So You Wanna Be An Entrepreneur In China?
Every month or so, I get an email from someone asking me for my views on their starting a business in China. These emails usually come from someone who has been in China for a year or so at a really low paying job or from someone who just recently graduated from college in the United States. I typically respond with one or two sentences of lawyer advice, something along the lines of the following:
I really do not know what to tell you, never having been an entrepreneur in China myself, but from the perspective of a lawyer who spends his life representing companies (including start-up companies there), I can tell you that it is going to be much more difficult and more expensive for you to start a company there (at least legally) than in the U.S. For an on the ground view of what it takes to be a foreign entrepreneur in China, you should read Sam Goodman's book, Where East Eats West.
I am now also going to tell them to read Rand Han's recent post, entitled, "Confessions of A China Entrepreneur." This paragraph both tells you what Rand's post will be about and why you absolutely should read it:
So in the interest of fully answering the “China Entrepreneur” question, I’m going to take those of you not already bored with this article down memory lane, and reflect on how many times I got my assed kicked, punched, and handed back to me in a beautifully arranged gift basket during my journey through China’s “wild wild east” business frontier… from the street level looking up.
The post is a no holds barred history of Rand's Shanghai-based advertising agency Bloody Amazing and his just-formed digital social media agency, ZeroDegrees. Though it does ramble a bit at times (which Rand admits and which really only adds to its charm), doing so it only makes us better "feel" what it is like to go through starting a business and becoming an entrepreneur in China. I am hoping this is only part 1 of a series.
Comments (6)
Read through and enter the discussion by using the form at the endSage Brennan - March 8, 2010 8:47 PM
Something that I have realized only recently (although maybe I once knew, when I still had the benefit of nubie innocence... or sense) -- it's easy to start a company in China and remain a small company, but the chances of starting a sustainable business that can grow to significant size are slight.
Rand is a great guy, and I feel/have felt his pain.
Joe - March 8, 2010 9:31 PM
What is it exactly that makes starting a business in China so difficult? Their government seems pretty pro-money at this point. Is it just that they don't like foreigners coming in and making money off of them? Or is it more the cultural divide in business ideology?
William - March 9, 2010 6:17 AM
When a Chinese friend suggested that we go into business together, I did some research and I was surprised how simple it is to form an LLC in the US, and dismayed when I realized how frustrating and expensive it would be to start a company in China.
Peter - March 9, 2010 6:07 PM
I have been a entrepreneur in China for the past seven year. Cutting to the chase, China is as extreme an environment as it gets. One has all the issues that one 'normally has' outside such as 1) Competition 2)Supply Chain issues 3) Staffing issues 4)Marketing / Sales and so on so forth. Added to the intensity and the mix though one needs to go into business in China with eyes wide open with some realisations if doing business deals and transactions of a good size :
1) You need a good lawyer that you can trust. This generally costs lots of $$ and finding a Chinese lawyer who will really / can help you ( lots of them talk lots but deliver minimal and you left carrying issues)
2) Trust is a big big issue as was illustrated above. Sorry to say this, but trust nobody ( or next to nobody) or if trust somebody then do like the Author did - make them part of your family ( ie in the same boat as you)
3) If dealing with the Gov and need approvals for patents, copyrights etc learn to be very patient and learn to dance very very well and pay due respects to the system. Can take months for approvals and you will be waiting with full costs on your shoulders. By the way ,its easy to start a company but try to close it down ...Hmmmm that becomes interesting
4) Day to day issues : Things go wrong all the time . Can be lack of electricity during the day for manufacture; inventory vanishing or slippage ; Schedules promised but never kept to ; Internet down ...Building being flooded .... being kicked out of building by huge rental increases ...on and on ..... I kid you not this are the minor issues that need to be faced .... The author alluded to some of these things too
5) When things are good everyone wants to be your friend ..... on the other hand .... friends / partners to be there to help are few and far apart
Anyways thats a very quick update. If you are looking for adventure and lots of hard work go for it, but through it all remember your sanity and realise that no matter what and no matter how much you curse and swear, you are a guest here in a new Jungle. Be prepared to fight for survival on a daily basis and do not be afraid to use the tools of survival - lawyer, friends, Guangxi and so forth . Best of luck :)
getting out of Dodge - March 9, 2010 10:18 PM
It sounds like starting a business is hard in China. How about closing a business? Or when a business fails?
I was just reading about an English school in Shanghai that went bust during the recent economic crisis. The school had been around since the 90's, but closed its doors in 2009. The trouble is it left many teachers and staff unpaid and many students didn't receive their classes. From what I read, several of the owners/management left the country in the middle of the night, but it doesn't seem they left with much if any money because things were bad for awhile. It seems they were more scared about the repercussions from the govt and also threats from Chinese investors.
So here's my question. Is there a difference between what happens when a business fails in China versus in the West? If things were done right in the US, then usually people can only go after the company. Is that the same in China? As for the English school I'm not sure if all their paperwork was in order, so maybe that's why people fled. But I also wonder if the same situation occurred in the US, would these people feel the need to flee the country.
Etienne - March 10, 2010 8:35 AM
Starting a business in China is not easy, like anything in China. Once you know what is expected, you can move along the administrative steps quite smoothly, but the key is to understand what is needed and who can help you to get it. This is the trick.
Beside the formal steps of setting up a business, any foreigner must think twice about what he or she brings into the game that a Chinese entrepreneur will not. The times are long gone when we just could bring some simple concept from Europe or US and apply it here for a niche expat market. The local entrepreneurs are quick and well informed on what can be done.
My view is that China is becoming much more mainstream than it used to be. It means that the place is no longer a paradise for adventurers. When I came here 15 years ago, some real adventurers started some very funky businesses and made it. Today, this is no longer the case. Any foreigner needs to bring a real value and expertise or skill that is hard for a Chinese entrepreneur to match. And they now have access to ideas, money and have an tremendous energy and drive.
I do believe that China is a country of opportunities, including for smart foreigners. But this is because China is now embarking on a new wave of modernization and in moving to an new level of sophistication similar to what we lived in the left in the golden 30s from 1950 to 1980s.
Now, maybe there is still a space for the adventurous type: maybe they should head away from large cities like Shanghai and Beijing and try remote locations in central and Western China.
Etienne