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In the medium run, it will become harder to build a successful high-growth venture without a significant presence in China

For many years, journalists wrote dozens of stories pitting India against China. Which would grow faster? Which would emerge as the innovation leader to rival Silicon Valley, and which would produce more of the next Global Fortune 500? Which would in the long run produce more successful new enterprises?

For Indian entrepreneurs, today’s question is not whether venture capitalists or foreign companies should choose them over their Chinese counterparts. Handicapping a presumed rivalry between Chinese and Indian entrepreneurs made more sense when both were primarily competing for Western customers and Western investment. Today, however, both India and China are the fastest-growing sizable countries in the global economy. Large India companies such as Infosys have concluded that they must be strong in China, while large Chinese companies such as Huawei have concluded that they must be strong in India. For entrepreneurs, the same challenge is paramount: China is such an important market and such an important source of talent that Indian growth ventures ignore it at their peril, and vice versa. In the medium run, it will become harderto build a successful high-growth venture without a significant presence in China. Why?

China is one of the world’s largest and fastest-growing markets in many sectors. Companies in sectors ranging from mobile applications to automotive parts to industrial fittings will lose advantages of scale to rivals if they cannot win a foothold in China.

• Chinese suppliers are fiercely competitive and are sure to attack Indian markets, once they absorb the runaway growth that most struggle to manage in China. The best way to learn how to compete with them is to engage them, at least to a limited extent, in the most competitive arena.
• To scale, Indian growth ventures must serve global customers, who do not want to hear that their suppliers, partners, or channels cannot help them in China and know nothing about China.
• l Innovative business idea created in China are often more relevant to India than are ideas created in the West. Many of the same challenges entrepreneurs encounter in the Indian market are also found in China, but do not characterize Western markets. Examples include keeping logistics costs down over a wide geographic region with marginal infrastructure; serving a vast rural population; coping with slow-moving government bureaucracies; retaining talent when other opportunities abound; and so on. Entrepreneurs who combine ideas derived from operating in both India and China are much more likely to innovate successfully.

To date, only a handful of Indian entrepreneurs have opened operations in China, so little knowledge has diffused within the venture community about when to enter and how to win. We interviewed three people who have built fast-growth companies that expanded into China, in order to bring back insights, lessons learned, and advice.

• Alok Kejriwal started Contests2Win in 1998 and launched a Chinese subsidiary, Mobile2Win, that was acquired by the US-based Walt Disney Group in 2006. One of the few dotcom-era enterprises to thrive for a decade, Contests2Win develops and administers contests and games for brand owners to promote customer connection and involvement. One of India’s best-known online brands, it operates a popular Web site where users can enter thousands of contests and games.
• Ranjit Singh was part of Mobile2Win’s startup team and headed its international business from a base in Shanghai. After the Disney acquisition, he started Fugumobile in Shanghai, which he leads today. Fugumobile not only develops and distributes mobile games and applications but also acts as a full-service mobile marketing agency, providing entire marketing campaigns across various mobile platforms from concept to execution.
• Serial entrepreneur Mahesh Murthy started Pinstorm in 2004 as a search engine marketing company based in Mumbai. Pinstorm recently opened an office in Beijing as part of its drive to become one of the world’s leading digital marketing companies. Pinstorm has pioneered a pay-for-performance business model and garners 60% of its revenues from outside India.

Contests2Win was launched in August, 1998 when Alok Kejriwal left his family business (Hindustan Hosiery) to start India’s first contest site online with a budget of 5000 rupees. The company went to China in order to grow Contest2Win’s business when the Internet business in India flattened after the dotcom bust in 2000. “We were hearing rave reviews about China and how the mobile business there was picking up,” he recalls.

“China had a positive buzz then and our investors, Softbank, wanted us to transplant our model to China, Japan or Latin America. We felt the Chinese were very similar to Indians in the sense that they were willing to spend a lot of time winning small prizes in contests, so we launched the business there as Mobile2Win.”

“What keeps us in China is the huge cost competitiveness of operating there. Our costs would be three times more if we decided to move to the US, and the access to talented manpower is extremely high." – Alok Kejriwal

The company relied heavily on Softbank to smooth its entry. “We did not really think too much or research too much,” Kejriwal says. “Softbank showed us the way, and we decided to take the bull by the horns.” Contests2Win sent a core team of seven or eight people to launch the business, using executive recruiters to grow the team through local hiring. “Since we had well-established relationships with leading multinational brands in India, these companies recommended us to their counterparts in China,” Kejriwal notes. In this way, the company was able to start growing its sales while it was still finding its feet in a new country.

One of the members of the initial band of Indians sent to build up Mobile2Win in China was Ranjit Singh. Originally, Singh packed his bags planning to stay for two months until a local team was hired, leading the international business. He stayed with the company through the 2006 acquisition by Disney, then decided to put to use his experience and contacts by starting his own venture. “I believed that I had a huge opportunity to start a solid business here, which would be a fairly successful growth venture even if it didn’t become a $100 million company,” he states.

Fugumobile was set up as a mobile game distributor and service provider based in China with markets all over the globe, for example in the US, Russia and Greece. It soon branched into working with consumer brands on wireless gaming campaigns. “Consumer brands are excited having visual interaction with their customers, and since advertising agencies still do not understand this space, they are happy to work with us,” Singh says.

For Kejriwal, access to China’s market was the main reason for going there, but Singh places more emphasis on the advantages of using it as a base for building a global enterprise. “What keeps us in China is the huge cost competitiveness of operating here,” he comments. “Our costs would be three times more if we decided to move to the US, and the access to talented manpower is extremely high.”

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