Qunar’s American founder on succeeding in China as a foreign entrepreneur

Fritz Demopoulos, co-founder and former CEO of Qunar. Photo credit: Marek Koys.

Foreign tech companies have a tendency to fail in China. The list of casualties is long: eBay, Groupon, Google, Facebook, and now Uber – though Uber China’s merger with ride-hailing rival Didi Chuxing is actually one of the happier endings.

But there are success stories. Fritz Demopoulos, an American who founded Chinese travel site Qunar, is an exceptional example. After moving to China in 1997, Fritz left his position at Rupert Murdoch’s News Corporation and founded Shawei.com, a sports internet company. He sold Shawei.com for US$20 million in 2000 after getting backed by IDG, Softbank, and Intel.

In 2005, he started Qunar with Douglas Khoo and Chenchao Zhuang. During his six-year tenure as CEO, he negotiated a US$306 million deal with Baidu and led the company to an IPO on the NASDAQ in 2013. Today, Qunar is one of the top travel portals in China. Not bad for a laowai.

“Woody Allen […] once said that eighty percent of success is showing up,” Fritz told audience members at Big Salad 2016, a startup conference held in Shenzhen on Saturday. “I think in 1997, 1998 in China, if you just showed up you would have some sort of chance at success. Today, it’s much more competitive.”

Be first

Nowadays, foreign entrepreneurs in China can’t rely on the advantages that older generations had, like superior management experience or international perspective. To run a successful foreign venture in China, the key is being first.

“There’s too many smart people in China, too many people who can execute. There’s no way you can compete just being a better operator. You have to be first,” he said. “You have to do something that no one else is doing. If everyone is doing virtual reality, maybe you should be doing something else.”

When Qunar launched in 2005, for example, China’s travel industry was a blue ocean of opportunity. In fact, in its early years, Fritz and his co-founders had to self-fund the startup because investors didn’t get it. “There were so many […] people telling us: do a social network!” Fritz recounts to Tech in Asia. “Like we had the guys at IDG saying, hey, we’d invest in you if you did a social network.”

Part of Qunar’s resilience in its early days also has to do with the fact that Fritz and his founding team were stubborn. At the time, the concept of pivoting and The Lean Startup didn’t exist yet. “Luckily, we had never read that book,” says Fritz. “We thought if you have a difficult period, you have to just fight your way through it, and keep fighting and fighting and fighting.”

Fritz Demopoulos and moderator Jan Smejkal from Startup Grind. Photo credit: Startup Salad.

Leave product management to the locals

As the only foreigner at Qunar and CEO of the company, Fritz balanced authority with humility. For example, he and his team decided to run meetings in Chinese. It put Fritz at a disadvantage, but he didn’t mind since “the best ideas aren’t coming from me anyways.”

He also gave one of his co-founders, Chenchao Zhuang, full rein over product management. That was crucial to Qunar’s success in China, where execution reigns supreme and speed is essential.

“In product management, you have to talk to everybody, all the time,” says Fritz. “Unless you have superior communication skills, which is defined as speaking the local language, knowing the culture, all that sort of stuff, like if you can’t do that, it’s almost impossible to be an effective product manager.”

In general, there’s no longer an inherent advantage to being a foreigner in a Chinese tech company, says Fritz. He believes that the playing field is leveling and that foreigners will have to work harder to compete against more local and China-savvy peers.

In addition, China’s tech giants are highly innovative, in contrast to the big companies and conglomerates of the past. Tencent’s social messaging app WeChat is one example, but also Sina’s microblogging service Weibo, as well as dating app Momo, whose pivot to live streaming tripled the company’s revenue in the second quarter of this year.

“It isn’t as easy for the entrepreneurs to just pick at the large giants,” he says.

Reject the “China secret” myth

When I ask Fritz about how he negotiated the US$306 million deal with Baidu – especially as a foreigner – he emphasizes that it was the fundamentals of business, not some special knowledge of China that helped him close it. In fact, the whole “China secret” – like suggesting that tolerance for baijiu is essential to do business in China – is bullshit.

“The reality is, a complicated deal is many months of hard work,” says Fritz. “You have to know your positions, you have to know the people in the process, you have to know how the flow works, you have to have backups and alternatives.” For example, while Qunar was talking with Baidu, the company was simultaneously negotiating with Baidu’s competitor.

“It’s not this super secret code that only a few people in San Francisco have,” he continues. “You do your homework like anyone, you ask smart questions.”

Though Fritz is no longer running a company in China, he still keeps an eye on the country’s startup landscape. Now, he sits on the other side of the table as an investor at Queen’s Road Capital, an early-stage venture capital fund based in Hong Kong.

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