I have begun to think and write about China more and more lately; there is such an incredible opportunity across the Pacific that seems largely unobserved by a majority of Americans. The Chinese economy and population base is so large and modernizing so rapidly, and has transformed from 3rd world to 1st world in a matter of decades (that same evolution took us hundreds of years here in America). As you can see in this chart from Google, China’s internet adoption has blown past the United States, both in terms of growth rate and sheer number of users. And they’re still at only 20% internet penetration. Mobile phone penetration is actually higher than internet penetration, approaching 60% depending on what study you read – that’s over 500 million mobile phones. This in itself is an interesting dynamic, as it seems that in China the mobile phone (rather than the PC) is the primary method of internet use and communication. As I understand it, this is a result of the relative difficulty and expense of getting a computer and home internet line installed – particularly in rural China, which does not yet have the widespread and developed communications infrastructure that we enjoy in the United States. Coupled with pervasive and cheap mobile phone service and a proliferation of advanced smart phones, the mobile internet has become the single point of connectivity for millions of Chinese. However you measure China’s growth, it doesn’t take an economist or venture capitalist to see that the pace of technological change, adoption, and transformation in China is unlike anything experienced in America or anywhere else.

I saw a statistic the other day that by the end of 2010 China will have more mobile internet users than there will be people in the United States. That’s staggering. There are countless companies with tons of VC hype and astronomical valuations climbing all over each other to try to capture even a sliver of the ~90mm user U.S. mobile internet market. And yet there is a Chinese market that is orders of magnitude larger and remains relatively unaddressed by America’s top online properties.

For example – Facebook has experienced tremendous user growth outside of the United States, adding almost 10 million global users in March 2010 alone. Below you’ll see a top 10 table of Facebook’s growth by country in March – millions of users were added in Asian countries like Indonesia and the Philippines, and according to Facebook nearly all of those new users access the service exclusively on mobile devices (wow). And yet despite the obvious resonance with Asian consumers, Facebook remains conspicuously absent from China due to a near total blockage by the Chinese government.

Not to say there aren’t very significant and well established Chinese social networking players (including Tencent Inc., which is debatably the largest social network in the world) but I just find the under representation and seeming indifference of so many American Web 2.0 properties to be surprising. So many of today’s startups seem laser focused on attacking the United States mobile market, and are at the same time so haphazard in their Chinese strategy.

I do understand that there are significant regulatory and cultural hurdles to clear when moving a U.S.-based service into the Chinese market. In addition to censorship and restrictions on foreign business ownership, there is no guarantee that a product that has been successful in the United States will resonate with Chinese consumers. Many of today’s social media and self publishing centric products and services simply aren’t workable in a country that does not allow the free flow of information or exchange of ideas that we enjoy here in America.

It seems that the swell of Chinese internet users (on mobile devices especially) are like a tsunami being held back by poor access to broadband and isolated by the dam of government censorship. Though there are millions of users already climbing over and around the dam (with things like proxy servers and other methods of circumventing the “Great Firewall of China”), I expect that the real wave will come over the next several years as the government finds it increasingly difficult to censor its citizens, and increased broadband penetration plugs more and more Chinese into the web. As China comes online in a bigger and bigger way, it’s going to be harder than ever for American startups and social media players to compete without confronting the tsunami head on.

In the 19th and early 20th centuries, the American “Wild West” was a place of great opportunity and great adventure – rapid development, gold rushes, land grabs, and a booming population provided an opportunity for enterprising young men and women to strike out on their own and “grow up with the country”, as the famous quote goes. The West took on an almost mythical aura as a place where anything was possible and success was limited only by ambition.

Even after the American West had been developed, the United States has remained the epicenter of the world’s economic growth and a proverbial “land of milk and honey” for immigrants from across the globe. The best and brightest students from countries the world over aspired to one day travel to America to make their fortunes and pursue the “American Dream” – and countless many have done just that. However, while the western world has been the place to be for the past 150 years, I’m beginning to think that the next 150 may see a stark reversal of the compass needle.

Take a look at the picture that accompanies this post (click for a striking full size version). That’s Shenzhen, China – the biggest place you’ve never heard of. With some 14 million residents, it’s far bigger than New York City and remains the fastest growing city in China. Not only is Shenzhen exploding, it’s young, smart, and hungry. It’s estimated that 20% of China’s PhDs work in Shenzhen, and the average age of its citizens is less than 30. Thanks to billions in foreign investment, it’s young and educated population, and its status as the first of China’s Special Economic Zones, Shenzhen is also the #1 export center in China, accounting for 22% of the country’s total. All of this is particularly striking when you realize that less than 30 years ago, Shenzhen was nothing more than a sleepy fishing village with a population of 30,000 (that all of this growth has coincided exactly with the establishment of the special economic zone and a capitalist economy is best left for a separate discussion). Shenzhen has also developed as a manufacturing powerhouse, and is the origin of nearly every shiny consumer gadget you own with “Made in China” stamped on the bottom. And if you’re reading this on a Mac, iPhone, iPad, Thinkpad, Dell, Kindle, or HP (among many others), that includes the hardware your browser is running on right now.

John Biggs from CrunchGear spent several weeks in Shenzhen and wrote an excellent series entitled “CrunchGear in China: Where Tech Sausage is Made”, which explores the massive consumer goods (mostly electronics) manufacturing industry that has catapulted Shenzhen to prosperity and global prominence. CrunchGear paints an incredible portrait of the Chinese culture and the efficiency with which they conduct their manufacturing. If you have some time to read through them, they provide some awesome perspective on the seething, dirty, and ruthlessly effective economic powerhouse that’s growing up in the East. The articles are here: Introduction, China the Factory, Getting from There to Here, The Ex-Pats, Shanzhai.

So for all the reasons laid out above (and even more that I’ll elaborate on in a future post), I see the East as having many of the same characteristics that made the American Wild West so appealing – rapid development, a population boom, and a modernizing economy. And although the modern day Chinese gold rush has already begun, I can’t help but think there is still a vast opportunity in East Asia for those willing to make the leap and “grow up with the world”.

Recently, Philip Kaplan (aka “Pud”, founder of Adbrite and FuckedCompany.com) was emailed a question by a single mother looking to get her life back on track. Philip answered the question on his blog, and I found his answer particularly fascinating and relevant. The full text of Philip’s answer is replicated below:

Some people know what their passion is. Unfortunately, you do not. But I’m going to help you find it.

Here’s what you do:

Ask yourself, if you could do ANYTHING in the world, what would it be? What’s the ultimate fantasy that you’ll probably never actually achieve, but would be awesome? Rock star? Movie starlet? Teacher? Birthday party clown? Brad Pitt’s wife? That’s the “WHAT.”

Now ask yourself, “WHY?”

For example, my “WHAT” was “be a rock star heavy metal drummer!” Upon further analysis, my “WHY” was “I want to do something creative. I want freedom. I want to affect lots of people.”

As it turns out, there were about a million different more tangible things I could do, that would satisfy my “WHY.” That’s why I became a freelance web programmer: creativity, freedom, and the opportunity to reach the masses.

What’s your “WHAT?” What’s your “WHY?” You’ll be surprised how easy it is to satisfy your WHY, once you’ve figured out what it is.

I found that, as a college student rapidly approaching graduation, Philip’s advice to identify your “why” instead of focusing on your “what” was especially pertinent as I considered my long term career and happiness goals. I also think that his advice is helpful to entrepreneurs casting about for some direction in life. Many are so focused on becoming the next Web 2.0 darling, that I think they may have lost sight of why they embarked on an entrepreneurial career path in the first place.

Do what you love. Follow your why. The rest will fall into place.

I wrote earlier about the costs and benefits of taking venture capital funding (or any outside funding for that matter). It basically boils down to control of your company. Obviously outside investors want to be compensated for their investment in your company, and you satiate them with equity. However, by giving up equity, not only do you give up a portion of the business’s profits, you also give up control. Not only do larger stakeholders control more votes, outside investors may also require you to sign special agreements that give them first rights to the proceeds if your company is ever liquidated or sold. This means that if they invested $10 million, and your startup is liquidated for only $3 million, you don’t get anything, the entire selling price goes to recoup the outside investment.

FilmLoop.com provides a horror story about what can happen if you give up too much control to outside investors…

Over the past year, 3 year old company FilmLoop experienced first hand many of the worst case scenarios an business risks when they sign on the dotted line with a venture firm. FilmLoop raised $12.5 million in funding through two rounds, the first with Guy Kawasaki’s Garage Ventures($5 million), and the second, a $7.5 million round, with ComVentures in May of 2006. Things were going well in August 2006, when the company launched version 2.0 of their web app.

However, in November of 2006, ComVentures received pressure from it’s limited partners to consolidate its portfolio and squeeze cash from non-profitable startups. This seems to have included FilmLoop. ComVentures needed its money out of FilmLoop, and the only way to do that was through a sale. They told FilmLoop they had to sell by the end of the year, leaving the team only 6 weeks to find a buyer, negotiate a deal, go through due diligence, and finalize the sale. Not surprisingly, no buyers stepped forward on such short notice. Except one.

Fabrik, another one of ComVentures portfolio companies, was suggested by the ComVentures partners as a possible acquirer. With FilmLoop unable to find any other interested parties, the venture capitalists on FilmLoop’s board force its sale to Fabrik for just over $3 million – only slightly more than FilmLoop possessed in cash – in December, 2006.

Because of the equity and influence FilmLoop’s external investors received in exchange for their investment, the FilmLoop team was able to do little to prevent the sale. But that’s not the worst of it. Because of a liquidation preference agreement FilmLoop had signed when it took ComVenture’s investment, the founders and employees walked away with nothing. ComVentures took the entire $3 million to recoup its investment, and Fabrik (ComVentures owned) got FilmLoop’s technology.

So what can we as entrepreneurs learn from FilmLoop’s loss?

When you sign on the dotted line, don’t let the venture gold blind you to the fine print. Most term sheets have a number of trapdoors and parachutes to allow the investor to bail early and as safely as possible. Always be sure exactly what you’re getting, and exactly what you’re giving up to get it. When picking an outside investor, don’t just examine their offer’s monetary value. Make sure you know and trust everyone that will have a hand in your business.

Thanks to TechCrunch for the scoop on FilmLoop.

Inspired by Ben Yoskovitz mentioning Ready Fire Aim in his blogtipping post, I’ve decided to catch the bug and do one of my own. Blogtipping is a simple concept -

1. Choose 3 blogs (I’ve chosen 4 though)
2. Make a list of 3 things you like about each one
3. Make one tip as to how each blog could be improved

Most of the blogs listed below are entrepreneurship focused, however, I’ve included a web design and technology related blog as well. Hopefully I’ve included one or two you haven’t heard of before…

Blog #1: OnStartups by Dharmesh Shah – Feed

• I love Dharmesh’s writing style, it’s very hands on and direct. I find it easy to immediately apply his tips in my day to day life.
• The “Pithy Insights” posts are brilliant. Often lists like these are generic, but Dharmesh’s are always unique and on point.
• Dharmesh writes regularly, and his post length is long enough to be thorough, but not so long that he drones on.
• Tip: Work a little on your design. The header is excellent looking, but once the reader gets down to the content of the blog, things are a little muddy. The tags and social bookmarking links are kind of jumbled, and it looks like you’re not exactly sure where they should go.

Blog #2: Bokardo by Joshua Porter – Feed

• I like the 3 column layout. Most of the time I think 3 columns is too much for a blog, but Josh’s flow together nicely, and contain relevant information.
• The “Colophon” box in the footer is an excellent touch. It makes me feel like Josh is not only instructing me in design with his content, but also wants to use the design of his blog as a teaching point, and exposing his color and font choices makes it easier for other designs to be inspired by his.
• Josh seems to make an effort to write to promote conversation. Almost all his posts either ask questions of his readers, or express his viewpoint, while leaving the topic open for discussion.
• (Bonus praise) Josh includes a RSS subscription link at the bottom of every post, prompting readers to subscribe if they liked his article. A good way to grab subscribers.
• Tip: I’m not sure I’m a fan of the excerpts on the front page. Some of them aren’t long enough to indicate the subject of the article. I’d suggest reducing the number of posts that appear on the frontpage, but including their full text.

Blog #3: WorkHappy by Carson McComas – Feed

• I love that Carson prominently displays a “submit” link where readers can submit content to his blog.
• The “Happy Quote” feature that is sprinkled throughout the content provides great quotes (I love quotes) amd breaks up the long blocks of text.
• Normally I skip over recommended reading sections, but Carson’s caught my eye. Most of his selections are extremely relevant, and I’m tempted to grab one or two on them from Amazon on his recommendation.
• Tip: I’d like it if your design was centered on the page. To me, it feels as though the whole site is sliding off the bottom-left of the page (especially at higher resolutions). Don’t change your design, just center the whole thing on the page, to distribute the whitespace evenly on either side.

Blog #4: The Entrepreneurial Mind by Jeff Cornwall – Feed

• It’s great to read about entrepreneurship from someone who’s made it his career to study and teach it. Jeff’s posts have an educational quality to them that is really unique, and I feel he’s writing to teach, not just to garner page impressions.
• I enjoy that Jeff occasionally strays from purely entrepreneurial content, sometimes writing on politics, economics, and world events. However, he always brings it back to how it affects the entrepreneur.
• I like the list of the 5 most recent posts at the very top of the homepage. It makes it easy to read the headlines and jump to a post I may have missed, without scrolling.
• Tip: So much great content, and unfortunately not a lot of feedback. Try to make an effort to encourage discussion in the comments section. Leave part of the issue open for debate, or ask a question of your audience. After all, what teacher doesn’t like a little participation!

That’s it for this time, I hope I’ve opened your eyes to some new voices, and been helpful to those blog authors highlighted above. See everyone next time.