NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, June 24, 2019

The Chinese internet environment is famous for its brutal competition: a truly gladiatorial fight to the death with way fewer “gentleman’s” rules than we are used to in the West. This tough landscape helps Chinese entrepreneurs to learn and evolve rapidly, since they must focus not only on making effective products but also on making them at lightning speed. If they are slow to find the right product-market fit, odds are they will be copied even before they optimize their business models with better unit economics.

To be successful in this bellicose Chinese internet space, entrepreneurs work hard to raise barriers to entry often by either creating an “ecosystem” or extending its reach upstream or downstream. Many startups in the West follow the mantra “Do one thing and do it well.” Think of Google and its simplistic approach in the beginning. We do one thing well: search. On the other hand, successful Chinese entrepreneurs tend to build octopi with many more tentacles from the get-go. As a result, the successful Chinese startups grow bigger faster, and China created a unicorn every 38 days on average in 2018. Case in point: internet products like WeChat and Weibo, which are markedly more diversified than their U.S. counterparts, WhatsApp and Twitter.