China Paradigm interviewed Shuyang Cao, co-founder of Malu Innovation to understand how to set up a startup in China, how to raise money and to convince top investors like JD.com to invest in your business.
Shuyang Cao, an influential entrepreneur willing to disrupt China’s automation industry
Born in Shanghai in 1987, Shuyang Cao studied several years in France and graduated from Essec Business School with a Master degree in Corporate Finance. After working for 5 years in China at Cathay Capital Private Equity where he focused on specific fields such as logistics, robotics, and automation, he decided to create, with three other co-founders, Malu Innovation.
Cao Shuyang has an inspired vision of entrepreneurship and can see where there is strong market potential in China:
“First, in China, we have a strategy of 2025 for industry 4.0, and it’s a country level strategy. We have all the good policies from the government side and second is that today in China the automation level is extremely low, compared with western countries. But the demand is huge, which means that if you have a good product if you have a good technology you have a huge chance to succeed in the automation business.”
Malu Innovation, leaders in warehousing robotics in China
Malu Innovation is the leading business in the robotics industry in China with edge-cutting algorithm and robot technologies that can reduce human labor by 70% to 80% and increase surface utilization rates in e-commerce warehouses.
Today this tech start-up has about 100 employees, with more than 60mn RMB revenue. In 2017 Malu Innovation totally sold 200 robots in 4-5 different projects. The company has grown very quickly and this is because the four founders truly believe that entrepreneurship in China is a matter of speed and reactivity:
”You have to be fast. Many people could see a good idea, and if it’s really a good thing, many people will think it’s a good thing too, and we will have to be fast to make a decision, fast to develop, fast to sell – everything should be fast.”
As for clients, Malu Innovation is a supplier of JD.com for whom they are doing their pilot projects in their key warehouses in East of China and expect a huge demand from them afterward. They also work with some big names such as BIT.com, Gourmet which is the biggest home devices selling a company in China and some massive automobile companies for their factories in China.
Running a tech business in China: what about IP issues?
In China, there are two different models for creating new companies. First one is business model creation and the second one is the technology side, technology creation. But starting a tech business in China often leads to intellectual property problems which are a longstanding and critical concern for the country.
For Malu Innovation the supply management is very critical, but they have established a very reliable system to manage IP protection through operations naturally:
“We never let any supplier know the whole picture of the products for sure. So, each supplier does his work, and we will handle the whole picture in our team, and we do the assembling by ourselves.”
The company has, therefore, a small factory in a suburb of Shanghai with 20 employees working every day to do the assembling and tests.
How to convince top investors in China?
The first recommendation given by Cao Shuyang is to target the right partners: What is their investment capacity, their latest investments in China?
When Malu Innovation started looking for new investors in China, they looked at all the companies with strategic resources in the e-commerce field and which one was used to invest in logistic tech businesses in China. That’s how they thought of JD.com: JD.com has made 62 investments in China and is interested in investing in companies that could help improve their warehouse efficiency.
Then, you have to rely on your network in China:
“When I was working in Cathay Capital, I had excellent exposure to all the investment companies. And I also knew JD.com and their investment arm, so yes that’s why we had access to JD.com clients.”
And your network can be much larger than it seems if you know where to look:
‘’In China, the government has many special foundations to encourage different projects. For example, in Shanghai you have a foundation which is encouraging industrial automation, a foundation which is encouraging the industrial software, another one which is encouraging robots, you have many this kind of foundations, and you can apply for that.’’
Their strategic cooperation with JD.com helped them recruit, increase spending in R&D and in sales & marketing.
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