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Ahead of the Pack
Asiainfo on the vanguard of China's internet boom
by Kazuhiko Shimizu
Edward Tian likes to joke that running a startup in China is not all that different from his former profession, managing wildlife. His metaphor brings to mind all the wily operators that populate China's nascent capitalist jungle. But the 35-year old CEO of Asiainfo Group may well be seeing yet another image: A young gazelle finding out how fast he can really run.
From a modest start just three years ago, the company's Internet software and systems integration business has grown to the point that the Beijing-based Asiainfo now claims 70 percent of its market in China. Its sales have soared from $1.5 million in 1995 to $40 million in 1997, and it has 320 employees.
Tian's success hasn't gone unnoticed abroad. A meeting with Bo Feng, chief representative for San Francisco-based venture capital firm Chinavest Inc., gained Tian an entre‚ into the tightly knit club of China-focused private investors. In late 1997 Asiainfo drew in $18 million in its first round of financing from New York's E.M. Warburg Pincus, Fidelity Capital of Boston and ChinaVest.
Now Tian is looking to follow up with another round of financing sometime next year. "We have enough cash, but we need investors who have the knowledge and experience to make an entrepreneurially run company, with $40 million in annual sales, into a professionally managed company with $1 billion in annual sales," says Tian. If all goes well, he expects to take AsiaInfo public in two years.
Ambitious? Certainly. Justified? Possibly. Tian has thus far displayed a knack for making the most out of timing, opportunity and contacts.
Tian started his career as an environmental biologist, studying first at the Chinese Academy of Sciences, then earning a doctorate in wildlife management at Texas Tech. In 1993 came an offer that prompted him to turn entrepreneur. Louis Lau, a U.S.-born Chinese who had become somewhat of a business mentor to Tian, shared the latter's vision of bringing internet technology to China. Lau offered to put up $500,000 toward an internet venture if Tian would return to China to run it.
In May 1995 Tian moved back to Beijing to set up Asiainfo. The company swiftly prospered. Tian says that getting a jump on the market, having access to leading-edge U.S. technology and knowing China's internet needs all con-tributed to the company's success.
Knowing the right people didn't hurt either. Tian forged close connections with the former Ministry of Post and Telecommunications (MPT), which was merged with several other ministries earlier this year to form the Ministry of Information Industry. Not burdened with the bureaucracy that hobbles many multinationals, he quickly set up two joint ventures with MPT subsidiaries.
That helped Tian negotiate the deal that set Asiainfo off and running. In November 1995, the startup inked a contract for a $10 million project to build a national internet network backbone for ChinaNet, the MPT internet provider. "We were lucky and the timing was right," Tian recalls. "There were only a few competitors in 1995 in China."
That same year Asiainfo also won the contract to build the two international internet gateways in Beijing and Shanghai that linked China to the worldwide web. The internet soon took off, with the number of users soaring from 50,000 in 1995 to 1.2 million by mid-1998. The Chinese government expects that figure to reach 4 million by 2000.
That means more profits for Asiainfo. One of its core businesses, internet software-comprising internet billing, network management, user roaming access and internet publishing-is growing by 50 percent annually. "There are too many opportunities in China, but many companies do not know how to handle them," says Tian. For now, Asiainfo has set up representative offices in Shanghai and Guangzhou and plans to expand into intranet services.
Despite Asia's economic turmoil, Tian notes that telecom and other IT firms are doing well, thanks to China's drive to upgrade its communications infrastructure. But as optimistic as he is, Tian has taken out some insurance. Asiainfo Holding Inc., a Santa Clara, California-based company, is sole owner of the Asiainfo Group. "We operate 100 percent in China, but because China does not have a modern legal system, we decided on this structure," Tian says.
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