Diary of a Chinese Startup Part 2 of 4        ( 中文 )

In the heart of Silicon Valley, across the street from Great America in Santa Clara, California, is the representative office for Beijing’s Zhongguancun Science Park, China’s largest high-tech development zone.

Part of its mission is to help lure returnees—“sea turtles” like Go10000.com founder and president George Cao—back to their Chinese spawning ground and to see their tech startups hatched and up on their feet.

One of the more useful things the Santa Clara office provides is a booklet called the “Overseas Student’s Compass to Starting a Business.”

The booklet includes step-by-step information on how to register a company, find office space, apply for the tax breaks given to high tech and new technology startups, hook up with incubators, get a Chinese driver’s license—even how to apply for cash grants from the government.

Mr. Cao, a sea turtle who paddled back in the fall of 2004, did it all by the book. “The Beijing government and ZhongguancunSciencePark have done a decent job in helping people like myself start businesses,” said Mr. Cao. “No propaganda here: it was really pretty painless.”

The $10,000 cash grant he received in May of this year may have been less than a month’s burn for Go10000.com, but Mr. Cao isn’t complaining.

“There are no restrictions on how you use that money,” he said. “The grant is given to the individual, not to the company. Director Xia [Xia Yingqi, deputy director of the ZhongguancunSciencePark] even said, ‘Go buy a car with it if you want.’”

Mr. Cao estimates that at least half of the people who apply for the grant actually receive money.

Talent Scouting

The only real difficulty that Mr. Cao has encountered so far has been in locating talent. “It took me a whole month to find my first engineer,” said Mr. Cao.

Working mostly from résumés posted on China’s major job web sites—ChinaHR.com, 51job.com, and Zhaopin.com—he cold-called promising candidates. “Fifty or 60 percent of them gave me a straight no,” said Mr. Cao.

The problem, according to Mr. Cao, is that the first choice for top-school grads—those who aren’t starting companies themselves, anyway—is almost always to work for the big multinationals like Microsoft, IBM, Sun, or NEC.

IBM

Their second preference is major Chinese companies like Huawei and Lenovo. “To most of them, startups offer no more security than vegetable stands,” said Mr. Cao.

He asked those he did manage to meet face-to-face to solve a technical problem. “I told them, ‘If you can solve this, give me a call. It doesn’t matter how long it takes. Just tell me how you did it,’” said Mr. Cao. “Half of them never called back.”

But then, a stroke of luck occurred. Mr. Cao called up Frank Zhang, whose impressive résumé—he holds both bachelor’s and master’s degrees in computer science and a bachelor’s degree from Shanghai’s prestigious JiaotongUniversity—was posted online.

They met, and Mr. Zhang nailed the problem in just days. It cost a lot to land him—well over twice the average Beijinger’s monthly salary of $1,485. But Mr. Zhang turned out to be a great hire and has led the R&D team, which now stands at seven techies who work nights and weekends to launch Go10000.com.

Bad Cop

The other critical hire made by Mr. Cao was Wang Shizhong, who serves as vice president and runs marketing and business development. Formerly general manager of the Beijing office of the Chinese online travel services provider CTrip, a Nasdaq-listed company, Mr. Wang plays bad cop to the irrepressibly gentle Mr. Cao’s good cop.

“In normal life, I’m a nice guy too,” said Mr. Wang, an imposing man who goes by the English name “Strong Wang” and looks considerably older than his 41 years. “But in the work environment it’s another matter.”

Mr. Wang is a strict disciplinarian. He levies a fine of $0.12 for every minute someone is late to a meeting, payable to each of the other individuals who arrived on time.

“Monday morning meetings are for inspecting work from the previous week—and for setting weekly targets which they had better meet,” said Mr. Wang. He seems to relish his role as bad cop and makes no effort to disguise the relish he takes in upbraiding team members and cracking the whip.

Meeting the Money

On Friday morning, George Cao was almost half an hour late to an 8:30Starbucks breakfast meeting with Xiong Yuzhu, a senior associate at the Beijing office of the venture capital firm WI Harper, a Silicon Valley fund with a strong local presence and an interest in early stage investment. It was their first meeting.

“He’s always late,” said Mr. Wang, who has collected a handsome sum in fines from his boss. “I apologize. He’s still new to Beijing and just can’t conceive of how bad the traffic is.”

After exchanging formalities and business cards, Mr. Xiong started with a few softball questions on scalability and the revenue model. Mr. Cao explained that his web crawlers were built to scrape and extract data from new sites without the need for any additional coding.

The reason Go10000 hasn’t gone beyond 100 web sites to include in its search engine is simply that there just aren’t that many Chinese sites with unique rates for air tickets and hotels.

As for revenue, he described three main streams: cost per acquisition, or commission share collected for completed transactions; ad revenues including sponsored ads, banner ads, and fixed position search placement; and collection of data.

“We collect a lot of hotel and airfare data, and we’re talking to people back in the U.S. in travel intelligence who are interested in pricing data from the China market,” said Mr. Cao.

Lingua Franca

Both he and Mr. Xiong speak the lingua franca of the Chinese tech world: Chinglish. The grammar is Chinese, but a good 40 percent of the syntax is English. Go10000’s data is “feichang [extremely] dynamic,” explained Mr. Cao.

feichang

Yield management systems, optimization, average occupancy, user experience, parsing—these and many other words and phrases are in English.

Mr. Xiong has been looking at companies in the travel meta-search space and has met with Go10000.com’s chief rival in China, Qunar.com, he told Mr. Cao. He probed Mr. Cao politely about his chief concerns—barriers to entry, especially for established search players like Baidu, and the size of the market.

Mr. Cao fields the questions with confidence. Sure, any hacker can scrape web sites, but it’s a rare individual who can combine Internet expertise with a deep understanding of the travel industry, he contends. As for the big search engines, travel meta-search is built on a different business model than their core businesses.

“Google and Baidu don’t deal with their customers that closely,” said Mr. Cao. “For us, we have to go negotiate and sign deals with each distributor, and each one takes time. They are actually in a space where their core business is growing very fast. I don’t think they’ll be getting into this vertical niche market yet. But I’m sure it will be incorporated three years from now.”

Google

Relevance and Actionability

Go10000.com’s value proposition vis-à-vis Google and Baidu, he added, is relevance and actionability.

“Type four keywords—two cities, two dates—and you’ll get a huge range of results on a search engine,” said Mr. Cao. “But type those same keywords into us, and every result you get will be relevant and every result actionable.”

As for market share, Mr. Cao confesses that as a new market, hard stats are impossible to come by.

“The online travel market for China was $80 million in 2004,” he said. “If all of the traffic for booking travel products online came through us, and that’s of course unrealistic, we’d get half—or $40 million—because on average we get 50 percent of the commission that our partners receive from hotels and airlines.

“But it’s not unrealistic that we could capture half the traffic,” he added. “If we use the 2004 number, we’re talking about 20 million as an upper boundary. And of course our market will grow with the overall online travel market in China, which is growing at close to 90 percent year-over-year.”

Mr. Cao agreed to send over a business plan pending the signing of a nondisclosure agreement, or NDA.

“I think it was informative—a good first meeting,” said Mr. Cao later. “I like this guy. He’s a smart guy who seems to know the business well. But who knows where it’s going to go?”

Mr. Cao was glad to hear, at least, that WI Harper was willing to sign an NDA. “It’s a rare thing nowadays,” he said. He looks forward to following up after the VC has looked over his business plan.

Next Week: Over the last several weeks, George Cao and Strong Wang had been debating a critical issue for the site: whether, as Mr. Cao had long held, Go10000.com should remain strictly a meta-search site or should include, as Mr. Wang argued, travel-related content.

It now looks like Mr. Cao is ready to concede. “As a tool, people will use you if you’re good,” he said. “But they’ll only use you when they need you. That’s good in some ways. But it sucks in terms of driving traffic.”

Source/来源: http://www.redherring.com/Home/14427