China · Wire Transfers

Best advice to open a Chinese office for your startup? (Mainland China, not HK)

Francisco Guerrero

March 21st, 2013

Hi all,

My startup received some seed funding, but it was much less than we expected it. Instead of hiring 1 FTE here in Silicon Valley, we'd like to open an WOFE (wholly owned foreign enterprise) with 3 FTEs in mainland China. One of our technical co-founders is Chinese (though he lives here in SV) so he has Chinese citizenship. However, we're looking for the best advice on how to go on doing this, since usually early-stage startups either outsource or not, but rarely they open a China-Based office.  Any Ideas, advice? Anyone knows a startup that successfully opened an office in China?

Gerry Miller Gerry Miller is a business and technology visionary.

March 22nd, 2013

Hi Francisco, Logic Solutions in Ann Arbor, MI has done this - I believe they have 7 offices in China now. Their founder is Jimmy Hsiao. Maybe you can reach out to him for advice. Gerry Miller Business & Technology Visionary gerrymiller.com 100 W 5th St Ste 403 Royal Oak, MI 48067 USA Mobile: +1 (248) 819-0443 Email: gerry@gerrymiller.com Skype: museholdings See who we know in common

Thomas Hartman Founder at StandardCrypto

March 22nd, 2013

OP: You may want to learn from ulrich at kudelabs.com in guangzhou.

Kude's niche is they run big auctions for governmental and
quasi-governmental agencies, like carbon credits and new top level
domains and that kind of thing.

product page: www.powerauctions.com

I know ulrich and can provide an intro if necessary.

FYI, kude is both simultaneously hiring talent, and possibly also open to outsourcing some of their own talent. That is, sometimes they're overstaffed and sometimes understaffed. Their action thing is the core business, and when that's slow they branch into other things, sometimes doing proof of concepts for other startups, both local to china and in the more mainstream startup hubs.

Francisco Guerrero

March 22nd, 2013

Thanks Gerry. We will also get some local help, recommended. Looking at all the options in the table before the jump. 

Victor Wang

March 21st, 2013

We just recently joined http://hanhaiinvestment.com/. They're based in SF and have offices in Beijing too. We have the same outsourcing interests as you, and Hanhai seems to be able to help with that. I think you really need an inside contact or several with good guanxi if you really want to do anything in China. But it sounds like you might want to just use your seed funding to demonstrate more traction in the next couple of months and then raise more $$? It'll be a lot of work to set up the WOFE, hire, and manage, and unless you've done something similar before (our CTO has overseas dev experience and we have Hanhai now) it's probably better to spend that effort on something that pushes your business forward. Just my 2c. Victor

Freeman Fan Entrepreneur

March 21st, 2013

Hi Francisco, From my personal experience (I lived and worked in Beijing for a year recently), I would say this is quite difficult, mostly because of the lack of quality engineers and the multitude of software startups that are springing up and competing for the engineering talent. Top engineers command salaries that are on pace to catch up with what engineers make here in the U.S. (and they seem to rise so quickly from year to year). If you hire engineers who are not considered 'cream of the crop' in China, you will soon realize that even three of them combined may not be as productive as one competent engineer here in the U.S. My company had a very difficult time hiring engineers in Beijing, even though we are a relatively well known brand over there, and we go to all of the university recruiting events and receive hundreds of resumes. The other issue is the cost of registering a business. I'm not too familiar with this aspect, but I believe there are three ways to do this: foreign direct investment, registering a local business, or creating a partnership with an established local business. The first two option both involve significant capital investment in China and may not be suitable for your startup right now. I hope I have not been too discouraging. I would say if your goal is to create a product for the fast-growing Chinese market, then by all means open an office in China. If your target market will be the U.S. for now and you are only considering opening an office there to reduce labor costs, then you need to consider this move very carefully and probably explore other options. Best, Freeman