Why William Bao Bean doesn’t think Asia will produce the next Mark Zuckerberg
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William Bao Bean speaking at Echelon Asia Summit 2016. Photo credit: e27

William Bao Bean speaking at Echelon Asia Summit 2016. Photo credit: e27

The MOX MD and SOSV Partner explains the issue faced by Asian companies in competing in the international markets, and what they can do about it

e27

The second day of Echelon Asia Summit 2016 began with a shocking statement by William Bao Bean at the CREATE stage.

“What I’m afraid of is that we won’t have any Mark Zuckerberg from Asia,” the MOX MD and SOSV Partner stated.

“If you look at recent million dollar funds raised lately, all of them are going to ads, transferred to Google and Facebook,” he further elaborated.

This happens because in mobile-first markets like China, user acquisition and retention are very different from that of the U.S. and Europe.

“The problem with China is that there is very little virality. If you’re a game developer in the U.S., you need at least 500,000 users [and then you can get] your product out there,” he said.

“We see the China market as walled gardens. The route to acquire users is closed and you have to pay. It’s easy to start up today, but as a VC, all my money goes to marketing, and it’s silly,” he explained.

The situation led to the conclusion that startups require stronger networks and bigger funds to succeed in China compared to the U.S., where even big companies can begin the dormitory of a campus.

When it comes to China, the numbers are fantastic. Being the largest mobile market in the world, two out of five top Internet companies in the world are from China, he noted.

Even 70 percent of P2P lending companies are in China, “because the banking system sucks,” said Bean. And five out of 10 most downloaded Android apps in the world are made in China.

“But you don’t read about them because they don’t get picked up by U.S. press,” he said.

The major money drivers in China are gaming and e-commerce. Interestingly, many of these companies are relying on the local market, such as Tencent and Alibaba.

“Tencent is divided into product groups that grow independently, with its own CEO and budgets, and these groups actually compete with each other,” Bean explained.

“WeChat is worth $83 billion in market cap within four years, with 43 percent year-on-year growth,” he elaborated.

If there is anything that China is falling behind other markets in, it’s digital advertising. “They are very controlling and yes, they do manipulate clicks. They are also unwilling to pay for softwares,” Bean explained.

Back to the topic of winning the competition: So what model can Asian startups use in order to survive a tough competition?

What SOSV has been doing might serve as a great lesson.

“So we created the Shanzai market model,” Bean said. “We took the Xiaomi model, which builds an ecosystem based on hardware, but without the hardware. Hopefully this can be the way Southeast Asia companies compete with China,” he concluded.

This post was originally published on e27

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