5 reasons why China makes sense for Australian startups
You have a great MVP for your startup, and you’re considering China as an option for manufacturing and bringing your product to market. But where do you start and how do you go about it? UTS startups member and Espresso Displays co-founder, Scott McKeon, discusses why China makes sense for Australian startups.
Our startup Espresso Displays is currently riding the Kickstarter wave for our first product, an ultra-thin portable monitor. On Day 1 we hit $50,000! In our first week we surged past the $100,000 milestone and by the end of our campaign we had raised a whopping $432,000. But way before this huge achievement, our journey started with a big idea, a prototype, and the need to find a manufacturing solution to scale up.
As someone who had previously never been to China, people are intrigued that I went over there to prototype our products and find the right manufacturing partners. However, I think China presents an amazing opportunity for Australian entrepreneurs.
Moreover, I think we should be leveraging our advantages of proximity, time zone, trade relations and the strong influence that Chinese culture has had within Australia.
But perhaps we as individuals and entrepreneurs are not utilising this enough, and I think with China this is likely for two main reasons:
China seems very complicated with cultural, security and language barriers;
And, most people believe they need to have a lot of up-front capital.
I can honestly say I was surprised by the accessibility, affordability and the enthusiasm of how much the Chinese suppliers wanted to do business with us.
More broadly, we need to start a conversation understanding how startups can engage more easily and utilise China and Asia-Pacific to create, manufacture and scale new businesses.
As I see it, Australian startups have five global advantages to engaging and utilising the ‘machine’ that is China:
1) We are educated and wealthy
We have a high education standard and a high level of wealth on a global scale. We are great creators, designers and businesspeople. The scale that China offers is the missing link to designing great products and sharing them nationally or even globally.
2) Low barriers to entry
You can set up an operating e-commerce business within a few hours. The barriers to entry are so low, that it is even possible for a university student to save up a few thousand dollars to purchase their first batch of products and fly over to China.
Think about it. Every week there are currently 50 flights from Sydney to Hong Kong, (Skyscanner) and at the time of writing, you could get return flights and a train across the border to Shenzhen for less than $500.
This means that there is a relatively low-risk to get started as we have the knowledge and have the financial means to do it. There are even expat-led sourcing agents and project managers, who can take away much of the uncertainty for a small fee.The risk isn’t as much financial, but more being willing to try and potentially fail.
3) Yes! We have the same time zone as China
We are the only ‘western’ country that shares the same time zone as China. This means we can have a full working day alongside our partners in China.
For us at Espresso Displays, this has been incredibly productive, being able to work alongside our suppliers, prototype faster throughout the day, not having to have short bursts at night time where time-zones overlap. Communication can be a problem, so being able to work in parallel between Sydney and China is very useful.
4) Free trade agreement and export grants
More topical now than ever, we have a free trade agreement with China, and though the distance is a challenge for Australia, sea freight is much cheaper than you would expect.
Beyond this, Austrade has many incentives for global exporting including the Export Market Development Grant (EMDG). Australia wants you to export globally.
5) Culture and migration
Australia is a microcosm of the world, a mixing pot of cultures. As Australians, we are known to be light-hearted and easy-going. For Chinese business partners, Australia is seen as a great place and they are very welcoming of us.
Australia’s thriving Chinese community is also a distinct advantage. I now find my conversations about my experiences in China with people of Chinese heritage here in Sydney are hugely interesting. These conversations have even led to important networking opportunities and introductions to two new factories in China.
Change our no-risk culture to a low-risk culture
Having now navigated China for our first product range, I can honestly say the financial risk is lower, and the time risk is lower than you might think. The main risk is common to any entrepreneurial activity: to try something uncertain with the real possibility of failing. Australia tends to be a risk-averse nation, which is reflected by our standing in global innovation rankings. The mindset of innovative founders and our thriving startup ecosystem will help change this.
Our education also focuses on perpetual success, and we’re not good at encouraging trial and error. We tend to follow a path of study, get a good job, save up for a house, raise a family and retire. This limits our risk tolerance and overall innovation culture. Again, the mindset of innovative founders and our thriving startup ecosystem will help change this.
If the success of Espresso Displays, at this point of our journey, is anything to go by, China represents a hugely viable option for Australian entrepreneurs and startups - even for a small business like ourselves that is taking measured risks to scale quickly. As Australian entrepreneurs, we can lead and give ourselves the competitive edge, by sharing our knowledge, networks and experience of working in countries such as China.