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Hello and welcome back to TechCrunch’s China Roundup, a digest of recent
events shaping the Chinese tech landscape and what they mean to people
in the rest of the world. Last week, we looked at how Alibaba and
Tencent fared in the last quarter;
the talk in Silicon Valley and Beijing this week is on Y Combinator’s
sudden retreat from China. We will also discuss the enduring food
delivery war in the country later.
Brief adventure in the East
The storied Silicon Valley accelerator Y Combinator announced the closure of its China unit just a little over a year after it entered the country. In
a vague statement posted on its official blog, the organization said
the decision came amid a change in leadership. Sam Altman, its former
president who hired legendary artificial intelligence scientist Lu Qi to
initiate the China operation, recently left his high-profile role to join research outfit OpenAI. With that, YC has since refocused its energy to support “local and international startups from our headquarters in Silicon Valley.”
What was untold is the insurmountable challenge that multinationals face
in their attempt to win in a wildly different market. Lu Qi, who wore
management hats at Baidu and Microsoft before joining YC, was clearly aware of the obstacles when he said in an interview (in
Chinese) in May that “multinational corporations in China have almost
been wiped out. They almost never successfully land in China.” The
prescription, he believes, is to build a local team that’s given full
autonomy to make decisions around products, operations, and the
business.
A former executive at an American company’s China branch, who asked to
remain anonymous, argued that Lu Qi’s one-man effort can’t be enough to
beat the curse of multinationals’ path in China. “All I can say is: Lu
has taken a detour. Going independent is the best decision. When it
comes to whether Chinese startups are suited for mentorship, or whether
incubators bring value to China, these are separate questions.”
What’s curious is that YC China seemed to have been given a meaningful
level of freedom before the split. “Thanks to Sam Altman and the U.S.
team, who agreed with my view and supported with much preparation, YC
China is not only able to enjoy key resources from YC U.S. but can also
operate at a completely independent capacity,” Lu said in the May
interview.
Moving on, the old YC China team will join Lu Qi to fund new companies
under a newly minted program, MiraclePlus, announced YC China via a Wechat post (in
Chinese). The initiative has set up its own fund, team, entity and
operational team. The deep ties that Lu has fostered with YC will
continue to benefit his new portfolio, which will receive “support” from
the YC headquarters, though neither party elaborated on what that
means.
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