I recently sat down with a VC who invests across the US and China. We were talking about the geographic expansion possibilities of a tech company that currently operates successfully in a single geography, Turkey.
I focused on the company’s core value proposition and business model to suggest that there would be greater demand for what the company is doing in China than in the US, and that it would be able to operate with superior unit economics in China. I therefore shared that I was in favor of entering China rather than the US.
My counterpart shared that, while the factors I had pointed out were important, I was overlooking the most important variable that the company needs to consider when deciding which geography to enter. That’s competition, and when it comes to competition, doing business in the US is a walk in the park compared to doing business in China. He therefore recommended that the company expand to the US.
I have yet to do business in China, so, until I experience it for myself, I need to take the investor at his word.
I will, however, be visiting China soon. Although a visit is far from enough to understand the true extent of competition in the country, I look forward to getting my first glimpse.