Wanna start a healthcare company, in China? Work with a business incubator

Lets say you want to come to China and start a healthcare company.  How do you start?

First lets review the three worst ways to do it, in descending order of bad, with number one being the worst.

3) Enter into a Joint Venture with a Chinese company that you know little about except for the fact that they do healthcare, too, because you figure that it will let you get a foothold in the market.

2) Register your company in Hong Kong or some other off shore account.  Then, come to China and work as a ‘consultant’ where you try to score contacts by getting people to pay you through a personal bank account registered in China.  From here you always take the money, convert it, and bring it to Hong Kong.

1) Give money to a friend or a acquaintance who says that she is building a healthcare facility on the mainland, then cites China’s population for why this can’t fail. Then, you hope for the best and use the mobile number and email you were given to ‘keep track’ of your investment.

Hopefully, for most people why the above three would be bad ideas is self explanatory.  And, yes, all of these are things that people really do.

Here’s a much better idea – seek out a solid business incubator.  The first time I’d heard of a business incubator was in college.  Two of my professors had set up an organization to help  students with promising social venture business plans by giving them seed capital and guidance in their entrepreneurial endeavors.  These professors vetted the plans and their candidates to find the most promising ones to work with.  Crucially, they also offered help to students whose plans weren’t ready for any sort of implementation.

Organizations like Raleigh Triangle Park’s The Hamner Institute for Health Sciences – whom I have previously written about here, (on ChinaHB) -  have taken this concept, blown it up to a global level, and tailored it specifically to biotech and the Chinese market.  Like my professors, The Hamner and others like it vet individuals/individual companies and their ideas/patents/technologies and then strive to help those they really like . They recruit locally in the RTP, drawing their talent from a depp pool of very smart people in North Carolina’s universities, and then strive to prepare those individual’s properties to successfully enter the Chinese market.  Other incubators recruit globally.

What sets these China [healthcare/health science] incubators apart from venture capital firms is their main purpose is not to give money; at the end of the day they are not responsible to investors.  Some probably do give money and I’m not sure whether The Hamner does or not, but the core of their investment is in the form of expert guidance and a powerful Chinese network.

The main advantages of seeking them out are two fold:

First, it’s always a good idea to run your idea by someone who is both an expert in the field you are working in and the market you want to enter.  They can usually tell you whether your work is where it needs to  be or can ever get there.

Second, if your work is good, their guidance will help you cut down on the likelihood of something going catastrophically wrong in the chaos that is the Chinese healthcare market.  Some, like the ChinaBio Accelerator, have even set up domestic Chinese companies that you can Joint Venture right into, and be protected because you enter into a contract with an American LLC that’s already partnered with that domestic company. In fact, I think that they are so knowledgeable that I would recommend you going over to Youtube and checking out this two part presentation on just how they do what they do – Part 1, Part 2.

But, you say, this just seems like too much trouble when starting a project.  Well, the truth is that if you try to go at it alone, without help,  you are going to find it easier to start.  You’ll quickly meet people that have similar aspirations, find contacts, etc.  However, keep in mind that the healthcare business world is closed off for a reason.  There are big profits to be made here and so there are many out there who are more than happy to make a quick buck by going about things illegally, and in a way that hurts the naive. So while starting on your own might be easier, finishing on your own is much harder, and even if you finish there are no guarantees that you’ll win out with in the end.  It is my advice to work with people who make it hard up front.  Once you’re in, these incubators are designed to help you  finish, win, and stay protected.  Whichever way you take there is risk of failure, but if you go at it alone with a good idea you are also risking success.