Sequoia’s advice to US companies: Go into China before you get big

Businesses that want to succeed in China need to have the nerve to enter the country sooner rather than later, according to a partner at Sequoia Capital China.

Speaking Wednesday at CNBC’s East Tech West conference, Xing Liu said Western companies have historically been too bearish about doing business in the world’s now second-largest economy, choosing to focus first on becoming dominant in the rest of the world.

But, now, aspiring companies — including those at start-up stage — should concentrate on entering China early on.

“I think Western companies need to be more daring to come to the China market,” Liu told CNBC’s Deirdre Bosa. “If you are not a meaningful player in the China market, you will not be a global leader down the road.”

That requires a shift in mindset, Liu noted. Business leaders need to become more flexible in the targets they set.

“For a Western company, you don’t need to be number one in China,” said Liu. “Even if you are number three, or number four, or even number five in (the) China market, you are still getting a lot of business out of China.”

Those that can, however, will reap the benefits of the country’s huge population, he said. China has more than four times as many people as the United States — and widely varied consumer groups within that.

“When you think of the Chinese, it’s not one homogeneous group,” he noted. “It actually has many, many different layers.”

“The population is so large, so even one of the layers can mean 50 million people, 100 million people,” he said. “If you can serve that 100 million people you have a large enough space to start your business with.”

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