Expanding our Energy Drink empire in China, through Shenzhen

This article is written by Marty Spargo, co-founder of REIZE Energy Drink. REIZE developed the world’s first online subscription service for energy drinks – made in Indonesia, energizing people across the globe. 

In March 2017 I spent a few weeks in China to immerse myself in the Shenzhen startup scene, network and research the local market for our product. I had an amazing time and want to inspire other Australian entrepreneurs to get on the first available flight to China to go and experience it for themselves.

The first part consists of practical information and my experiences arriving in China. If you’re just interested in the Shenzhen startup scene, skip the first part and go to part 2 right away.

Why China and how I prepared my visit

Our business is growing rapidly in Australia and the time is right for us to start looking at opportunities further afield. China is a very interesting market to us for a bunch of reasons, not the least of which is that there are around 1.4 billion potential customers there.

I’ve long known that you don’t achieve much by sending emails and making the odd phone call from the comfort of your home and that if you really want to kick a few goals somewhere you need to turn up and meet people face to face.

Why did I choose to visit Shenzhen as opposed to Shanghai or Beijing? To be honest, I’m not much a fan of cold weather and at that time the destination within China was not relevant. I wanted to get a first impression of China’s startup scene and Shenzhen seemed like a great place for that.

Booking my flights and obtaining a visa

I found a cheap flight for $349 AUD from Sydney to Shenzhen and applied for a (compulsory) visa at the Chinese Visa Application Centre in Sydney.

If you are invited by a Chinese business you can request them to send you a standard letter of invitation that will enable you to obtain a business visa. Otherwise you can simply apply for a tourist visa.

Make sure you understand how many entries your visa allows. Even though Hong Kong and Macau are technically part of China, if you do a day trip across the border and then return to Shenzhen that will be counted as an exit and a re-entry. Confirm that’s OK if you plan to do that.

Preparing to hit the ground running

I joined a couple of Shenzhen Expat Facebook groups and before I knew it I was getting invited to all sorts of WeChat groups and had a pretty good feel for where I wanted to base myself. Pro-tip: install and make yourself familiar with Wechat before you get to China.

After that I searched for Meetups and events to join during my time in China and put them in my calendar. I was keen to meet as many entrepreneurs, potential partners, potential investors and potential distributors as possible. I figured attending a bunch of these events and mingling with the go-getters of the world was a good place to meet some of these people.

Landing in China and getting set up

I felt like I arrived on a different planet.

After a long flight from Sydney I arrived in Shenzhen at about 1am and discovered that none of the ATM’s in the airport would accept my Australian bank card and that all the money changers were closed.

I searched the entire terminal and tried every machine before crossing paths with a friendly family I had met on my flight from Sydney who kindly swapped me $20 AUD for 100 RMB so that I could pay for a taxi to get to my Airbnb and then deal with the money problem in the morning.

I woke up in my Airbnb (AUD$45 per night) that happened to be in an industrial zone. Then came the challenge of finding an ATM in a city only 40km away from HongKong where nearly no-one speaks English. It was not easy, but fortunately I did withdraw money successfully and that marked a turning point in my fortune. I was able to eat (finally!) and headed back to my temporary home to grab my laptop and get on top of some work.

Finding a base in Shenzhen to work from

I was recommended to checkout Simply Work 2.0 co-working space and I popped in that first afternoon to have a look.
I’ve spent plenty of time in lots of different co-working spaces, but this place is really something else.

Water features run most the way around the walls with gold fish swimming around, there’s a café that serves nice food, the staff are super friendly and speak great English, there’s ample space for people in shared working spaces, fixed desks, enclosed offices that a bunch of local companies call home, a gaming room, gym and even a mediation room if you need to get your zen on.

I instantly felt like I had found my base and despite the manager telling me I couldn’t pay with cash (WTF?) and suggesting I go somewhere else, I persisted and with a bit of arm twisting she accepted my payment in cash.

Interesting note: many places think you’re a weirdo when you try and pay with cash and everyone seems to prefer WeChat Pay or Ali Pay. China has transformed into a pretty much cashless society.

The price for a month desk rental was 625 RMB, or about $120 (March 2017 rates xe.com) and that includes access to the gym. Total bargain if you ask me!

Pro-tip: If you’re going to base yourself from Simply Work and like to work out, don’t bother with the Simply Work gym. Instead, visit Michael who runs Attitude Fitness. I paid roughly $60 for 2 weeks.

On censorship and getting a VPN to access blocked websites

If you’re like me you probably rely pretty heavily on Google and Facebook to run your business. You might have heard, but China and Google are not best buddies and as such absolutely nothing Google works in the mainland (but works perfectly in Hong Kong which is just across the road!).

Gmail, Google Drive, Google Sheets? Forget it. Facebook and Instagram are blocked too.

I was interested to hear from a few people that it’s not all about censorship anymore. These days there are domestic alternatives to anything you’ll find in the West, so by blocking FB and Google they give Chinese companies a better chance to grow and thrive. As someone put it “why support employment and taxation in the US when we can support it here?”.

Fair enough, but it’s still annoying not to be able to get anything done.

I spent the first week banging my head against the wall complaining about how slow the internet was, until eventually a Dutch guy named Rueben told me that he thought the internet was fine and that I should consider getting the same VPN that he uses.

The one I switched to is called Fyzhuji and you can download an app for it called “Shadow Rocket” for $1.49 in the app store so that you can ping test the fastest server every few hours and then switch both your mobile and your laptop over to the best performer.

That was life changing, although the internet was still worse than Australia at times – and we all know that’s not a very high bar for speed.

A word of caution: during my stay I saw a news story that it had just become illegal to use a VPN in Chongqing (a city) and anyone caught would be fined around $3000 USD. It’s worth understanding the rules around this, but I really don’t see people stopping their use of VPN’s.

What’s with all the cats?

Shenzhen is cat crazy. It seems like everywhere you go, whether it be the gym, the office or to a restaurant – everyone has a cat.

I asked about it a couple of times and no one seemed to know it was a thing and didn’t even notice that there are cats everywhere you go.

The café around the back of the Simply Work building does great juices. They also have a cat.

Michael from the gym brings his cat “Fortune” with him 6 days a week to let him roam around the gym floor and make sure everyone is putting their weights back after use. He says he gives him one day off a week to stay at home and sleep.

Getting your grub on

In Shenzhen there is epic food everywhere you look and it’s mostly really cheap.

Dumplings, pork buns, wontons, dim sum. Geez I miss it already. Breakfast was typically 4 steamed pork buns from the street vendor outside the Simply Work building for 6 RMB (about $1.10) and I don’t think I managed to spend more than $15 AUD in a single meal sitting the entire time that I was there.

It’s totally possible to find great eats for around $4 AUD and it seems like you can walk down any random street and stumble upon some good places to eat.

Getting around Shenzhen and using public transport

The train network (MTR) is awesome and a piece of cake to navigate. Apparently the entire city was modelled on how Singapore does things and that shows when you jump on the MTR to go anywhere.

There’s enough English on the ticket machines, signs and displays in the carriages to get by and a one way ticket to the other side of town will set you back 6 RMB (AUD$1.10).

The Shenzhen MTR network looks complex, but is pretty easy to navigate. I personally found getting around by MTR to be easier than taking a taxi and took about the same amount of time.

If you’d rather take a taxi, I suggest you download DiDi – the equivalent of Uber in China. They now have an English interface that accepts foreign credit cards.

Finding a place to stay in Shenzhen

I stayed in a serviced apartment in High-Tech Park for around $45 per night. You could certainly do things much cheaper if you were willing to stay a bit further out, give up a few creature comforts or just grab a room in someone’s place on Airbnb instead of the entire place. Airbnb is a good place to start.

Getting a phone and sim card in China

On my first day I went and bought myself a new Samsung phone for the very lucky price of 888 RMB. I figured I would get a local sim card for my stay and it would become my Chinese phone.

I got by the entire time using wifi on my Aussie phone.

Everywhere you go has wifi. It’s not like in Sydney where wifi is the exception rather than the rule, in Shenzhen every single café, restaurant or place that you’ll find yourself has wifi. Even little mum and dad dumpling joints have wifi. It’s great.

On using Wechat in China

In China people communicate on WeChat, so download it and get ready to embrace it. In the Philippines people use Viber, in Indonesia it’s Whatsapp, in China it’s WeChat.

It’s actually pretty handy because it has its own translate function. Someone can send you a message in Chinese characters and all you need to do is long press the message and then click “translate” and although it may not be perfect, you’ll be able to figure out roughly what they are talking about.

Be prepared for everyone you meet to ask to add you on WeChat. I’m not sure what the etiquette is for declining, but I never declined once. Even the guy I sat next to on a ferry who couldn’t speak a single word of English. I’m not sure why he wanted to add me, but I accepted his request too!

Use Google translate to translate signs on the spot

Google translate has an awesome feature whereby if you download a language it is available when you are offline and you can point your camera at some Chinese text and see an English translation on your screen.

It seems like translations aren’t perfect, but it’s generally enough for you to get the gist of what something says which is really handy when you’re in a restaurant trying to order food off a Chinese menu without pictures.

The Shenzhen startup scene from the eyes of a foreigner

The Chinese startup scene has only really existed for about 5 years or so, but it feels like it’s a special moment in time. I couldn’t help but think that “these are the days” while networking, meeting people and going to events.

When you go to startup events in Sydney people seem a little more reserved, but in Shenzhen it seems like everyone has the attitude of “hey we’re here on the other side of the world, let’s just go for it”. People seem really interested in meeting you and finding out as much as they can about your business – and that’s just the other foreigners.

I found the Chinese to be awesome and super helpful too, although don’t expect someone who isn’t confident in their English to come and try and strike up a conversation with you.

Shenzhen is really tech focussed. VR, AR, robots, electronics – all stuff that I know absolutely nothing about.

I went to an event run by HAX one night and despite not having a clue about what the presenters were talking about when they were discussing their products, when they came to talk about running a business and sourcing from a country other than your home country I found some common ground and could relate.

There are loads of events on every week. I recommend putting yourself out there and going to as many of them as you can, even ones that aren’t exactly aligned with what you do because you’ll meet interesting people everywhere you go.

As far as networking goes I think you get out what you put in.

If you say yes to every invitation, put yourself out there as much as you can and go out and actively try and talk to as many people as you can at an event you’ll be surprised at how easily things happen for you. But if you keep to yourself and don’t make much of an effort to mingle you might find that less opportunities fall into your lap. You only live once, just go for it!

Ground Zero

Shenzhen and Shanghai are currently ground zero for startups and entrepreneurs in China. If you’re into (hardware) tech you need to be in Shenzhen though. Shanghai sounds like it might be a more suitable base if you’re interested in financial startups.

I was told that Guangzhou is the region where new food products cut their teeth, although I didn’t make it there on this trip. That will have to wait for another time.

Venture capatalists and valuations

Thirty percent of Chinese VC’s have their headquarters in Shenzhen and there is a crazy amount of money there.

Equity valuations appear to be on a different level compared to Australia. In Australia an early stage idea with something to show investors might be valued at around $1 – $1.5M, but in China it sounds like a $1M cash injection might just be considered an Angel Round. That gives you some idea of how much money is up here.

Chinese work harder than Australians

OK so it’s based on a pretty small sample size, but in Sydney Steve and I are often amazed at how Aussie entrepreneurs leave the office at 6pm and are done for the day. We joke that people in the corporate world work harder than this group of people who supposedly are trying as hard as they can to build successful businesses. The same is not true in Shenzhen.

At Fishburners it’s typical for there to only be a handful of people still grinding after 7pm and no one in sight after 9pm, but at Simply Work the office was still buzzing until about 8pm and even at midnight there would be some movement.

One guy in particular was there every single day (even weekends) until 11:30pm and I never saw him say a single word to anyone. I have no idea what his name was or what he was working on, but he was in the zone.

A Communist nation?

Yeah, right. Chinese love money and business is booming. I recall as a child thinking that China was a poor country, but these days there are so many super wealthy people that it boggles the mind. Just look at how many Chinese are now Australian real estate owners for evidence of that.

The personal tax rate caps out at 45% (sound familiar?) and Chinese businesses pay a bit more in taxes than Aussie businesses.
Chinese businesses pay 17% of all revenue (VAT) and 25% of profits. Compare that to an Aussie business that pays 10% of all revenue (GST) and 30% of profits. Not that different.

China doesn’t have great welfare and health care like Australia does, which seems odd for a “Communist” nation.

So Australia is a Capitalist nation and China is a Communist nation? I don’t buy that argument for a second.

Confucius says…

On my second day in Shenzhen a German guy named Phillip told me “in China nothing is impossible, but everything is difficult”. I was hoping that only applied to his business.

“in China nothing is impossible, but everything is difficult.”

Unfortunately after 3 weeks in Shenzhen I still don’t have clarity around the import rules and regulations for our product which seems totally absurd, considering that is the first question that we would seek to answer about whether we can do business there.

In addition to language difficulties that mean making a phone call to any company or government agency is basically impossible, it seems the Chinese government agency I needed to talk to wasn’t the most efficient of operators. Who would have thought?!

Every few days I would ask a native speaker in the office at Simply Work to help me to make a phone call to the CFDA, but they never answered the phone. I guess those guys don’t get paid based on how many phone calls they handle!

Such inefficiencies mean that you need to work with some kind of private sector broker who is incentivised to help and get things done. Still, after weeks all I know is that it may be possible, but it’s going to require jumping through a lot of hoops and red tape.

Progress takes time and effort

I had several meetings with Austrade officials during my time in Shenzhen and found their advice helpful, if only high level. One of them made the comment that what I hoped to achieve during my stay was optimistic and that I should “dream big, but take small steps.”

This means that to make solid progress in China (or any country) you will have to spend some serious time on the ground there. It’s not realistic to think that you will be able to have a few meetings, meet the right people, learn all you need to know and establish a successful company in any jurisdiction in just a few days or even a few weeks.

Swimming against the tide 

Of course, I was the odd man out in Shenzhen for more reasons than one. In addition to sticking out like a sore thumb because of my signature Aussie shorts and a t-shirt attire most days, I was also the only person I met that was trying to sell to China as opposed to source from China.

Sourcing your products from China is obvious. Production is cheap, Chinese are efficient and you can iterate quickly and scale rapidly.

Indeed, there is a saying that a week in Shenzhen is worth a month anywhere else when it comes to robotics and electronics because of how quickly the local suppliers act on your feedback and deliver improved prototypes.

Unfortunately for me, the same is not true when trying to set yourself up to sell to China, although I do feel in some ways that a week in Shenzhen is worth a year in Sydney in terms of how much networking you can do and how many important people you are able to meet.

It’s amazing and I had to pinch myself a few times to check if it was actually real life or just some parallel entrepreneur universe nirvana.

Domestic cultural diversity

Every city and region in China is different. There is also the concept of “first tier cities” and “second tier cities” that we don’t have in Australia.

Basically the key point is that what works in Shenzhen may not work in Beijing, or anywhere else. I get the impression some products focus on one area or region and then spread their wings and grow to other regions.

As they expand into other regions they may need to employ different marketing techniques though.

One really obvious example of this is the language.

I’ll admit, it has bothered me for many years that Chinese don’t just all speak Mandarin and make it easy for us foreigners, but after I recently learned that China wasn’t always a united country, that the different dialects are an important part of each regions cultural identity and that more recently the government is trying to impose a “one China, one language” policy which threatens the survival of these dialects, I’m now in favour of everyone in different corners of China maintaining their local dialects so that they aren’t lost.

Besides, I’m giving up on ever becoming fluent in Mandarin – it’s way too difficult. I think I’ll just stick to trying to learn Indonesian!

A memorable experience for any entrepreneur

Like I said at the outset, I hope this article brought some practical advice that you might find useful if you want to do a similar trip. Much of what I’ve covered would be applicable to any region in China, not only Shenzhen.

I feel privileged to have had this short stay in Shenzhen and to have met the people that I did. To think that I had all of these great things happen to me because I decided to go to China on short notice and then chose the warmest destination on the map is kind of humbling. Sometimes I amaze myself at how lucky I get.

If you have any interest, however remote, in selling your product in China, sourcing from China, doing business in China or raising Capital in China I beg you to just book the flights and go. It’s cheaper and easier than you think and you’ll be glad you did it.

In fact, even if you have no interest in doing business in China I still suggest you go. You’ll get to see some different co-working spaces, meet people from all over the world who are doing all sorts of interesting things and have some cool experiences.

Best of all, you’ll get to eat plenty of great dumplings!