Opening Up Global Opportunities: Picus’ German Market Discovery Trip Helps Chinese Start-ups Succeed Overseas

We at Picus Capital believe that expanding to overseas markets is a desirable direction for many innovative start-up companies. The reasons we've observed can be manifold and oftentimes start with the founder herself. Other times, the founders are rooted in having a cutting-edge product suitable for customers across the world. We, as an entrepreneurial sparring partner and global early-stage investor, assist our founders hands-on in making big strategic decisions. As such during this July, we took some of our most promising Chinese Enterprise Software portfolio companies to Germany for a Market Discovery Trip: to learn, connect, and pitch. The following piece summarizes observations and conclusions from our trip.

Building Global Category Leaders

As a global investor with offices in Munich, Berlin, London, New York, Beijing, and Singapore, we actively seek out promising businesses and talented teams worldwide to invest in. Our approach allows us to identify the most promising founders and best investment opportunities regardless of geography and to support them in a way that's tailored to their specific needs. In the Mobile Internet, Cloud, and AI age, category leaders can emerge from anywhere.

Recognizing that some strategic priorities such as global expansion may not come naturally to every company, we go beyond providing financial resources. We're here to offer hands-on support to our portfolio companies on this complex journey. That's why we at Picus are committed to walking alongside our portfolio companies, nurturing their potential, and actively supporting them in becoming global category leaders.

Factors Favoring Chinese Software Companies' Global Expansion

Fueled by a talent-rich ecosystem and a mature digital economy, we believe that China's software industry is well-positioned for global expansion. We've seen Chinese software companies enhance their global appeal and competitiveness by aligning with international standards and best practices.

We've noticed that the international business landscape, transformed by the Covid-19 pandemic, is increasingly receptive to companies, like ours, that serve markets beyond their borders. The rise in technology adoption and the shift towards remote work and sales have created an environment where businesses can flourish regardless of their geographic location.

Internal Drive Propelling Chinese Software Companies' Global Expansion

We've seen that many founders, enriched by international experiences, harbor ambitions to build globally competitive companies. We've observed that their global vision drives strategies that have resulted in Chinese products - such as BYD's electric vehicles and ByteDance's TikTok - demonstrating global competitiveness.

We do believe that Chinese tech’s potential on the global stage, at a foundational level, can be attributed to its massive talent pool, particularly in engineering. With millions of graduates and postgraduates from some of the top-tier technical universities, China's engineering talent consistently ranks among the best worldwide and Chinese engineers are often not just found in China but among the ranks of top global tech companies.

A prime example of a company we've seen not just taking Chinese hardware and consumer products global is PingCAP, a hybrid transactional and analytical processing databases service provider with origin from China, successfully venturing into the competitive markets of the U.S., EU, and Japan. Its emphasis on open-source technology fostered trust, allowing its product, TiDB, to gain recognition in developed markets. We've seen that these achievements show that it is possible to grow an Enterprise Software venture from China to the world. However, to achieve success - and that is what the PingCAP story can also teach us - any efforts of building a global product must start early in the journey of a venture to succeed.

Forging Global Partnerships: Picus Capital's Germany Market Discovery Trip

In July, we held a week-long Germany Market Discovery Trip for a few selected China-based portfolio companies. The trip included meetings with our growth-stage portfolio companies in Germany, interactions with industrial technology experts, and established companies both Chinese and global. With a tailored busy schedule, our participants had opportunities to learn about European business practices, find potential partners, and pitch to high-potential clients. Additionally, our attendees had networking dinners with executives from high-profile tech companies, providing an excellent platform for engaging conversations and forging valuable connections. For our trip we purposefully chose quality over quanity and decided to go with a small group size, allowing the participants to get the most out of every meeting as active participants, rather than just passive listeners.

Our attendees were well-suited for global expansion due to their international experience, competitive products, and industries favorable to global operations. For instance, Lei Dong from Maptable has a strong international background, and his product has already been adopted by corporate clients abroad. Similarly, Yongli Chen from Edgenesis and Mingkai (Melody) Xu from Stardust, both with notable international experience, lead companies that have attracted high-profile clients overseas. In the case of Lifeng (Ace) Li from Naturobot, his company's product has successfully been adopted by multinational corporations in China by integrating into his client’s respective global software suite, showcasing its global appeal.

The trip, designed for a small, selected group of globally-minded professionals, showcased our commitment to fostering international collaboration and facilitate hands-on growth within our portfolio. The productive dialogues and networking sessions we facilitated resulted in concrete connections with esteemed companies, emphasizing the importance of such initiatives.

Exploring the European Enterprise Software Landscape: Key Takeaways

During our Germany Market Discovery Trip, our team gained valuable insights and reflections on the EU market. Below, we aim to provide a short summary of some of the key learnings from the perspective of our Chinese portfolio company founders.

Talent

Hiring in the EU presents unique challenges and opportunities. The competitive nature of the EU employment market often leads to higher compensation expectations, reflecting the value placed on skilled professionals in the region. To attract top talent, companies must invest in defining their Employer Value Proposition (EVP) and effectively communicate their Employer Brand Identity.

During our market discovery trip, we kept hearing from various companies in the EU about how they're actively hiring talent from all over the world. This shows how global the tech industry in the EU is and highlights opportunities for international collaboration and idea exchange, especially in engineering departments.

Team management in the EU also requires careful consideration. The preference for remote work among many workers, coupled with a broader desire for motivation beyond financial incentives, necessitates a thoughtful approach to employee engagement. In terms of sales strategy, founders often find success in taking a hands-on approach initially, before transitioning responsibilities to a Head of Sales in the region. Building the right team forms the foundation for further steps in product development and business strategy.

Market & Product

One key insight from the exploration was the growing relevance of topics such as IoT, Automation & AI, and Data Insights in the EU market. These areas are becoming increasingly important, offering great potential for our participants who have the capabilities, knowledge and products to tap into these trends. This shows how - at a fundamental level - tech trends are similar around the world, setting the stage for global category leaders.

The exploration of the EU market provided essential insights into product development and differentiation, reflecting a distinct approach compared to other markets. In the EU context, leading companies adopt a more structured methodology in developing products. This involves recording user journeys to understand which features are utilized most and utilizing this information to make data-driven decisions on how to iterate the product.

When you manage cloud deployments with proper data privacy measures, you can really dig deep into how users interact with products. That's not the case with on-premise deployments where detailed monitoring isn't possible, limiting chances for product improvement.

Additionally, the presence of a key product roadmap and the practice of engaging, at least at an early stage, with top clients and key stakeholders in the process on a timely basis demonstrates a collaborative and strategic approach to product planning and development. This focus on differentiation, structured development, and client collaboration underlines the unique characteristics of the EU market, emphasizing the need for precise planning and alignment with market expectations. Developing a solid product strategy is vital, but its success depends on how it's marketed and sold.

Public Relations, Sales & Marketing?

In terms of PR and marketing, LinkedIn plays a multifaceted role beyond sales. It is essential for personal branding, allowing CEOs and founders to engage in regular storytelling and connect with a broad network. Employer branding is also amplified through polished company pages and active profiles of employees, who share business content and engage with their network. Platforms like Product Hunt can provide valuable comparisons and insights into similar products, contributing to a more comprehensive marketing strategy.

In the EU market, sales strategies are often shaped by remote interactions, emphasizing the importance of identifying Key Decision Makers with significant influence over purchasing decisions. LinkedIn, as a premier business platform in the region, becomes crucial for building connections and promoting sales. Having a professional LinkedIn profile for both individuals and companies is key to establishing credibility. Since LinkedIn is not present in the Chinese market, this requires founders to pursue a dedicated effort in building a decent digital presence in the European market context. Our team took a deep-dive into optimizing these pages, projecting the professional image that's so crucial for trustworthiness in the sales process. Content marketing, with well-crafted, informative content, can also serve as a vital tool, aiding in the presentation of the value proposition and engaging potential clients.

Regarding pricing, the approach can differ based on growth strategies. For companies with product-led growth and standardized pricing, it is beneficial to display prices on their website. Conversely, companies with a sales-led growth approach and less standardized pricing should typically avoid public price disclosure, as it can be a point of negotiation during sales discussions.

By weaving these insights into sales and marketing strategies, companies can navigate the complex EU market more effectively, emphasizing professional digital presence, tailored content, and understanding of decision-making structures for meaningful connections.

Legal

One big takeaway was the importance of GDPR compliance, a regulation that sets guidelines for the collection and processing of personal information within the EU. Understanding and adhering to these guidelines is vital for any business intending to operate in the region. One particular challenge is the issue of data residency, a stipulation under GDPR that requires data to be stored in the same country where it was created. This poses a logistical challenge for cloud-based businesses operating in multiple countries within the EU. However, by partnering with a cloud provider that has data centers in multiple countries, companies can ensure compliance with data residency requirements while still enjoying the benefits of cloud computing. Additionally, our team observed the unique structure of the EU regulatory framework, which is designed to create a single market. While the EU has the power to enact numerous laws, enforcement is left to local authorities, leading to legal differences across various jurisdictions. This complex landscape emphasizes the necessity for a nuanced and well-informed approach when navigating the European market, underscoring the importance of localized knowledge and adaptability. The trip gave us a firsthand look at these intricacies, equipping our team with a deeper understanding of the legal environment that will surely shape our future endeavors in the region.

To sum up, the Picus Germany Market Discovery Trip was a rewarding experience for our China-based portfolio companies, allowing them to gain insights, forge partnerships, and explore business development opportunities. Our trip was more than just a conversation; it resulted in real connections with respected companies. This shows how committed we are to international collaboration and actively helping our portfolio companies grow. The insights from our trip highlight how important local knowledge and flexibility are in the European market, and they reinforce the need for careful planning and market alignment. As a global investment firm, we keep focusing on supporting innovative companies with the potential to compete internationally, acting as a valuable partner for businesses looking to expand globally.