China’s tech titans are no longer startup steamrollers

Image credit: Tech in Asia’s Andre Gunawan

“In the US, students think, ‘If I build something good, Google will buy me.’ In China they think, ‘If I build something good, Tencent will copy me.’” That was the grim assessment of Stephen Bell, a Shanghai-based partner at Trinity Ventures, back in 2011.

A year earlier, a Chinese tech magazine was much more blunt. “Fucking Tencent,” blasted the cover of China Computerworld on its July 26, 2010, issue (pictured below). It depicted Tencent’s penguin mascot stabbed with three knives and bleeding profusely.

The magazine’s lead article was written from the standpoint of a startup competitor to Tencent’s social media and gaming empire. It blasted Tencent for copying and cloning many of its web services – such as its QQ instant messenger from ICQ – and claimed that its alleged practices were a barrier to innovation as much as a bulwark against rival tech titans.

“Tencent is never the first to ‘eat crab’ [to try out new things]. It looks for a space in mature markets to shove its way in. However, the methods it chooses also invite controversy: imitation, sometimes unscrupulous shanzhai copying,” the magazine’s author wrote (in a translation from Danwei). He went on: “Most recently, Data Center of the China Internet (DCCI) director Hu Yanping questioned Tencent’s creative abilities, saying that it was not an outstanding innovator, and was actually the mortal enemy of innovation among smaller internet enterprises.”

China Computerworld, which did not seek to interview Tencent for the article, later apologized for the provocative cover and the “unfair” nature of the piece. But the point was made; the anger it conveyed was real and shared by many in the Chinese tech industry who reacted with glee to the ad hominem attack.

Pony Ma, Tencent’s CEO and chairman, later told Bloomberg it’s unfair to say that his firm doesn’t innovate. He stated in the August 2011 interview that Tencent does what he calls “micro-innovation” — adding small details to localize a service so that it’s well adapted for the Chinese market.

Tencent wasn’t the only Chinese tech titan perceived as a startup steamroller. At around the same time, the next social media wave was already gathering momentum as everyone started talking about Twitter. In China, a handful of startups decided to try building a microblogging platform for China with more emphasis on visuals and photos. Then Sina copied one of China’s earliest Twitter-esque sites to create Weibo. While the startups who first adapted Twitter for the China market (just before Twitter was blocked by the Great Firewall in June 2009) struggled to grow their audience and ran up against a drive for censorship of real-time social sharing, Sina Weibo skyrocketed to over 100 million registered users in 2011, just over a year after it launched. The startups who wanted to be “China’s Twitter” soon died off.

China’s startups just couldn’t catch a break.

Five years on, the situation – and the sentiment – is very different.

Seeking younger partner for fun, possibly more

A huge rise in investments in the past couple of years in China’s startups by the nation’s biggest web companies – Baidu, Alibaba, and Tencent, a triumvirate referred to as BAT in China’s tech press – suggests that the nation’s tech giants are different beasts now.

“Some time in the past few years, attitudes shifted dramatically,” says Thomas G. Tsao, Shanghai-based managing partner at venture capital firm Gobi Partners. “Chinese tech companies have demonstrated a more enlightened approach to investments by incorporating a model similar to venture capital firms.”

Sugar daddy

Global reach

BAT + Xiaomi = BATX

Strings attached?