Startup Lessons Learned Scaling a Brand and Community in China
It is risky taking your business outside your home country. But with risk comes reward; with hard things comes big opportunities.
China remains the land of risk and opportunity for business today. Even as its economy and stock market struggle, it’s remains a period of strong, grassroots business creation.
In my job at Techstars Community Programs, we’ve spent the last year developing our operations in the Middle Kingdom. We grow startup communities to empower and educate the next generation of entrepreneurs.
China business is a hard place with few easy victories. The reality is that you need to first survive, before you can thrive in China. I want to share some insights from this journey.
To my mind, control is a huge factor to successfully operating in China.
As one of my colleagues likes to say, we have to be “super anal” (i.e. tightly controlling) about what we do in China. This level of control can be hard for Westerners who assume trust. Many aren’t used to complicated negotiations and unclear intentions.
In this four part series, we are looking at controlling your brand in China.
In this third part, we will look at controlling finances. Failing to control finances is a make or break aspect of operating in China.
To grow and scale a business in a sustainable way, you have to control it. For anyone operating in China, control is critical to your ability to understand what you are doing and operate lucratively.
Our China Problem with Local Finances
Clear finances are a critical component when you grow abroad. Projects with multiple partners and participants create added challenges. You need to understand how money is handled across operations.
In China, our financial arrangement created a difficult starting position for us. We didn’t control our money and local volunteers had complete control over ticketing and finances.
Startup Weekend is a community program that is part of Techstars, previously UP Global. We operate in 500 cities per year and many different countries and currencies. We depend on our local volunteers. We empower them to decide, implement and organize our events.
To ensure high quality, we have a few online tools, some rules and a network of people. The operations and health is supervised by a small team of official regional managers.
For Startup Weekend, controlling finances globally is not easy. We control finances through a common ticket platform (Eventbrite), voluntary reporting and an international transfer system (PayPal) for reimbursements.
In China, where Paypal and Eventbrite do not work, we had almost no control over money. We had little understanding of our local event finances too. This created a rather imbalanced situation.
Control Your Local Finances
Are my finances under control? Are my partners and agents making money in ways beyond those agreed upon?
In our case, we didn’t have control over our local finances. We also had little idea on if and how people were making or using their money.
For any business, you need to get this control over your money. It’s equally important to realize where people make money, even if it isn’t directly from you.
The perception was that we weren’t serious about China. Within the first 3 months of our efforts, we took control over all event ticketing and finances in China. And we got serious about China.
This change created extra work as managers, but it immediately paid off. Startup Weekends in China had official systems. Combined with the official information portals, we were unified and centralized.
Unfortunately this ticketing change resulted in some previous organizers leaving our programs. Some went to their own programs, cloned models or simply dropped out. Losing these legacy organizers was a sad but necessary step in our evolution.
This shift in our finance model had huge payoffs. We were able to make promises and deliver on them with our partners. It was now possible to see operations as a complete picture.
Like controlling messaging and information, if you aren’t able to control finances (or, in our case ticketing) in a region, it becomes impossible to ensure the quality and adherence to your standards. We couldn’t grow without control over the flow of money.
Conclusion: More or Less Control
Communities don’t operate without money. It’s a necessary part of how most aspects of society operate. For us, we had to take over finances to ensure a healthy community.
Control is not just about being paranoid. It’s about controlling the mode in which you operate and, in turn, having the data to know where to steer the ship.
In our case, controlling the finances also brought us a useful pool of data about how to organize and recruit . This data helps us understand our participants and community better.
In China, we are often at a disadvantage as foreign companies. The rules and culture are stacked against us. Partners often try to help us, but create a situation where we have lost control over our most important assest: money.
When you setup your operations in China, you must find ways to control the flow of money. This does not mean you need to take complete control, but you need to control the key points and trust the right partners to manage the other parts.
Some people might not directly make money from transactions with you. You should still understand where and how they do make money from your arrangement.
Ultimately controlling finances is something you need to take seriously in any businesses. Not only is it how you operate profitably, it is how you avoid putting yourself in legal trouble.
Control your money, understand your partners’ relationship to your money, and you are well-positioned to grow your brand in China.