Gridsum Holding Inc. (NMS:GSUM) is a company that provides data analysis software for multinational and domestic enterprises, and government agencies in China. The company’s CEO, Guosheng Qi, sat down with Executive Casts at the company’s headquarters in Beijing, China to discuss some of the most important things that will help investors connect with and learn about the company beyond what is usually gleaned from brief post-earnings conference calls. Below he goes into detail about his background in the tech space and things to consider when starting a business in China:
- His Background
- Early Involvement in Technology
- Starting a Business in China
- How The Entrepreneurial Scene in China is Changing
- How Corporate Governance Has Evolved in China
Gridsum Introduction and Guosheng Qi Background
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So, I am Guosheng Qi and I’m the founder and the CEO of Gridsum. Gridsum is a company who provides a SaaS offering – so, Software as a Service, which is pretty popular in the United States. And to help big organizations, like big enterprises and the big government organizations, to help them to better utilize their own data to make better data decisions. They determine decisions, that is what we are doing.
And my personal background, maybe people know that I founded this company when I was still a college student, when I was at 20, 21? When I was a kid, I was always very passionate and very curious about technologies. I always asking a question about “why?” Why this can’t be done?
I grew up in a family which my father was a mechanical engineer and my mother a doctor. So, unlike other kids in China, when I was five, six years old, I got a chance to get in touch with the computers, very early computers and began falling in love with all the stuff associated with the digital world. And, as I mentioned, I always wanted to figure out “why?”
I think technology is changing our lives. That influenced me a lot. And also my father, most importantly, later on he became an entrepreneur. He started his own companies and it’s a big mining machine companies and that is successful and once you came to decisions, making business decisions every day, and I realized, “Okay, I don’t want this heavy machinery industry. I would like to cool computer science, computer software industry.” And that is me. I am pretty good at Math and Physics when I was a student and I am also a fan of sports, I play a lot of basketball and I was a long distance runner. I’m pretty good when I was in middle school. Yeah, that’s me.
Early Involvement in Technology
When I was at high school, I was in-charge of our High School’s website – buildings and internal. We have a student forum and it’s all built by me. And I had a small team of five persons who are great at computer coding and building the website, which was in 1999. And at a very early time, not very early, but it’s a very close like to an internet bubble. So, internet is so hot, but even you as go back to that time in China, not too many families are connected with the internet, but I was very fortunate to take that role for my High School.
Back to that time, kids, younger people, they play games, right? They play games and spend a lot of time playing computer games which basically impacts your… So you cannot study well, right? You spend so much amount of time on games. So, most of my friends they play games, but their parents doesn’t know, they didn’t know that they spend a lot of time playing games. And back to that time since there is limited information you can get from internet – so, it is the offline, paper, magazines, it’s still very popular. Their parents didn’t allow them playing games and they didn’t allow them to buy gaming magazines. So, magazines was 100% of how to play a game.
So, what I did is I think, “Oh, I need to do something for these friends who cannot get access to the magazines,” because they always borrow my magazines and I cannot buy more than two copies, right? So, what I did is I wrote a special website. Nowadays, it could be called as a blog to which I, as an owner of this website, can create anything with no limitations – like pictures, text and other people they can be followed by some comments. So, this is exactly like a blog. And all the content is from the magazines. So, basically, I bought my magazines and I “OCR’d” it [Optical character Recognition] and so it becomes text and images and uploaded it to the website. And I didn’t plan to show the website to the public and we don’t have a server.
So, the only server I had back to that time was our High School servers, our High School’s official website servers. So, I put that gaming website underneath secretly, underneath our High School’s website. So, nobody knows the URL. Only a couple of people knows the URL, so they can access that website and they can get all the information they want. And I think this was cool. I was so glad that I made it for a while.
So, after I operated it for one year. So, can you imagine how much content was on that because I almost OCR’d all these magazines. Until one day, actually my headmaster called me. He said, “Hey, our server has problem.” He says, “I cannot access our High School’s website. It seems as if not accessible.” So, I went through the server room and realized that the server was crashed by huge amount widgets, like more than 6,000 widgets in ten minutes and they’re so crowded. And back to that time, like 2000, we don’t have the enough bandwidth; it’s just a High School official website.
Nobody will try or will access it every day, right? There’s there 20 visitors every day, that’s it. And I got my secret website has a hundred visitors everyday but this is all from the people I know. So, I tried to figure out, why? So, I dig into the log and then realized, “Oh,” some special weird named website, named the Google, G-O-O-G-L-E dot com, send me 6,000 in traffic in ten minutes. Why? What happened? I know Google is a search engine, I didn’t really use it back to that time then I go checked with Google and search about several like public games and with Chinese, “Oh my god!” And then I realize that Google pick up my secret URL. And even today I don’t know how Google did that, but that happens
Even to search about several hot game names, back to 2000 then you get my secret links under a High School’s official website. I was so scared. So, I killed my own website because I was scared about several things. I was scared that my headmaster figured out that as I had some secret gaming website under the High School official website. I was scared about the magazines, that they’d sue me about copying their content and sharing their content to the public. That was a nightmare, but that was very cool.
So, I get to know the power of search engines because I was already wondering…if I can create a website with all the great content, how could I promote my website? I don’t know. No idea. But around 2000, Google came to China and that solved my questions. If you have a good content, search engines will pick it up and then send you traffic. And also, I get to know that if you want to figure out what happened, you need to dig into the data and the data will tell you what happened. So, that is my early story about Computer Science, about Digital Marketing, about data analytics.
Starting a Business in China
I think in my case it is even more difficult. I would say it’s extremely difficult. Because what I was doing it’s very different and most of people were doing… I started this company in 2005; I began to plan a start-up in 2003, when I was a college student, as I mentioned. And unlike 99.9% of the people back to that time because most of them, almost every other entrepreneurs back to ten years ago, we’re focused on consuming Internet because China has this huge population and China government invested hugely on infrastructure – like bandwidth, like a cable line.
So, It’s much easier to start a company focused on consumer internet rather than what I did because I tried to do something for the business. So, I try to do, not to see, but to be. I wanted to focus on enterprise’s services. I wanted to focus on data analytics because when I was young, when I started my college, I had a student association named Software Industry Research Associations of Tsinghua.
And we had some conclusions as to why in China we don’t have company like Microsoft; we don’t have a company like Oracle. So, we have no operating system, we have no database back to that time, these two things are very important for a company running their business on computers, right? No doubt that we don’t have an Intel, we don’t have AMD, we have no chips. So, I keep asking a question, “Why we don’t have this?” Whereas from the early entrepreneurs startup company call like WPS who contributed with like Microsoft Office, competed with Word, the famous text editing software, but were not successful.
It is okay at the beginning [to] fail. So, I keep asking question, “Why?” And I say, “Hey, can I do something on this?” And you know it’s difficult because nobody was doing that and you’re going to compete with all of the big names, big enterprises, software providers. And most importantly, in China – maybe also in Europe it’s the same – that people tend not to do business with younger kids. If you’re younger kids you can do Facebook, you can do Twitter, no problem, because you don’t need to go there to talk about business every day. But as what I want to do I wanted to just sell software to big enterprises and this is what’s cloud computing.
Back to that time, there was no term of a cloud computing or like a big data. There’s a simple reason. When I decided to start my business, started my products, development of first product…the reason why I wanted to make sure the products are purely built on cloud it is because of the policy issues, illegal software in China back to that time. So, I think the only way which make sure that your software will not be copied, like illegally copied by your end-users, is to put it on the cloud. So, people access your software through internet, through their browsers and you cannot get the source code and you won’t deploy software into their data center. So, that’s the reason.
Very luckily now everybody has cloud computing and then what we did for data analytics people on the cloud, people call it big data. So, that’s fascinating, but that’s extremely difficult at the beginning for a young kid, who want to sell their software, data analytic software, to big enterprises.
But, I would say that’s great because even today when people talk to me like the younger entrepreneurs they ask me, “Do you encourage, can give us some advises on entrepreneurship? Should we start a company earlier?” I would say that if your objective is not like making money, seeking financial independence before your thirties and if that is your objective, then, you should not start a start-up while you are so young. But if you can understand one thing that is the journey of entrepreneurship, of starting a company when you are young, you are going to face extremely high pressure and that pressure will punish you and train you.
So, you are going to have a much better training than [people] your average age. So, that is the best outcome you can expect. If you expect that as your objective, then, I think you can create your own company. You just don’t care about if you will be finally successful or not, but you will be a much better person and a much professional person after running your own company for a while. So, that would be my strategy.
The Entrepreneurial Scene in China is Changing
I think a lot has changed. Now, China government encourages people to make start-ups and the entire… So, the China economy is growing really fast for the past and many years. It is a slowing down, but still growing faster than anywhere else in the world.
I think China government was smart to invest lots on infrastructure. So, today especially if you go to the first tier cities in China you see the infrastructures is totally like in developed countries even better than New York City and that is the case. And you have a high-speed railways which connected to the major cities and along with that before our, for example, if you’re young, you want to have a start-up nobody will invest in you. Like me.
I started this business in 2005 and in 2010 it’s a self funding. So, luckily I have a relatively financial independent father and he gave me a lot of support for the first five years until I can find an institutional investor in West and England. It is really because we were already generating significant revenue from our own products. But today younger entrepreneurs can…It’s very possible to get [investments] from professionally westerns and the entire community accepts younger people to start their own business, trying something. I think that is actually very very good. So, time is different now.
How Corporate Governance Has Evolved in China
So, we talk about corporate governance. And I wanted also talk more about like the China, the businessmen in China for the past 40, 50 years because my father was also a businessman, he was an entrepreneur.
So, as you people may know that we have the Second World War, have the Civil War China was very very poor. So, we don’t really have old money. So, corporate governance and a company, it’s a concept for Chinese people, very very new. So, the first generation of entrepreneurs, they don’t really have an idea of corporate governance. Maybe they’re “amazing leader”, so he makes people believe he will bring them a better life. So, people followed him and is the main character for the first generation entrepreneurs like my father is you need to be very brave because it’s the low-hanging fruit.
Everybody was, back to 30, 40 years ago, nobody was doing their own business, everything is controlled by the government, there was a plant, there’s no invisible hand, there’s no market. So, the only thing you need to do is you need to be brave. And you be brave and go out in the open new world because of the low-hanging fruit you can be successful. So, these people, they’re not well-trained by like a proper business program and most of these guys, these early generation entrepreneurs, their background are engineers or traders just a businessman, pure businessman because they’re brave.
And things is changing now. So, it’s a much more sophisticated business world not only globally, but in China. The first generation entrepreneurs they reach they’re 50s, not only 50s, 60s and their business is getting bigger and bigger and some of them become listed companies in China. So, I watched as my father making decisions, in the early time it making decisions by guts and feelings, just by his guts of feelings, his instincts. And because there’s no data to analyze and that you don’t know what a world is going to be changed tomorrow or the day after tomorrow. Things change, and are changing very rapidly. So, you have to make decisions by guts of feelings.
When I started at Gridsum… So, I’m asking my questions, so “How would a company become from success, from a little bit of success to hugely successful?” I think it is not only like the technology innovations, not like the leadership, not like the courage, the bravery… it’s about corporate governance, right? Because if you don’t have a great corporate governance, then, you cannot scale your business, they really scale business.
When I started this company, and I built a real board. When I was only having five employees, I invited a professor who has a major influence on me, who started like a technology innovation, who has a doctorate degree from MIT went back to Tsinghua University and focused on tech innovations, on a tech-innovation-driven economy and I invited him to my first independent board of directors.
And in 2009, I invited another very successful entrepreneur, serial entrepreneur, named Tom Alger, who’s a New Yorker now and back to that time he was in China […] I invited him to join the board and become another independent board of director even before institutional investors to come into the company.
And another thing which I did, which is pretty unique and different than other China entrepreneurs is that, this company is founded by me and I was in early time I was CEO, COO, CFO and the CTO. So, I created our own products and I coded it myself, but before the institutional investor came I already gave half of my shares to my partners.
And another thing is that don’t forget that it’s a 100% of the early funds is funded by my family. But I gave more than 50% to other partners. I believe it’s a start for a better corporate governance, for you to make sure people are really your partners. And I begin to set up structures which you have shares, but you don’t have voting rights because I gave you this shares, for this partner because you don’t spend money to have these shares. And it works really well.
It’s a balance issue because for a lot of company would say at their early stage and entrepreneurs and the founders are very generous about giving shares and unless these partners invest, once there is a conflict, like they cannot agree on something, then they have a problem.
But in our case we successfully balanced both of the personal interest and also at an early stage we quickly make decisions. It cannot be slow in making decisions. And another good thing that we have a real board, even though interested, even when we are like five persons, we made right decisions with the board’s support. And that’s my view about corporate governance.
And in the early time, and when I now listed the company, the reason why I chose the United States to list our company…several reasons. One major reason is, I think I’m young and I have an ambition to build a very successful company. I believe that in China we were already very developed on consumer internet sectors. We have IT services companies, we have a software outsourcing companies which are pretty big, but they don’t really have a lot of intellectual properties and they have no products.
And none of the big China companies or SOEs are really using something which are produced by China like software. So, I have these ambitions to build a successful, a great like a China enterprise services software company and I think corporate governance is the most important things and if you incorporate it as early as possible, then, it will help you.
I have watched my father’s business and I think he is also eager to incorporate a more advanced corporate governance into the company. But that’s hard because their culture from that very early beginning is like a workshop. I have to say they’re successful, but they’re like a workshop. So, it’s hard because you are going to change the entire culture of the company and especially when company getting bigger, like a more than five hundred people, it’s so hard to change the culture.
So, that’s why I pay so much attention to corporate governance. I think it’s also the entire China where we are already very developed. But I wanted to keep, to maintain our success and make sure we can still have a steady growth in the future when we need a wider much wider corporate governance, not [just] on companies.
Please view the full interview here. https://geoinvesting.com/gridsum-holding-inc/
Chairman of the Board, Chief Executive Officer
Guosheng Qi is one of our co-founders and has served as our chief executive officer and chairman of our Board of Directors since our inception. Mr. Qi founded Beijing Gridsum in 2005 when he was a student at Tsinghua University. Mr. Qi holds a bachelor’s degree in computer software from Tsinghua University. See more about Gridsum here.
Article by GEO Investing