JD CEO: getting startup funding in China ‘very easy,’ but beware the traps

China’s startup scene is ridiculously hot right now, so much so that China’s tech CEOs are talking about it a lot. Just a few days after Robin Li said investors are tripping over themselves to throw money at Baidu employees, JD.com CEO Liu Qiangdong said that these days all it takes is an idea to get US$30M in funding when spoke at the Harvard China forum on Monday.

But just because getting funding is easy doesn’t mean doing a startup is. Liu dedicated a significant portion of his speech to talking about the startup scene in China right now, and the good and bad reasons for getting into it. As a very successful startup founder himself, Liu’s comments are worth considering for anyone doing or considering a startup. What follows is our translation of his startup remarks (based on this Chinese-language transcript).

I think that if everyone’s doing a startup, I hope that they ask themselves a crucial question: what problem does this solve? If you can’t solve any problem, then I’m quite positive you’re doomed to failure, so doing a startup has to be about solving a problem. Some people say, ‘No, doing a startup is about getting rich legitimately,’ but I have never seen a founder who was just in it for the money be successful.

Everybody knows that startups are really hot right now in China. How hot? Well, investors can be kind of dumb, and right now all you need is an idea to get US$30 million in funding. It’s really very easy, and it makes people happy, but don’t forget: taking money from an investor doesn’t increase your personal wealth, and you’ll need to return it 10 or 20 times over. The cost of venture capital is high; if you could get loans from a bank you’d be much better off doing that and not taking venture capital. Of course, as a new founder when you’re broke you can’t get a loan so you’ve got no choice but to go with venture capital. But don’t look at venture capital as your own riches or your own success. It just increases the pressure on you, because you need to return 10 times or 100 times what was invested.

Some people say ‘I’m doing a startup for the freedom. I don’t want to punch a clock or take orders from anyone else, and as my own boss I can make my own schedule and go to work whenever I want.’ But if you really want freedom, I can tell you that doing a startup is the least free thing in the world. As a founder, you have to be the person at your company with the most self-discipline. Other people can break the rules and occasionally show up late or leave early, only you cannot. If you come in to work at one in the afternoon, the rest of your team is going to start coming in at three or four, that’s how it goes.

If you say you’re doing a startup to get famous, and participate in high-level discussions, I can tell you that 99 percent of the time you really will become famous. You’ll be a Harvard case study: this guy took US$2 billion in funding, burned through it all in five years, and failed. Everyone will study how you failed.

We’re in a very fortunate place right now. If you look back 30 years or ahead 30 years, there’s no one luckier than us. There are massive opportunities [because] this year technology will advance more than it has over the previous ten. Back in 1998 when we were connecting to the web with 14k phone lines we thought it was fast, getting an email with 1,000 characters so quickly! But I think that very soon every home is going to need 1 GB broadband.

So humanity’s need to continually have more faster gives us a great opportunity as entrepreneurs. Consumers have desires and if you can solve a problem and satisfy them, you can be successful. But this process of solving consumer problems has created many new problems: environmental problems, pollution problems, healthcare problems, education problems. This gives us entrepreneurs a lot of new opportunities. So what I want to say is that in this time period right now, if you don’t go do something you’re really going to regret it later.

(Source: Sina Tech)