Steve Hoffman | Startups In China & The Five Forces That Change Everything

Topics Discussed and Key Points:

● Launching Founders Space in China

● Why Steve wrote Make Elephants Fly

● China’s unique (and commonly misrepresented) approach to innovation

● Mentoring Chinese vs Western entrepreneurs

● How evolving family dynamics and the Westernization of much of today’s Chinese youth influences the country’s perception towards entrepreneurship as a career path

● What Western startups need to know if they want to enter China, and what Chinese startups need to know if they want to take their business abroad

● Why Steve wrote The Five Forces That Change Everything

● Steve on whether China will win the battle for AI supremacy

Episode Summary:

Today on The Negotiation, we speak with Steve Hoffman, venture investor, serial entrepreneur, and award-winning author. He is Chairman & CEO of San Francisco-based startup accelerator Founders Space, which was ranked the #1 incubator for overseas startups by Forbes and Entrepreneur Magazines.

Steve remembers the moment he was first invited to establish his first Founders Space in China. This was the start of a plethora of opportunities that came his way almost overnight: That same year, Steve was simultaneously doing speaking tours, launching his incubators in other cities, and had just published his first book Make Elephants Fly. His big “break”, however, came in the form of a talk he gave for Tencent which made Steve China-famous.

Steve makes the case that China’s business world is actually quite innovative, contrary to its “copycat” stereotype. In fact, he says that it is precisely due to their ability to see what’s working, and to be able to improve upon these products and adapt it to their local market, that defines China’s truly innovative spirit.

Asked for his experience in mentoring Chinese entrepreneurs as a foreigner, Steve says that, in order to get the best out of a local, a mentor needs to know their limitations. Specifically, as a foreigner, Steve can only teach from the point-of-view of a Westerner. But that is okay—the Chinese entrepreneur will even appreciate that unique perspective.

He then adds that a true, well-rounded business education comes when the foreign mentor collaborates with local Chinese mentors, filling each other’s gaps and complementing each other on a cultural level.

The same principle applies when it comes to Western startups who are looking to enter the China market. “Entering China is tough,” says Steve, “because it’s an entirely different ecosystem.”

A big part of this is culture, which is centered on relationships. Those who succeed, then, are founders who have a firm grasp of the language and culture of China. At the very least, it pays to have local partners who have an intimate understanding of this ecosystem.

Key Quotes:

“The reason startups work so well is, by their very nature, they are limited. They are limited in size—they only have so many founders. They are limited in money—so they have to use their resources very cleverly, forcing them to innovate. And they are limited in time—so they have to iterate really, really fast. A big corporation doesn’t have those limitations.”

“[Chinese entrepreneurs] are really receptive. Chinese entrepreneurs want to succeed. They are open to ideas. And because I’m a foreigner, they’re really open to our perspective. So, I’m not going to give them the same advice that a local Chinese mentor or innovation instructor would give them. I give them advice from my culture, my background.”

“[Chinese] understand that it’s not about what you wrote on the paper. It’s about your relationship with them. And it’s not just about your relationship with one person in China—the person you’re doing business with—but, it’s your relationship to all the other people in that person’s network.