China’s tech industry moves at breakneck speed. In the span of one year, it’s possible for a startup to go from zero to unicorn, and to see new tech trends – such as bike-sharing – take over a city. It’s hard to keep track even if you’re based in China. Connie Chan, partner and China-watcher at Andreessen Horowitz, manages to do so all the way from Silicon Valley.
“There are two different types of people who go to China,” Chan tells Tech in Asia. “One goes to China and can’t get enough of it. They want to explore, they want to understand all the social dynamics. […] And then there’s the other kind that’s like, what is this, and then they want to go back home.”
“I definitely fall in the first category,” she says.
Understanding China, a more mobile-first society than the US, can help or inspire portfolio companies.
Chan didn’t start visiting China until after she graduated from Stanford University, but her connections run deep and wide. She knows investors from top firms in the country, such as GGV Capital and Matrix Partners. She also has friends inside major Chinese tech companies like Tencent.
Now, she’s the resident China expert at Andreessen Horowitz, often writing and speaking about the latest developments in China’s tech industry, especially mobile trends.
“I worked in Beijing before I came to Andreessen Horowitz and that was when I realized, wow, Weibo is in many ways more advanced than Twitter – and there are many more examples like that,” she explains.
“When I came back to the States, WeChat was one of the products […] that really got me feeling that I needed to educate startups in Silicon Valley and other companies about what’s happening in China,” she says. “Every time I tried explaining WeChat, it was falling on deaf ears.”
Andreessen Horowitz hasn’t invested in any Chinese companies, but Chan often uses her expertise to help portfolio companies, such as Airbnb, that have business interests in China. More recently, the Silicon Valley-based VC firm led a US$12 million series A round in LimeBike, a bike-sharing startup in the US. Understanding China, a more mobile-first society than the US, can help or inspire portfolio companies when it comes to product development as well, says Chan.
Last week at the Wall Street Journal’s D.Live conference in Hong Kong, we had the chance to meet up with Chan and pick her brain about how she’s become a China expert, what trends she’s keeping an eye on, and bike-sharing. Below are edited excerpts of our conversation.
You’ve developed a reputation as a broker for cross-border collaboration between Western and Chinese firms and investors, like Lyft and Didi Chuxing. How else do you help Western companies enter or understand China?
It runs the gamut. For example, I will read the job description [for new hires] and make sure I think it’s accessible to a Chinese audience for the kinds of characteristics they’re looking for. If they’re pitching to a Chinese investor, I may change and rewrite parts of their deck because I know what a Chinese business plan generally looks like and I don’t want it to deviate too far from that.
I think Weibo is really misunderstood in the US.
There was one company of ours [that had] a malicious fake version of their app in a Chinese Android appstore that had a bunch of malware on it. This US portfolio company had tried contacting this appstore for over a month and couldn’t get it down. I happened to know a VP at that company and was able to remove it in one afternoon.
I’m also making introductions to Chinese recruiters, advisors, celebrities, or media as well.
What are some examples of Chinese products or concepts that you often have to explain to people who aren’t China-savvy?
I think Weibo is really misunderstood in the US.
Because it’s called China’s Twitter equivalent?
Yeah, but also people don’t realize that it’s not just the features that they have in there, but also the way that people are using it to satisfy a lot of what Instagram would typically satisfy.
Some social media influencers are posting photos of themselves doing selfies of what they’re eating, drinking – they’re using Weibo for that, not just WeChat official accounts or WeChat Moments [the app’s personal newsfeed]. Because when you’re posting that kind of stuff, part of it is to also show the world what your lifestyle looks like, not just your immediate friends.
Any other apps besides Weibo?
WeChat is important to study if you want to understand the China mobile lifestyle. But I also think […] that people ask about WeChat the most because there is no close US equivalent to it. When there is a close equivalent, Western interest in digging deeper into features decreases. For example, people don’t really ask about the Didi app even though Didi has a lot of interesting features in it beyond ordering a car to pick you up.
For instance, they have a feature where if you’re drunk and you can’t drive home, you can hail a driver to show up at your car and drive your car home for you. There are also features around buses and there is a version for seniors with bigger font. They have features that I haven’t seen in other ride-sharing apps worldwide, but no one ever asks about it because they just think, oh, it’s the Uber or Lyft of China.
I’m impressed by how closely you’ve been able to follow tech trends in China from Silicon Valley – especially since some features, such as local services in WeChat, are not available in the US. How do you do it?
Prior to going to HP [Hewlett Packard] when I was at Palm, I was a product manager. When I look at products, it’s very much conceptually – what can this create, what does this allow for? So even if I’m not using WeChat’s local services and Wallet every day, I can imagine what’s possible. And then I validate those thoughts by speaking with my friends who grew up and live in China.
What about tech trends like live streaming and virtual gifting?
The best way to understand products is to use them. For example, I forced myself to live stream a few times and and then I deleted them right after. This helped me to understand the psychology of the user. It was like wow, I made some friends and some of them even watched my follow-on broadcasts. […] And these apps throw this beautification filter on your face and I was like, wow I look great, I want to do this again. Trying the product allowed me to understand the positive emotions that come with live streaming, and that helps me better understand why broadcasters continue to broadcast.
To really understand virtual gifting you have to spend money. So I buy the coins and then I send people [virtual] gifts and I see the reaction. I see how nice they are to me afterwards and then I can see very clearly why other viewers will send more gifts.
It’s very much a product-centric view that I take when I analyze Chinese trends.
You’ve mentioned in your blog that Western firms can draw inspiration from Chinese companies. What are some challenges in adapting China-first consumer businesses, such as bike-sharing, to places like the US where population density is lower and people aren’t as QR code-savvy?
For the bike-sharing example in particular, these companies have to adapt their go-to-market strategy when entering cities, universities and corporate campuses in the US versus China. In China, some of these [bike-sharing] companies just show up and throw tens of thousands of bikes on the street and they wait until the regulators slap them on the wrist. In the US, you can’t take this approach with regulators.
Every company can learn from their Chinese counterpart.
In China, most of the companies [also] require a big deposit to ride the bike. This approach won’t work for in the US for legal and other reasons, and the way in which you would accept payment would look very different than in China. For example, US customers would expect that once the bike is returned, their deposit would be returned. In China, customers are comfortable with a deposit being held for months at a time.
Given the recent clash between WeChat and Apple over in-app payments, what are your thoughts on Apple adding QR code scanning support to iOS 11 for the Chinese market?
It’s interesting. When they launched that, at least from the people I’ve talked to, there was quite a mixed reaction. Many people were writing it off, saying it’s way too late and they’re just going to use WeChat for everything.
I wouldn’t write it off yet because Apple can still create the best shortcut or access to their own apps, right? Like the fact that I can get to the camera from a locked phone with just a swipe versus having to unlock my phone and then open the WeChat app and then open the payments [screen]. Apple can create different shortcuts because they own the operating system, so I think that’s powerful.
Secondly, it’s unclear what they’re planning to use that QR push for. It’s possible it’s aimed at Apple payments, which of course you can’t expect them to give up on yet. It’s possible to think of it as a hedge against mini programs, [lightweight apps embedded inside WeChat that don’t need to be downloaded or installed], because of course the App Store is very critical for Apple.
Apple hasn’t been vocal about what their strategy is around QR codes. But I wouldn’t write it off.
What tech trends in China are you watching closely this year?
Fintech, mobile payments, and understanding how mobile payments open up new business models. For example, Mobike, Ofo, and all the other bike-sharing companies, plus the umbrella sharing, the basketball sharing – all that stuff is only possible because of mobile payments. It allows you to do a transaction without a physical human being there to collect your debit or credit card.
So it opens up a lot of business models offline, and then online, digital payments with low fees allow for very low denomination payments and creative business models that no longer have to rely on advertising.
You mentioned offline business models – are you referring to WeChat mini programs?
I’m watching mini programs really closely because I’m very bullish on what it can become once the offline service providers and offline manufacturers start incorporating it. This will take some time but I think of mini programs as an entry way to do a bunch of other things. So it’s not just mini programs when I think of offline business models.
In terms of other promising areas in general, there are no big unicorns in China in the pet industry but yet Chewy just had a US$3 billion exit in the US. There are a lot of cats and dogs in China and because of the One Child Policy, people spend a lot of money on their pets, and the veterinary access and quality is not great. I do believe there’s a market for pet care. And senior care – with the growing elderly population, China will have to have new solutions for that too.
What advice would you give to startups that don’t have any connections in China but are interested in the market?
I’ve told companies to study their Chinese counterparts. Look for someone in your organization that can read Chinese, and if you don’t find one, look for an intern that can do it for you. That’s a really great first step to learning about China.
It doesn’t have to be someone who is Chinese as long as they can read the language. Then, ask him or her to do a walk-through to teach you about the Chinese equivalent product. […] I think understanding the local competition is the best first place to start. Then from there, if you still think you want to enter China, then you can start thinking about partners and legal structures and everything else.
The thing that applies to every company is they can learn from their Chinese counterpart.
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