Fritz Demopoulos On How The East Can Be Won

The latest session at TechCrunch Disrupt was a fireside chat between Sarah Lacy and accomplished entrepreneur Fritz Demopoulos — an expat who arrived in China in the late 90s while he was working at News Corp and went on to start (and sell) two very successful companies.

The conversation, which you’ll find a recording of above, focused largely on the issues facing Western companies as they try to make their way into China.

The issue, Demopoulos says, is that companies can’t simply look at China as an important market. CEOs and other executives have to be looking at China as a commitment, both from an organizational and financial perspective. Many companies, he says, scoff at the idea of putting several years or more into building a sustainable presence in China (in part, in some cases, because they’re public). But they need to be willing to do this.

Asked about the lack of acquisitions in China, Demopoulos said he’s hearing that more bankers and lawyers are actually working on M&A style transactions, so it looks like they’re picking up. He added that the shortage of M&A historically may step from a Romance of the Three Kingdoms scenario, where “everyone hates each other”.

Finally, the talk turned to what it takes to start a successful company in China. There’s a widely held perception that you need to ‘know someone’ with connections to the Chinese government to make it there, which Demopoulos addressed. To succeed, he says, you need to do one of four things:

  • The first, is to be a broker or middle-man
  • The second is to participate in the china information industry, or PR
  • The third is to take advantage of government related opportunities
  • And finally, the fourth is the find new markets or create great products

As for the government connections? Demopoulos didn’t dismiss that entirely (there are some times when they can help), but he said that when you think about it, there are probably tens of thousands of people with various connections. In some ways, it’s sort of a buyer’s market for those who need them.