Houston Community News >> Chasing Dot-Com Dreams in China
6/2/2007-- First of two parts
In the office after hours, the Chinese economic miracle didn't feel much like
magic.
Spent cups of instant noodles lay in the trash can. Cubicles were empty for the
night. Among the last to leave the office of Internet start-up HiU were Jacques
Ding and Susan Su, the two entrepreneurs who had everything on the line.
After more than 18 months in business, they had pitched their idea to top
venture capitalists but were still hunting for the backing they needed; they had
attracted advertisers and more than 1.5 million members but needed many more;
and they had poured years of savings into the business without knowing if it
would survive.
To follow the ups and downs of a single Chinese start-up - one among thousands
today - is to glimpse how entrepreneurs are battling for an edge in the world's
hottest Internet boom. The changes sweeping China in the early 21st Century not
only are ushering millions of people into the middle class, but also are
spurring many others to reach for a life beyond it.
American venture capitalists are scouring China for the dot-coms they calculate
could be the nation's next big hits, the next Google or YouTube. Ding and Su
were betting that HiU could be one of them.
'We think we can change people's lives,' said Ding, a tall 32-year-old with
rimless glasses. 'And we've put our money into it.'
Ding, once the top-scoring high school student in a Chinese city the size of
Dallas, gave up a stable job as a tech executive to start HiU. Su, his wife and
business partner, built a thriving marketing firm but put it aside to help
launch the Web venture.
If their start-up succeeds, they could be China's next dot-com superstars. If it
doesn't, they could lose everything.
Their gamble began days after Su gave birth to their second son in February
2005. She had stacks of clothes that no longer fit, so she posted for-sale
fliers in their leafy middle-class apartment complex; neighbors streamed in and
spent more than $1,000.
The couple saw an opening: They could create a Facebook.com for the Chinese
middle class, a social-networking site that would connect like-minded people for
community and commercial purposes. Their site would attract users by offering
hyperlocal news and information, arranged by neighborhoods, and it would charge
advertisers to reach specific audiences.
The concept mirrored their lives. A generation ago, Ding and Su's parents lived,
like so many Chinese citizens, in housing supplied by employers. But Ding and Su
were born late enough to avoid the trauma of the Cultural Revolution. They
caught China's surge toward the free market, graduated from good schools and
entered the business world. They own a three-bedroom apartment in a typical new
Beijing compound.
'Chinese people used to be tied to their homes chosen by their work units,' Ding
said. 'Now they are able to choose their communities, their neighborhoods. It's
a fundamental change in their lives and we could capture that.'
Savings spent on future Four weeks after the maternity-clothes sale, the couple
and two partners launched HiU with $125,000 drawn mostly from the couple's
savings. Su became chief executive; Ding was chief operating officer. They spent
the first month working from the dining room table, clearing it off each night
for dinner.
By July, the site was online. They were drawing about $10,000 a month in income,
they said, which was not enough to cover salaries but enough to be encouraged.
The following spring they moved into a large airy office on the 22nd floor of
one of Beijing's many new business towers. The building was so new that the
Citibank and KFC downstairs were still under construction.
The business was all-consuming. The couple often went a full week without seeing
their sons, ages 9 and 1 1/2 , before bed. The little one had started calling
the nanny 'Mom.' Su's fashionable life as a highflying marketing executive had
abruptly ended.
'Handbags to shoes, I used to match perfectly,' said Su, 36, a mile-a-minute
talker with short hair. 'I looked stylish and had good taste. Now I'll wear the
same sneakers for a month straight.'
Ding's parents had started traveling to Beijing from the eastern city of
Hangzhou to help care for their grandkids. Ding's father, who retired from a
cardboard packaging company, thought the idea of a start-up was crazy. But his
mother was intrigued by the unfamiliar new world and spent hours scouring the
Web for information on China's Internet growth.
Private backer helps open door In January 2006 they found their first investor -
a private backer offering a half-million dollars - and they set out to grow. By
September 2006 HiU had a sprightly orange-and-white logo, a straightforward Web
design and a staff that had grown to 60 people - virtually the same size as
YouTube in the days before Google paid $1.65 billion for it last year. Most
importantly, by September 2006 the site was touting a membership of 1.5 million
users.
But they knew it would take more than that to break out of China's vast new
ranks of aspiring tech ventures.
'Yesterday I met 12 Internet firms,' said Liu Xiaoxuan, who screens start-ups
for the Beijing-based advisory firm Zero2IPO, which links entrepreneurs with
investors. 'I tell each of them that they get 20 minutes, and sometimes they
open a PowerPoint [presentation] and after 5 minutes I tell them, 'Thanks, but I
don't want to waste your time.' '
Inspired by Silicon Valley and partly funded by it, China's Internet revolution
has spawned thousands of Web start-ups in the past three years. By July 2006
China's 137 million Web users were looking at 2.9 million Chinese Web sites of
various kinds. Venture capitalists invested in 122 Chinese tech start-ups in
2006, according to a Zero2IPO report, though nobody tallied how many more like
HiU were still vying for funding.
Succeeding online in China poses particular challenges: A site needs content
that is provocative enough to get noticed by users but not shut down by censors.
Like all Chinese sites, HiU filters out obscene content and keeps up to two
editors at a time scanning it for politically sensitive content to ensure that
it never makes it online, said Chief Technology Officer Zhang Chunyun.
HiU chases added funding Chinese entrepreneurs are of particular interest in the
West because U.S. Internet giants have not fared as well in China as once
expected. Google and Yahoo trail Chinese rivals, and eBay recently abandoned its
Chinese site. By contrast, companies little known in the West - such as Tencent,
Tudou and YoQoo - have growing audiences in China and millions of dollars in
backing from American investors.
That was the trajectory that Ding and Su were aiming for. With help from Liu,
they began meeting venture capitalists. The reaction was positive, Liu said, but
non-committal. The investors wanted to watch HiU for a while longer before
committing cash. They wanted to see it build a larger audience and make more
money.
But for Ding and Su, every month without funding raised the stakes. They began
talking about whether they would have to sell their apartment, a home their
parents never could have dreamed of buying. They began to think twice about
taking the kids out to dinner. They scrapped a trip to Disneyland. They bought a
pet squirrel instead.
But they had no intention of slowing down.
'No matter the risk, we will carry on,' Su said.
As autumn arrived, they embarked on a major overhaul of the Web site. They were
going to need to cut staff. Things were getting more complicated.
'The reality is that most companies will not make it,' Ding said over lunch one
day. 'Maybe it's funding, maybe it's communication, maybe it's execution. But
everything has got to be in place for it to work.'
(Contributed by Chicago Tribune)