Registering a company in Shanghai takes a few weeks and a folder of documents. Almost every foreign founder I meet manages that part without much drama. Month seven is where the story gets interesting.
I have been doing business here for ten years and I learned that the hard way. So at the WeStart conference I sat down with one of the most experienced startup advisers in Shanghai, someone who has been helping foreign startups come to China for decades, and asked him for the version without the diplomacy.
Incorporate a company is damn easy. But to make a business successful is damn difficult.
The competition you are signing up for
His answer to what makes it difficult was about the companies that are already here.
A foreign team lands in one of the most cutthroat competitive markets there is, against domestic companies that will go the extra mile on cost, on working hours, on effort, at the same level of technology and intelligence. In some areas, he said, better than that.
He does not accept the story that the market is closed. Companies have made it, and in his words nothing is impossible. The difficulty sits in who you are up against once you are in.
Shanghai is the window, and only the window
His first condition for the ones who succeed is localisation, and he means it structurally. Shanghai is the window to China and a tiny fraction of the real thing. The market behind that window is enormous, and reaching it needs a local partner.
Then he added the part founders underestimate. Finding that partner runs on trust, and trust takes time. He compared it to looking for a Chinese husband or a Chinese wife.
That comparison lands differently once you have tried it. A partner search is a slow read of whether the other side will still be interested when your first plan fails, and you cannot run four of them in parallel the way you would run a supplier tender.
Twelve months is not a test
His second condition applies to the whole team. Everyone has to be committed to the China journey, which is a higher bar than getting the market entry approved in a board meeting.
He has watched teams arrive, meet the competition he just described, and pull out after six or twelve months with the verdict that China is too difficult. What he asks for is grit and perseverance, with one condition attached. You need to believe you have product market fit before you come.
He was clear that he is not telling anyone to register a company here first and check for that fit afterwards. It is a question he hears a lot.
The patent question
I asked him what happens to your technology and your patents once you operate here. His answer separated two eras.
Twenty or thirty years ago there was a copycat problem, and to some extent, he said, that reputation was earned. Today he sees China as a source of innovation in EV, energy, robotics and AI, in selected areas ahead of the rest of the world.
His advice on being copied was short. A strong company should not spend its energy worrying about it.
What I would take into a board meeting
The useful part of his answer is the order. Product market fit, then the partner, then the company registration. Registration is the step that can be finished in weeks and looks like progress on a slide, which is why it so often comes first.
The second useful part is the horizon. A team that plans to review its China decision after twelve months has already made that decision, and the partner it is courting will read that long before the review meeting.
What one conversation does not settle
His work is bringing foreign startups into China, so his optimism has a direction. He named no company that made it and no share of those that did not.
His answer on copying speaks to competitive strength. What a court does for you on the day it happens is a second question, and that one stayed off the table.
The number I would want is the one he left open. Of the foreign teams arriving in Shanghai this year, how many still have their local partner in two years. That is what I plan to watch.
[00:00] When you look at this background, you know that Shanghai is an exciting city. But if you do business here, there are a lot of challenges. Incorporate a company >> is damn easy. But to make it a land, to make a business successful, is damn difficult. >> I have been doing business here for 10 years already, and I learned it the hard way. So, I asked one of the most experienced startup advisers in Shanghai what the formula for a successful business here is. >> [music] >> Jiawei here supported foreign startups to come to China for decades already, and you saw everything. You saw all the problems. You saw all the challenges. Today, I want to have an honest opinion [music] from you. How easy is it to incorporate a company here in Shanghai? >> Incorporate a company is damn easy. But
[00:49] to make it a land, to make a business successful, is damn difficult. >> So, what is the biggest challenge for a foreign venture, for foreign startups, to make it successful here? >> Your observation is [music] China's not an easy market at all. People who think China's almost impossible to penetrate. >> Is that true? >> That's partly true. Nothing's impossible. [music] Few companies have made it. But I think the fundamental reason is you're literally competing in one of the most cutthroat competition market. And you are competing with the domestic companies that are willing to go extra mile on cost, on working hours, on efforts, and naturally on the same level of intelligence and technology. To some areas, maybe even better. >> You talked about that there are a few that actually succeeded. What is their secret? >> First of all, localization. Shanghai is the window to the China, but Shanghai is not everything. Shanghai is just only a
[01:36] tiny [music] fraction of real China. China market is massive. The size-wise is massive. You do need a local partner to really work with you. [music] At the same time, to find a local partner, it takes time to build a trust. It's the same as a marriage. [music] You need to find your Chinese husband. You need to find your Chinese wife. And they take a lot of time to build a trust for you to be able to do it. Second point, for the whole team, you also needs to basically be committed to the China journey. As I was telling [music] the China is a difficult market, but not mission impossible. You can't just chicken out after [music] 6 months and 12 months say, "Ah, China is difficult. Maybe I shouldn't do this anymore." You should have the [music] great and perseverance once you believe you have a product market fit. And by the way, I'm not asking you to come to China register company immediately without knowing whether I have a product market fit or not. This is a question I hear a lot.
[02:23] What about my IP? >> What about my technology? What about my patents? How safe are they in China? [music] >> 20, 30 years ago is that sort of a so-called a copycat thing. Yeah, I mean, to some extent, yes. But I think China nowadays is actually has gone past that stage. Now actually being seen as a source of innovation such as EV, energy, robotics and AI. In some of selected areas, China actually now leading ahead of the world. So, there's no worry about sort of stealing the IP thing. And thirdly, what I really want to emphasize is if a really good company, strong company, you shouldn't worry about a copy. >> That's why we're talking to you, people who are on the ground, people who understand, people have the experience and they have advice that actually supports people. Thank you so much, Owen. Thomas, thank you. Find a local partner, give it time, and stop worrying
[03:11] so much about your IP. Starting a company here takes the right people, a lot of trust, and staying power. If you need support, reach out to us. We make the connections.
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