Alibaba: The House That Jack Ma Built pdfdrive com

China’s First Technology Entrepreneurs
As word spread that China was finally investing in its telecom infrastructure, the
country’s first technology entrepreneurs began to emerge. Mostly U.S.-educated
engineers, they started new ventures to help build out China’s communications
networks. One of the most prominent was James Ding (Ding Jian), a master’s
graduate in information science from the University of California, Los Angeles.
After the suppression of prodemocracy protests in Tiananmen Square in June
1989, he and many other U.S.-educated Chinese instead shifted their hopes for
radical political change in China to a faith in the power of technology to reshape
the country. In 1993, James Ding joined forces with Beijing-born Edward Tian
(Tian Suning), who had recently completed a Ph.D. at Texas Tech, to cofound
AsiaInfo. In 1995, they moved the company’s operations to Beijing to work on
the data network buildout for China’s telcos, including China Telecom’s
ChinaNet dial-up Internet access network. Edward Tian would go on to become
a leading figure in China’s telecom market, and both he and James Ding would
become high-profile investors in the technology sector.
In 1995, another influential Chinese technology firm, UTStarcom, was
formed. Started by Chinese and Taiwanese entrepreneurs in the United States,
the company soon set up its China operations in Hangzhou. UTStarcom would
play an important role in spurring the growth of China’s telecom market by
promoting a low-cost mobile system called Little Smart (
xiaolingtong
). This
success helped put Hangzhou on the map for investors as a technology hub.
A key investor in UTStarcom in 1995 was the newly established Japanese
investment fund SoftBank, a firm that five years later would start to play a
critical role in the success of Alibaba. Founded by Japanese billionaire
Masayoshi Son, SoftBank took a 30 percent stake in UTStarcom.
UTStarcom was formed by the merger of Unitech Industries and Starcom
Network Systems. Unitech’s Taiwanese founder, Lu Hongliang, had studied
with Masayoshi Son at the University of California, Berkeley. Starcom’s
cofounder, Chauncey Shey, went on to head SoftBank China Venture Capital,

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which led Masayoshi Son’s investment in Alibaba in 2000.
By late 1995, with China’s telecom and Internet buildout beginning to gain
momentum, Jack and his customers were finally able to connect to the Internet
from Hangzhou, using the ChinaNet service that had already been rolled out in
Beijing, Shanghai, and Guangzhou. Soon after, Jack traveled back to the United
States with Li Qi, his newly appointed chief engineer, to visit VBN in Seattle.
On returning to China they ended their venture with VBN, setting up their own
servers and a new China Pages site.
This helped cut costs, but boosting revenues was proving hard. In 1995,
only 1.5 million personal computers were sold in China, mostly to business or
government users. Priced at roughly $1,800, the PCs cost a fortune for average
Chinese at the time. The costs of getting a fixed line installed and getting online,
combined with a lack of awareness about what the Internet actually was, meant
that China Pages was having a hard time finding enough customers.
Jack stepped up his efforts to evangelize the Internet. He even enlisted Bill
Gates, in a manner of speaking. In late 1995, Gates’s book 
The Road Ahead
became an instant bestseller in the United States and soon after in China, too.
Although the book hardly mentioned
4
the World Wide Web, to convince
prospective clients of the importance of the Internet Jack started citing a quote
from Bill Gates: “The Internet will change every aspect of human beings’ lives.”
A useful marketing message for China Pages, Jack had in fact made it up, as he
later confessed, “In 1995, the world started to know Bill Gates. But if I said,
‘Jack Ma says that the Internet will change every aspect of human beings’ lives,’
who would believe it?” But, he added, “I believed that Bill Gates would
definitely say it one day.” (Shortly after the book was released, Gates famously
did realize the importance of the Internet, dramatically stepping up Microsoft’s
efforts and releasing a second edition of the book with a much greater emphasis
on the Internet.)
Meanwhile, in Beijing, an entrepreneur, Jasmine Zhang (Zhang Shuxin),
had started to attract growing media interest after founding in May 1995 one of
China’s first privately owned Internet service businesses. She called her venture
Yinghaiwei, a rough, phonetic equivalent in Chinese of the English term
“Information Highway.” Other China Internet founders credit her as the source
of inspiration for starting their own ventures. One told me: “One day I was
driving to work and saw one of their billboard ads saying, ‘How far is China
away from the Information Highway? Fifteen hundred meters ahead,’” referring
to the company’s office. Building on a tradition of internal BBS (bulletin board
systems), popular in leading academic institutions such as Tsinghua and Peking
universities, the company started to serve a few hundred users keen to

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experience the Internet, then mostly dominated by websites in English, and share
comments in Chinese about what they were discovering.
Back in Hangzhou, Jack stepped up his efforts to promote his own venture,
scoring a breakthrough when the Zhejiang provincial government invited China
Pages to build its website. The government official in charge of commissioning
the website, Yang Jianxin, later recalled his dealings with Jack: “The first time
he came to my office, frankly speaking, as I understood him to be an Internet
guru I didn’t expect to meet such a young guy.” Jack launched enthusiastically
into an explanation of the Internet. Yang recalled Jack talked “nonstop for two
hours.” Although Yang indicated the government was unable to pay for the
project, as its impact was unknown, Jack and his team quickly built the site,
hosted by China Pages, in cooperation with a local unit of Zhejiang Telecom
called Hangzhou Dife Communications—a partnership that soon after would
sour dramatically. The site was one of the first projects in a national initiative
5
 to
bring the Chinese government online, generating a lot of publicity for Zhejiang.
Within a few days Yang received congratulatory emails from overseas, including
from members of the U.S. Congress.
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The coverage also boosted Jack’s profile,
a local newspaper
7
ran a feature story on his company and his dramatic first visit
to the United States.
But the publicity also triggered problems for Jack and the official who had
commissioned him. One of Yang’s colleagues reported him to the provincial
government, accusing him of “hobnobbing with a 
getihu
.” The disgruntled
colleague’s report thundered that “government information dissemination was a
serious issue, how could it be handled and published via a 
getihu
?”
After encountering resistance at the local level, Jack started to spend most
of his time in Beijing. There he met up with Jasmine Zhang of Yinghaiwei. The
two did not hit it off, Jack later sharing his first impressions: “I though if the
Internet’s demise comes one day, hers will be earlier than mine. I was already
very idealistic, but here was someone who was even more idealistic than me.”
Jack and his partner, He Yibing, set about raising the profile of China Pages
in Beijing. Jack had brought with him some articles he had written about the
Internet, and asked his friends to help publish them. In Beijing, thanks to a
relationship with a driver at the publication who was introduced by a friend, he
met Sun Yanjun, deputy editor in chief of