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

‘All is chaos under heaven, and the situation is excellent.’

-Mao Zedong

George Cao, founder and president of Chinese travel meta-search site Go10000.com, is no devotee of the Great Helmsman, but he does know that a little chaos under heaven—at least in the online travel sector—is good for his business.

Developments in the travel industry last week lent confirmation to what Mr. Cao has been telling potential investors all along: that the sector is becoming increasingly fragmented.

At the China International Travel Mart held in Kunming, the Hong Kong-listed China Travel Service (CTS) announced that it will invest 1 billion yuan ($123.6 million) in Shenzhen-based travel site Mangocity.com.

Mangocity will now compete directly with Aoyou.com, the joint venture online travel service formed late last year between China travel industry giant CYTS (China Youth Travel Service) and U.S.-based travel conglomerate Cendant.

“Traditional agencies are getting into the game,” said Mr. Cao. “They’re just waking up to the success of CTrip and eLong”—both are Nasdaq-listed Chinese online air ticketing and hotel reservation systems—“and realizing that their own resources in hotels and air travel are much better.”

China International Travel Service (CITS) also announced it will set up 3,000 storefronts nationwide in China, with 300 in Beijing alone, in an effort to boost sales of travel packages. “That’s good for us, too, because CTrip and eLong are selling package tours, and with these big guys coming in, there’s more pieces for us to aggregate,” said Mr. Cao.

Monkeys and Gorillas

“One of the founders of SimplyHire.com, a job meta-search, once described perfect market conditions for meta-search as having ‘a few gorillas and lots of monkeys,’” said Mr. Cao. “That’s exactly the situation that you have in the market in China. You have gorillas like CTrip and eLong”—and now Aoyou.com and Mangocity.com—“who can organize all the monkeys.”

The smaller simians are individual agencies and independent hotels. Too high a gorilla-to-monkey ratio and there’s no point to meta-search. Conversely, too many monkeys make scale impossible. A meta-search site loses leverage if it has to deal with every individual hotel and small agency.

China is fragmented enough to make businesses like CTrip and eLong useful to consumers. Seventy to 80 percent of hotels in the U.S. are chain-affiliated,” Mr. Cao said. “But in China that number is less than 20 percent. The Chinese market is even more fragmented than Europe,” he said.

The Money Hunt

Meanwhile, Go10000.com’s search for the right investor continues. Tsinghua Science Park, which to date has been the startup’s landlord but has not taken a more active role in incubating the company, has expressed an interest in helping Go10000.com raise capital, and may even itself invest, said Mr. Cao, following discussions with Tsinghua Science Part incubator vice president Jin Song.

“The chairman of the SciencePark, Meng Mei, once said, ‘We’ve been a real estate company for a long time, but now we’re starting to get into the science part of the science park. We now have cash on hand and want to help companies grow,’” Mr. Cao related.

With this encouragement from the SciencePark, Mr. Cao has shelved plans to relocate to a larger space. The incubator has offered more space to rent. “I’m inclined to rent from the SciencePark because I value more than just the space itself,” said Mr. Cao, “They actually help you to network and meet people, and they organize useful events. Now that they’ve expressed some interest, that’s enough to keep us here for a while.”

But with its limited funds and its manpower constraints, Mr. Cao is by no means counting solely on Tsinghua Science Park, and he is continuing talks with several VCs. Mr. Cao is willing to hand over a significant equity share should the right VC take an interest. “We’re pretty small right now—especially in terms of the management team, so we’re not that sensitive about a VC taking a lot of control of the company,” said Mr. Cao.

What matters to him is the value a potential investor brings, he said. “A VC, if we pick the right one, can really help—not necessarily in daily operations, but in networking with portfolio companies who may be possible partners, in building our BD [business development] network,” said Mr. Cao, who is looking in particular for a fund with a partner who grasps the Chinese online travel market—“someone who missed out on the CTrip deal but has studied the market carefully.”

Clutter = Substance

He’s learned to respect the experience of seasoned investors when it comes to the idiosyncrasies of the China market. Like many returnees whose early Internet experiences were all in the United States, Mr. Cao’s taste in web design tended to run toward the minimalist—a preference reflected in the initial, stripped-down look of Go10000.com.

But when he showed the site to China Internet veteran Carlos Bhola, now of Celsius Capital, he was surprised the veteran investor—Mr. Bhola backed EachNet.com and SmartPay Jieyin—advised him to bring as much information to the front page as possible.

The dense, garish riot of hypertext and floating ads on any Chinese portal may offend the Western eye, but to Chinese consumers, Mr. Bhola told him, clutter equals substance. A minimalist web site means there’s not much there.

The same applies for retail space: boutique shops that keep the all the inventory in the back mean “expensive,” while overflowing shelves and jostling crowds mean “sale!” It’s a lesson that Mr. Cao did not have to learn the hard way.

Filling the Hole

Mr. Cao earned a master’s degree from Cornell’s prestigious School of Hotel Administration. And Go10000.com’s vice president of business development, Wang Shizhong (who also goes by the Westernized name Strong Wang), ran the Beijing office of leading online travel site CTrip during its early years. Both men have extensive travel industry backgrounds.

“What we need is someone with a strong background in the Chinese Internet space,” said Mr. Cao. “That’s someone we’re missing, and we’re actively seeking someone like that.”

Mr. Cao is particularly interested in finding someone who can get them in with the major Chinese Internet portals—Sohu, Sina, and Netease—and with the search engines. “Every portal has its own search engine now. Google’s already doing something in the travel space. I’m sure that travel is on every search engine guy’s mind—‘Do I do it myself, or do I partner?’ I’m willing to be a ‘powered by’ with a revenue share. I just need someone who can come in and lead that effort—an individual or a VC—someone with credibility.”

Next Week: With a new corporate image and a revised business plan, Go10000.com prepares to debut its new web site in mid-December. “We have a bunch of really bright engineers from top schools, and we can take an idea and get it implemented really fast—something that a lot of the traditional online travel companies can’t do,” said Mr. Cao.

The thoroughly revamped site incorporates all the must-have Web 2.0 features—user-generated content, RSS feeds, and a tag cloud. Will it boost traffic as Mr. Cao is betting? Or do users just want meta-search for its unadorned functionality?

Source/来源: http://www.redherring.com/Home/14639