In this article, LCB’s managing editor, Aaron Posehn, sits down with Marc van der Chijs, the co-founder of leading online video site, Tudou.com (土豆), to discuss his fascinating “China career,” starting first with Daimler in Beijing, up to his current position with CrossPacific Capital in Vancouver, Canada.
This post is the third in a series of interviews on entrepreneurship in Greater China. A listing of all interviews can be found here.
LCB: Although you moved to Vancouver a few years ago, you spent well over a decade in China. What originally took you there?
MVDC: I originally moved to China as an expat for Daimler, Mercedes-Benz’s mother company. I had worked in Daimler’s headquarters in Stuttgart, Germany for several years when I got the opportunity to apply for a job in Beijing as a financial controller for Northeast Asia. I got the job in late 1999 and thought I would move to China for just three years, but that eventually turned into more than 13 years.
LCB: You held several prominent and successful positions during your time in China, including CEO of Spil Games Asia and co-founder of user-generated fashion website UnitedStyles.com. However, your most well-known success may be as co-founder of the massive Chinese video site, Tudou.com. How did you initially become involved with that project, and what were your main responsibilities during your time with the company?
MVDC: After working for Daimler for three years, my contract came up for renewal. I had the chance to move to Hong Kong in a different position, to stay in China in the same job, or go back to headquarters in Germany. I realized that China was the place where things would start happening soon (this was in 2002), so I decided to stay in China. However, I didn’t want to keep on doing the same job, so I took a big risk and quit my job to study Chinese at BeiWai [北外] (Beijing Foreign Studies University).
While there I started looking at entrepreneurial opportunities and I set up my first business: a trading and consultancy company that helped European companies to establish their business operations in China. I also did some trading from China to Europe, and learned the hard way that constant quality control is extremely important in China. It was hard work, but I learned a lot more in those few months than I had in the whole three years while at Daimler in Beijing.
I also became more active on the Internet, and in the summer of 2004, I looked at the technology behind podcasting and automatically distributing audio files through RSS. This eventually led to the idea of Tudou.com, although we quickly abandoned the audio idea and changed it to online video.
The early days at Tudou were very diverse, from brainstorming about the strategy to finding a name for the site (even then, most suitable domain names were already taken). We launched six months after we started the company, in April 2005. From then the growth was very fast, and we started looking at fundraising. It took us almost a year to get our first round of funding in, but after that getting funding was suddenly a lot easier. The number of visitors and number of video views exploded, the press started featuring the company, and all of a sudden most people online had heard about (or had even used) Tudou. An amazing experience!
Once Tudou became bigger, I moved to a role on the board of directors and my wife came in as CFO for the company. Tudou kept on growing and I stayed on the board until we started preparing for our IPO process. It was a wild ride but totally worth it.
LCB: What were the main difficulties you encountered when first establishing Tudou? Additionally, although you partnered with Gary Wong, a Chinese citizen, to establish the company, did you have any specific hurdles to cross because you were a non-Chinese citizen?
MVDC: A start-up always has tons of problems, but one of our main problems was getting funding. That took a lot longer than we had imagined, partly because Gary and I were both first time entrepreneurs. We had a huge vision, but most venture capitalists did not believe in that vision. They did not think that people would ever watch videos on a computer screen, let alone that they would upload clips. Some even said that there would not be enough bandwidth if we would grow as fast as we planned to grow. In the end, we grew must faster than our plans and there was of course never a bandwidth issue.
At a later stage, regulatory issues became a headache, especially because there were simply no regulations when we started. Not only did we suddenly become a competitor of the state-owned TV stations, but we also quickly surpassed most of them in terms of audience size.
As a non-Chinese person, you can never become very successful as an online entrepreneur; you need a Chinese partner. I was very happy that I met Gary a few weeks before we decided to team up together and start this business.
LCB: When Tudou merged with Youku.com in 2012, it brought together two of the biggest internet video sites in China. Although you were already on to other projects at that time, did you still have a role to play in this merger? If so, in what way?
MVDC: No, I was not involved at all anymore. I was involved in other start-ups by that time and was starting to think about leaving China eventually to start a new phase of my life abroad. I was happy to see the merger though, it was good for both companies to cooperate instead of continuing to compete.
LCB: Originally from the Netherlands, you have a master’s degree in economics from the University of Maastricht. Your wife, also previously involved in Tudou, has an MBA from a well-known international business school. Some people say that these types of advanced degrees do very well to prepare an individual and provide them with the contacts they need to later succeed as an entrepreneur; others suggest that you should just focus on actually building your business. What is your opinion? Is it one or the other, or a bit of both?
MVDC: To me, what you learn in university is less important than who you get to know there. As an example, Gary went to the same business school as my wife (INSEAD in France), so without her MBA, I would have not met him and there may have not been a Tudou.
In my opinion, you learn a lot more from running your business than from doing an MBA, especially if you already have an economics or management background. For engineers, that’s different obviously; if they would like to run a business, an MBA can be very useful.
After leaving Daimler in 2002, I thought for a while about doing a top MBA in the United States, but I eventually decided not to spend my savings on an extra education but to invest it in my business. Looking back, that was probably the right decision.
LCB: You are currently a managing partner at CrossPacific Capital in Vancouver, Canada, a capital partnership that invests in undervalued Canadian and U.S. businesses that have a potential for revenue growth when strategically connected to Asian markets and partnered with Asian companies. What are your responsibilities in this position, and did your previous experience working in China help you to successfully take on this role?
MVDC: Being a partner at a venture capital fund means that you talk to a lot of start-ups that are looking for funding. We look at several hundred new companies per year, but invest in just a few, so it’s a very selective process. Once we invest in a company, I help them with their strategy and with their execution. I’m also involved when a company wants to raise additional money.
One of the main criterion that we use to invest or not to invest in a company is whether the company has good potential for Asia, and especially for China. For example, we look for synergies, whether it’s product or service that can be used in China, or whether we have potential partners for them already in China.
I also talk to potential Chinese limited partners (limited partners are investors in a venture capital fund), and I keep in touch with our strategic partners in Asia. One of the main reasons why I have this job is that I built up a fairly large network in China over the years. Without my Chinese experience, I would not be able to do this role in our fund.
LCB: You have been a strong advocate of Bitcoin in the last few years, and your current company is a supporter and investor in the Bitcoin ecosystem. Do you see Bitcoin becoming even more widely used in the future, such as a “world currency,” and if so, why?
MVDC: Bitcoin is still in its infancy and most people don’t really understand it. I am not sure if it will ever be a world currency, but I think Bitcoin or another type of cryptocurrency may replace currencies in high-inflation countries, or it may even become the currency of the Internet.
Even more important is the underlying Blockchain technology that is now already changing the world. It allows trust between people that don’t know each other, and it provides a ledger that is stored decentrally. This has tremendous opportunities for many fields of business and may eventually become one of the main building blocks for all Internet applications.
LCB: What advice would you give to someone who wanted to start a business in China, or who wanted to do business with China from outside of the country? Is there anything that they should particularly be aware of?
MVDC: There are so many things that you need to be aware of, but I think the most important thing is to have a local partner, someone you can trust. Without that it’s virtually impossible to do business successfully in China as a non-Chinese person. I could, for example, never talk to high-level government employees, even if my Chinese would have been better. You need a local Chinese person for that, and not a consultant or someone who works for you, but a partner who shares in the ups and downs of the company.
Next to that, in China you need time to do business. You need to build up trust relationships with people, and that doesn’t work if you just fly to China once or twice a year. Either you need a local partner on the ground that builds up the business with you, or you need to be in China much more often. Because China is so big, companies expect quick results, but in reality it may take at least two to three years for most foreign companies before their local Chinese business starts growing.
LCB: What’s next for you? Will there be any more China- or Asia-based businesses founded by Marc van der Chijs in the future?
MVDC: I will be directly or indirectly involved with the Chinese operations of several companies I personally put money into or that our fund, CrossPacific Capital, invested in. For example, right now I am on the board of the fast-growing p2p lending site, Dianrong.com. I always look for new business opportunities for our portfolio companies.
This year I helped to co-found a p2p insurance company, Uvamo.com. The company will first launch in the United States, but I could imagine that we would eventually also set up Chinese operations because there is a huge market for this in China.
I don’t see myself living in China in the foreseeable future, but once my kids are a bit older (they are five and six now) I may consider it again. I miss the business vibe in China, but I also know that once I live in China, I’ll miss the quality of life and the natural surroundings that I have in Vancouver. There is always a trade-off, and I am quite happy in my current role where I work with China but am based in Canada.
Aaron Posehn is currently the managing editor of LearnChineseBusiness.com and is a graduate of the University of British Columbia. Originally from Vancouver, Canada, he also currently works as an academic editor in Taipei. Endlessly interested in the cross between business and culture, he has written a free guidebook on how to learn Chinese characters for business and travel purposes.
Find Aaron on LinkedIn here.