Innovation programs in China

Podcast transcript #42: Innovation programs in China, a good accelerator for foreign startups

Find here the China paradigm episode 42. Learn more about Matthieu Bodin and Adriana Verde Rios’ story in China and find all the details and additional links below.

Full transcript below:

Matthieu David:  Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting Strategic Research Company, and this China business podcast China Paradigm. Today I have these two guests. It’s very funny. I hope I’m going to handle it correctly. I’m with Adriana Verde Rios and Matthieu Bodin.

I’ve known Matthieu for some time. Back in Hong Kong, you were in charge of Startup Weekend and Techstars at that time. I’m sure you’ve always been an entrepreneur, environment tech, an entrepreneur in the environment. That has been my image of you since I’ve known you.

Currently, you’re a Growth Director at XNode. And, Adriana, you are a Program Director at XNode. So, it’s pretty new for both of you. Your position, I think, is less than three months, for both of you, it’s 2019. Previously you had both been in Asia and China for some time. You have observed the market, and you have built entrepreneurs and companies entering China, those developing in China, or starting in China. So you have experience which is much longer than actually the three months at XNode, witnessing entrepreneurship.

Thank you very much for being with us. The first question I always have for every guest is, what the size of XNode is? What is the size of the business you are working on currently? Size could be revenues, several clients, or several companies that you have.

But before that, actually, I didn’t explain what XNode is. I’m a bit afraid of explaining what it is because I feel I don’t understand fully. Initially, XNode started as a coworking space. You have now three locations, as I understand. But you are doing more than coworking space. I think you don’t like that we say that XNode is a coworking space because you are also offering corporate innovation programs in China.I like to know what it is – acceleration program in China and the discovery of China.

When I read your PDF, you said that foreign companies in China, because they don’t know enough about the market, they don’t find the right partner, so that’s what you are providing. Right now you’re providing more than just space and an office. I like to know more about this.

So, thank you very much again. I’ll let you talk now. What is XNode? What are the size of XNode and some numbers to share?

Adriana Verde Ríos:  First of all, an introduction. We have different businesses. Yes, you’re right on the coworking space. That was our first. That was how we were born in 2015 as a coworking space. But today, we’re actually much more than that. And the biggest part of our business comes from the innovation side.

The innovation we divided mainly in two. One of them is our relation, how we help foreign startups in China; we call it to scale up. It’s usually when foreign startups want to enter the Chinese market, and we help them do that. Maybe we’ll go a little bit more in detail later.

And then we have the corporate innovation side where we have different types of corporate innovation programs in China, and where we might create a relationship between certain startups on corporates, or we might help the corporate to develop projects or business as a startup or in a startup environment.

Matthieu Bodin: If I may add something, we are indeed anchored in the physical space. We have three locations in Shanghai. We’re opening new places in different cities very soon. But what was interesting when you have a physical space is the fact that so many different ecosystem players come and ask you questions about what’s going on locally. You’re being associated as a community leader.

Very quickly, what the leadership at XNode realized is that there is a major need for the head of innovations programs in China to figure out a way to innovate in the Chinese context. They often don’t have resources from the HQ who’s very disconnected with what’s going on in China, but they have that big pain point that needs support. That’s how 18 months ago, XNode started offering these sorts of corporate innovation programs in China. But at the core, right at the roots, what is now the blood are the entrepreneurs that we see on a daily basis in the coworking space that we associate with the corporates and that we have during our events.

Matthieu David:  I really want to have a bigger idea on numbers. I have at least one in three locations. Could you share more about the size? I know people, I know companies which are at XNode. Could you tell us more about some numbers? Share us some numbers.

Adriana Verde Ríos:  We are totally about 65 employees, 40 of them are in Asia, mostly in Shanghai, and 25 of them are on our joint venture together with HighTechXL in the Netherlands. Of these 40 people here in China, we have around 6 to 7 of them on a JV with a Japanese partner. We have around 7 to 10 people managing the coworking space, and the rest, almost 20 are from the innovation programs in China, both corporate and scaleup.

Matthieu David:  In terms of coworking space – I’m sorry, I cannot get rid of this word – how many companies do you have?

Matthieu Bodin:  We have around 400 startups. Not all of them obviously are in our space in Jing’ an, but many of them are in our spaces in Hongqiao or ZhangJiang, which is around the Pudong airport.

Matthieu David:  Before you started, are you using your space currently?

Adriana Verde Ríos:  Yes.

Matthieu David:  I see. You’re so much bigger than I thought. And 20 people in the innovation programs in China, compared to 7 to 10 people managing the space – that means the innovation programs in China for you now is more important at least from a cost perspective than the pure coworking space.

Matthieu Bodin:  Have in mind that this service got started really two years ago, but the need is so clear from large corporations that it’s taking off and the team will probably double within the next two years.

Matthieu David:  I see. Very interesting. I like to understand more about the innovation programs in China then.

I think you mentioned, Matthieu, before we started, and you thought, Adrianna, we have a lot of buzz words, and I think that’s one of the things during the talk we have, we will have to define some of the words we are using like the innovation programs in China. What is innovation? Is it the discovery of a market? And basically, it’s a research and discovery, a trip, or is it the innovation of a product? What is really there? What do you call innovation? For instance, what other words you’re using like scaleup and startup. One of my friends, for instance, has a definition of a startup as an organization making money but is still looking for its product and its market fit, and then it’s becoming a company which is making money.

I really wish that for the audience and people listening to us, we know where we’ve put as a definition behind those words – innovation and innovation programs in China – those both words. Innovation – what do you specifically do? Can you be specific on what you do in terms of innovation programs in China at companies? Some cases.

Adriana Verde Ríos:  innovation programs in China. We have two main lines. As I was saying, the scaleup, which I was playing first, these are already relatively mature startups from the West, usually Europe or the U.S. They already have a business case. They have a product or service, and it’s validated in their market of origin. And what they want is to come, enter China, adopt their product or service to China, and grow here. That is the scaleup, and that is one of our innovation programs in China

The other part, which is the corporate innovation, is usually, as Matthieu was saying, foreign, big corporates usually or, in many cases, Fortune 500 companies who want to enter the Chinese market but China is a black box for them. They want to either leverage on the technology, the market, or whatever. And we have different kinds of programs depending on what they need that we will apply.

For example, our main ones, we have what we call the “outside in,” because we bring startups from outside to contribute and help the corporate achieve their goal, or “inside out” where we select and scout specific people competencies, resources from inside, and we run it as a startup to achieve a certain impact.

Matthieu Bodin:  Typically, what people expect from us is either understanding of how to innovate like an entrepreneur and then goes through a set of workshops, one-on-one mentoring session, and exposure to entrepreneurs. Some other clients of ours are expecting a concrete output such as a small prototype, something that addresses a business need. So they are looking actually for an internal startup that they might eventually spin off. And that also goes through a set of workshops, one-on-one mentoring and exposure to entrepreneurs. What we deliver is typically the same things. But the goal, the objective, is being defined together with our clients.

Matthieu David:  How do you charge?

Matthieu Bodin:  We are still exploring the right revenue model. At this stage, it remains a service fee, and that’s something that we are comfortable for the foreseeable future.

Matthieu David:  What do you mean by service fee? Is it tailor-made for each of them?

Matthieu Bodin:  The idea is that we look at the goal of the program and that we make sure that it aligned with their internal objectives, that we understand the KPIs. And based on that, we are able to assess what’s value added, and this is how we would price our offering.

Matthieu David:  Would you mind sharing your ranges of pricing for the program?

Matthieu Bodin:  Yeah, we’ve seen everything. It would start in the mid-six digits up to low seven digits.

Matthieu David:  Are you talking in RMB?

Matthieu Bodin:  Yeah, absolutely.

Matthieu David:  So, basically, you’re starting at about USD 15,000.

Matthieu Bodin:  That would be for the lighter products, like a pack of [phone] and these sorts of things, but then it can go really high based again on the expectations from the clients.

Matthieu David:  I see. Okay.

Adriana Verde Ríos:  Also we are sourcing investment from our sites. For some of our programs, if it’s just scouting, for example, to help the startup find specific technology, it might last only two months. That will be a little bit shorter than if we do the full-blown five to six months acceleration program in China.

Matthieu David:  You mentioned the Netherlands. You mentioned 25 people working internationally in the Netherlands. What was the connection with the Netherlands? I never heard you connected XNode with the Netherlands.

Matthieu Bodin:  That’s a very exciting opportunity that happened two to three years ago. HighTechXL, which is an acceleration program in China, an organization innovating in the height of Eindhoven, came to China trying to scout the market and see if they could partner up with a local ecosystem player. And, Luke, who was sent by this organization and who is now the head of innovation, basically found XNode to be the right partner to help, making that bridge between the two continents and the two countries. Basically, HighTechXL became a shareholder of our innovation programs in China. This is how we can tap into their experience, their network, their understanding, and we bring the same from China.

Matthieu David:  Talking about your two positions – you are a Program Director, Adriana; you are Growth Director, Matthieu. Can you tell us more about your specific positions? What’s your prospective income?

Matthieu Bodin:  Do you mean positioning or position roles?

Matthieu David:  Your position roles.

Matthieu Bodin:  As the Growth Director, basically, what I’m trying to do is find a way to add more nodes into our ecosystem. We see ourselves very much as a platform, as a network, which is the two buzz words. But the idea is to figure out how do we all become stronger and how do we all figure out a better way to innovate here in China, and that takes more and more and more people, more and more and more experiences, experiments, adventures, and my role is to basically give a chance to the team and to our partners to have these opportunities with us.

Matthieu David:  Adriana?

Adriana Verde Ríos:  For the Program Director, I am in the innovation side, mostly working with corporates. What I do is I run the corporate. So I tailor them, accelerating training with foreign startups in China, giving workshops, basically providing the tools and processes to achieve as much impact as possible for both corporates and startups as soon as possible or in the shortest time as possible, and also supporting the growth of XNode with processes and so on.

Matthieu David:  To understand better about the innovation programs in China – and you work with this environment – you do the design of the program. Once the client is working with you, then another team within the 20 people is working on the project, is that one or two people? How does it work on an innovation program in China? What can they expect? They have one point in contact, and then all the teams are working on all the projects? How do you organize yourself?

Adriana Verde Ríos:  First of all, we have the contents already. We have designed it. We keep improving it as long as we learn. There is only a certain level of tailoring that happens in every project, depending on the needs. Usually, the way it works is there will be one program director running each program, together with a few acceleration managers. It depends. It can be one to four, depending on the size of the program. These acceleration managers will work directly either with the foreign startups in China or with the entrepreneurs, which are the people running the programs when we’re not engaging startups, so the people inside the corporate.

Matthieu David:  What do you call an acceleration manager? Would you mind defining it? What is his daily job?

Adriana Verde Ríos:  Acceleration manager, they work very closely either with the startup or with the entrepreneurs to ensure that we have a business model that is aligned with the objectives of the program, then we validate the business model that we provide the content that the people in the program need in order to achieve to create, for example, a proof of concept of a minimum viable product, that we have the certain impact that we have promised at the beginning of the program. So they are much more execution. They work together with the people in the program and the program director just overseas.

Matthieu David:  The acceleration manager is going to interview people within the Chinese market. He is going to reach out to people to introduce to the client. What is his daily work? Or is he to interact with the client to make a merge, actually, the MVP and the business model and so on. Could you be more specific? Is it daily or weekly or monthly work?

Adriana Verde Ríos:  The acceleration managers support this. They are a part of all this process – interviewing, creating the business model – but on the sideline. So in the end, it will be either the accelerator startup or the entrepreneur that we will manage it. But the acceleration manager ensures that the quality is high, ensures that they have the certain knowledge that they need in order to achieve this, and they guide them in the right direction.

Matthieu David:  I see. I understand. Going back to your position as the Growth Director, you talked about nodes, if I remember correctly. You talked about adding nodes. I remember that I went to XNode one year ago, actually, a few times, because of EO (Entrepreneurs’ Organization) where we have a gathering over there. Is EO, for instance, one additional node for you? Could you be specific and give examples of nodes you are adding up now? Or are you thinking of adding up?

Matthieu Bodin:  It’s very timely that you’re mentioning EO because I’m seeing a meeting with the Australian branch members shortly after this episode of China Paradigm. If we think about it, and if we try to simplify it, we are on a mission to figure out how innovation is being done in the Chinese context. For some of your listeners, that might sound like a no-brainer. It’s very easy. Just apply what are the tools that we’ve learned and discovered from the U.S., But in practice, on the ground level, that’s not a satisfying way to really innovate with the resources and the people that we have here in China.

So, with this mission in mind, our goal is to be on the hunt for the right people, the right patterns, and the right ways of innovating in the Chinese context. We have to be very inclusive because we don’t know where some of the chunks and bits of information will be coming from. EO is probably aware of certain elements that we haven’t seen yet. But we’re also working a lot with the Chinese government, with universities, with corporations, with entrepreneurs. Our goal is to be as inclusive as possible. So whenever there is something that comes to our attention, we’re able to capture it and reuse it afterward to give it to everybody. There is a sense of we learn from everybody, and then we share it with that same network. So for EO Australia coming this morning, I will be sharing also what we’ve learned from everybody else, which is a very exciting value proposition for the network.

Matthieu David:  Let’s take this example. EO Australia is coming to Shanghai. They go to a new place. I think that’s the advantage of having your own place – you can host events. And then after, all the companies you are hosting in your space can interact with EO Australia. After the talk, they can network with them, they can know them. Is it one example of interaction, for instance? Then you have similar things with universities as well?

Matthieu Bodin:  You’re absolutely correct. Yesterday, another example, we had entrepreneurs from Serbia – I hope they are listening to our China business podcast, China Paradigm. They came to Shanghai. They are looking into implementing a branch here in Shanghai. By talking with each other, we’ve realized that they were not a good fit for our program because that’s not what they were looking for. But at the same time, we had heard of a car corporation, one of the largest carmaker who was looking for a solution that they were working on the entrepreneurs and we’ve made the introduction. So an e-mail was sent.

These are basically two nodes that we have never had a chance to work together, but us being part of that community and actively engaging with it, we’re about to create value for these two different organizations. And that’s what we try to achieve on a daily basis.

Matthieu David:  I feel that what you are describing is what has been expected from Chambers of Commerce, from other organizations to actually create this environment of the network. How do you analyze the competitive landscape? Of course, when we think about the coworking space, we think about WeWork, we think about Naked Hub. How do you analyze the competition, and how do you think you are different?

Matthieu Bodin:  First of all, something to have in mind is that competition is a sign of health in a community. Because of my previous job, I’ve been assessing a lot of local communities, and the worst thing that you can possibly find is when there’s only one player in the market. That becomes basically the only point of contact for anybody. This is unhealthy because you don’t know what might be happening in that organization’s mind. So, first of all, having different ecosystem players, bringing all of their services, capabilities, and excitement to the table is a great, wonderful thing. That’s the first thing.

The second point is the fact that we are at a beautiful place and an incredible time when we are not looking for market shares, we still haven’t realized how big is the pie in the first place. When WeWork is getting a new foreign startup in China, when a Chamber of Commerce is getting a new corporate partner, when another acceleration program in China is investing in a startup that we could not have access, we don’t see it as we lost a deal because there is just so much that we could not take care of everybody.

The other thing – and that’s probably the third – is that we have a very specific program. So when you think of WeWork, you obviously have a certain ambiance, a certain network that we don’t necessarily provide. Instead, we would focus a lot more on the global, on the local community. We have a lot of events that are being run by very different people — the same for corporate innovation. We found something based on all of our previous experiences, and we feel like this program is very clearly differentiated.

Adriana Verde Ríos:  To add there is that there is a lot of acceleration program in China. But most of them in China, they are partnered with the government. They have a different set of KPIs and goals that are not in line with what our customers always have. Moreover, they often stop after putting in contact the corporate and the startup. For example, if I take the corporate innovation programs in China, but all the work is to be done afterward because you need to align the business model. You need to align the goals, and you need to bring both of them to the same maturity level or to a maturity level where they can work.

So I would say XNode has a pretty unique value proposition on this end because our goals are aligned with those of our corporate clients but also foreign startups in China. And we manage, or we drive the work until we achieve these goals instead of stopping just at the networking part of it.

Matthieu David:  One of the differentiation I saw as well is that you insist at the end that there is low, less equity that comes into the company. So, basically, different models for different situations.

You were talking, Adriana, about acceleration program in China with governments. I feel like changing the name because you had a lot of spaces, zones from the government to attract foreign investment, to attract companies with a bit of free space, some amenities, whatever, and then they are rebranded into acceleration program in China but without changing too much of what it is. Could you be more specific on where the government is providing in China and examples of what they do? You said that they don’t follow up. They purely are putting contact but could you be more specific about what you see in the market?

Matthieu Bodin:  Maybe I can jump in here because I have an experience beyond the Shanghai area. First of all, it’s incredible what the government is trying to achieve. How do you get as many people in touch with innovation and entrepreneurship? For example, the program that they are starting at universities to teach AI is absolutely incredible. When it comes to creating centers or district or high tech parks, these are initiatives from which the government – I assume, and that’s just my personal opinion – want to learn what’s going on. And I’m pretty sure that they are doing a similar work of discovering the best practices and redistributing them everywhere.

If you look at Beijing, for example, you have in a way doing wonderful work with Jeong Kwan Soon, that incredible street where you have the crazy amount of VCs and coworking spaces and every ecosystem players like this. You also have Techstars that got created from Xinghua. That’s doing an amazing job getting into cities where there is nothing, and they build an ecosystem from the ground up. And then you have a bunch of organizations like Startup Grind, Startup Weekend, AngelHack, also doing a wonderful job in creating a grassroots community. I assume that the government is throwing experiments in every direction, trying to understand what works, and then as soon as they figure out that model, they will try to ramp it up everywhere. So I think it’s okay to have some failures at first as long as they keep learning and keep improving.

We are currently working with another one, which is one of the largest government-backed organization in the tech industry. What they are doing is fascinating. They started as a real estate move when they opened a bunch of tall buildings, and then they started attracting large corporations. And then they also bring grassroots ecosystem players like XNode. What they hope to achieve is creating a community that they can learn from and have these being shared elsewhere in China.

Matthieu David: Would you have some examples of products you have to support, to develop within the Chinese market which were already existing outside of China and you introduced to the Chinese market through the programs you have or a localization you have or a discovery which happened, which led to a partnership or joint venture? Would you be able to share some very, very specific, and detailed cases you have been working on?

Matthieu Bodin:  The fact that it has been generally a few weeks ago, I haven’t been able to sponge all the information from the organization. What I can mention is a program, a startup that we are helping right now, they are from Europe, and they have a solution for hotels, and helping the hotels manage with something that I can’t remember right now. But they are basically bringing that solution. They have the tech that has been developed in Europe, and they already found a local partner to help sell that solution to different clients here in China.

Matthieu David:  But you found the partner for them, right?

Matthieu Bodin:  That startup found us because they were based in Europe. We were looking into the Chinese market, so they found us they came. We were able to accelerate them as part of our scale-up program. As part of that acceleration program in China, we placed them in touch with a bunch of potential mentors, but more importantly, business partners. And eventually, it worked really well with one of them.

Matthieu David:  How does it work? They have someone here in Shanghai, which is staying at your office and they just come from time to time? Do you talk to them over the phone? How does it work?

Matthieu Bodin:  It’s a two-month-long program. The first two weeks are full-time here in Shanghai, so they have to come. And we’re talking about the founders. You cannot send an intern or somebody just prospecting expansion. You’ve got to have the founders because that’s what China requires from any startup.

Within these two weeks, we hope that you get a clear understanding of what you would need. And over the following six weeks, we’ll put you in touch with potential business partners – of course; it’s a tailor-made service – mentors, possibly investors. And you can come only once every week, every two weeks based on obviously the rest of your schedule. But the idea is that every single time that you’re flying to Shanghai – again the founders – you have super practical, but also high-level conversations with people who can drive your business here eventually.

Matthieu David:  Adriana, would you have any cases to share?

Adriana Verde Ríos:  Not for scaleup. If you want, we can share maybe one for corporate innovation.

Matthieu David:  Yeah. If you can be as specific as possible about what the product is, what you did for them, what’s the limitation as well of what you do because you cannot manage a business for them as well. So, to understand really, in details.

Adriana Verde Ríos:  We were talking before, and we decided that we would share one very interesting one, Sodexo.

Matthieu Bodin:  We did a program with Sodexo. It’s a large French company that does a lot of corporate services. The one that they are very famous for in China is managing a canteen at universities, at corporate offices. We’ve done a program with them where we scouted the market in Shanghai, in China, and we identified the startup. What they were doing is, when you’re at the canteen, and you have your tray with some food items on it, you put it under their machine that would recognize what you’ve picked. Then they would scan your face, they will know who you are, and based on what you ordered, they would charge you automatically.

Sodexo started working on and deploying this solution in some of their canteens here in China, and they liked it so much that they eventually invested USD 22 million in that startup, which was their first investment ever in China. This is something that got a lot of traction on the media and that everybody can buy, do a Google to look more for. But basically, without that connection … it’s always about that connection, right? But that connection and the support that we provided, Sodexo was able to interact with the entrepreneurs, really understand where they were trying to achieve. And vice versa, the entrepreneurs really understood Sodexo’s vision, the business opportunity, and that investment made a lot of sense.

Matthieu David: I want to understand precisely. You found the startup, and you would have them interact between Sodexo and the startup?

Adriana Verde Ríos:  Yes. Usually how this works is, first of all, we start with the corporates to understand their need, their challenge. Then we scout in our network startup. Our extended network, I think, is over one million startups globally. We have some tools to make some kind of filtering and so on. Then we select a short list with which we have one-to-one interviews to see whether this could potentially be of value.

Then the final narrow list would be about maybe 15 startups or so. We discuss with the corporate customer. Usually, we select three to five because that’s the optimum number for us to add value and run something meaningful. With these three to five, we assess their level, and we run them through our internal acceleration program in China. We provide content. Again, we ensure they have a business model that we can validate and that we can add value together with the corporate. Usually, the thing we have is that the startup wants to go in this direction, and the corporate wants to go in the other direction, so that will never work.

So what we do is really understand what they both can do together. We run the startup with the different innovation programs in China and use in this case – how many foreign startups in China were there? Maybe five or something like that. One of them got this outcome. It could be that there are other projects also that may be a little bit less successful but still meaningful adding value on other things, or some of the projects might end up being killed because we see along with the program that it will not add to the program objectives.

Matthieu Bodin:  Another concrete example that we can share is the Ask Jerry Challenge. I don’t know if you are a cocktail drinker, Matthieu, but Pernod Ricard, another very famous French multinational, asked us to basically support the foreign startups in China that were selected for the Ask Jerry Challenge. Eventually, two were picked and had a lot of support from XNode to eventually become actual foreign startups in China. Now, they are still thriving; they are still doing a lot of business. I don’t know how many employees they have, but I know that they are doing really well. Pernod Ricard is really excited about this market opportunity that would not have been possible otherwise.

Matthieu David:  As far as I know, Ask Jerry is a service which is providing cocktail at home or learning how to do cocktails and also provide these cocktails. I’m not totally sure of that. Pernod Ricard, one of the biggest companies who work for selling liquors and wine, has invested in these companies. I remember they connected to each other through competition. Were you the guys behind this competition?

Matthieu Bodin:  The company is called Agari. They are a French startup. They have an office in Hong Kong, and they were involved in the scouting of the entrepreneurs.

Innovation programs in China

Matthieu David:  So, what did you do? Did you work with Ask Jerry?

Matthieu Bodin:  We did everything after the selection of the entrepreneurs, making sure that the entrepreneurs get the support that they need, the coaching, and the drive. Just to step back a little, typically corporations with the processes, that due diligence, with the internal procurement process, have a natural tendency of crushing small entrepreneurs. I’m not saying that it was the case for Pernod Ricard. What I’m saying is that large corporations have certain needs and requirements, and we often act also as the translator between the two worlds. So that might be another thing that we provide to the entrepreneurs.

So, for Ask Jerry, the idea was really to manage expectations on both sides. How do you work with a French multinational or, on the other hand, how do you work with a team that just got created and they are working on an idea that you gave them? These are all very complex, very human, very personal issues, and that takes a lot on our team to be mindful and understand and work around.

Adriana Verde Ríos:  Also, another challenge that we often see is that many of the foreign startups in China, especially if they are very deep tech, they believe that once you have the technology, you can conquer the world, and there is so much more to it about the team, about the business model validating the market, and so on. What we provide is this 360 view and help a startup realize that you need to add on to that to ensure this technology can be incorporated or made into a product.

Matthieu Bodin:  That reminds me what Cathay Capital investment firm is doing with some companies that initially have value have given them some money to manage innovation. In some way, you are doing a similar work, which is to culminate your foreign startups in China, help the startup to grow, that had been invested by a bigger company. Is that correct?

Matthieu Bodin:  It’s hard for us to talk about Cathay’s specific activities and strategy. We are in touch with some of their partners here in China, but I would not be able to get into the details of how they run their operations.

Matthieu David:  Yeah. I feel that actually, you also are managing innovation for others. And that’s something actually which is pretty new over the last decade; it’s to externalize innovation, management of innovation.

Going back to more specific cases, could you tell us how much it is to join XNode and to have an office? I know you are more in the innovation programs in China, but I guess you know those matters as well. What’s the budget to join XNode and to have an office at XNode? I know that there are different offerings, but a range.

Matthieu Bodin:  Actually, it depends on the location. But for Jing’an, it starts at 2500 RMB a month for a desk, which is your desk. You don’t have just to pick a random one every morning. You have one desk with one locker. You can also use it against another fee for business registration. And then we can go from that specific desk up to a closed office of 30 people, I think. I’m not too sure for the budget of that one.

Matthieu David:  You don’t have hot desk offers?

Matthieu Bodin:  No, we don’t have a hot desk.

Matthieu David:  Okay, so 2500 RMB, it’s about USD 300-350.

Matthieu Bodin:  It should be around this. Yes, absolutely.

Matthieu David:  A month? Okay. Good. Thanks. I like now to talk about your experience. As I was mentioning, Matthieu, I’ve known you since you were in Hong Kong, and you have always been involved in the entrepreneurial ecosystem. I like to go back in time. You had been what we call Entrepreneur in Residence at WeWork Lab. You used to mention several times that you use a lot of buzz words in your industry. Could you tell us what Entrepreneur is in Residence?

Matthieu Bodin:  Absolutely. WeWork Lab is a fantastic program that WeWork started a few years ago originally from the U.S., and the Shanghai Nanjing Xi Lu WeWork created their labs – they were the first one in China – and the concept of the lab is to create a community with more ecosystem players. In that lab, you have the entrepreneurs, of course, always at the center, but you also have a large corporation, some mentors, and some events.

The idea of the Entrepreneur in Residence is to be a potential mentor that’s very often available to the entrepreneur’s part of that lab. Again, the mindset of creating connections. Concretely, what I was doing for the entrepreneur’s part of the Nanjing Xi Lu Labs is sitting down with them on a regular basis and asking them the questions that hurt a little, so they get to think from a different perspective.

Matthieu David:  Why Entrepreneur in Residence?Because there was nothing and you had to create the business?Again, we’re talking about buzz word: Entrepreneur in Residence. Isn’t it another word for the manager? What we have called like 20 years ago, the manager or the manager of the unit, which is just very new when to create.What is the definition of Entrepreneur in Residence?

Matthieu Bodin:  It’s an excellent question. The reality is that it varies a lot based on organizations. For example, at TechStars, an Entrepreneur in Residence might be concretely involved into one project that we deliver for a client, but it can also be somebody that thinks about broader strategies with a certain angle.

At the WeWork Labs, an Entrepreneur in Residence is somebody from the local ecosystem, who can plug that ecosystem with the members of the labs while bringing mentoring. So it might have a different definition in the U.S., but this is how I perceived the volunteering role on Nanjing Xi Lu. It was not a job; it was a volunteering thing.

Matthieu David:  Talking about all the experiences with entrepreneurs, now I think it’s pretty famous. You have been involved with Startup Weekend. I say it’s pretty famous because when I was in Beijing, like eight years ago, I participated to one Startup Weekend, and I was very, very happy with it because it helped me to connect with developers, with designers, and so on. But could you tell us more about what Startup Weekend is? Is it a for-profit organization? Is it a non-for-profit, nonprofit organization? I know there’s a trademark and you need to ask for support to use it, the name. Some people have a way of business. What’s the Startup Weekend?

Matthieu Bodin: Startup Weekend is a 54-hour event that helps people get connected with others, as you mentioned, learn how to create a project from the ground up. And third, get a chance to validate their ideas. It’s not just a startup manufacturer. It’s really just a platform for people to discover the fundamentals around meeting somebody, testing an idea, or learning the first few steps.

Startup Weekend is owned by Techstars. TechStars is a worldwide network that helps entrepreneurs succeed. It’s based out of Boulder in Colorado. It runs a bunch of different programs to help entrepreneurs grow to their next stage based on their level of development. Startup Weekend is very often considered as the first step towards innovation.

Startup Weekend is being run with, in mind, not to make a profit. Ticketing is only to reimburse the costs of running the event. If there are sponsors, it’s to make sure that the event is slightly fancier than what it could have been. Startup Weekends are being run by volunteers that we call community leaders because they often are really well-plugged into their local community. The mindset is really to create an opportunity for more people in their local city to have a chance at being an entrepreneur.

It works only because people are willing to give their time for free – the organizers, but also the mentors, the judges, and with the support of partners. And it’s working very well because this format is simple and resonates with any culture. There are Startup Weekends in over 160 countries. One of my most memorable Startup Weekend was in Bhutan, where we had 140 students from all universities across Bhutan coming together and creating projects. The same way people do it in Shanghai, in Mumbai, in Paris, in New York, and in L.A. This is a very, very exciting organization to be a part of.

Matthieu David:  I see. So it’s owned by Techstars. It’s leading towards the other question, but what TechStars is exactly in the ecosystem of services for entrepreneurs? You have Startup Weekends; you have EO, you have XNode. Now I’m very clear on what XNode is providing, but I’m not very clear on what Techstars, Startup is providing and what are the differences? I may not have mentioned that many organizations exist and still Startup Weekend is very famous. So, TechStars, I think has a very specific place in this environment. Can you tell us more about what TechStars is doing? How do they make money as well? Actually, we understand a lot how companies are making money, what they do. So, could you tell us more?

Matthieu Bodin:  Sure, certainly. TechStars got founded in 2006, in Boulder, Colorado, in the U.S. It’s not a Silicon Valley company, which is a very interesting thing, by the way, because Techstars sees itself as not the Silicon Valley model where you try to attract everybody to you-you try to have the best entrepreneurs, the best mentors, everybody. TechStars’ mindset is that we need to put an accelerator closer to where you’re comfortable creating a business, and we need to create the environment on which you can be successful.

TechStars runs acceleration program in China. It’s very often considered as the organization that’s structured what an accelerator is. And then they often sell the concept, and that’s why there are accelerators all over the world. But basically, you have a three-month program where 10 startups get selected, and they each receive an investment of USD 20,000 for 6%. They also have access to USD 100,000 convertible note. During this three-month program, they can have access to hundreds of potential mentors and business connections. There is a strong focus on growth. And in the end, they get prepared to raise additional money during a demo day.

TechStars’s core business is one of investment. They have invested in over 1700 startups. It’s actually one of the largest early-stage investors in the U.S. One out of five startups in the U.S. gets an early stage investment through our Techstars acceleration program in China and it’s becoming a very exciting value proposition because now there are 47 acceleration program in China and the goal is just to add some more in different locations. Their network is also growing exponentially fast.

Matthieu David:  This is for profit, right? Startup Weekend is not for profit, but TechStars is for profits, privately owned?

Matthieu Bodin:  Absolutely, yes.

Matthieu David:  Okay, I understand. Very interesting. Again, TechStars would be more like an acceleration program in China?

Matthieu Bodin:  I would almost say the other way around.

Matthieu David:  Yeah, sure. TechStars is older, for sure. Okay. Understood. What are the differences you’ve seen so far between Hong Kong, where you live, and Shanghai? I saw that you have also organized events in other locations. You mentioned, Macau, you mentioned Taiwan. You may also mention places you haven’t been.

Matthieu Bodin:  Typically, when I look at Hong Kong, I’m thinking of an amazing and incredible market to test something new. It’s a small market where it’s very easy to reach out to your customers, it’s extremely simple to raise some funding, and the legal system is simplified for you to operate at an early stage. The problem is it’s only a seven-million people’s market. So eventually, acquiring new customers is going to become really expensive, and hiring dozens of developers is going to be a headache.

That’s when Shanghai is absolutely incredible. You have a 22 to 24 million people city, very close to other exciting markets that are thriving. And it’s also the Chinese market, which means that every six months you need to start from another blank page and rediscover what people care about, how they consume, and this is absolutely incredible.

When it comes to Macau, we were extremely surprised and so impressed by the quality of the individuals that we’ve met over there. It’s an ecosystem that’s very early stage, still very much focused around the hospitality industry, but they also realize the challenges of being focused in one direction only, and they are now developing entrepreneurship as one of their potential next industry.

Matthieu David:  We didn’t talk too much about your past experience, but have you been involved in solar energy/renewable energy. Could you tell us what’s your perspective in China about this industry, about renewable and solar energy? Do you feel that the momentum is still on? We know that China has bought a lot of solar and actually wind turbine in the past. What’s your perspective of the market in China?

Adriana Verde Ríos:  Actually, my experience is in the wind, but China is the first consumer of all kinds of energy right now, even nuclear and gas, so there is a huge amount. Actually almost half of their worldwide installations of wind last year were in China. So yes, there is a huge development. Whether this is very much related to innovation, I wouldn’t say, because the Chinese wind energy, to a certain extent solar as well, they are relatively new. So they are catching up on the European on the Western way. So we need to first catch up to a certain level before we can innovate.

That’s also one of the reasons why left a pretty traditional, immature industry. What I really like about it is that in China, specifically, things happen so fast. Now what took you Europe 30 years to build, we’re doing it in China in less than 10 years, and that is extremely exciting in that sense. So I would see China and Asia catching up to Europe in the next few years and maybe even surpassing them.

Matthieu David:  Thank you very much for your time. It’s close to one hour. You’ve been pretty efficient, and you’re a good speaker for China Paradigm, that’s why. You’re used to it. Thank you very much. I hope you enjoyed this new episode of our China marketing podcast, and thanks, everyone, for listening.

Matthieu Bodin:  Thank you, Matthieu. Take care.

Adriana Verde Ríos:  Thank you. Bye.

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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