Chinese startups ambitious to make it big in the West now face a major hurdle: their connections to home. The scrutiny facing TikTok in the US for its management structure and data practices is a poignant reminder that giving up one’s Chinese ties can be essential to being accepted abroad.
In their expansion to the West, Chinese startups are now disconnecting from home, as we’ve described in a series of stories (here and here). The process may include moving their controlling entity overseas, moving to cloud centers overseas, and moving their executives overseas.
Against the backdrop of decoupling, one company is taking an unconventional path. Rather than trying to mask its Chinese identity, Seafile, a low-code application developer founded in 2012, has expanded internationally by entering into a symbiotic relationship with its German joint venture, SeaTable.
Since its inception in 2020, SeaTable has garnered nearly 200,000 users for its cloud-based database platform outside of China, while the local version of the software has about 500 customers, including the German Armed Forces, a company included in the German stock index Deutscher Aktien Index (DAX) and various universities.
Unlike many globalizing Chinese startups fueled by heavy venture capital investment, Seafile has an enviably self-sufficient business. The company has not raised any outside funding since it recovered a million yuan (~$142,000) angel round from Matrix Partners China a decade ago. Today it is profitable and self-funds all of SeaTable’s ongoing development. Seafile has 40 employees in China and 10 in Germany.
In 2019, Seafile’s two Chinese co-founders, Daniel Pan and Jonathan Xu, approached their future partners, Christoph Dyllick-Brenzinger and Ralf Dyllick-Brenzinger, with an intriguing proposal: to set up a joint venture to grow Seafile abroad.
At the time, the two German brothers, who consulted veterans, had been helping Seafile for a few years to distribute their other product, a sync-and-share solution. They were enticed by the opportunity to own a product they truly believed in: a low-code database tool that offers a self-hosting option.
SeaTable offers both cloud-based and on-premise solutions, a strategy he says sets it apart from industry giant Airtable.
“Europe is all about data privacy, data sovereignty,” Ralf, CEO at SeaTable, told TechCrunch in an interview. “So there will be a big market demand for the product in Europe.”
The Dyllick-Brenzingers rose to the challenge and founded SeaTable GmbH, with Seafile holding a 50% stake to maintain its commitment to product development while maintaining firm separation from the German company’s management and access to customer data.
Focusing on Europe, SeaTable is multilingual and will be delivered in English, German, French and Russian, with Spanish and Portuguese in development. Language may seem like an unimportant feature, but in underserved markets with high purchasing power, such as France and Japan (as is the case with the meeting productivity tool Airgram), having the localized option can help a startup move forward. SeaTable also has 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 have chosen the best possible path for Seafile’s global expansion at a time when the public and government in the West are becoming increasingly skeptical about companies’ Chinese ties. But entrepreneurs who want to run an empire don’t let go easily, let alone do business with partners thousands of miles away. As Ralf noted, “I think a lot of trust is needed between the two sides.”
Separation of data
Although Seafile is not involved in the day-to-day operation of SeaTable, it plays a key role by developing the database platform from Guangzhou, an arrangement common among global technology companies seeking to leverage China’s affordable quality engineers.
“The Chinese team gives us a piece of software… that anyone can download from the internet, from the repository, and we, the German team, run it. The repository is a bit like the dividing line. Everything on this side of the repository is managed by Jonathan and Daniel and everything on that side is managed by us,” explains Ralf.
A repository, in computer programming, is a centralized digital store that developers use to make and manage changes to an application’s source code.
The SaaS version of SeaTable is fully managed by the German joint venture and stores data in Europe. All customizations and services are done in the German office, which handles everything from installing the software, performing upgrades, managing backups, troubleshooting, reading and interpreting logs, and optimizing system performance .
“Managing the system are German citizens or European citizens. Aside from the fact that SeaTable was developed in China, it’s about as European as it gets,” said the founder. “It’s ironic that we all have hardware made in China…but Chinese software is in a tough spot in Europe.”
The German brothers admitted that SeaTable’s marketing method is not the “safest”. While some customers are fine with the Chinese roots, others, including a ministry in France, have reservations about software that comes from China. But this proactive approach sometimes leads to amicable discussions about new forms of cross-border cooperation that make use of software development in China on the one hand and localization efforts in the target countries on the other.
“Some customers I speak to are completely unaware of SeaTable’s Chinese origins and it is I who is revealing it to them. We don’t want to get into arguments and at the very end it comes out as if SeaTable is Chinese and then they say, look, you should have told us that before,” said Ralf.
“So we are very proactive about that and a lot of customers find this interesting because in the early 2000s the typical joint venture model was that European and American companies went to China and looked for a Chinese partner to build their business in China . Now we are an example of a Chinese company coming to Europe to set up a joint venture. People are realizing that oh, this is actually interesting, so they’re curious to learn more about that.