AsiaInfo
02
Working for marquee clients including China Telecom, AsiaInfo assembled relatively standard components, including Sun servers and Cisco routers, into internet networks. The thesis was simple — there could be no Internet in China without a network.

Edward Tian and James Ding, who met over the intranet as graduate students in the US, founded AsiaInfo in 1993 to provide Asia business information via a daily online newsletter. By the end of its first year, it had 8,000 clients including Dow Jones and Reuters.

Tian and Ding had been testing the waters in China for over a year and in 1995, moved AsiaInfo's headquarters from Dallas to Beijing before winning a competitive sub-contract from Sprint to work on a China Telecom pilot for an internet service offering called ChinaNet.

This is when the pivot happened. AsiaInfo had arrived back in China just as the country’s internet was opening up. In 1997, there were 670,000 internet accounts; by the end of 1998 there were 2.1m. With many users lacking personal computers and logging on in internet cafes or sharing accounts, that number was probably 2-3 times higher.

By 1997, AsiaInfo had resolutely made the move from systems integrator to developer and provider of network maintenance, technical training and platforms for content providers. Revenue grew from $1.2m in 1995 to $60m in 1998. And from 17 to 450 employees. Tian remembers: “The early days were more like being missionaries. People didn’t even know what the Internet was.”

The early-1990s also represented the dawn of venture capital in China with legislation designed to encourage the growth of an investment culture and stimulate technological development. AsiaInfo was one of the first companies in China to seek VC investment and in 1997, Eight Roads invested, alongside Warburg Pincus and Harbourvest. In 2000, AsiaInfo IPO'd on the NASDAQ, opening up investment in to China's booming internet story.

When I saw the power of the Internet as a knowledge-sharing machine, I knew I had to do everything I could to bring it back to China. It's like growing up without light, and then discovering a candle.
Edward Tian, Founder, AsiaInfo

The AsiaInfo investment journey reveals a few themes:

Bureaucratic burden: When AsiaInfo first moved to China it was not registered as a Chinese company and Chinese law prohibited signing contracts with a foreign entity that was not government approved. Bureaucrats laughed out loud at the idea of two people starting a company. So, AsiaInfo’s first deal had to be settled on a handshake. Importing computer equipment was equally fraught. To help overcome this, AsiaInfo formed a JV with a state-owned company that built telephone switches for China Telecom. This pragmatic 55:45 arrangement enabled the company to gain early market access.

Walk before you run: In early-1996, inspired by industry developments in the US, AsiaInfo started a 50-person intranet division to build internal networks for large corporates. But Chinese companies weren’t ready. Meanwhile the systems integration business was growing rapidly and starved for talent. Worse, the intranet experiment fuelled a stand-off between the technical and marketing departments. AsiaInfo's close-knit family culture was in danger. In 1998, the intranet business was closed down, and the co-Founders began hunting for a board. In a company of 200+ people, they saw their passion alone was no longer enough to hold it all together.

Western systems with a Chinese heart: In the early days, AsiaInfo’s average employee was a 25-year-old graduate. The educational background of these employees posed a problem as young PhDs sought to teach the customer rather than listen and collaborate. This made training enormously important and as the company grew AsiaInfo hired managers trained in the West to handle the increased scale of the operations and large personnel.This included the CFO of Hewlett-Packard and the COO of Northern Telecom. Initially, the Silicon Valley attitude jarred with a set of local values that went beyond just making money but the co-founders worked hard to preserve the Chinese mindset and create a company that could be a model for aspiring entrepreneurs in China.