invest in retail technology startups in China

Podcast transcript #66: Broaden investment horizon: invest in retail technology startups in China

Find here the China Paradigm episode 66. Learn more about Max Peiro’s exceptional experience of investing in retail technology startups in China: he has brought the powerful SaaS solution for the Chinese retail market and helped the retail startups in their Series A funding round in China.

Full transcript below:

Matthieu David: Hello everyone. This is China Paradigm, where we, Daxue Consulting, interview seasoned entrepreneurs in China. Hello everyone. I am Matthieu David, the founder of daxue consulting, a strategic market research company based in Beijing, Shanghai, and Hong Kong, and this podcast, China Paradigm. And today, I am with Max Peiro.

You have been in China for a while now because you moved to Shanghai in 20008. So, you have stayed in Beijing for 11 years now—this year in China. You first worked in a company in an accounting company called Mazars. And then you started your first company called e-Qi—I hope I pronounced it correctly—in 2011. Then you did something I am very interested in. You represented a company in China and actually, you started that business for them called Beabloo. And after, you sold your shares to them when you developed the business in China—when they got their Series A funding round in China. It was a SaaS solution for the Chinese retail market. And it was the beginning of your story with retail because afterward you started Sanpei Ventures (You are still managing it now) and Re-HUB (You are still managing now) since 2015. So, it’s almost four years. And what you do with Sanpei Ventures is to invest in retail technology startups in China. With Re-HUB, it’s a platform that is actually connected to Sanpei Ventures, as far as I understand, to support this introduction into the Chinese market. But you are going to tell us more about it. Thanks for being with us, Max. What about your current two businesses and what about the size of those businesses? 

Max Peiro: Hi, Matthieu, it’s a pleasure to be talking with you today here. So, yeah, I’ve been 11 years in China. I must say it’s been a journey and I think I’ve been very lucky to be at the right place at the right time. Right? I’ve been able to experience this fast change that occurred in China in the last 11 years. And I think that my career is somehow connected to this fast change, right? Currently, we are six partners and we are split between Shanghai and Singapore. Basically, the companies are two sides of the same coin. Okay? At Re-HUB, we work with large corporates here in China—recently also in Singapore—and we held them to innovate, right? Innovation is a buzzword. 

Everyone is talking about innovation, but in practice, it’s not that easy for corporates to start innovation, right? So, we do believe that the most efficient way to innovate is by cooperating with the startups. But here, there is a challenge. 95% of startups fail. So, our mission at Re-HUB is to help these corporates find and engage with 5%. We understand what their needs are. And based on that, we introduce them to technology startups. And we use our extensive network in China, but also overseas. Okay. And then on Sanpei, what we do is we identify these growth-stage technology startups from overseas. We have a strong connection with Israel but also, we work with startups from the UK, Finland, and India. And then, we help them to access the Chinese market by means of equity partnerships. So, we don’t charge them any fees. We put our resources to develop the market. And then, in exchange, we get equity partnerships.

Matthieu David: I just think I have a hard time understanding people investing in or supporting startups and innovation. How do you earn money? Because if you don’t charge the startups you work with… I understand the return can be in three, five, ten years or maybe you bet on the right ones you are to get Series A for in three months. Then secondly, when you work with large companies to work on the innovation and link with startups, how do you make money out of this business? Can you tell us about the business model? 

Max Peiro: Yeah, I think that’s a good question. We are not structured as a fund. I would say that we are a hybrid somehow. And the reason is what you’re saying, right? A fund typically doesn’t make money until it connects. right? But this exit can happen in several years. On Re-HUB, we serve as the brains, right? So, we charge them fees for our services. So, this is pretty straight forward. We have different services and different offerings. And then, we charge different fees accordingly. On the startup side, I mentioned right now that we have a hybrid model. We do not charge a retainer to the startups because I believe that, to be honest, Chinese technology startups will not pay a lot of money. The amount of money we can make is not that much and it isn’t even worth the effort that we’re willing to allocate and our commitment and goals beyond that. We only invest in retail technology startups in China that we truly believe their potential. So, then our model is mixed. We work on a revenue share. So, we make money if we engage in projects with Chinese technology startups in the region and then we make money in the future if an exit happens. 

Matthieu David: When you work with startups and you want to develop them in China, do you register WOFE for them? Do you raise an independent structure… then you can actually sell the asset or you’re using your existing structure? Because if you don’t charge, I believe you have to be very lean in terms of cost. You used to work in accounting with Mazars and you know the costs involved with maintaining WOFE. How does it work? 

Max Peiro: That’s a good question. At the beginning, my original plan was this one—for each company we partner with to set up a structure here. Right? But then, as you say, it’s very complicated. If you’re doing it with one company, it’s fine. If you are doing it with 10 companies, it becomes a nightmare, right? It means 10 companies set up, I0 accountings, 10 board meetings, and 10 audits. So, it didn’t make much sense for us. Right now, we try to make it as easy as possible. So, everything goes through our company. 

Matthieu David: So, you’re generating sales you invoiced for them and then you have an agreement with them in terms of profit-sharing model or you can actually send them clients and they invoice themselves. 

Max Peiro: We do side with the clients here in China unless we work with Chinese companies. Think of us as a traditional distribution model in this sense. 

Matthieu David: Okay. And as far as I understand, you are focusing on New Retail. Could you tell us more about what kind of business you are embarking in China and give us some examples or case studies? 

Max Peiro: Sure. We work with and invest in retail technology startups in China, but this is a very broad term and it’s a bit confusing, right? When we are looking for Chinese technology startups, they need to be B2B solutions, right? We don’t work with any B2C solutions. I think it’s extremely difficult in China given the uniqueness of the ecosystem and how fast it’s changed. All of that. Alright? So typically, these are SaaS solutions for the Chinese retail market—software as a service. We only work with growth-stage Chinese technology startups, meaning that these are startups that need to be well-funded. We’re agnostic in terms of funding, but I think that the smallest startup that we worked with raised $2M. The largest one raised $15M. Right? It really depends on the amount of funding that they need to develop their solution. But what is most important for us is that any of these startups need to be already working with large MNC in their countries of origin. It’s kind of a filter for us to understand that the solution works for large corporations. We don’t work with SME. It’s also for us to make sure that these startups are used to the requirements of large companies, right?  

It’s not easy as a Chinese technology startup to work with large corporations. So, we make sure that they already have this experience. We work with different solutions, but what all of them have in common is that their core is a strong technology—usually different forms of Artificial Intelligence. We divide it into major categories. One of them is consumer insights and analytics. So, any type of solution that will help you to understand your clients, understand the market, understand your competitors, or your own company analytics, or business intelligence tools. Also, another category is customer personalization and segmentation. So, anything hyperfocused to really get one to one understanding of your customers and communication. Another category is digital optimization. So, any tool that will help these corporates to increase traffic, improve conversion rates, reduce wait time rates, etc. And the last one is the so-called New Retail.

Matthieu David: You chose to work in retail. It’s very often, I understand, linked to brick and mortar and digital experience. How is it going to China so far? Retail. We saw Auchan had a hard time and actually sold part of his business. We see that Walmart had a hard time. How is it to represent the foreign interest and to work in the retail business in China? 

Max Peiro: Actually, it’s funny because we don’t do that many projects with brick and mortar. Most of our efforts are focused on their online business. And I think this also follows a trend that was in China. I think that brick and mortar growth is slowing down at least in tier one, tier two, and even tier-three cities. Most of the offline growth is coming from lower cities. And this is because of how fast the Chinese ecosystem is evolving and how developed and advanced the online offering right now exists in China. I think that offline is not going to disappear. They just need to reinvent themselves. And I think that, in a sense, with all the New Retail eruption in China, we’re seeing this transformation. Recently, we can see it in many different sectors. I mean it’s not only China. This is happening in the US. It’s happening in Europe. But then, in a way, China is leading and then the other ones will follow up sooner or later. 

Matthieu David: You talked about consumer insights and analytics and customer acquisition and segmentation for online mainly as you said—less about brick and mortar. So that’s what I understand from what you just said. The thing is that with all those software in China where e-commerce is linked to Tmall or which is a very closed platform where you cannot put your code inside or you cannot put plugin and so on, how do you implement such solutions? It’s not like WordPress. It’s not like WooCommerce. It’s not like Magento or Shopify. It’s hard to go into the machine. How do you implement those platforms, and do you have to adapt the SaaS solution for the Chinese retail market, technically speaking?

Max Peiro: You’re right. The unique ecosystem of China presents some challenges. Tmall and JD are not that open. It is possible to work with them as Chinese technology startups, but it’s not always easy. Right? So, the answer is yes. Any solution from overseas that we bring to China requires some degree of localization. Right? Based on our business model, we try to minimize this localization. For example, if we see an incredible technology, but you need to practically develop it from scratch to adapt it to a Saas solution for the Chinese retail market, we will not be interested. Right? So, in terms of analytics on Tmall and JD, we’re working with some Chinese technology startups with these platforms, but you need to find a way to cooperate with them and to be able to have access to the data. On the other hand, I think that the eruption of WeChat—not only WeChat as a messaging tool, but now with many programs and with all the different possibilities—this opens a lot of opportunities for Chinese technology startups and we are quite excited. I wouldn’t say it’s small because WeChat is massive, but this is still quite new. Right? So, I see a lot of possibilities for Chinese technology startups working in the WeChat ecosystem. 

Matthieu David: Yeah. That’s the thing. That’s what I always thought. Now, WeChat is opening a new stream of business for foreign businesses because WeChat is based on the H5 website. It’s a similar way of doing business as in the West where you have your own website. You have your own URL and so on. For people who are listening to us, the issue with China and e-commerce is that we have Tmall and where you cannot actually change the code inside the website. It’s very strict. And then, WeChat helps you to actually open a shop online with a lot of freedom by having your own shop independently on the platform and not having to share all the data with WeChat. One question about SaaS businesses and introducing analytics and SaaS businesses in China from overseas is, why do you see an edge from overseas players in China? China is a big market. You have many companies. You have a lot of competition. What can a foreign player or a player from overseas bringing to the Chinese ecosystem? Generally speaking, what have you observed?

Max Peiro: China is a very difficult market. Right? I think all markets are difficult if you come from overseas, but I think China is even more difficult because you cannot relate to a lot of the uniqueness of the echo system. Right? So, if we intend to bring innovation that is purely based on a business model, we are likely going to fail, right? Because local players will be faster, better, and smarter, right? So, I think that the opportunity and where we are focused on is bringing advanced technologies that are integrated into solutions that make sense in the Chinese market. I think China’s probably the most innovative market in the world. I think technology-wise, they’re advancing very fast. If you see all the focus on the development of AI that happened in the last three to four years, pushed by the government, it’s impressive.  

The AI capabilities of Chinese companies are growing very fast, but still, there is some edge in countries like Israel in terms of technology development. So, we want to capitalize on this opportunity. We bring advanced AI applications in building solutions that make sense in China. For me, this is the only way to compete with local companies. That said, we need to be careful because sometimes we get too obsessed about the technology and how sophisticated the technology is. But we also need to consider that often, the technology obviously plays an important role, but it’s not everything. In China, you can be much more competitive with a technology that is maybe 80% of the competitor’s technology by the solution that is more localized for the Chinese market. It’s more agile and even cheaper. So, technology is not everything, but it’s a very important component of our criteria to choose Chinese technology startups.

Matthieu David: You insist on how robust the technology should be. You said strong technology. How do you define a robust technology or strong technology? I understand your criteria. You work with SaaS businesses that should have worked with MNCs. So, those tech startups are used to large companies. I understand those criteria, but you also said strong technology. What’s strong technology for you? How do you define it? Could you share some examples to be more specific for people to really understand what you’re talking about?

Max Peiro: I think that’s a tough question because I don’t have that background myself. I mean I do not care that much about the technology per se. I’m interested in the outcome that these technologies generate. And this outcome needs to have an edge compared to what’s being offered right now in China. Let me give you an example of one of the Chinese technology startups that we’re working with. It’s an Israeli startup. Basically, what we do is we collect all the user reviews that are placed on Tmall and As you know, Chinese users are more likely to write down product reviews more than any other nationality. There are millions of user reviews out there. And still, brands have very little visibility on what these customers are talking about. The concept of social listening has been out there for many years, but the way social listening works is that you pre-define keywords, identify them, extract them, and then you understand the context on a manual basis. So, it’s not that accurate anymore. And given the volume, it’s not fast. It’s not that scalable. So, these guys use a totally different approach. They use machine learning and natural language processing to obtain deep insights into these customers. So, the way it works is very easy.

Let’s say you are a brand selling watches. So, the way people talk about watches is very different from the way people talk about shirts or cars, right? So, what we do is first, we work with the brand to define the category. In this case, watches, right? And then, we identify what the channels are that they want to analyze—whether it’s Tmall,, etc. And what brands or shops that they want to analyze. So, we’ll take all these millions of reviews and then we will use the algorithms to learn about the category—to learn about the way people talk about watches. So, once the algorithm learns about that, the algorithm itself is able to extract automatically, with no human intervention, what aspects are being mentioned and what the related sentiments are to any of this. So, as a result, we can provide insights that are more granular, more accurate, and faster than using traditional methods. This is a startup. It’s called Reviews. And this is a startup that is working with some of the largest companies in the world—in the US and Europe. It’s invested by Nielsen and works with agencies like McKinsey, for example.

Matthieu David: You just mentioned the case where you have to adapt to China because the Chinese speak Chinese. In the Chinese language, you don’t have a space between words. 

Max Peiro: Yeah. 

Matthieu David: And you don’t know when the words are ending or beginning because three characters can be one word and one word can be one character. Sometimes, actually, the same character can have a different meaning depending on the context. Did you have to adapt to yourself? Was it your job to adapt this part to the SaaS solution for the Chinese retail market or they had already been adapting this?

Max Peiro: That’s a great question. Usually, anything that touches on languages in China, we try to work with Chinese technology startups. But in this case, their solution was already ready for Android, which was a huge advantage for us. And also, I think nowadays, a lot of SaaS solutions for the Chinese retail market using machine learning are—I wouldn’t call it language-agnostic—but almost. Nowadays, for an algorithm, it’s easier to learn about a language than ever before. We have to adapt a little bit. Yes. But I think that more than adapting to the language challenge is to adapt to the Chinese users. The way, for example, that US companies will look at dashboards or insights might be different from the way that their Chinese counterparts look at that. So for me, the most important thing besides language and obvious challenges of the great firewall (hosting, etc.) is to adapt to the Chinese culture—what the Chinese users want.

Matthieu David: More from the sales perspective, I feel that actually, you focus more on making it saleable in China so the clients can use and understand your SaaS solution for the Chinese retail market. With the technology of the product, I feel it’s more the company itself or the startup itself which you get to work on. Am I correct?

Max Peiro: Yeah, that’s correct. We don’t handle the technology. We think that Chinese technology startups are the ones that should be in charge of technology. And technology requires us to lead the localization. But then the product itself is the one that requires localization and this is where we come in.

Matthieu David: I see. I see. So, when you mentioned strong technology in this specific case, it’s mainly about machine learning. It’s the fact that you are going to feed the machine with a set of data of sentences and so on. And the machine is going to learn from this data set you’ve already selected for the machine. And then, from that, it’s going to be able to scrap a much bigger platform from the marketplace to actually select the right wording. Would that be the strong technology in this case? 

Max Peiro: Yes, the strong technology would be the machine learning and the natural language processing capabilities—the ability to be able to analyze whole sentences or reviews. And then based on the methodology that they explain, extract what is the aspect and then what is the related sentiment. For example, you mentioned before about the uniqueness of Chinese characters. Let me give you an example in English. When you talk about the battery of a phone, you can talk about the battery lasting very long or you can say that it takes longer to charge. In the second example, you are not mentioning the word, ‘battery’. So, with the traditional social listening approach, you would discard that sentence. So, the uniqueness of Reviews and their technology is the ability to understand with the context that ‘it takes longer to charge’ is referring to a battery. So, it can assign a negative sentiment to a battery in the context of the phone. And that’s why it’s important to really understand how users talk about a specific category. So, equipped with the SaaS solution for the Chinese retail market, you can extract this context and then provide better accuracy.

Matthieu David: I see. With this specific case again, when you entered the Chinese market, did you have no competition? Did you have a different competition? What was the situation? Usually, with a startup you bring in China, do you face competition in a kind of red ocean or do you actually create a market because it has not been developed yet? 

Max Peiro: We try to find more blue ocean situations. If the market is very crowded, we usually stay away. In this case, there was not much direct competition, but there was massive competition by means of social listening. And I think one of the challenges for us was to explain why this is different compared to social listening. 

Matthieu David: Yeah. There is a lot of software like Linkfluence and Meltwater. And certainly, I have forgotten some. 

Max Peiro: Yes. Also, it requires a lot of discipline on our side to understand what use case we want to focus on. If you try to do everything, it’s going to be difficult. So, for example, we stay away from social media. We understand that our solution might not be that relevant for social media where you have social listening that is mainstream. It works very well. Brands have been using it for a long time, but the other value is on e-commerce where usually, users write deeper reviews about the product and talk about the product, talk about the quality, talk about the fabric, or talk about the features of the product. So, we decided to stay on that where we had a more competitive advantage. There are competitors and there are more and more coming. I think that in the aspect of technology-wise, we are superior. But then as I said before, it’s not always about technology. I think a lot of our competitors are becoming much more competitive and faster. So, it’s always a challenge. 

Matthieu David: I feel the idea of starting Sanpei Ventures and Re-HUB came from your first experience with Beabloo. Isn’t it? 

Max Peiro: Yes. 

Matthieu David: Yeah. So, I got it right. So, could you briefly describe what happened with Beabloo? I feel that that’s really a use case you can use as an example of a successful case. You represented them. You actually started the company for them in China. And then, they bought you when they got their Series A funding round in China. Could you tell us more about how it began, how you developed it, how you sold back to them, and what kind of structure it was? You were the only person in China and so on. 

Max Peiro: Yeah, you’re right. The idea of setting up Sanpei Ventures and Re-HUB all came from my experience at Beabloo. What happened is, back in 2013, I was running my first company in China called e-Qi. e-Qi was an e-commerce agency. To put things in context, I started e-Qi in 2011. I remember in 2011, e-commerce was booming already in China, but it’s when B2C was starting to take off. Tmall was starting to become more relevant. Before that, it was mostly about Taobao—C2C. 

Matthieu David: Exactly. People forget that actually Taobao was created around 2007/8. It’s not that long ago. And Alibaba was created in 1999. 10 years for Taobao. And Tmall was 10 or something like that. It was really recent when you started. may not have started yet. Or it was a small business. 

Max Peiro: Yeah. I mean e-commerce in China for many years was underdeveloped if you compare it to that in the US or Europe. But I think that the main difference was the eruption of Tmall. And then JD and others would follow. And for me, this was the game-changer. So back then, I was running this e-commerce agency, our main goal was to guide these brands on how to do business online in China. So, when I was developing that—and that was my first encounter working with retail and with brands—I became more interested in technology. As I said, I have no technical background but I have always been interested in technology. So, by chance, I got introduced to Beabloo. Beabloo is a startup from Barcelona. I am from Barcelona myself. And then, I thought that what they were doing was quite interesting. So Beabloo was doing retail analytics and digital marketing solutions for offline stores or brick and mortar environments.

Nowadays, offline analytics or retail analytics is almost a commodity. But again, to put things in context, back in 2013, their solution was quite advanced. I thought it was very interesting and I saw that there was not much going on in China in this field. Beabloo was a smaller startup. They had around 20 employees mostly operating in Spain, UK, and the Middle East. So, we started talking with their founders and then we decided to partner to develop the SaaS solution for the Chinese retail market. The way we did it was a traditional way. We set up a company together on an agreement of 50/50. They will have 50% of the company in exchange for giving to this Chinese entity the exclusive rights of their technology. Again, exclusivity plays a very important role in this. And I would get 50% in exchange for running the company and growing the business in China. So, we started very small. I mean I started myself with one employee. We started generating traction quite fast and started signing clients like Converse, Dunkin’ Donuts, and Sunpower.

Matthieu David: How long did it take you to have your first client?

Max Peiro: Around one year. Yeah.

Matthieu David: Okay. And you sold back after two years. So, you had to wait for one year to get the first client. After you got some leverage, you sold back very quickly. 

Max Peiro: Yeah. Well, we got the first client quite fast. It took us one year to generate a decent number of clients. 

Matthieu David: I see. 

Max Peiro: Okay. In 2014, at that point, Beabloo, the Chinese technology startup, was looking for a Series A funding round in China. So, I started to help them by looking for investors here in China. And I was very lucky to start conversations with SoftBank. So SoftBank was very interested in the SaaS solution for the Chinese retail market and they loved the theme. Obviously, they loved the technology and the business model. But for SoftBank, Europe as a market is not relevant, but China is. So, in 2015, SoftBank decided to fully support this Series A funding round in China for Beabloo but one of their conditions was that Beabloo had to own 100% of China. So, Beabloo used part of this proceeds to acquire my 50% and regain full control. To be honest, when we started this, I didn’t expect this outcome—at least, that fast. But after this, what I realized is that this was a win-win result. It was great for Beabloo, a small startup from Barcelona, to be able to grow in the Chinese market and to receive investment from a giant like SoftBank. And it was great for us because we’re able to do a nice exit. So, my experience at Re-HUB later set up Sanpei Ventures.

Matthieu David: What are we talking about in terms of exit? Basically, with the exit in two years, you were in a better situation than working at Mazars. What are we talking about? Was it a good return for you? After two years, was it a risk you took of representing and working with a Chinese technology startup or actually was it covering a similar lifestyle as before? Could you share numbers?

Max Peiro: I cannot share numbers but it was a nice return. It was a nice return. 

Matthieu David: Sorry. What?

Max Peiro: It was a good return. 

Matthieu David: It was a good return for two years. 

Max Peiro: Better than working in a corporate position in those two years.

Matthieu David: I see. So, you have this model in mind. Could you share one more thing if possible, about numbers if possible or an idea of the site? When do you think a Chinese company or a Chinese subsidiary is saleable? Is it when you reach half a million dollars or when you reach two or three clients? At what stage, do you feel the asset has been good enough?

Max Peiro: I think that the question is not when the Chinese company is saleable or it’s ready to be sold. It’s when a foreign company is ready to acquire it. And this is how we position ourselves. Let me take a step back on this. So typically, a startup, whether it’s from Israel, France, or the UK would only come to China after series B or even series C. They need to already be a large company. They need to be funded enough to take this risk of coming to China. So, our value proposition is that we start developing the market for you. And then, when you get your raise or next funding round, you can acquire the business and take over. So, the bigger the Chinese entity becomes, the more expensive it will be for the startup to buy. So, for me, it’s about finding the balance of when it’s the right time. And looking again at the startup side, I think, ideally, it should be series of research. 

Matthieu David: Series B, right?

Max Peiro: Yeah. 

Matthieu David: Yeah. Series A funding round in China was very early. I was surprised actually, but it’s very uncommon because you were with SoftBank. You initiated the deal and they wanted to buy everything. That’s why it made sense. 

Max Peiro: Yeah. Seriously, that was a bit exceptional. In a normal situation, I would say that seriously, it’s a sweet spot. Also, take into consideration that right now, we work usually with larger startups. 

Matthieu David: About your team at Re-HUB, how do you attract people like Michael Zhang, the co-founder of Baozun which is a company listed on the NASDAQ? How do you attract people to work with you on the board? Do you pay for them? Do you give them access to preferred shares? How do you attract them to be on the board? What does it take to be on the board of your company or be an advisor? 

Max Peiro: When I started this project, I wanted to make sure that I surrounded myself with smart people with experience that could provide value to this project. I mean even though I’ve been working with brands and with retailers since 2011 when I started my first company, I never worked on the brand side. So, I wanted to make sure that people like Michael and Nicolas who was the digital GM for Nike in China. He was in charge of bringing Nike in China to Tmall, WeChat, etc. who joined in providing value. In this case, on their side, they were quite interested because I already knew them from before. So, they were interested in this new project. And also, for them, it’s a way to learn about innovation and understand what’s going on out there in terms of Chinese technology startups and what the next disruptors are. 

Matthieu David: Because you don’t pay them, do they get a return?

Max Peiro: Well, they are shareholders of the company so they get a return if we succeed.

Matthieu David: Your company has shown off each investment.

Max Peiro: Yes, of our company.

Matthieu David: Your company?

Max Peiro: Yes.

Matthieu David: Okay. I see. And your company will take shares in other companies if you start the company for a Chinese technology startup or for a large company.

Max Peiro: We might or we might not. It’s really case by case. I think that taking equity of a Chinese technology startup that is already at Series B, raised like $50M, and has top VCs sitting on their board is very difficult.

Matthieu David: Yeah.

Max Peiro: At the end, we try to make it as simple as possible. What we want is to create win-win situations. We want the startup to benefit from our work, which is obviously growing the business in China and now also through our office in Singapore and some parts of Southeast Asia. And we want to get rewarded if the Chinese technology startup succeeds partially because of us. So, I think that there are many ways that don’t involve hard equity but still can benefit from this potential exit. 

Matthieu David: I see. Does it mean that when you represent a startup in China, you mainly actually resell a contract you have—an iterative contract—and once they raise a Series B, they’ll buy back the contract. They don’t buy the WOFE back because you have not set up the WOFE for them. Is it purely a contract—actually a distribution contract—they would buyback?

Max Peiro: Yeah, that’s right. They will not acquire our company, but they will acquire or buy back the business. Matthieu, this is not a new business model. If you think in the 90s or more in the 2000s, think of all the large brands from Burberry to all the big brands and retailers. They use a very similar model, but then they would give the license. It’s a bit different because it was a license in many cases to Chinese companies and recently, they bought it back. So, the model is not new. We just apply it to the startup environment. And then, we change it a little bit in the sense of the corporation. In this case, we always see ourselves as partners of Chinese technology startups. And the reason is we cannot do it alone. We still rely on them, on technology, and helping to localize the product. So, we have very fluid communication with the startups we work with. 

Matthieu David: You mentioned several times that you have strong links with Israel and that actually one of your focus is Israeli startups. What situation do you see between Israel and China? My analysis so far is that Chinese companies have not bought many Israeli companies. That’s one. The second thing is Israeli companies need to adapt to a lot of things for China because the Israeli ecosystem is closer to the US or to Europe. So, could you tell us more about what you see that Israeli startups can have as leverage in China as an asset?

Max Peiro: What I see is a growing interest from Israeli startups in the business in China. They are very excited. I think one of the advantages of Israeli entrepreneurs is that they’re extremely open-minded because they have no choice. Israel is a very tiny country. So, when you start a business in Israel, when you’re an entrepreneur, you immediately need to think about selling in markets that are not yours. And this is something very unique. This doesn’t happen in the US obviously, but even in smaller countries like France or Spain. But in Israel, when you start a business, you don’t focus on your country as the core market. So, this open mind allows them also to look farther than many other entrepreneurs. They would never think about China.

So, I see a growing interest, but I also see that they encounter a lot of difficulties. I see, in recent years, many more expeditions from Israel to China to do business or more help whether it’s from the Chinese government or from private companies helping them to set up companies here. And it’s tough. It’s very difficult. To do business in China is not easy. To start a company or run a company that is small in China is difficult if you don’t have prior experience in China. So, I see the willingness, but also, they are realizing more and more the threats or the difficulties. On China’s side, a few years ago, you would barely see any Chinese in Tel Aviv. Right now, you see plenty. You see a lot of companies going there. I think also there is a growing interest on the Chinese side about Israel and about the technology oasis that Israel is in a way. We see more communication between China and Israel. 

We are starting to see more cooperation. There are few investments. I think it’s not there yet and it’s not at the level of US investment in Israel, obviously, but we need to understand the links between US and Israel are extremely strong. And they come back from many, many years ago. All the Jewish diaspora in the US make this link with Israel very strong. These bridges with China are still in the process of being built. It’s still quite recent. So, I think it’s still going to take a few years. But I think Israel and China are meant to work together. So sooner or later, we’ll see much more presence of Chinese companies and investment from Chinese companies. I think also Chinese usually are more cautious in their expansion. So, for example, we saw Alibaba. We saw Tencent acquire some Israeli technology companies.

Matthieu David: They did? Which ones?

Max Peiro: I don’t recall the names, but they did. They acquired a few of them. Usually, they keep quite a low profile. And these are not huge technology companies. They mainly invest in retail technology startups in China. 

Matthieu David: Okay. Which sector? What were they doing? Do you remember?

Max Peiro: I remember one of them. It was more focused on AR. It was acquired by Alibaba. I don’t remember the name right now. 

Matthieu David: AR? Augmented Reality. 

Max Peiro: Yes. Some of them are more AI applications in business intelligence, analytics, cloud computing, etc. But also, you need to realize, for example, Alibaba is also a limited partner in JVC (Jerusalem Venture Capital), which is one of the largest VCs in Israel. So, I think this is a very unique characteristic of China compared to the US. And in this case of Israel, it can apply to other markets. I see it as a more conscious approach. So instead of going directly and buying everything that you see, start learning, start developing your network, and understand the market. 

Matthieu David: What is the future for Sanpei and Re-HUB? What do you see for the future of your two companies? 

Max Peiro:  So, we are very excited right now with Southeast Asia. We recently opened our office in Singapore. We’re still doing baby steps there, but I think that there is a very large potential. We see Southeast Asian countries like Indonesia and Vietnam following a little bit in the steps of China with their unique characteristics. So, I think that there is a good opportunity for us there. Eventually, we would like to have a presence in Asia as a whole. I think that our model for Chinese technology startups makes a lot of sense for the Asian market.

It’s still untouched territory or untouched continent for most of the startups. And at the same time, it’s where most of the growth is coming from right now. And also, on the brand side, I think that I see a lot of leapfrog growth in Asia and especially China of course, but also Southeast Asia. So, I think that these collaborations between corporates and startups make a lot of sense. On the startup side also, I’m very happy that we started working with Chinese technology startups recently. It’s short-term, of course, providing value to the brands we work with here in China. But also, in the midterm, we would like to help these Chinese technology startups to go to other markets. It’s the same model we are applying now with Israeli startups into China—to be able to apply it to Chinese startups into let’s say Indonesia for example. 

Matthieu David: What would be a number you would like to reach in terms of representing startups? 10, 15, 20 startups? What’s your goal? 

Max Peiro: I’m part of the Entrepreneurs Organization. And they always want us to think big especially when it comes to boards. So, I would like to have helped at least 100 startups. 

Matthieu David: Okay. But when you help a Chinese technology startup, you follow them for a very long time. So basically, you have a retainer every month or every year. I mean, I know that you don’t charge much but still, it’s a long-term contract. So, it’s ongoing. 

Max Peiro: Not always. Basically, we try to make it simple. So in the beginning, when we start our relationship with the Chinese technology startup, we want to get to know each other and understand what the potential is. So, the goal, in this case, is to develop one first project. Sometimes, after this first project, there will be no more projects coming. So, the fact that we work with a Chinese technology startup doesn’t mean that we will get into a long-term relationship. But even if we only develop one project, I hope that the startup also can receive value from the project—either they learn about the potential of China, or they learn that it doesn’t make sense for them to allocate resources to the Chinese market, or maybe they would want to access by themselves. So, as a broad goal, I think being able to cooperate with 100 startups, whether it’s short-term or long-term on a new market is a very exciting goal to achieve. 

Matthieu David: Last question. That’s a question I now want to ask every interviewee. What sources do you use in order to know about China and be up to date about China? It could be a blog. It could be booked. It could be newspapers. It could be people you are going to meet—like, you like to meet with entrepreneurs or VCs. I don’t know the kind of people. Could you give us a framework for how to get knowledge of China? 

Max Peiro: That’s a tough question. I think, for me, an important source of knowledge is LinkedIn. 

Matthieu David: Okay. Which is not banned or censored. That’s why right? 

Max Peiro: Well, yes. But also, because, for me, I mean I built my own LinkedIn over the years, which might be different from yours or some people else’s. So, what I like about LinkedIn is that I get curated information that is relevant to me. So, I think that there are great people on LinkedIn. Talking about China, one of my favorites is Jeff Dawson who is a professor at Huanghuai University School of Finance in Beijing and also an investor.  

I think that he writes a lot about the New Retail ecosystem, about Alibaba or JD. It’s a very relevant source. I would say another source for me are WeChat groups. Several professional groups are talking about the digital ecosystem and different relevant topics. Also, I think my own network is quite relevant. As I mentioned, I’m part of EO (Entrepreneurs Organisation). So, it helps me also a lot to acquire knowledge that is relevant to me. And, of course, we have our own sources. We have a team here in Shanghai. We have our own analysts. So I would say that for anyone interested in learning about China’s retail ecosystem innovation startups, they should follow our blog and our newsletter at because we really try to take all the knowledge that we acquire and then share it with the people that are interested in these topics.

Matthieu David: Thanks. Thank you very much, Max, for your time. I hope you enjoyed it and I hope everyone also enjoyed the talk. If you like it, please share it, comment, and like on iTunes, Spotify, or anywhere you’re listening to the podcast or watching the video from. Thanks, Max, again.

Max Peiro: Thanks a lot, Matthieu.

Matthieu David: Bye bye

Max Peiro: Bye 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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