Chinese startups aspire to make it big in the West now faces a major obstacle: their connections at home. The scrutiny that TikTok is facing in the US over its governance structure and data practices is a sobering reminder that shedding ties to China can be crucial for acceptance overseas.
As they expand to the West, Chinese startups are now decoupling from home, as we detailed in a series of stories (here and here). The process may include moving their controlling entity to a foreign country, moving cloud centers abroad and moving their executives abroad.
Against the backdrop of decoupling, one company is taking an unconventional path. Instead of trying to hide its Chineseness, Seafile, a low-code application developer founded in 2012, has expanded internationally by creating a symbiotic relationship with its German joint venture, SeaTable.
Since its founding in 2020, SeaTable has gathered nearly 200,000 users for its cloud-based database platform outside of China while the software’s on-premise version has about 500 clients, including the German Armed Forces , a corporation listed on the German stock index Deutscher Aktien Index. (DAX) and many universities.
Unlike many globalizing Chinese startups that are fueled by heavy investment investment, Seafile has a self-sustaining business. The company has not raised outside funding since it secured a million yuan (~$142,000) angel round from Matrix Partners China a decade ago. Today, it is profitable and funds all the ongoing development of SeaTable in house. Seafile has 40 employees in China and 10 in Germany.
Avoidance of control
In 2019, the two Chinese co-founders of Seafile, Daniel Pan and Jonathan Xu, approached their future partners, Christoph Dyllick-Brenzinger and Ralf Dyllick-Brenzinger, with an interesting proposition: to establish a joint venture to help Seafile grow overseas.
At the time, the two German brothers, consulting veterans, had been helping Seafile distribute its other product, a sync-and-share solution, for several years. They were drawn to the opportunity to have a stake in a product they truly believed in – a low-code database tool that provided a self-hosting option.
SeaTable offers cloud-based and on-premise solutions, a strategy that is believed to differentiate it from industry giant Airtable.
“Europe is all about data privacy, data sovereignty,” Ralf, chief executive of SeaTable, told TechCrunch in an interview. “So there is a lot of demand in the market for the product in Europe.”
The Dyllick-Brenzingers accepted the challenge and founded SeaTable GmbH, with Seafile holding a 50% stake to maintain its commitment to product development while maintaining a strong separation from the German company’s management and access of customer data.
Focusing on Europe, SeaTable is multilingual and comes in English, German, French and Russian, with Spanish and Portuguese in development. Language may seem like an insignificant part, but in underserved markets with high purchasing power, such as France and Japan (as in the case of meeting productivity tool Airgram), the having a local option helps to get a head start. SeaTable also boasts the capacity to store millions of records compared to Airtable’s scale of tens of thousands, according to Ralf.
In retrospect, the two Chinese founders chose the best path for Seafile’s global expansion at a time when the public and Western governments are increasingly skeptical of companies with Chinese links. But businessmen who want to run an empire can’t let go easily, let alone interact with colleagues who live thousands of miles away. As Ralf said: “I think it requires a lot of trust between the two sides.”
Although Seafile is not involved in the day-to-day operations of SeaTable, it plays an important role by developing the database platform from Guangzhou, a setup common to global tech companies that want to tap into cheap, quality Chinese engineers.
“The China team gave us a piece of software… The repository is like a dividing line. Everything in this part of the repository is managed by Jonathan and Daniel and everything in that part is managed by us,” explained Ralf.
A repository, in computer programming, is a centralized digital storage used by developers to make and manage changes to an application’s source code.
The SaaS version of SeaTable is fully operated by a joint venture in Germany and stores data in Europe. All customization and service takes place in the German office, which handles everything from installing software, running upgrades, managing backups, troubleshooting, reading and interpreting logs, to to optimize system performance.
“Managing the system are German nationals or European nationals. Apart from the fact that the SeaTable was developed in China, it’s about as European as it gets,” added the founder. “It’s ironic that we all have hardware made in China … but Chinese software has a difficult position in Europe.”
The German brothers admit that SeaTable’s marketing method is not the “safest”. While some customers are fine with Chinese sources, others, including a French ministry, have reservations about software originating in China. But this proactive approach sometimes leads to friendly discussions on new forms of cross-border collaboration that take advantage of software development in China on the one hand and localization efforts in target countries on the other.
“Some customers I’ve talked to have completely forgotten the Chinese origin of the SeaTable and I’m the one who revealed it to them. We don’t want to engage in discussions and then it ends up coming out as if the SeaTable is Chinese and then they say, look, early You should have told us,” said Ralf.
“So we are very active in that regard and many customers find it interesting because, in the early 2000s, the common joint venture model was that European and American companies went to China and looked for a partner in China to build their business in China. Now we are an example of a Chinese company going to Europe to do a joint venture. People realize that oh, this is really interesting, so they are interested to learn more about that.”