EHang Founder Discusses Entrepreneurship Climate in China

July 14, 2016
Entrepreneurship, Innovation

Derrick Xiong started his first company at 19. It didn't take off, but he was hooked.

"I couldn't stop," Xiong said. "I was just like, keep doing this."

Born in 1989, Xiong is one of a generation of young Chinese entrepreneurs who are steadily changing the country's business climate. He is chief marketing officer of EHang, a startup he cofounded a year after graduating from Fuqua's Masters of Management Studies: Foundations of Business program in 2013.

EHang manufactures drones that can be controlled from a smartphone. Xiong offered his perspective on the startup environment in China during the 2016 Duke International Forum at Duke Kunshan University.

"There is a grassroots generation of entrepreneurs in China," he said. "People are just starting companies everywhere."

Xiong attributed that to a generational fearlessness that does not see any risk in China.

"There's nothing to lose in China," he said. "There's tons of space for entrepreneurs to fill in."

Xiong said most of his Fuqua classmates went into consulting or finance, but that his eyes were fixed on starting his own enterprise. EHang makes drones that can be used for agricultural inspections, to transport organs for transplant operations, and other scenarios.

The company's ultimate goal is to mass-produce automated driverless drones that can carry passengers. But its entry into the market was based on the ability to control the copters with the tilt of a smartphone.

"We saw this gap in the market, where drones are too difficult to control," Xiong said. "There's no one who's ever done this thing before."

Xiong traveled the world seeking capital investment and found a few dozen investors who believed in the idea enough to back it.

"There's a lot of people who think this is going nowhere," he said. "People show different attitudes to this disruptive technology."

Many investors were wary of the concept, raising concerns about regulations or just dismissing the idea as crazy, Xiong said, but he was undeterred.

"China has a higher tolerance for risk compared to other countries," he said.

Xiong calls his startup model thoroughly American - "the typical Silicon Valley startup." But it's underpinned by a distinctly Chinese vision of success that he has noticed is absent in some other parts of the world where they are not accustomed to seeing firms go from startup to a public company within four or five years.

"But this is happening every single day in China," he said. "That's a major difference and that's why I'm thinking China is one of the best places to start a company."

Xiong acknowledged the challenges involved in marketing a proudly Chinese product overseas. He is fighting the perception of Chinese goods as priced cheap and low on quality. A distributor who wanted to sell his drones in U.S. stores wanted to strip the EHang branding and even encouraged the company to change its name to something less Chinese-sounding.

"We said no, this is who we are," Xiong said. "You're not going to ask Panasonic or Toshiba to change their name. As long as the product is good enough, we don't see it's necessary to change anything."

Xiong said he's also concerned China isn't doing enough basic scientific research.

"Most companies are working so hard on the applications level, so we can have a great mobile phone for example, that it's possible in the next  10 to 20 years China might be again far behind," he said. "Because I'm not seeing a lot of Chinese companies today doing fundamental scientific research."

Still, Xiong said, the Chinese work ethic will continue to fuel innovation growth there. When Xiong was at Fuqua, Duke sent him to a summer business incubator program in Silicon Valley. He said he was surprised at the attitudes toward work that he found in the world's innovation capital.

"Every day after 6 or 7 p.m. everybody just went out for happy hour," Xiong said, while he just wanted to keep working.

"Chinese entrepreneurs are spending twice or triple the time that anybody outside China is spending," Xiong said. "I'm not saying working overtime is a good thing. I'm not saying people outside China are not efficient. But all those hours accumulate, and over many years you gain more and you grow faster."

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