Chinese tech firms don't copy Western innovations, they learn from them, says venture capitalist

PUBLISHED : Friday, 31 July, 2015, 5:35pm
UPDATED : Friday, 31 July, 2015, 5:36pm

The success of Chinese internet giants like Baidu and Tencent is down to their innovative technologies, not copying Western companies, a leading venture capitalist said on Friday.

Speaking at the inaugural Rise technology conference in Hong Kong on Friday, Neil Shen, founder of Sequoia Capital China, said that there is often a "misperception" in foreign media that Chinese start-ups mimic companies like Google.

Baidu and Tencent have long been criticised for copying Western internet firms, as have newer firms such as Xiaomi, which often comes under fire for producing smartphones that look remarkably similar to Apple products. The US firm's chief design, Jony Ive, even went as far as to call the design of Xiaomi's Mi 4 smartphone "lazy" and a form of design theft.

Shen argued however that rather than stealing from established Western firms, Chinese companies "learn" from them, and incorporate innovations into their businesses.

"You have to learn from somewhere," he said. "But if you learn without innovating you will die."

Shen raised the example of Chinese anti-virus software maker Qihoo 360, which he praised for their homegrown business model. Xiaomi has also innovated in this area, selling its mid-to-high end smartphones with low margins in order to reach a wider market, allowing it to tap longer-term revenue streams via software sales. The smartphone maker has also specialised in so-called "flash sales", short term e-commerce events which drive up demand and media attention.

Shen highlighted three reasons for why Chinese companies are successful on a global level – a big home user base; a strong engineering and development talent base; and high-quality entrepreneurs and business leaders able to lead their companies to success.

"Israel has many strong engineers, but [no large user base]," he said. Other countries like Brazil have large user bases but a lack of engineers to develop the technology required to accelerate their technology scenes.

"That’s why I continue to be an active investor in the Chinese tech world."

Sequoia Capital China has invested in a number of Chinese companies, among them group-buying site, review website Dianping and discount retailer Vipshop.