Will Amazon Succeed In China Where Google Failed?

By some measures the Chinese government budget for internal security exceeds that of their armed forces. This security budget includes such things as electronic information monitoring in addition to the use of security forces to manage the internal safety of their citizens.  One common view of Google’s pullout of China was primarily due to Chinese regulations and restrictions around information flow which is a central foundation to Google’s search business.  While not as important to Amazon’s business, information and data is still central to many decisions to the value of their online shopping platform. So will Amazon succeed in navigating the online terrain in China where Google did not?  So far, they seem to be doing a good job.

In a recent presentation to a Tech incubator called DreamT located in downtown Shanghai and in suburban Jiading, I had the opportunity to understand more deeply how Amazon’s EC2 Cloud infrastructure is being deployed.  The incubator does specific cash and in-kind investments to tech companies who are deploying apps or websites that need access to fast, secure and reliable cloud infrastructure. One of the main in-kind investments is access to EC2 servers for one year which is funded entirely by the China based Amazon cloud business.   Although not a significant investment to the startups this does provide some great benefits to Amazon including exposure to start-ups, china based tech entrepreneurs and goodwill to the government.  The Amazon EC2 infrastructure allows internet based companies to bypass the 8 firewall points that regulate internet traffic in and out of China. This allows a better consumer experience for any foreign based companies that want to setup a ecommerce, app or website to access the Chinese consumer.

It remains to be seen how the online shopping platform of Amazon in China will do as they compete head on with local favorites Taobao.com and Alibaba.com but this strategy of co-investments, co-branding and partnerships with local incubators seems to be a good long term bet in the world of Chinese cloud infrastructure.

Taking a Closer Look at Shanghai’s Unique Tech Approach

Shenzhen was the Chinese epicenter of a massive economic shift to manufacturing in the early 1980s and the attraction to most foreign manufacturing companies setting up there was the promise of inexpensive labor.  On a visit to Shenzhen City (near Hong Kong) a couple of years ago I was surprised to learn how much that is changed when a large US optical manufacturing customer was in the process of moving its operations to Vietnam due to the rising cost of labor in China. The shift of manufacturing from China to other countries has also signaled a shift of Chinese companies focusing more on technology and business innovation. Nowhere is that  more obvious than in Shanghai where smaller districts are all setting up innovation hubs and incubators to build the foundation for this innovation economy.

Impact10x had a recent opportunity to speak at one technology park called Keiji50 in the Jiading area of Shanghai. The main focus of this park was  IOT/wearable devices and housed probably 10-20 companies on its campus.  Companies building versions of Google glass, Smart Mirrors and even Smart Coffee machines adorned its demonstration room. Especially interesting was the fact that the center also did China based VC investments through a quasi-government funded organization. We had an opportunity to talk to their Partners to find out a little more about how their VC investments worked in China. It seems most investments were made after a working prototype had been demonstrated and with maximum investments of 3M RMB (approximately $500K USD).  Seed capital financing did not seem to be something that they were particularly comfortable with as some of the frameworks/tools they used to evaluate innovations were based on mass appeal to a broad consumer audience. Most true breakthroughs start with a small core of leading edge customers which then lead to growth.

Another piece of their investment approach was the emphasis on patents or other more basic scientific intellectual property which could be a competitive barrier to entry.  Although this has traditionally made sense 5-10 years ago, with the massive shift to more open source platforms, crowd sourcing and any new innovation being circulated around the planet at light-speed…basing your competitive advantage solely on protection of information is quickly being eroded. As Bill Gates recently said “intellectual property has the shelf life of a banana”.

Stay tuned for the next couple of blog posts as we will be posting some more of our discoveries on China and Shanghai based incubators and technology parks.

 

Doing Business With The New China

I have been privileged to experience the vibrant transformation that China is undergoing to be a greener, progressive and tech savvy nation over the last 9 years. Being based in Shanghai my modest goal is to share stories and thoughts to help businesses, entrepreneurs and people navigate their own unique business challenges in China!

-Harsh W.

China Invents the “Lean Startup” for Countries 40 years Ago

The enormous transformation of China from the starving Chinese farmers of the 1960’s to having skylines full of gleaming skyscrapers in 2016 is a testamount to the incredible power of perseverance and experimentation. Deng Xiaoping who rose to lead in China in 1978 is generally accepted as a key figure who lead and drove this transformation. His philosophy was a simple one “to experiment, to take risks, and to not be afraid of making mistakes; when you make them, just correct them”. In Ezra Vogel’s biography of the leader “Deng Xiaoping and the Transformation of China”, the word “experiment” happens no less than 78 times throughout the book.  This book was recently promoted by Bill Gates as one of the best books to read on China.

The Impact10x team had an opportunity to share our views on innovation to China tech entrepreneurs and engineers on invitation from IC CAFE, a technology incubator and china venture capital fund located in the east part of Shanghai.  The best known innovators of our time like Steve Jobs and Elon Musk were the standard part of our discussion but Deng Xiaoping took a special place as an example of a leader who emphasized execution over guessing.  It maybe the hottest thing now in Silicon Valley to be a “lean startup” but lets not forget that this idea of experimentation and fail fast was what started the incredible transformation of China over 30 years ago.

Thanks to Xiaoming, Sean and Yixin from the Impact10x team in joining and supporting the seminar!

If you like this post, please check out some others at Venture Capital in China or contact us at info@impact10x.com. 

Wearable Tech Seminar in Shanghai for Sun Lovers (or haters)!

Impact10x was delighted to share the story of our UV Protection Wearable device to a room of technology and business professionals at IC CAFE a technology incubator and investment fund located in Shanghai. Please check out the summary of the talk on UV Protection Wearable and Smart Garment technology by IC Cafe.

Here were the highlights of what we covered:

Love the Sun!  Health Care App and Smart Garment hardware solutions: We are entering a golden age in the evolution of IT where better information, automation and connectivity will transform every industry in the next 10 to 20 years.  Industries that have not changed in a long time (for example: health care, clothing, and consumer goods companies) are all on the verge of disruption through technology.  Combine this technology pressure with people’s new attitudes about fitness, health and environmental stewardship and there is a massive opportunity for many new businesses to form.

In this presentation we will talk about some of the broad trends in the technology industry including Mobile technology, Apps and wearable devices and how this has created innovative o2o, sharing economy and IOT business models which are disrupting traditional businesses.  We will then deep dive on Impact10x’s  Sun Care technology platform which includes Health App technology and Smart Garment hardware solutions.

If you like this post, please check out some others on UV Protection or contact us at info@impact10x.com.

Impact10x Talks at Massive Tech Incubator in Alibaba.com Hometown

Shanghai literally means “On the sea” (shang: on, hai:sea) which shows up in its very distinctive flat coastal landscape. In fact, the highest hills you will see are the roads that lead up to massive bridges in the city. But go about 2 hours driving west to a city called “Hangzhou” and you get to see some of the greener more mountainous areas of China.  Known for its tourism and lake district this city is now getting known for its new innovative technology companies including the global giant Alibaba which has its headquarters there.

The Chines government recently built a massive technology incubator there under the “High Tech Zone Plan-5050” initiative which is to create even more tech companies.   The incubator finances IOT, Internet and software tech companies through competitions and local china based venture capital. The young companies that we met were impressive doing innovative App services to companies serving the up-and-coming DIY generation of Makers.

What was clear on our visit is the government still seems be the main actor in most financing and promotion activities but that there is definitely a generational reversal going on between older workers concerned about money, health, emotion and entertainment (in that order) and the younger generation being more concerned about entertainment, emotion, health and money (in that order). Those innovative tech companies that can satisfy these emerging Chinese needs have the potential to be the next big winners.

Ghost Tech Parks Attracting Some Beijing Attention

China is facing the largest migration in human history of 400 million people moving from rural to urban areas in the next 10 years. Urban areas especially along the coastal areas promise higher wages and a better standard of living as compared to the interior of China. To manage this mass migration, the Chinese government has made a high priority the development of cities interior to China to stem the flow to coastal areas. In some cases, this accelerated thinking has led to interior cities which are heavily built out with shining apartments and office buildings but has a feel of a ghost town.

On an invited visit to a Technology Park in the Yixing area of China (a city 1 hour west of Shanghai) some of this was painfully obvious. Wide streets, massive buildings, large beautiful courtyards, tree lined gardens but with a scattering of people walking around. This particular Technology Park was recently recognized as a National Research Park  by the Government in which only a handful have been given this honor.  The officials who ran the Park enthusiastically welcomed our conversation around bringing internet and IOT technology into the Park.

As the government continues to invest heavily into building out these innovation parks the question for this strategy is whether these gleaming towers will attract and grow the right innovative companies or whether its just putting some lipstick on a pig. What is for sure is that the approach being taken in investment models, company management and technology development is uniquely Chinese with no shortage of ambition to build out this next phase of China’s growth.