Network Advisor Spotlight: Daniel Hsu, Bits x Bites
Silicon Foundry’s Network Advisors are a distributed network of hyper-connected founders, investors, and cross-industry leaders who are part of our extended Silicon Foundry family. This handpicked group of advisors, who are embedded in innovation hubs across the world, amplify our visibility across the landscape, extend our global network, and serve as resident experts for our Members.
Daniel Hsu serves as VP, Partnerships & Corporate Innovation at Bits x Bites, where he connects global corporations and innovative startups to build a better food future. Daniel has worked in giant companies like Walmart, Exxon and Bain, as well as scrappy startups like D.light, in both China and around the world. He frequently mentors, writes and speaks on China, tech, corporate venturing and various other topics. He uses his broad range of experiences to bridge gaps between startups, corporations and investors. Daniel holds an MBA from MIT Sloan and an MPA/ID from Harvard Kennedy School.
You first arrived in China in 1999 and have done three separate “tours” for a total of ten years and counting — what kinds of shifts in the corporate venture and innovation space have you seen over the years?
Two years stand out to me as watershed moments in China for innovation: 2014 and 2019.
2014 is when startups became cool. That fall, Premier Li Keqiang coined the term “mass entrepreneurship and innovation” abbreviated in Chinese as 双创. Small, fast-growing businesses had always existed in China. I recall joining a scrappy outfit in 2010 selling agriculture equipment and renting a tiny back room from another business to serve as our China office. Pre-2014, we used the words “enterprise” and “sublet.” Post-2014, we say “startup” and “co-working.” Entrepreneurship became seen as a desirable career and scaling disruptive tech a credible path to success. While Tencent and Alibaba had always existed, after 2014, there was an explosion of enthusiasm for startups and the associated proliferation of new VCs, accelerators and other elements of a startup ecosystem.
2019 is the year when I believe “corporate venturing” will go mainstream. Again, corporations have been engaging smaller enterprises in China for a long time. The Microsoft Accelerator has been in China as far back as 2012. But for many years, venturing in China seemed the domain of VCs and perhaps a few of the more progressive Fortune 500. In 2018, I started to notice for the first time large numbers of non-Fortune 500 corporations engaging startups across China, whether through hackathons, pitch competitions or other one-off activities. With 双创 turning into 双降 (roughly translated, “decline of both new startups and VC funding”) late last year, 2019 could well be the year when corporate venturing is finally recognized, not as some special activity, but as a basic requirement for corporations to stay competitive in this ever-evolving market.
Surely, there are many more shifts at play. But these two — the popularization of startups and the mainstreaming of corporate venturing — are the most salient to corporate innovation in China.
What are some examples of large Chinese corporations and startups working together in a way that’s driving tangible results? Any examples that you can point to and think ‘now that’s how it’s supposed to be done’?
Rather than name names, I’ll just point out some best practices I’ve observed, specifically in China.
- Connecting venturing to concrete business unit needs. I can think of both an automaker as well as a retailer who have created platforms welcoming Chinese startups to solve actual business challenges. This ensures not only substantive value to the startup (in the form of relevant mentors and potential pilots) but also buy-in from within the corporation of innovation efforts. The one drawback to this approach is that, by design, it focuses on incremental innovation rather than transformative innovation.
- Offering unique value to startups. Each corporation has assets that are unique and can be put to use to help startups in a way that other companies can’t. Examples I’ve seen in China include wet lab space for biotech startups, floor space and customers for retail startups, or sales channels for SaaS startups. Somewhat useful to startups, but NOT differentiating for a corporation, are common offerings like publicity, mentoring, cash grants, trips to HQ overseas, co-working space, etc.
- Aligning with national government directives. Perhaps unique to China is the involvement of the government in everyday life, including business. When I see corporate venturing teams that can articulate how their work is in line with general directives of the Party, this gives me the confidence as an external stakeholder to support. This is not to say corporations need to work directly with government officials in their venturing work; that would likely be a disaster. Rather, showing a certain level of market savviness will assure everyone, including startups, that an initiative will be long-lasting and successful.
You’re currently based in Beijing — and just last week, we were discussing the varying degrees of startup activity across China’s major tech hubs. Can you share some of those insights here?
Despite how it may be portrayed in the media, China is not one monolithic market. It is more like multiple markets, potentially overlapping geographically, but each with their own distinct characteristics. Similarly, different cities in China have different strengths.
Beijing, with a diverse mix of academic, government, business, and art communities, often tops lists of Chinese tech cities. I’ve written much about the ecosystem here so will let those interested Google it.
Other tech hubs and their perceived strengths include:
- Shenzhen (hardware)
- Hangzhou (e-commerce)
- Shanghai (fintech)
- Chengdu (gaming)
- Nanjing (mobility)
- Hefei (AI)
- Guiyang (big data)
All of the above are gross oversimplifications and incorrect at any level of granularity. But the larger point — that China is incredibly diverse and different cities may present different advantages — is worth keeping in mind.
If really interested in industry hubs, get smart also on China’s three emerging mega-city clusters.
Not to be too broad — but what should corporations outside of China should know about the Chinese tech ecosystem? What do you think they’d be most surprised to find out?
My perhaps contrarian view is that international corporations should see China’s tech rise as an opportunity as opposed to a threat. Surprising to most is that you don’t necessarily need to enter China to take advantage of this opportunity. Strategies to consider:
- Sell B2B, not necessarily B2C. Make billions off Chinese businesses as they go global.
- Learn, but don’t copy. Observe Chinese innovations, adapt to one’s home market, and deploy quickly.
- Invest in, but don’t raise from. Most people don’t realize that those who profited most from the rise of Chinese tech were not Chinese but international investors (e.g. Naspers, Softbank).
What’s your advice on how corporations, startups and VCs alike can get smarter in the region and continually build on their knowledge? In that same vein, what are some of the industry events, and/or technology publications they should be following?
The most interesting events are invariably in Chinese. If you’re really committed to learning the language, do embark on that multi-year journey; I’m still working on my Chinese. In the meantime, here are some recommendations for staying up to date:
- Read: TechCrunch, SCMP, & Reuters for timely yet well-researched English coverage of tech in China.
- Listen: Tech Buzz China, 996 by GGV Capital, and China Tech Talk are each great podcasts that cover tech in China from different angles.
- Visit: Apply for a visa, download WeChat, and come to China! Nothing beats being on the ground to truly internalize the scale and pace of this unique market.