Privacy concerns, marketing and local regulations on data security are just a few of the barriers China’s tech companies face when they want to go global, says seasoned VC William Bao Bean at the China Technode Emerge 2020 conference in Shanghai last week. Geopolitical tension are way overrated as possible hurdles, he adds, according to Technode.
2020 has been a tough year for Chinese tech companies selling to overseas markets. In India, local authorities banned a total of 177 Chinese apps in June and September following border clashes between the two countries. In the US, the Trump administration announced impending bans on short video app Tiktok and instant-messaging app Wechat, which are among the most successful Chinese apps in international markets. Chinese telecommunications equipment maker Huawei is facing increasing restrictions on supplying gear for Western countries’ next-generation 5G networks.
Beyond geopolitical tensions, Chinese tech companies expanding overseas also face obstacles in the form of privacy regulations, marketing, and localization, William Bao Bean, general partner at investment firm SOSV, said during the opening panel at the Shanghai event.
“The challenge for entrepreneurs going across the border is actually trying to understand what you can do and what you cannot do,” Bean said.
The lack of regard for privacy has led to some of the problems Chinese tech companies face in markets like Europe and the US because of stricter local regulations on data security, Bean explained.
“You have to adapt to the local market. You have to follow the local law. And half the time, people [startups] don’t even know that they’re breaking the law when they go across the border,” he said…
Chinese venture capital (VC) funds may find it difficult to raise money from US pension funds, said Bean. But he believes that the hurdles faced by VCs are not affecting Chinese startups. “That’s a money problem, not a startup problem,” he said.
“China has got the number-two largest VC industry in the world in terms of the amount of funds put in startups and it’s actually easier for Chinese companies to raise money from China,” he said.
Bean said that Chinese tech companies should see Southeast Asia as their next destination in their global expansion plans to avoid regulatory uncertainties in Europe and India.
“Southeast Asia has a lot of the same challenges, problems, or opportunities that China had 10 years ago. It’s a mobile-first market. So people’s first or only experience with the internet is on a smartphone, which is very similar to China,” he said.
Bean said he couldn’t be sure whether or not there will be more Chinese tech companies facing global regulatory backlash like Huawei and Tiktok, but he is optimistic that this would not stop Chinese startups from going overseas.
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