Consulting Playbook: Startup Capital Secured in Partnership with Chinese Party
The Consulting Playbook, Edition #30
The context of this project comprised of assisting the CEO in developing a funding and marketing plan for his new business as well as the implementation of the plan. The assignment also included a trip to China, accompanying the CEO, to develop the supply chain and present his business case to potential funding sources.
The main goals were to create a viable business plan and to obtain funding in addition to coaching the CEO on leadership, strategy, and marketing.
The Consultant’s Approach
The consultant first needed to develop a deeper understanding of the business case and make an assessment on the CEO’s native skill set. After the initial analysis, the CEO was advised on the critical skills needed for the company’s growth identifying which capabilities were already in-house and what needed to be outsourced.
It was important for the Executive to gain a firmer understanding of the investor’s perspective on the company prior to engaging in funding conversations. After further review, the consultant connected with local finance experts tailoring the case to Shanghainese norms and expectations. The business case was presented and thereafter began to facilitate the negotiations. After the project was completed, the CEO maintained the relationship utilizing the consultant as a mentor.
The Successful Outcome
The sourcing aspect of the assignment went exceedingly well as several suppliers signed preferential term sheets with the client. The funding was secured, and accomplished in two phases, VC’s from connections with CEIBs and the CEO’s personal connections. The company as per VC market was still underdeveloped. The investors were interested in 50% or less ownership, additional funding on behalf of the CEO had to be secured through a Small business loan.
Doing Business in China – Tips for Entrepreneurs
China is an interesting destination, and by now, is no secret that is one of the most important developing countries to do business in. However it is well-known to foreigners that cultural difference can present a serious obstacle for successful completion or even start of any business initiative.
Therefore for anyone planning to travel there and engage in business, it is absolutely necessary to learn cultural models and adjust their expectations and behavior accordingly.
Here are a few valuable insights:
- All Proposals and Agreements Must be In Writing –
Regardless of phone conversations, meetings, and email communication, all business related issues must be put in writing, in detailed and clear form. Also if translations need to be made of the documents, they must be done too, in order to ensure all content is understood by all parties. Copies to be provided too…
- Business Card Exchange –
In Chinese culture, this is still an important part of meeting a new prospective partner. So make sure you have plenty of cards when heading to a meeting.
- Importance of Relationships –
If you are just a stranger, and haven’t met Chinese people and done your networking, this is where you need to start before any actual business takes place. People feel more comfortable doing business with people that they know and are comfortable with. Keep in mind that it takes time to establish and nurture relationships, so the sooner you start, the sooner you will be able to conduct business too. As they say in China, it can take a year or two, for Chinese people to start trusting a new partner. So plan in advance and adjust your timeframe.
- Never Make a Chinese Person Lose Face –
Western culture can be more tolerant toward cynical behavior, jokes, or critique, but to a Chinese business person, a sense of dignity is crucial. Whenever there is an issue or a conflict situation, it should be resolved with extra care in order to preserve other parties’ reputation. Once an offensive action has been taken, it will be very hard to overcome the damage it caused.
- Respect Rank and Hierarchy –
China might be less strict in this way, compared to other Asian cultures, but still it is important to observe hierarchy of individuals you do business with. For example, meetings are conducted between individuals on the same level. The Chinese party can be greatly offended if this protocol is bypassed.
- Friendliness and After-Work Socializing –
In Chinese culture business relationships extend into informal team dinners, lunches, even karaoke visits, and relaxing massages at spa centers. Do not be surprised by these invitations, and be willing to accommodate them in your schedule. It is just the opposite to the popular idea in the West that business and pleasure should not mix, Chinese people will disagree with that. It is a normal behavior to engage in fun activities as team after work, so just enjoy it!
For Further Reading:
About The Consulting Playbook
The Consulting Playbook is a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.