workshop presentation did in Shenzhen in 2008. The report talks generally of the new business in China and specifically of entrepreneurship opportunities and how to foster a start-up and sme culture in China
3. Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Shenzhen 2008
4. Joan is Head of Business – Asia Region at
Porcelanosa. A Spanish Blue Chip company
with presence in more than 100 countries and
with more than 500 show rooms.
Joan has 5 years of ‘hands on’ strategy and
operations consulting experience focusing in
internationalization of SME and start-up firms.
Worked for premium brands such as Shell Oil
and Gucci.
Joan studied Industrial Engineering at UPV,
Spain and Chemical Engineering at UV –
Chalmers University of Technology Sweden.
Trainee at Institut für Verbundwerkstoffe,
Germany and Master in International Trade,
Finance and Development at Shenzhen
University, China.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
5. Agenda
Session Topic
2:00 – 3:00 China: Current Market Status and Trends.
3:00 – 3:30 Tea Break.
3:30 – 4:30 Venture Opportunities and setup in China.
4:30 – 4:45 Tea Break.
4:45 – 5:30 Resources in China for Spanish Start-Ups.
Workshop’s Purpose: To provide insights
and a milestone to daring Spanish Start-Up
companies with innovative products and service
eager to target in the Chinese Market.
Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Shenzhen 2008
6. 1 st Session
Current Market Status &Trends
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
7. Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Source: CIA World Factbook; Joan Lopez Shenzhen 2008
8. Beijing
Shanghai
Guangzhou
Taiwan
Hainan
Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Shenzhen 2008
9. The most intriguing consumer
market
• China offers the world’s rapidly
growing and attractive consumer
market.
• With only 4% of global retail sales,
China accounts 20% of global
growth.
• Chinese’s consumer spending 35%
of GDP in 2007. Chinese Chamber López González
of Commerce
Chinese Chamber of Commerce.
Joan your name
Shenzhen 2008
Shenzhen 2008
10. Unique set of challenges
• Most consumers are price sensitive.
• The consumer market is very
fragmented.
• Top tier cities are becoming very
competitive.
• Middle class have just started to pay
attention on lifestyle.
Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Shenzhen 2008
11. Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Source: CEIC Data Shenzhen 2008
12. Share of China
Imports increase Chinese Chamber of Commerce
Joan López González
(%) your name
Shenzhen 2008
13. Asia: Retail Sales
Chinese Chamber of Commerce
Volume Joan López González
your name
Shenzhen 2008
14. China Outgoing
Chinese Chamber of Commerce
Foreign Investment. Joan López González
your name
Shenzhen 2008
15. Total imports and
Chinese Chamber of Commerce
exports 2007 Joan López González
your name
Source: Zero2IPO; Joan López Shenzhen 2008
16. China’s corporate world is
divided into
• Revitalized state-owned
enterprises.
• Globalizing players.
• Restless SMEs.
• Emerging innovative start-
ups. Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Shenzhen 2008
17. 1. Revitalized state-owned
enterprises
• Highly regulated and concentrated.
• Largely protected by government.
• Improvements in corporate
governance and risk management.
• Long way to go before will be truly
world class organizations.
• I.e. China mobile. Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
18. 2. Globalizing players.
• Started as state owned but evolved
into a mix between public and
private sectors.
• Serving as OEMs but rather playing
with their owns brands.
• Own products, network and
distribution channels.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
19. 3. Restless SMEs
• Middle size but growing very fast
and ranking among the leaders in
their fields within China.
• Brands not yet well known to the
world.
• Market targets: Russia, Africa and
Middle East.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
20. 4. Emerging innovative start-
ups
• Unconventional business model.
• Innovative approach to developing
products bringing them to markets.
• Fertile M&A territory to build up
presence in China and foster new
alliances in EU, USA and LATAM
markets.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
21. VC investment in China
($million)
Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Source: CBAN. Joan López Shenzhen 2008
22. China’s VC market is heating
up
• 2nd largest VC market in the world.
• Still almost 1/5th of the U.S.
• Traditional industries still account for
almost 50% of the VC money
invested in China.
• There is a major shift from offshore
USD funds to domestic RMB funds.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
23. Local IPO market
• Government is soon launching a
genuine Growth Enterprise Board,
‘’China’s NASDAQ’’.
• Shenzhen’s SME board proved to be
and exit for VC investment in China
for more than 10x returns in a period
of 3 – 4 years.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
24. Entrepreneurship
• Today Chinese entrepreneurship is
tradition.
• Young people in their 20s and even
early 30s.
• A number of Chinese entrepreneurs
dubbed ‘’returnees’’ with prior,
overseas experiences.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
25. Investment Environment.
• Legal Issues. A lot of regulations.
• Entrepreneurship is still a new
concept for local graduates.
• The big problem: family pressure.
• Innovation government driven.
• Guanxi.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
26. 2 st Session
Venture opportunities and
setup
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
27. Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Source: Zero2IPO; Joan López Shenzhen 2008
28. High Technology
Chinese Chamber of Commerce
Exports. Joan López González
your name
Source: Deloitte; Joan López Shenzhen 2008
29. Where are the opportunities?
• Education: online / offline.
• Consumer Internet / Mobile:
– E-commerce.
– Internet communities.
– Gaming.
– Online advertisement.
– Mobile applications.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
30. Where are the opportunities?
• Technology: Logistics technology
infrastructure.
• Retail: franchising / licensing.
• Healthcare: Services / Medical
devices.
• Energy.
• Cleantech. Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
31. Additional skills required
R&D Procurement Manufacturing Supply Marketing Sales
Chain
• Master • Improve overall • Negotiate • Rationalize • Undertake • Manage large
advance process and terms manufacturing marketing modern
technology. equipment aggressively logistics research retailers
• Create a few efficiency wit a few large footprint • Control media • Manage large
substantial suppliers planning and distributors
innovations execution
The best candidate
should do not only Chinese Chamber of Commerce
Joan López González
this… your name
Shenzhen 2008
32. Additional skills required
R&D Procurement Manufacturing Supply Marketing Sales
Chain
• Simplify • Handle • Identify and • Configure • Master event • Transform
products hundreds of manage low distribution marketing wholesalers
• Tailor small cost and low network by • Focus on PR into
products by suppliers. capital evaluating management distributors
responding • Identify, investment low cost • Manage
quickly to coordinate, options. alternatives small
change motivate and fragmented
consumers develop accounts
reeds. suppliers.
…but also this Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
33. Pick an example
Internet and Online Gaming
Market
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
34. China’s Digital Generation
• ‘’One Child Policy’’ today in the range
12 – 29 years ‘obsessed’ with
internet.
• ‘’Reform Generation’’ today in the
range 29 – 38 years opening up
policies and enjoying internet
diversity.
• 39+ uses Mobile voice service.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
35. Digital Entertainment
• There are not many alternatives for
affordable entertainment.
– Media/Music/Cinema are still in their
infancy.
– Internet is filling a gap.
• Chinese Internet Pop culture is on
the rise.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
36. The Chinese Internet
Internet Users China USA
Average Age 28 42
Education (Higher than college) 67% 40%
Employed 75% 61%
Online Contributors (Age 13 – 35) 50% 15%
Active Bloggers 40% 13%
• In 2008, China
reached 253 million of
internet users being Chinese Chamber of Commerce
the world’s biggest. Joan López González
your name
Shenzhen 2008
Source: Deloitte; Joan López
37. The Chinese Internet
• 70% of users are 30 or younger.
• Local Players won the top spot in all
main Internet sectors.
• Baidu and QQ enjoy a strong lead in
their sectors in terms of market.
• AliPay makes online payment
easier.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
38. The Chinese Internet
• China has turned a Web 2.0
powerhouse, with:
– Large influx of Venture capital.
– Overseas educated returning talent.
– Low entry barriers (if any).
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
39. China online trends for 2010
• Social networks: Mobile social
networks are the future.
• Online communities are not a teen
phenomenon.
• E-commerce is the key and will be
the main growth segment for the
next years.
Chinese Chamber of Commerce
• Online gaming. Joan López González
your name
Shenzhen 2008
40. China online trends for 2010
• The new mass media. China has a
population who spend more time
online than watching.
• Online startups will face a strong dose
of realism.
• Copycats want proven business cases.
Time to innovate.
• Age of convergence
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
41. Chinese Gaming Market
• China has an estimated 120 million
online gamers.
• 3 years where gaming industry has
increased 25% yr-to-yr.
• Although 76,6% are free to play and
23,4% are pay to play in 2007 sold
over $1,4 billion in prepaid cards.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
42. China Online Game Market
Chinese Chamber of Commerce
Chinese Chamber of Commerce.
Joan López González
your name
Shenzhen 2008
Source:iResearch Inc; Joan López Shenzhen 2008
43. Chinese Gaming Market
• Online game publishers provide
distribution to the content providers.
• The game publisher:
– Prepays the content provider.
– Pays IDC for hosting services.
– Pays for marketing and promotion.
– Pays the internet cafés.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
44. Chinese Gaming Market
Prepaid Marketing
Content IDC Card & Interne
Provider Hosting Publisher 36% t Cafés Total
5-10% Distributor Promotion
20% 8%
s 16% 10%
Distribution of the revenues.
Next big wave:
Chinese Chamber of Commerce
Social Gaming. Joan López González
your name
Source:iResearch Inc; Joan López Shenzhen 2008
45. Setting up a legal entity
Equity Joint Cooperative WFOE Representative
Venture Joint Venture Office
Advantages • Local • Local • Full * Few restrictions
expertise. expertise. Control, and few downsides
• Government • Government no to such a limited
incentives. incentives. conflicts enterprise.
• Lowest Tax • More flexible of
Rates. capital. interest.
• No profit
sharing.
Disadvantages • Shared • Shared • Strict
control and control and foreign
conflicts of conflicts of exchange
interest. interest. controls.
• Increased • Increased • Higher
chance of change of taxes.
losing trade losing trade
secrets. secrets. your name
Source:iResearch Inc; Joan López
46. Set up a legal entity
• Law enforcement in China is not
very strong.
• Before incorporating:
– Change the type of business is long
and costly. Ventures.
– There are grey areas and regulations
are updated on a weekly basis.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
47. 3 rd Session
Resources in China for Spanish
Start-ups
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
48. Source:iResearch Inc; Joan López
Management • An exceptional CEO.
• Core team in place.
• Core product ready and rolled in Spain.
Product • Concrete future product development
plan.
• Competition analysis and tracking for the
Market Chinese market.
• Initial draft of the marketing plan.
Revenues • Clearly identified new revenue streams.
Cash • Reserve cash.
• Cash Flow positive.
• At what stage you
should be before go to Chinese Chamber of Commerce
Joan López González
your name
China? Shenzhen 2008
49. Source:iResearch Inc; Joan López
Intellectual Regulatory
Property Policy
Business
Commitment
Exit
Chinese Chamber of Commerce
• Beware of the risks… Joan López González
your name
Shenzhen 2008
50. Preparation
• Strategic decisions are a crucial
component for a start-up company’s
success or failure.
• Preparatory trip(s). Spend significant
amount of time in China.
• Develop your ‘’Guanxi’’ or social
network and business relationships.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
51. Preparation
• Select and setup the right legal
structure: SINA vs. Joint Venture.
• Manage intellectual property.
• Bring your ‘’know-how’’ from Spain.
• Study and learn from best practices
in foreign markets.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
52. Preparation
• Understand your customer.
• Competition analysis. Find out Who,
How, Where, When…
• Listen, research and comprehend
the political and regulatory
environment.
• Add managerial value.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
53. Preparation
• Where in the value chain is your
place in China?
• Location: First cities vs. Second and
Third cities.
• Can you get local government
incentives?
• Brush up your mandarin.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
54. Early Stage Investors in
China
• Good and experienced venture
managers are scarce in China.
• Good and experienced early stage
venture managers that:
– Have previous own start-up
experience.
– Truly work ‘hands-on’.
Are very scarce. Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
55. Early Stage Investors in
China
• Your select investors should add
value:
– Screening and recruiting management
team.
– Installing and maintaining financial
controls.
– Improving productivity through
reducing product costs.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008
56. When to use your Spanish
connection…
• Spanish’s brand.
• Integrity and quality of service.
• Chinese culture but also gateway to
the U.S, Singapore and ASEAN
markets.
• Particular industry expertise.
Chinese Chamber of Commerce
Joan López González
your name
Shenzhen 2008