mistakes from Silicon Valley. They do copy ideas, but they enhance them by making money from their own people, a huge market. The education system in China has a problem and cannot provide creative young people. Period! But if they change it (can happen overnight, believe me), new ideas will come along in a big time.
So I believe it is time for Silicon Valley to re-think, and change, especially in the speed to make money. I really like Peter Schiff’s book: Crash Proof. While Americans are busy in building nice golf courts for its people to enjoy, Chinese people are making apples and oranges to feed their own people. When there is not enough apples and oranges, you have to work double harder to survive. Now USA may face shortage of them, while China could produce more than enough soon. So who should work harder?
We all knew this was was going on, but love how you brought alive the reality of this unprecedented concurrent development in China. Bravo Sarah!
china cannot innovate. don’t look to see anything new and exciting coming from that area.
the culture isn’t structured to do it. capitalism = innovation
go ahead and name companies that AREN’T making knock offs and clones of existing businesses/products.
i’ll give you some time to think about it
Ryan, I forgive your shortsightedness – just check out Sri’s comments for one example:
http://guangzhou.edushi.com/
great you got one, of limited value and interest.
is that facebook? is it twitter? is it even stumbleupon?
Ryan, it’s not surprising that you have no clue about what is happening in China since most start ups are not thinking beyond their domestic market. There’s more than enough growth opportunities for them without attempting to target the likes of you.
But dismissing China out of hand because of some sort of idealism is short sighted. Not so long ago people used to say pretty much the same thing about the auto industry. Just saying.
creating products for their own market is a zero sum game in communism.
they’re not earning anything doing it unless they’re making like productivity tools etc.
you might need to look beyond the simple “aha” that they have a huge audience and see that they don’t create wealth by creating what we would call web technology if only they consume it
I guess you should try visiting China before attempting such comments… You may realize that in many ways, China is very capitalist in their way of doing business. Not saying there is no trace of communism in the country but when it coms to business it maybe the most capitalist country around….
You make it sound like its Stalline’s Russia….. And just to mention other non-communist country that focus much attention on domestic market there is Japan so I don’t see how focusing on domestic growth doesn’t create value.
Alex:
Please not drag this moron to china. he just made me sick of stupidity of him.
-
The big mistake that I believe many Americans make when evaluating China is that they tend to do it through US-colored glasses. They tend to want to make the China discussion about us or them, a binary decision. A zero-sum game.
It’s true that they don’t tend to have the creative thinking gene as evolved as we do here in the states. But it is evolving. As more companies (Cisco, GE, etc.) start technology R&D centers in China, this evolution will begin to move quickly and spin-outs and start-ups with greater creativity will evolve.
They already have 5-10x the engineers graduating from their schools, and their children are all bilingual so they have engrained global viewpoints.
And for anyone that thinks that they don’t have hardship, even with all that VC capital floating around, just take a walk around Beijing or Shanghai (with your red eyes and hacking coughs) and tell me that Green companies won’t emerge from there. Tell me that someone won’t figure out how to better feed, educate and employee their 100M that make less than $1/day using new technologies.
So maybe the question isn’t whether China will be the next version of the 2009 Silicon Valley, but whether China will be the next version of the 1970s or 1980s Silicon Valley that created 100s of companies that built sustainable products and created companies that grew over long periods of time. I would tend to bet on the latter.
It is interesting to me that we’ve assumed China will be like USA 2.0 in the 21st century. It’s like we foisted onto China all the things we wish we could do if we could start over, as if they are some kind of tabula rosa. We dont have a very accurate picture of China in America. China is in fact rife with poverty and all sorts of civil unrest, evidence of which we almost never see. What we do see is images of their power, greatness and potential…
i don’t know how is the valley, but i know how china and beijing are, and i think you’re right about it. that’s why i am here. we’ll see…
really, but i dont think so~
Interesting analysis you are making here. I am just missing something on the many differences in work ethics, attitude towards work, quality etc. China has long ways to go. Just look at the T-shirt guys in your other article, in a year they weren’t even able to find a company that builds their website.
>and I’m learning Mandarin in the meantime.
That’s a great idea in any case, but hope your expectations on the level of conversations you can have within half a year aren’t too high… If you manage to interview the next great grinning Web coverboy, please post a video of it here.
Great article. It is truly a 21st century gold rush in China right now. I can’t help but wonder when and what the down cycle will be like after this boom has run its course.
I can recommend a great little Mandarin school here in Shanghai to get you up to speed.
China not necessarily WANTS to be ‘like America’ (and the rest of the world is not craving for it too, btw).
Why reproduce this SV atmosphere of overlegalized lazy cronyism? Who needs that besides the SV hype machine and the bunch of ‘angels’, ‘devils’ and MBA’s after all?
I assume its because a totalitarian government is opening some of its doors, and meanwhile, all these Chinese business people are seeing all of these developments and realizing that they can catch up and learn from the US for their markets.
Its like a hose has been shut, and now the water pressure is releasing a lot in a short amount of time.
That doesn’t mean that china is more open, it just means that they are watching us make progress and then the Chinese businessmen are seeing money to be made in the things we did already.
Nice post Sarah, I lived in China for 2+ years and will definitely be returning. I was mainly working in the outsourcing sector and I could definitely see the enthusiasm which many of they guys I worked with had for owning their own business, setting up a small startup.
Learning Mandarin is 100% the right step, you’ll understand much more of the culture once you can actually speak to these guys in their native tongue. Loved the angles on the local startups over there, I’m not sure why Techcrunch does not have an Asia focused site much like Techcrunch UK. Keep up the good work.
Welcome to India
We have some good start ups here too..though cant claim of becoming next USA..next China..blah…blah..:)
Most of the smart of us go to US and the remaining earn bread and butter and engage in spiritualism..devotional songs..food..
But i am sure ull enjoy ur stay here..:)..its very different here..if u have an appointment u can go 5 or 10 min late..we wont mind..we dont like strict discipline..smile less faces..just relax and enjoy.
Sarah, great insightful article. I’m currently spending the summer out in the sticks of Southern China and it’s pretty astonishing how much has changed since I was here a decade ago.
I never took a step back to take in the macro view you covered in this article. It is astonishing. I guess this gives me that extra push to commit learning Mandarin as well.
I don’t have anything valuable to contribute but.. this was the best article on TechCrunch I’ve read in a very long time.
If I were building a company in China, one concern I would have is the arbitrary actions of government. It seems like they hand out death penalties for business people a little too often.
Of course, once the US loses its access to foreign capital, it may be a lot easier to get funds in China. And then you’ll be able to get your busy work done in low wage economies like the US.
Fantastic article.
Having worked as an entrepreneur in Asia/China, I can completely see where you’re coming from; the electricity in cities like Shanghai is incredible, and I’m sure that our children will give us funny looks when we think of China as “developing”.
That being said, the siren call of China as a business opportunity is an old one, and historically disappointing. Contracts can’t be trusted, and “good” businessmen are seen to be those who make/take/steal the most money, not those that create the most value. Google “kiasu” and you’ll see why Singapore, a Chinese culture, still depends on imported talent despite being economically very developed. Money will be made in China, but very little of that will be made by outsiders.
Silicon valley might have its arrogance and occasional cronyism, but we do have rule of law and a culture that respects and admires entrepreneurship – factors I can say are crucial.
If you want to learn more about the culture of entrepreneurialism in China, try to find a founder with more then one failure under his belt, or to ask a parent what he thinks of his son’s venture – the cost of failure is very high in Confucian and shame-based cultures.
Thanks for great post, I totally agree with you about China Internet policy. They are trying to block themselves.
I think the political stability is a big concern in China. Not only do they hand out death penalties to people too often, but they also change their regulations just as often. It’s like running a website and constantly looking at what their firewall is blocking everyday.
On top of that, there are localization problems. Locals use a really good comparison of how foreigners view China, it is viewed as a beehive, it’s one big country from the outside, but none are connected on the inside.
Great article. Don’t rule out the possibility that another Silicon Valley may arise in the East though. However, over time, policies will change and morph – the country is going through “growing pains”
Nice post.
China is big special market. For internet, full of chance.
For instance, zuosa.com is a twitter like website, twitter still make no money, but, zuosa.com, make money now.
…no stupid ads
I find it silly that you mention Facebook in the same light as Google. Facebook is no Google. In fact, Facebook isn’t much more then Twitter. Popular, sure. A good business… well, where is the revenue?
Yet again – if you want to find out what’s happening there, just come to Hong Kong. That is what we are there for. Basically, we only exist because we make it our business to know who, what and where it is happening.
We are also the ones who have been telling you we will help set up a TechCrunch affiliate about it on the spot.
Read your in mail!
Hong Kong is NOT China u prick.
Bear in mind that China is benefiting greatly from the innovations of Silicon Valley. Without such a foundation, China would not be in such an interesting period of growth.
@John So, definitely an issue. My father conducts business in China and is constantly complaining about the arbitrary changes in regulation. It’s a constant wine-and-dine to stay above the heap. These political games I believe are the real issues holding China back. It’s not external forces that will diminish China’s role in the coming years, but the internal issues that still need to be solved. It can’t happen overnight, but it does need to happen eventually before China can move to the next level.
As someone who just returned from 3 years in China, working in the web space, your “change in regulations” point is spot on (as is your localization point), but you just have to adapt if you are going to do business there. It’s just the “doing business in China” overhead (which is why local are companies are so tough to compete with when there are limited barriers to entry, such as anything web related).
The “death penalty” worries on this forum are laughable. Look at the cases. Almost invariably they involved massive fraud, usually fraud that resulted in the death of Chinese citizens (e.g., fraudulent baby formula, drug regulator fraud, etc.), and none of the cases, to my knowledge, has ever involved a foreigner, nor involved anything in the information/tech industry.
P.S. Spent some time in India too (admittedly not as much). Sorry, but there is no comparison. China is on a whole other level.
muy buen post, espero que la argentina tambien se haga un buen polo tecnologico y los gobiernos entiendan lo que significa invertir en tecnologia
The Chinese programmers are some of the best in the world. News week article Title: “U.S. Military Should Worry About China In Space”. Can China be the next Silicon Valley, of course they can.
Well written article Sarah.In the second para, “For every wunderkind smirking on the cover of a magazine…..” did you mean “wonderkid” ?
What gives US silicon valley a leg up compared to other evolving markets is their ability to support every single idea.Sometimes over cautiousness is not good for a startup ecosystem.China and Indian will need to learn how to breed ideas so that more ideas are churned out without the fear of failure.
It’s called “wunderkind”, even in English.
http://en.wikip...wiki/wunderkind
I’m going to have to agree with Ryan above. I’ve worked with a TON of Chinese devs in the tech sector at top tier companies — here in the US, not China — and I haven’t been overly impressed with the level of independent thought coming out of these people. Their culture is designed to breed conformance and risk-aversion, not independence, and these aren’t good qualities in startups. What I’ve personally witnessed is that they’re really good at copying existing ideas and reverse-engineering; not so good at innovating on brand new ideas. It’s a function of their values. China holds Western archtetypes like the rebel in contempt. But that’s where the best ideas come from, thinking outside the box. It’s going to take a long time for China to overcome this conflict of values, and anybody who sprinkles money around in China is likely only going to enrich the local bureaucracies, not take money out in a wheelbarrow.
Those creative Chinese devs are back in their own country to run their own business.
A few weeks ago, China blocked blogspot for the first time since before the Olympics. Not just certain blogs on blogspot, but the whole lot, including through proxy servers. Hard to keep up with tech news in such a business-friendly environment. Just one reason why startups happen in America, see http://www.paul...om/america.html for more.
Excellent essay. Thanks for bringing it to our attention.