COVID does not stop innovation – our Venture Client Cycle in China shows what large corporations need to do to work with the Chinese startup ecosystem. 

 

Back in February, we launched an exclusive Venture Client Cycle in China. The goal, together with Stora Enso and Tetra Pak, is to start commercial, paid partnerships with Chinese startups. Doing it locally makes sense: China is a fast-growing internet innovation haven. After all, they have the largest domestic market on the planet. Also, in order to succeed in China, European companies need to work with colleagues in China to understand what is important locally.

Setting up for success is quite a different thing though. With the pandemic still affecting operations, many considerations had to be made to ensure the end result worked both for the startups and the corporations. So what did Combient Foundry have to do to strike this new ground?

 

How Did We Set Up the Approach?

The two corporations already had a presence in China. Stora Enso, a global leader in the renewable materials industry, has 4000+ staff in China and a prominent Packaging Materials Division. This unit wanted to build innovative ways to engage with their customers and end-users. The target market for the Venture Client Opportunity was the on-demand food delivery field. 

Tetra Pak, the world’s leading food processing and packaging solutions company, also wanted to find suitable solutions for their food packaging offering. Their supply chain digitalization team wanted to find partners to enable nimble traceability of the food packaging supply chain. 

To be able to work in the local market, we understood early on the importance of having a local voice in the startup space and started successfully building it in collaboration with the local teams from Stora Enso and Tetra Pak, supported by Plug and Play China.

 

What Did We Want to Find in China?

The internet in China, and the ecosystem that surrounds it, is completely different from the rest of the world. The key players are not the same ones users in the West recognize. Just think about it: you would not read this post with Safari on a WordPress homepage, or on Medium, in Shanghai. 

Even with an established presence in the country, entering the startup ecosystem and tech space presented uncertainty for us. There was no way to be 100% sure of what industrial B2B players would face. However, we did our homework and dived in headfirst. 

Our priority was to connect with locally operating startups. The ones we wanted to talk to ideally had relevant B2B business models and could partner with our corporations. Both Stora Enso and Tetra Pak are in the upstream of their industry’s supply chain, i.e. ones providing raw materials to those assembling end-products. For us, it was of interest to find out how B2B corporations could find a connection with their products’ distributors and end-users. 

 

What Did We Discover?

Our expectation was that China is a strong consumer-oriented space with a heavy focus on B2C online services. Hints of this can be seen from observing the market leaders in social media (Tencent’s WeChat), e-commerce (Alibaba’s Taobao), and the on-demand economy (Alibaba’s Ele.me). With these industry straddling platforms, each worth billions in annual revenue, it would not be surprising to find the local startups would take advantage of these application ecosystems to build their services. Similar examples can be found in Europe and America with Google’s, Apple’s, or Amazon’s platforms, which many startups build their products on.

Starting up the Venture Client Cycle, we slowly began to notice our initial assumptions were right on the mark. No point in bringing a European business mindset into the new environment; a strong local presence and ownership are key. 

We also found startups who do build their offering on top of the large platforms. Many work side by side with large tech companies to develop their offering. These startups utilize so-called “WeChat mini-apps” to reach their customers; a practice that end-consumers in China expect as the norm. 

 

What Have We Learned about Entering the Startup Scene in a New Market?

Many B2B solutions were readily available too. Many take advantage of more familiar consumer internet features a consumer in Europe or America would recognize: QR-codes, facial recognition, blockchain were all featured heavily. Identifying these features would have taken a long time doing research independently as a market entrant. 

With the Venture Client Approach and open innovation as a core principle, we were able to summarize large amounts of information in our workshops. In these sessions teams were able to learn from one another about which solutions work in which context. Not only now we were able to recognize which individual startup teams would be the best fit for a pilot, but we also have a head start on negotiations for scaling these solutions.

Our work in China shows it is possible for upstream industrial companies to connect with end-users. We could not have achieved this without our local teams and partners on the ground. For that, Combient Foundry owes thanks to many people in Shanghai, who helped make the Venture Client Cycle happen. 

 

How will Combient Foundry Move Forward in China?

The heavy lifting is now largely complete. The selections are made at the remote VPD in June. Afterward, Stora Enso’s and Tetra Pak’s teams will be ready to move into the first phase of their partnerships. As the experience has moved on, the onsite teams from both companies could not have wished for a better result.

“Stora Enso has plenty of long-term experience in startup engagement,” says SVP of Packaging Materials China at Stora Enso, Pentti Ilmasti. “It’s great to try how our global Venture Client model works locally in China. We’re excited about the chance to co-create a local approach with another company, Tetra Pak, for approaching the Chinese startup ecosystem.”

Deploying the Venture Client Approach to expand into new markets and connecting with new audiences shows a lot of promise. The next stage is the remote Value Proposition Days in Shanghai. We will also be eager to see how many participants sign a contract with Stora Enso and/or Tetra Pak. 

 

We will be following up with more updates on the results of the China Cycle next month! Follow us on LinkedIn to stay up to date!