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Building business relationships in China

Podcast transcript #48: Building business relationships in China

Find here the China paradigm episode 48. Learn more about Lucas Rondez’s story building business relationships in China and find all the details and additional links below.

Full transcript below:

Matthieu David: Hello everyone, I am Matthieu David, the founder of Daxue Consulting, a strategic market research company in China and its China marketing podcast, China Paradigm. Today I am with Lucas Rondez, the founder of Nihub Innovation Centre based in Hangzhou. You have been in Hangzhou since 2005. You are also an Honorary Citizen of Hangzhou. I am very impressed by this and would like to know more about how to become an honorary citizen. You have received a lot of awards like the Qianjiang Friendship Award by the city of Hangzhou again. Before starting Nihub, you had started another company called Nihao app to make it easier for foreigners living in China. Thank you very much for being here. Could you tell us about your story in China?

Lucas Rondez: I came to China in 2007, so it’s been 12 years. Previously, I have worked for the banking industry all my life. I started in Switzerland, working at Union Bank of Switzerland for six and a half years. Then I decided to quit and try to go east to see what was going on over here. In the beginning, I asked my bank to send me to China, but they refused. So, I quitted and came here. It was challenging, but I love challenges. I decided to come without any background, language skills, and job offers. By chance, I found an opportunity here to work for a very local bank, Bank of Zhangzhou for six years. It was amazing. When I arrived at the bank because I had a private banking background, they had many customers that fit this category, but they don’t have private banking. They asked me if I could build one for them. I did that for 6 years and then moved to another bank called Ping An Bank under the Ping An Insurance. I spent one year there.

I knew I always wanted to become an entrepreneur in China and be close to my friends to see how trustful they really were with me. So, I switched into sales. In 2015, I had plans to open a startup in China, and I had to raise some money. I wanted to see if all the people who were talking to me would back me as soon as I embark my entrepreneurship in China. That’s what they did, and I was really happy and lucky to have these people around me to open my first startup in China in 2015.

Matthieu David: Which was Nihao app at that time.

Lucas Rondez: What we did is that we started with an online application. The goal was to resolve all the issues that we had experienced by ourselves in China. We did an online application to resolve some personal and life problems of foreigners living in China. We did that for one and a half year. It got on very good traction with many users. The only issue we had is that we made so many mistakes. The biggest mistake was that we didn’t spend much time seeking at the beginning of the business model around it. After one and a half year, we realized that most people were more interested in our own story than our services. Because they were interested in hearing how we opened this startup in China, how we raised money in China, how to build government relationships in China, and how we created this business ecosystem in China. We realized that the need was more on that part. At the same time, the government was very active in attracting more talent and startups like us. We saw that there were needs from both sides, so we worked more on a B2B model. For that, we created Nihub to help other foreign entrepreneurs in China get access to the resources we have.

Matthieu David: You are managing two co-working spaces, one in Hangzhou and one in Qingdao. The one in Hangzhou is about 600 square meters with 65 desks and the one in Qingdao is of a similar size. But I was surprised that it’s free rent in Qingdao, whereas in Hangzhou, it’s a business where people have to pay for the rent. You have raised 280 million RMB. I believe it’s not for you, but your clients at your co-working space. Could you share more numbers about the story, in terms of the revenues, the size of your team, number of clients, the money you have raised, to give an idea about where you stand?

Lucas Rondez: We started Nihub in the middle of June in 2017. Since then, we already had a few projects talking to us and got much more on the road. For that, we created this NiHub. With NiHao, we helped startups in China land and scale in China. We developed a platform of services, including co-working space. But this is just helping them land and set up the structure of the company, most of it is to create this business ecosystem in China.

First, we must create a business ecosystem in China that is very close to the local Chinese ecosystem to help startups in China get access to opportunities. We work with early-stage companies mostly, Around and before. Most of our companies are pre-A round, which means that they have developed some product and overseas businesses and want to build relationships in China. That’s why we work with all these European companies because the European market is just too small for them to become big. We help them get access to China.

We help many companies from different points of view. We are not an incubator or an accelerator platform in China. We provide solutions based on the marketing strategies we could help. Till today, we helped more than 60 companies, for 40 of which we had created their strategies in China. We helped some of them only with the funding strategy, some of them with everything.  280 million is, of course, not for us. We raised ourselves more than 10 million RMB between two businesses that we did. We had to get access to all of the VCs in China. But this was back in 2016, 2015 and 2017. Since 2017, we have only helped other startups in China raise the money. 280 million was for some of our portfolio companies.

Matthieu David: You mentioned some cases in your portfolio, Dashmote and SCMC Accelerator, more corporation with an accelerator from Israel. But Dashmote raised money in China. Could you tell us more about the story of Dashmote with you?

Lucas Rondez: In general, for any startup in China that we work with, we will spend different phases. The first phase is to look at the opportunity that they have or may not have in China. It’s an analysis of the risk and opportunity for the first few weeks and months until the founder of the company decides that China could be their growth strategy. We help them get into the business ecosystem in China. We have to create a future for the company. We work with all the operations like accounting, taxes, design for the products. The reason why we emphasize the funding strategy strongly is to raise money in China from investors. It’s not only helping the startup in China have funds, trade the team in China, and develop the business. It’s also to get access to the resource of the funds because all of the funds that we work with are Chinese locals, and they have access to the market. To accelerate the process of landing and growing in China, it’s very important to put all business relationships in China together. That’s why we offer these funds. The 280 million was not for the 60 companies, just a few of which actually got access to money. Some of them are still not yet ready to raise money in China, so it has been their incubation process. The 280 is not for an early-stage company, but for those that are profitable with very good technology and R&D and had some projects with us like researching for the past six, seven years. They are already mature and close to the commercialization strategy. That’s why we help them raise money in China, build the team, get access to the market, and of course, build business relationships.

Matthieu David: How much does it take for a startup in China to join the Nihub?

Lucas Rondez: First, we don’t have any restrictions on that stuff. We really focus on looking at which company and technology have good long-term growth potential. We focus a lot on the team background of these startups in China and what they are building. We focus mostly on working with the B2B strategy because that’s where the technology advantage could be different in China. We have services for all kinds of company. As long as it is a B2B startup in China, we can help it with coaching to build the business ecosystem in China. It’s very affordable for a very early stage company. But for the funding strategy, we will start to work with companies who are already in the growth strategy. We can serve all kind of companies in different setups. The only thing that we focus on clearly is foreign entrepreneurs in China. We only work with companies with Chinese strategy. If a company is based abroad, for example, my country, Switzerland, and wants to scale in the US, I don’t see any values we could bring to it.

Matthieu David: Could you tell us the minimum budget in order to enter your hub like $10,000 in one year?

Lucas Rondez: Because we do many things, if you look at just the soft things that we do like events, they are open for everyone with a cheap cost to join our events to build business relationships in China. Now people who want to work closely with us may get a desk in our office. So, this depends on the locations. Everything we do is trying to reduce the cost. Most of the startup in China need to control their costs. For example, in the new office that we just opened in Qingdao, the rent is free for every startup in China to get access to the area. We charge in Hangzhou, but it’s very funny.

Because we get a lot of government support, one desk in Hangzhou is only for 750 RMB a month for a startup in China, and they can get exactly the same amount from the government. For us, the goal is to reduce the cost of these entrepreneurs in China. Our main business model is not different from these startups in China, because we just set up our own firms, and our goal is to invest in companies. That’s why if we don’t invest in the company, we will not take shares in that company. Now we have raised money in China. The goal is to invest and grow with the company. At the same time, when you are investors, especially early-stage investors, many people do badly is to support the entrepreneurs in China at an early stage, because many startups in China are new for their entrepreneurs. When you are a CEO of startups in China, you are not only leading a business, but also leading a team and everything, but you don’t have all the knowledge. Our goal is on raising money in China. We also care a lot about pre-and-after-investment service and support. Of course, our growth will come with the growth of the valuation of these startups in China. 

Matthieu David: So, the cost of one of your desks is $100 –110 USD per month, but you can also be reimbursed by the government. You mentioned the government several times. Why is it so important to build government relationships in China, and how did you do that?

Lucas Rondez: First of all, I don’t think it’s only Hangzhou, because every government within China is very supportive. For us, it’s important when you bring a company and technology somewhere; you need to be close to the business ecosystem in China that you need. The reason why we chose Hangzhou to start is that the whole business ecosystem is amazing here. The premises are so much cheaper than in Shanghai, and the other side is because, for a business ecosystem in China, you need many things like a very good market that is not only big but also is open to new technologies. Hangzhou has been very innovative on that point. If you look at the mobile payments, for example, I am sure the populations in Hangzhou were the first one to adopt this new technology. Apart from the market, you also need a good talent pool. Hangzhou has very strong universities and also good people who have been trained by all the big companies like Alibaba and other big tech companies that train and make strong talents. Finally, you also need a lot of funding. Here, we have money available due to a lot of entrepreneurs in China that make a lot of money and support the innovations. Of course, you need government support. The government relationships in China that we are looking for is more about the mindset. The government in Hangzhou says that we are a big incubator. What we want is not a big company, but small startups in China that can become big. When they have this mentality, they know and understand that you need to support each stage of the company with different policies. They know that many of them will fail, but the government will still support them because it creates this mindset and also a very big unicorn. If you look at the number of unicorns in this city, the number has been growing in the past 2-3 years. It’s the general mindset of this business ecosystem in China. This is also what we see from many different cities around China like Beijing, Shanghai, Shenzhen that have been there already for many years. But I think today, Hangzhou is definitely starting to be very competitive in those terms, the same as Chengdu and Shenzhen. There is another business ecosystem in China, for example, Qingdao. The reason why we chose Qingdao is that Qingdao has the potential to create a very strong business ecosystem in China, in terms of market and everything. It’s not in the first 3-5 position, but it has to develop because it needs to be more innovative and transform the current technologies that they have. That’s what is amazing to be in China because there are opportunities everywhere, and it is important to help startups in China be close to the industry that they are working on.

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Matthieu David: I’d like to understand better your government relationships in China and how you build them? The government of Hangzhou and Quindao, all the cities, have they organized with one central desk to talk to entrepreneurs in China and foreign investments? Is it because you have been in the city for long, so you know some people who are not specifically working on investment and foreign entrepreneurs? Could you make it more visual and clearer? What do government relationships in China mean?

Lucas Rondez: Government in China is actually the same as a company. You have the manager and C-level of the government. It’s always good to know the leaders. What you need to understand is that each level of the government is an institute, from nation to province to city to district. Every single level is the same as an institute, but they are all different. You need support from each level, high level like provincial, but everything is also created at the district level. It’s very important to be close to the district level. That’s also why when you register a company in China; you need to register on the district level. When you work with government relationships in China, there are a few key departments you need to work on, such as the talent department. People should focus on attracting talent, and they need a lot of support to do that. The second one, which is also important for us, is the technology department, which focuses on incubators or creating this business ecosystem in China for innovations. You have others, which are more specific for foreigners like foreign expert department, focusing on the visa, attracting talent and a working permit especially. You have many, many other departments. But I think it’s really the same as a department of a company. It’s very easy to talk to them and show them how we can cooperate, especially for us, because they understand that what we are doing is actually helping them with their jobs. It’s a win-win situation for the government, for us, and the startups in China.

Each of the department is the same. There is another department like the propaganda department, which is strong because it can also bring us close to the media. This department has the same structure on the district, the city, the provincial level, and even the national level. So, a part of that is just to connect with them. This government relationships in China are not as difficult as it seems. It’s just that you go to meet with them and explain what we are doing. What is amazing in Hangzhou is actually the mind-set, because I never had to find them. They came to us, and when they came to us, it was funny because they were very open-minded, especially when you don’t know how to build government relationships in China, you made it a bit formal. They told us, “Don’t be too formal. Go straight to the point. Be more straightforward.” After I introduced what I was doing, they had only one simple question, “How can we help you?”, to show this open mind and the point that they understand that the economy is made by companies, so they need to support us. If they support us, it’s a win-win situation for everyone.

Matthieu David: I also had a similar experience in Beijing  10 years ago with one district, which was a bit far from the center, when an official was helping us start a business. He was very, very active, and helpful. I would like to know which district you are in Hangzhou?

Lucas Rondez:  It’s called Binjiang District, the national high-tech zone of Hangzhou. We are even more close to the district level, which is IoT Valley. We are very close to the big and strong companies like Hikvision, JD, many other A-listed companies as well, which focus on innovation. We are also very close to NetEase and Alibaba, so it’s a very high-tech zone.

Matthieu David: You are close to JD’s office, right? Is it in the same district?

Lucas Rondez: JD is just 100 meters from us. I can see it from here.

Mathieu David:  Taking about the companies you are working with, could you mention some cases or at least some industries where they are in? I saw on your presentation that there are 5G, AI, lifestyle, money structuring, IoT, semiconductors. It’s very fashionable because a lot of people talking about those industries like 5G. Could you mention some cases to make it more accessible and visual?

Lucas Rondez: This is actually a choice we did because we really focus on the technology and I think it’s important for us to realize that to get access to the business ecosystem in China is still challenging. If you try to compete in a business model, it’s quite difficult. But if you compete on technology, there are so many advantages if you bring very strong technologies, so that’s a choice and a personal interest as well that we focus on technology. We work closely with the business ecosystem in China, which is made on very high-tech. We focus on two parts, hard technology, and life science, where we are also the strongest, especially in Europe in terms of research and development. For example, we work a lot with IoT, which is very important to develop hardware, because everything about IoT is also about the question of the power consumption that the device has. When they try to develop, these startups in China always try to reduce the power consumptions. For that, if you work on the current situation in terms of software, there’s a Green One company doing semiconductors and developing a chip for IoT, so it can use very low power to make the device. It also has a strong AI capability, which means the AI is not only on the cloud but also on the hardware that changes a lot. If you bring the AI machine learning on the cloud, all of the transactions and data transfer will consume a lot of energy. To develop things into the hardware is the key. That’s one of our cases, and we have many cases that are not as high-tech as this one, but we really focus on the technology.

We also work a lot with new material. For example, there is one working for the cement industry, a very traditional industry that has not changed for 100 years. Cement is a natural resource for everyone after the water. Today, there’s a huge problem of pollution in China, so it developed a new material with the nanotechnology that creates new material to implement in the cement industry. If you look at the cement industry, 50% of the world’s cement industry is in China. What they are developing is made for China, and there are so many opportunities like that. We work a lot with this research and development type of company, so that’s why a lot of company that we work with are spinning around universities abroad. They have been working for many years, doing their Ph.D. and researches on such technology and now they are ready for commercialisations, and the business ecosystem in China is definitely a very strong opportunity and the market for them. 

Matthieu David: You were talking about Hangzhou as a good place to start. Could you mention a couple of cases that would not have been able to make it, if they were outside of Hangzhou? Could you share some examples of companies that succeeded specifically because Hangzhou was the right business ecosystem in China for them to be?

Lucas Rondez: The only reason why I still believe Hangzhou and another business ecosystem in China that we work with are important is because of the cost. I cannot say that a lot of cases are very strong because it’s just the beginning. But I’ve met so many startups in China, which I believe what they are doing is amazing, but the only mistake they made is to localize in Shanghai. Because everything in Shanghai is not made for startups, in my opinion, because of the costs. I have seen many startups in China going very slowly because they chose the wrong business ecosystem in China to start. I think Shanghai is a good ecosystem to scale, but maybe not the one for startups in China. 

Matthieu David: About the cost in Hangzhou, Alibaba is in Hangzhou, and you have so many high-tech companies and unicorns that value more than 1 billion USD. The cost of hiring should not be low anymore with all those high-tech companies. Do you still think that hiring developers is lower in Hangzhou than in Shanghai?

Lucas Rondez: The price of people is definitely not low, but I think when you come to China, it’s not a problem anymore, because you try to find cheap labor. You want to hire very strong and talented people. But the thing in Hangzhou is that we have many very strong people and they are not cheap to hire. Even if you put the money, they will not come to your company, because they have so many choices and they will pick the big ones. But it’s still why I am very interesting to be here because these big companies attract a lot of people. A lot of cities like Wuhan, one of the biggest cities for university in China, have a problem of keeping the talent. These people will be attracted to cities like Hangzhou. There are always new fresh people coming to this business ecosystem in China that is good to work with. The life standard here and the cost of an apartment or food for these people is also lower. The level to start here would be still quite competitive. 

Matthieu David: You mentioned that you have a lot of partners, including WeWork and DealMatrix. I am really surprised to see WeWork because I feel that you two are providing something very similar. Could you explain what you do with those partners?

Government relationships in China

Lucas Rondez: Many people ask us if we have competitors. The word “competitor” doesn’t exist in my vocabulary, because we create this business ecosystem in China together, and this ecosystem cannot be made only with one company. Everyone needs to work with each other because it’s actually to share the resources that are available in the business ecosystem in China. For example, if we work with WeWork, we can have access to the startups in China who need our business ecosystem in China to do great stuff together. How we work specifically with WeWork is that it is also trying to bring much more services to startups in China that are implemented at WeWork, and it also wants to work with the community. We do a lot of training by handling, teaching, sharing knowledge, and resources with startups in China located at WeWork. That’s what we have been doing with them, and it has been a very great opportunity for everyone to create this trust business ecosystem in China.  

Matthieu David: How do your clients find you? There are many places where they can find a desk. I understand that’s not the only thing you provide, but also services of raising money in China and so on. But you can have different places like XNode, WeWork as well. How do your clients get in touch with you? Is it through media and the Internet, or referred by the Hangzhou government?

Lucas Rondez: First, mostly, it’s still from a referral from other startups in China that we worked with like our partners and the government as well. We work a lot with the consulates, innovation centers, and local government, but mostly with universities abroad and other incubators abroad. We work a lot with is with funds abroad. If a company is investing in a company abroad, it is the best one to know which one is ready to scale. We have strong business relationships in China with them, not on the funding, but more on helping their portfolio company enter into China. Coworking space business is not what we are looking for. The only reason we have that is to create a business ecosystem in China, where people can be close to each other. On the operation side, when you open a company, you need to have an office address and here to a co-working space, which means that we can deliver 100 addresses to create startups in China. It’s a very pure operational reason, plus to build business relationships in China with each other. But we are not trying to scale this co-working business, and it’s also not where we try to make money from, because our goal is to provide the resources that these startups in China need to grow.

Matthieu David: Its very interesting that funds are actually reaching out to you. We have worked with rich private equities in China, and I saw how active they are in China to support their investment in B2B. I feel this the trend that the funds are more and more active in supporting their investments, and they can reach out to you as a support for their China expansion or understanding.

You said that co-working is not the way for you to make money. You focus on raising money in China and helping startups in China understand the business ecosystem in China. Could you tell us more about your business model? Is it on the service side like helping them register, the accounting, or hiring people?

Lucas Rondez: We decided to lower our costs as low as possible to help startups in China, but in this strategy, we need to control our cost. For us, the service that we provide still charge, even if it’s not a lot. We still need to charge to cover our costs, even if it’s a little bit of margin on all of these operation services like creating a company, helping with the visa, the co-working service, PR and marketing service that helps startups in China brand themselves through WeChat content creation. All of these services help us cover our costs and make us profitable a little bit. But it is not where we are looking to make money from. Making money is still from the investment point. The goal is to invest in the company and grow with them, and we are not different from the funds. We charge management fees from our LPs and looking for an exit. When we are looking for an exit, we need to put all the support we have in hands to help startups in China scale, grow and make stronger businesses. By doing that, we still need to have our team working for these startups in China, so we need to cover our costs to make sure that we are sustainable as well. 

Matthieu David: LPs, which stands for limited partners, actually give money to people who manage this money to make their investment. That’s what you have to manage some of your investment or direct investments to some of the startups in China you are working with.

Lucas Rondez: Like many types of companies, they will choose to get shares from the beginning and provide services to get shares. I think it’s a very interesting model, but for me, as an entrepreneur in China, when you start, you think it’s fine. But when your company grows much bigger, you start to realize that the shares that you gave at the beginning are much more valuable than the services you get from that. We give a choice on that point. I would say, “It’s your advantage to pay for the services because it’s cheap. If you cannot afford it, we can still find a way to take some shares.” But we are planning to get shares from these startups in China and grow with them. We only invest in the company, and I think it’s very important from that point of view because, in the long term, it is more viable.

Matthieu David: When you take shares of these startups in China or Asia, are they within the WFOE or the Chinese company?

Lucas Rondez:  We still have some startups in China that we helped them raise money in China and they still didn’t have the Chinese structure yet. They get investments from their main holding company abroad. But we create a Chinese structure for most of them because I think it’s important for the operation to have a structure here, so we help them create their WFOE or joint ventures so that they may find Chinese investors. We help them with all of the legal issues and understanding the structure.

We always have close business relationships with entrepreneurs. Even if we work closely with the government and funds, we don’t work for them. We work for startups. We have this mindset of entrepreneurship in China to help startups get the best deal from all of that.

Matthieu David: Would you mind sharing your process of raising money in China? You had been working with the UBS for 8 years. You must be quiet familiar with the process of raising money in the West like Europe. Could you also tell us the differences in raising money in China and in Europe?

Lucas Rondez: To be honest, my banking experience didn’t bring me too much knowledge of the venture capitalists. I learned VC’s in China. I am not familiar with how to raise money abroad, because I never did that, but I am very strong in the process about how to raise money in China. The way to raise money in China is actually quiet and not as difficult as it seems, because it’s just to meet the right people. To make sure that we raise money in China, we need to find the resourceful investors, who understand the industry that they are investing and can provide not only money but also business relationships in China. It should be very strong matchmaking between the stage of the company and the stage that the investor thinks best, to create this business relationship in China. What we do is challenging, because it is difficult to create a trustful business relationship in China when you even can’t communicate with each other because many Chinese firms cannot speak English. That’s why we focus a lot on the technology side because we need to spend more time in due diligence to look at the technology and make sure that your team can handle the scalability in China. The process is quite simple. Startups in China just need to send some very simple pitched for us to know the overview of the company, what they are doing and where they want to go. We help them adapt that or discuss adapting the strategies for China. As soon as this is ready, we start to connect through our networks in China and our business relationships in China with the investors that we have in our hand. That’s why we have a very low profile. We are not the one that are creating roadshows every day or going to the conferences, because what we are doing is still through business relationships in China and contacts directly to make a match.

Matthieu David: How many meetings do you need to get an answer to raising money in China? Could you share a bit more about some experience in raising money in China? Do you go to the same VCs or find your VC depending on the startup in China and its technology to better match them? Could you explain more about how intense and heavy it can be to raise money In China or how easy it can be?

Lucas Rondez:  It depends on the businesses. You need to establish as many business relationships in China as you can because raising money in China is a slow process. If the investors listen to one project for the first time, they will not have the same feeling from other peers about the same project. They will move more quickly. I think raising money in China is more about the speed and the strategies of getting invested. The strategies are very simple, which is to make sure we connect with the right business relationship in China and to be very aggressive in contacts in order to make it quick and efficient. We spent more than 10 years in China creating all of these business relationships in China. My goal is very simple. I don’t want my startups in China to spend 10 years to have the chance of one meeting with investors. Because we already have these business relationships in China, I want to give them the opportunity to meet tomorrow. We help them through the initial networking in China with them and then we help them pitch their companies to the investors. If we see interests, we arrange meetings or conference calls. If there is good traction, the deal will follow very quickly.

Matthieu David: Why would raising money in China be more sensitive to Chinese investors? Would it because they feel that the technologies that can scale in China can have an impact in China? Is it because it is disruptive or because of the innovation simply? What are the key factors to convince a Chinese VC? 

I am more interested in the technology that can scale in China because they know the business ecosystem in China. They see their values here or they are a bit agnostic of the location, for example, the Silicon Valley VC would say we are targeting the world. Do they have this worldwide vision? Do they focus on the technology that they can plug with other investments? What are the key factors if you want to convince a Chinese VC to put money in your startup in China?

Lucas Rondez: VCs in China are the same as everywhere in the world. They just want to see the growth value and the potential of each startup in China. It depends on what you’re targeting. If you look at the technology that you are bringing, obviously you need to see what’s the potential. Today, many Chinese investors are convinced that foreign entrepreneurs in China cannot get into this business ecosystem in China, which from my point of view, most of them are correct. That’s also why we have the responsibility to help them establish business relationships in China. But if you have a very strong competitive advantage, you can get access to the business ecosystem in China. The switch that we have recently seen from the past one and two years is that Chinese investors today are also looking more at opportunities abroad because they are looking for globalization and are more and more interested in understanding the overseas market. Especially when you see all of this business model concept that has been created in China over the past years, there are a lot of opportunities being brought to South East Asia, Africa, and other markets to grow and scale the Chinese company abroad. But on the other side, I think it is because the business ecosystem in China itself is already very big, so it’s just looking at other opportunities. 

Matthieu Rondez: How did you become the Honorary Citizen of Hangzhou and all those awards like Qianjiang Friendship Award?

Lucas Rondez: Two reasons. The first reason is that I speak Chinese fluently and the government still also needs to communicate with expats here. I am one of the first foreign entrepreneurs in China, in Hangzhou speaking Chinese, so it’s very simple for them to build a business relationship in China with me. The second reason is that they are also looking for the win-win strategy. What I am doing is helping the economy of the city with its international development strategies.

From a more operational point of view, there are some key departments that are important for building strong government relationships in China. When they do the provincial award, they also have also the Qianjiang Award, which is the city level award in Hangzhou. To get the first one, you need to get the city level, which is very simple. They said,  “We have 20 awards for this year.” They put that on the district and 3 to 4 for each district. The district knew me, so they asked me to apply and I got it. It was very simple. When you get the city level award, they will recommend you next year for the provincial award. This year, they recommended me for the national award. It’s basically like that. But I think in the end, it is because they understand that the strategies I am using areas similar to what they are looking for. It’s a win-win. They support me and I support them.

I got two things from them, which I think are amazing. The first one is that I got the PR residence, the green card of China, just because I got the award. You know the working visa system and this ABC criterion for foreigners, A being the most talented one and C being the low-skilled one. If I rate myself I will become a C, because I have never been to the university. But even by being a C, I still get access to the green card is, because I got all these awards. The other thing I got from that is much more important for me. In China, there is a Communist Youth League. Inside the Youth League, we are actually the associations of entrepreneurs in China. They elected me to be the Vice President of the Hangzhou Young Entrepreneur Associations, which is very important for me because it helps us build business relationships in China for ourselves with the local entrepreneurs in China. It is very important to work with everyone, not only bringing and thinking for foreigners. We need to build business relationships in China with the local ecosystem. You mentioned about unicorns. We actually know all of them, because, in the associations, we are on a board of around 10 people, among which there are 4 unicorns and 3 listed companies. They are all very strong people to build business relationships in China with. 

Matthieu David: You said that you raised 10 million RMB for Nihub. What are these 10 million for, because I do not see a lot of costs of R&D on your side? Do you invest the 10 million in startups in China as well?

Lucas Rondez: We got most of them for the Nihao App because it was more burning. I had a staff of 30 developers working on the applications. Most of the funds were for that. But when we raised money in China for NiHub, my previous investors backed me up for the second venture. In total, we got around this 10 million RMB.

Matthieu David: So, it’s really an investment into your company, not investment to reallocate into the startups in China within your business ecosystem in China. Thank you very much for your time. Congratulations on everything you have achieved. I guess you are the person to build business relationships in China within Hangzhou. Thank you again for talking to us it was very instructive. Hangzhou is a really good place to consider before moving to China, at least to consider it. When I started my first business, I was considering Yantai and Qingdao. Ultimately, I started in Beijing but I have considered all of them, so it’s a very good exercise to do. Thanks again, I hope you enjoyed it and I hope everyone like the interview too. Thanks, Bye, bye everyone. 

Lucas Rondez: Thank you. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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