Answer These 3 Questions for Your Business Before Answering Ours
Author: Minjia Wu
Senior Analyst, SOSV & Chinaccelerator
Minjia Wu manages over 30 companies in the Chinaccelerator portfolio across healthcare, education, entertainment, and travel.
Chinaccelerator Batch 13 kicked off on March 12th, before which, the investment team was busy evaluating applications and meeting startups. Throughout this process I noticed themes across how companies think about their growth strategy, so here are some thoughts on a few critical questions to consider for your business.
Question 1: Why did you choose this market?
Back in 2016, in 全球招募: Three Tips for Getting Accepted into Chinaccelerator, we told you that solving pain points for expats in China is a small, uninteresting market. However, we dissuade you from this market not simply because it is small. In fact, small markets are interesting, but only if there is evidence that they will likely become big very soon. Nowhere is this point more important than in the Chinese market, which is often lionized for its size, but contains fast growing niches that help companies reach its first early adopters, experiment, and scale to its next million users.For an example, check out one of our more extensively covered portfolio companies BitMEX: 观点 | Opinion: 中国的比特币监管风暴 China’s Bitcoin Drama
Question 2: If your company can capture a rapidly growing market, why hasn’t a larger incumbent (Alibaba/Tencent/Baidu) poured resources into doing the same thing?
What is the logic behind why an incumbent is currently successful? And based on this logic, what would incumbents have a hard time changing?Alibaba’s Tmall Global is set up to help foreign companies introduce their products to Chinese consumers. Between JD (京东) and Tmall, these e-commerce juggernauts capture over 83% of the B2C online retail market in China. Most emerging B2C e-commerce companies hardly stand a chance. So why did SOSV invest in batch 12 company VeeShop, whose core business model is overseas to China e-commerce?
VeeShop focuses on bringing the most cutting-edge, foreign hardware consumer products to a dedicated niche: high-earning, female Chinese consumers. On the B2B side, Veeshop positions itself as the trusted partner for foreign brands. For example, VeeShop built out Hover Camera’s strong, local media influence, paving the the way for the hardware company to be sold in Apple stores, first in China and then across 30 countries. And despite overflow of interest from other overseas hardware companies, VeeShop strictly controls the number and category of SKUs. For Tmall Global and JD to copy Veeshop would mean to cannibalize their own models built for variety, big brands, and price. VeeShop热卖单品“Hover Camera小黑侠”全面进驻苹果店
Question 3: What will you do when what has been working today stops working tomorrow?
Startups begin with one thing – one product, one person leading the vision and team, and in many cases for B2B companies, one big customer. But what will you do if that one big customer who makes up 90% of your sales cancels your contract? What will you do when that one key employee leaves? What will you do when your initial channel brings you your first customers, but other players catch on, and now that channel is flooded? What can you build today to better manage your risk?
Of course, there are so much more we can ask from you, but let’s start with these three.
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