As the global economy continues to change and evolve, more German businesses are looking to China for potential growth and international expansion. But is the Chinese market the best fit for your startup? As with most things in life, it depends.
In this interview with Till Ammelburg, Director of China Programs at German Accelerator, he shares valuable insights on what makes the People’s Republic of China a potentially great opportunity for German entrepreneurs, risks and challenges to consider if entering the market, recent trends and developments, and the upcoming China Market Discovery program featuring the program’s first in-person visit to the country since the pandemic.
Tell us more about the China programs at German Accelerator.
Ammelburg: The primary objective of the program is for German founders to discover the Chinese market and innovation ecosystem and to enable them to evaluate its potential for their specific startup. We want to support the startup to build a foundation for their decision making and enable them to make an informed choice after the program to either enter the market or not.
On top of that, we are witnessing a new trend as well. More and more startups are looking beyond mere market entry and capture. For these teams it’s not as much just about conquering the market as it is about gathering information and business intelligence and incorporating Chinese approaches to their home market.
“More and more startups are looking beyond mere market entry and capture. For these teams it’s not as much just about conquering the market as it is about gathering information and business intelligence and incorporating Chinese approaches to their home market.”
Recently, large German companies have become more cautious when dealing with China. Do you see a similar trend happening within startups?
Ammelburg: First, we are convinced that the emerging cautious approach to dependencies and risks vis-à-vis China on the part of German companies is a healthy trend. Every economic actor should have a sober view on China, despite the often tempting opportunities this market offers.
Nevertheless, German businesses have been benefiting immensely from cooperating with China, and they are still doing that today. This is true for German startups as well: China is the biggest single market, for many industries it accounts up to 50% of the global market. If a startup aims to become leader in their niche, very often there is no way around China. We want to make sure that they discover the market safely and at the right time.
What are some current trends in China that might present opportunities for German startups?
Ammelburg: China has made significant progress in the commercialization of artificial intelligence (AI) and is a leader in mobile apps, mobile payments, and digital consumer interaction. In addition, the rapid development of new mobility solutions, e-mobility, and renewable energy presents both challenges and opportunities for German startups. Competitive pressure increases, but this is also challenging German businesses in a good way. They are benefiting from these innovation dynamics, which enables them to upgrade their offerings and solutions globally.
What have been some of the biggest accomplishments of the China programs at German Accelerator?
Ammelburg: One of our biggest achievements is the establishment of a robust network of mentors and partners for participating startups. It is amazing to see how open and willing both foreign and Chinese mentors in China are to support our startups.
Our startup mentoring sessions enable companies to be matched with industry experts who possess specific knowledge about their industry, product, or business model and can give them unbiased advice. For the last two years, we have had a steady flow of startups joining the program, ranging from early-stage entrepreneurs to small and medium enterprises. Also, the industry backgrounds of the startups vary: We have supported startups from consumer goods, SaaS solutions, mobile apps, smart manufacturing, clean tech, and edtech in building a foundation for their decision making regarding China.
What are some of the biggest risks or challenges that startup founders might face when entering the Chinese market?
Ammelburg: We make sure that startups are informed and educated about the challenges and risks of the Chinese market before they start their internationalization journey. With China Essentials, a one-day workshop before our main Market Discovery Program, we sensitize startups to the challenges and risks in China as a prerequisite to join our main program.
Generally, startups often lack the resources to independently assess risks, such as misjudging the competitive situation on-site, cultural miscommunication, mistakes when setting up agreements with Chinese partners, contractual mistakes, or intellectual property (IP) protection. That’s why our program assists startups in balancing and calculating risk assessments and helping them navigate potential pitfalls.
Taking IP as an example: Mature foreign businesses in China have a comprehensive and well-thought-through IP strategy which helps them to minimize the risks regarding IP. Young companies like startups, however, often don’t have the resources to run such an often costly strategy. With our trusted partners on the ground, such as AHK and EU IP Helpdesk, the startups receive a good briefing on how to tackle those issues for themselves within their capabilities or back off from China first and re-assess once they are more mature.
If you understand the risks and challenges before entering the People’s Republic of China and you manage them right, you will notice that many foreign companies are thriving in the Chinese market.
Can you tell us more about the upcoming trip to China as part of the China Market Discovery program?
Ammelburg: Absolutely! We have a scheduled trip to China in September 2023.
The journey will cover three startup ecosystems in China: Hong Kong, Shenzhen, and Shanghai. Startups will have the opportunity to meet their business mentors, engage with potential partners, and gain exposure to local innovation communities. An essential aspect of the trip is the Automatika Shanghai event. At this trade show, startup founders can gain first-hand insights from ecosystem players and determine if the Chinese market aligns with their needs and goals.
What sort of support do German startups receive during the China Market Discovery program?
Ammelburg: The China program provides extensive support and resources for participating German startup founders. Startups are guided throughout their journey – accompanied by the German Chamber of Commerce in Shanghai (AHK) – ensuring they are never left alone.
Additionally, German Accelerator collaborates with startup incubators, accelerators, and ecosystem players in China to facilitate networking, events, and exposure to relevant communities. This comprehensive support equips German startups with the knowledge and connections necessary to enter the Chinese market successfully. At the same time, if startups decide to postpone or cancel their market-entry plans to China altogether, that is still a valuable outcome for us. We pursue the goal to support the startups to make an informed decision on their China expansion plans.
Want to see if China is the right market for you?