Your FACE is very important in China

Investments in the stock market can be a very complicated affair. Depending upon the level of rigor that is taken in looking at the business performance, understanding the management team, competitive understanding and customer value…it could be a long time to come to any conclusion to invest in any given company. Or maybe it is as simple as figuring out what your neighbor, colleague or friend is doing and just copy them.

Sitting down with an Ad Tech company based in Shanghai it was interesting to find out the profile of the Chinese investors that decided to invest in their company. It turns out most of the motivation for their Chinese investors was a reflection of their friends desire to invest. But not because of the rigorous analysis of the market opportunity that these friends had done or that they were good past investors, it was simply a reaction to the fact that these friends were of the same or lessor economic status as them. The attitude was “if that guy is investing, then we can definitely invest”.  Now this could be simplifying things but there is a very real historical and cultural importance of “face” or reputation in China.

Maintaining face and reputation is important in China and is an implicit tool that could be used to market and sell to the Chinese consumer. Here are a couple of clever examples of this:

  1. A microfinance company based in China that provides student loans and requires a family member to be a co-signer on the loan. The co-signer in this case does not necessarily have to own collateral but is mainly used as a form of social pressure to ensure payback of the loan. If the student does not payback the loan, the co-signer loses face or their own reputation.
  2. One of the more popular Restaurant Review Apps in China (similar to Yelp) is called DianPing. The people that reviews these restaurants number in the 10’s of millions. Unlike Yelp though, the reviewers are also rated by the App which motivates them to do even more reviews. An example of their rating system goes from 1 to 5. The more reviews you do the more your level goes up. A system of reputation and face for reviewers.
  3. Taobao.com which operates under the Alibaba brand has an even more complicated level system for reviewers of products that are sold on their site.  Taobao.com is the equivalent of Amazon.com in China. Their system has over 5 levels in each of the major categories going from heart, white diamond, gold diamond, white crown and then golden crown. That’s over 25 levels which are used as a sign of reputation and status for these reviewers!

Using these subtle “face” techniques can be an important part of any marketing and sales tool targeting China consumers and businesses.

If you like this post, then please check out our other thoughts at www.impact10x.com/blog or email us at info@impact10x.com.

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. 

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.