This is a translation of a media report by Yongqing Lin that originally appeared in Chinese in Communication Information News on Nov 2, 2006.
Starting a business on the Internet is relatively easy. Various programs, such as returned scholars venture parks, high-tech venture parks, and web 2.0 projects, stimulate young people to pursue their dreams of starting Internet businesses.
Even great ideas, however, cannot be implemented without sufficient capital. According to a survey on Internet startups, 37.1% of the startups require less than 5 million RMB, and 16% need less than 1 million RMB. No matter what the business is, it has to start with fairly substantial initial capital.
Investors keep an eye out for opportunities to earn profits while companies are willing to give up some stocks in exchange for development capital. Investors and entrepreneurs need each other, but because of information asymmetry, investors and entrepreneurs can neither find each other nor understand each other well once they do; therefore, many agents and media are making efforts to match the two parties.
A Young Consultant
Oliver Ding does not come from a venture capital. On his simple but creative business card his title is consultant, and the business range is corporate identity and venture capital.
On the Internet his nickname is Microspace, and he now works for private investors. His work involves business plan writing, IPO due diligence investigation, B2B brand consulting, investor relationships, website planning and consulting for start-ups.
I interviewed him at a cafe in Fuzhou. Initially, it was a bit hard to reconcile his shy demeanor with his dynamism as a consultant.
Ding sent me a copy of The Art of Start by Guy Kawasaki. He said if he could recommend only one book to Internet entrepreneurs, he would recommend this book. Guy evangelized Apple’s Macintosh to software and hardware developers and led the charge against world-wide domination by IBM. He runs a venture capital website to connect entrepreneurs with investors. Well aware of the rift between entrepreneurs and investors, Kawasaki remarked that the chance of an entrepreneur securing venture capital is as likely a person swimming on a sunny day being struck by lightning.
Besides Capital, Entrepreneurs Need Communication
Despite the difficulty many entrepreneurs still spare no efforts to find opportunities to present their projects to venture capitalists. During this process the role of consultants is important because they can provide professional service to entrepreneurs who usually know little about financing procedures.
In fact, the difficulty entrepreneurs have attracting venture capital derives from several factors. First, they cannot write good business plans; and investors usually require detailed business plans addressing issues like costs and growth potential as well as analysis of target market and consumer positioning. Furthermore, they lack experience with business operation, have no clear profit model, rarely have a good team in place, and lack sufficient market potential.
Because of his distinguished reputation on the Internet and his column at a noted Fuzhou newspaper, Ding is well known to many young entrepreneurs, some of whom have contacted him for advice. And Ding always tries his best to answer their various questions.
Ding said, “Because of the confidentiality of a business plan, a start-up team rarely communicates its projects with others, yet a team needs constructive advice. Many teams have great ideas but find it difficult to systematize them or find that the product demo does not correspond to the descriptions on their plan. For example, when I found some mistakes in a team’s PowerPoint presentation, I pointed them out. Several months later I found their product demo was completely different from the plan. They had to address various mistakes by redeploying people, improve technology and reposition products. They wasted money on all these steps.”
Once Ding talked with an Internet developer who was leading a team to develop a local B2C e-commerce platform. Ding found that they did not have a thorough understanding of customer needs and behaviors and would very likely encounter a development bottleneck if they launched the website too soon. In another example fewer than 100 days after launching a website, members of a team found that they still needed more planning of the design of the whole project.
Ding said opportunities and timing are among the key factors that determine the success of a project. Entrepreneurs need to have clear minds to study the ideas of project, customer needs and customer behavior models. They should not take the launch of projects lightly because after a website is launched, it burns money quickly. An entrepreneur should try to make sure his or her website can rise to prominence quickly and retain as many first time users as possible.
Ding believes that at every stage of a project, an entrepreneur should actively seek advice from users, consultants and people in the same trade. The advice from outside can help him scrutinize his project more objectively to improve it.
Stories of Internet Entrepreneurs
Ding stated that among the entrepreneurs he met, many started their businesses in rented apartments. For example, Mr. C. demonstrated for Ding an e-commerce platform website that allowed people to set up shops and browse for the latest commodities information. In addition, it also provided for collective purchasing. Mr. C. and his team chose a special market positioning to implement the e-commerce business model. After the presentation Ding offered three tips. First, in terms of structure, he suggested that the website must structurally strengthen the management of personal accounts, optimize navigation quality and improve the viscosity of users. As for content the website needed a reduction in the content to commodities of only one category. About marketing, Ding suggested to launch marketing campaigns step by step.
The seven-person team led by Mr. C. rented an apartment to develop their business. Because some team members still had other jobs, they worked in their respective companies and came to the apartment in the evening to discuss the website business. They took no pay and pooled their own money to support the project. At very low costs the team finished the first stage of the website development and already launched the website.
Ding mentioned that when meeting with Mr. C. at a cafe, Mr. C. ordered only a glass of water, no coffee or tea. His frugality was apparent.
At the end of my interview, Ding invited me to attend a business seminar put on by Fuzhou Internet entrepreneurs. Through regular meetings, such as the seminar, Internet entrepreneurs in Fuzhou share ideas and network with one another to broaden their horizons.