4 ms·

She's naive. There's no way that I'd consider doing a software startup in China, and I live here. There's just no good way to make money at it. First, it's d

She's naive. There's no way that I'd consider doing a software startup in China, and I live here. There's just no good way to make money at it. First, it's damnably hard to get people to pay you for anything software based. With the rampant piracy, nobody has ever needed to pay a dime for anything. Convincing people to BUY software is virtually impossible. Even if you could convince people to pay, the payment systems are byzantine at best. Forget credit cards, you'd better be prepared to go collect cash from people at home or work. Advertising-based models MIGHT work, but the competition's going to be tough. You'll be competing with corporations like Google, Microsoft, YouKu, and others that have billions to burn while they build marketshare. However you might succeed. Games like WOW can also make money. Regardless, if you start making any money, it will probably be taken from you. The government already has its fingers in your pie, because you must get licensed from the government to run a website. That means dealing with government officials who will demand kickbacks, or might just up and seize your business. The same goes for any partners that you have, who will inevitably try to squeeze you out and take over any profit-making venture. The odds of you having your business simply taken from you are very very high. Naturally, you have absolutely no legal protection for anything. Zero. If anything, the courts are your enemy, because they side with whoever has the most influence and that's not you. Your employees embezzle from you? Your competitor (or a partner) steals all of your equipment? Government officials demand "protection" money? Too bad! Better luck next time. You can also forget about patent, trademark or copyright protection, but that goes without saying. I'm not even going to cover things like hiring engineers or building hardware here, which have their own special headaches. It's not impossible to make money here, but 99% of the time the risk/reward ratio isn't worth it. Personally, I'm basing my company in California and targeting the American market. We might eventually come to Hong Kong or Taiwan, but I've written off the mainland as a lost cause.

liuliu 17y ago
What you said is exactly what Sarah's argument is. For the constraints and the whole chaos situation in China, it is definitely not gonna be Silicon Valley anyway. However, it is more likely to come up with new business models (like the virtual goods and virtual currencies) because of all the constraints you talk about.
- deleted 17y ago
  [deleted]
megaduck 17y ago
One more thing. If you're doing any kind of social or media business, and you've never had to deal with government censorship before, you're in for a new special kind of hell. I watched Google build up all sorts of Government relationships, spend ungodly amounts of money, make soul-tainting concessions, and then have it all blow up when somebody posted banned videos on YouTube. The whole site was instantly blocked, and it's still down after several months. You can be shut down at any time, for no apparent reason, and there's no recourse.
garply 17y ago
I think a lot of those things can be turned to your advantage. If Chinese laws favor weaker IP protection, start a company that does legal arbitrage between the US and China (e.g. Megavideo - which is based in Hong Kong). Weak rule of law and lots of bureaucrats? Spend time building relations and you'll probably pay fewer legal fees than you would in the US. Do you risk having your stuff stolen by employees? Yes, but talent is generally less expensive. I think the challenges are different, but there are probably advantages in China as well.
- megaduck 17y ago
  When I talk about theft, it's bigger than the occasional missing laptop. It's more like coming into your office at night to find a bunch of guys armed with tire irons loading your whole office into a truck. Or perhaps you'll just come to work one day and find yourself locked out and the business "under new management". That's more common. I strongly recommend aspiring China entrepreneurs read "Mr. China" by Tim Clissold. It's about one of the first major investment funds in China, and the problems they encountered. It's pretty mind blowing, and not atypical.
  - garply 17y ago
    I've personally had these types of problems while living in China - I'm sure, as a foreigner, I just scream "sucker" - but in my mind a lot of these problems become less severe if you've developed good relationships with local residents. Are you in Beijing? If so, I'd love to meet up some time and hear specifics about these experiences.
cabalamat 17y ago
> Regardless, if you start making any money, it will probably be taken from you. [...] you have absolutely no legal protection for anything. Zero. If anything, the courts are your enemy, because they side with whoever has the most influence and that's not you. Your employees embezzle from you? Your competitor (or a partner) steals all of your equipment? Government officials demand "protection" money? Too bad! If this is all true (and I'm not saying it isn't), how come China has had 10% growth rates for the last quarter century?
- megaduck 17y ago
  The growth is mostly because they're selling a lot of exports. They've been building up domestic consumption, but it's still pretty weak. Almost all the growth is from foreign money flowing in one way or another, and once money is in China, it tends to stay under Chinese control. Regardless of how the general economy does, the question is: who benefits? The answer is usually government officials, or people that have relationships with them. There's a general assumption here that anyone with money must be corrupt. While that's not exclusively true, it's certainly true enough to discourage entrepreneurship.
joel_feather 17y ago
This is because you do not know how to navigate properly in business in other countries. Have you ever done business in Tanzania or Senegal or Kazhakstan or Peru? You'll have the same problems, sometimes a lot worse. If you cannot navigate the business processes in china, then you are not cut out for it. The basic issue is this - if you are starting a business in China, you start with a core team of chinese people whom you trust, who are efficient and who know the city. Then you hire properly - your administrative staff make or break your business in china. If you march in with a white face and expectations, you'll get what's coming to you - nothing. In china, you need to do things the right way. And to do things the right way, you need to know what the right way is. And you don't.
- pchristensen 17y ago
  Have you ever done business in Tanzania or Senegal or Kazhakstan or Peru? Would you want to start a company in any of those places?
  - joel_feather 17y ago
    You get to travel, meet new people, learn new languages and make a lot of money. Why would I NOT want to start a business in those places.
- megaduck 17y ago
  If I do base my business here, what's the upside? As a tech startup, I can make far more money in the developed world for a lot less hassle. Doing business from the Valley also doesn't require compromising my personal morality or professional ethics, and I won't be constantly looking over my shoulder just because I'm white. I know what the "right way" is. That's why I don't want to play.

liuliu 17y ago

What you said is exactly what Sarah's argument is. For the constraints and the whole chaos situation in China, it is definitely not gonna be Silicon Valley anyway. However, it is more likely to come up with new business models (like the virtual goods and virtual currencies) because of all the constraints you talk about.

deleted 17y ago
[deleted]

megaduck 17y ago

One more thing. If you're doing any kind of social or media business, and you've never had to deal with government censorship before, you're in for a new special kind of hell. I watched Google build up all sorts of Government relationships, spend ungodly amounts of money, make soul-tainting concessions, and then have it all blow up when somebody posted banned videos on YouTube. The whole site was instantly blocked, and it's still down after several months. You can be shut down at any time, for no apparent reason, and there's no recourse.

garply 17y ago

I think a lot of those things can be turned to your advantage. If Chinese laws favor weaker IP protection, start a company that does legal arbitrage between the US and China (e.g. Megavideo - which is based in Hong Kong). Weak rule of law and lots of bureaucrats? Spend time building relations and you'll probably pay fewer legal fees than you would in the US. Do you risk having your stuff stolen by employees? Yes, but talent is generally less expensive. I think the challenges are different, but there are probably advantages in China as well.

megaduck 17y ago
When I talk about theft, it's bigger than the occasional missing laptop. It's more like coming into your office at night to find a bunch of guys armed with tire irons loading your whole office into a truck. Or perhaps you'll just come to work one day and find yourself locked out and the business "under new management". That's more common. I strongly recommend aspiring China entrepreneurs read "Mr. China" by Tim Clissold. It's about one of the first major investment funds in China, and the problems they encountered. It's pretty mind blowing, and not atypical.
- garply 17y ago
  I've personally had these types of problems while living in China - I'm sure, as a foreigner, I just scream "sucker" - but in my mind a lot of these problems become less severe if you've developed good relationships with local residents. Are you in Beijing? If so, I'd love to meet up some time and hear specifics about these experiences.

cabalamat 17y ago

> Regardless, if you start making any money, it will probably be taken from you. [...] you have absolutely no legal protection for anything. Zero. If anything, the courts are your enemy, because they side with whoever has the most influence and that's not you. Your employees embezzle from you? Your competitor (or a partner) steals all of your equipment? Government officials demand "protection" money? Too bad! If this is all true (and I'm not saying it isn't), how come China has had 10% growth rates for the last quarter century?

megaduck 17y ago
The growth is mostly because they're selling a lot of exports. They've been building up domestic consumption, but it's still pretty weak. Almost all the growth is from foreign money flowing in one way or another, and once money is in China, it tends to stay under Chinese control. Regardless of how the general economy does, the question is: who benefits? The answer is usually government officials, or people that have relationships with them. There's a general assumption here that anyone with money must be corrupt. While that's not exclusively true, it's certainly true enough to discourage entrepreneurship.

joel_feather 17y ago

This is because you do not know how to navigate properly in business in other countries. Have you ever done business in Tanzania or Senegal or Kazhakstan or Peru? You'll have the same problems, sometimes a lot worse. If you cannot navigate the business processes in china, then you are not cut out for it. The basic issue is this - if you are starting a business in China, you start with a core team of chinese people whom you trust, who are efficient and who know the city. Then you hire properly - your administrative staff make or break your business in china. If you march in with a white face and expectations, you'll get what's coming to you - nothing. In china, you need to do things the right way. And to do things the right way, you need to know what the right way is. And you don't.

pchristensen 17y ago
Have you ever done business in Tanzania or Senegal or Kazhakstan or Peru? Would you want to start a company in any of those places?
- joel_feather 17y ago
  You get to travel, meet new people, learn new languages and make a lot of money. Why would I NOT want to start a business in those places.
megaduck 17y ago
If I do base my business here, what's the upside? As a tech startup, I can make far more money in the developed world for a lot less hassle. Doing business from the Valley also doesn't require compromising my personal morality or professional ethics, and I won't be constantly looking over my shoulder just because I'm white. I know what the "right way" is. That's why I don't want to play.