Page 37 - How China Is Winning the Tech Race

“compares the search for a retreating beauty amid chaotic glamour with the
search for one’s dream while confronted by life’s many obstacles.”
Sharing the story of Baidu’s roundabout path to success, Xu relates how
engineers were hired straight out of China’s top universities. The new recruits
were cheered on with examples from the Valley to persuade them to work
hard, grow the company, and get rich. Xu and many of the initial employees
did get rich from their stock options in the publicly listed Baidu. Xu became
a multimillionaire and today invests in and advises Chinese start-ups.
“We share the overall vision with them. We brainwash them about why
Silicon Valley has become so famous,” says Xu. “We took the secrets of the
Silicon Valley culture: tolerance of failure and tolerance of differences and free
flow of information with no barriers. We tell them that we have a democratic
environment and that they, as bright engineers, can turn their ideas into
products. These are the fundamentals of creating innovation,” Xu tells me as
we sit in comfortable chairs overlooking a smog-filled skyline. “It was a
tremendous start-up experiment. We were not sure we were going to make it.”
Indeed, they almost didn’t. Xu relates how Baidu failed with three near
clones of successful U.S. Internet businesses before finally turning a profit with
a fourth plan: a Google-like search
engine designed for consumers.
Their first business plan was
“It was a tremendous start-up experiment.
based on Inktomi, a search engine
We were not sure we were going to make it.”
for portals rather than a stand-
alone Web site. “We were going to Eric Xu,
be a Chinese Inktomi,” says Xu, cofounder, Baidu
referring to the once high-flying
California engine that peaked with
a market capitalization of $20 bil-
lion during the dot-com boom. “We felt that we could raise money from
venture capitalists with this model.” And they did: $1.2 million in 1999.
Then the Internet bubble began to deflate. Inktomi was snapped up by
Yahoo! in 2002 for $200 million, a fraction of its prior value. In China, Li
and Xu had little negotiating power over prices and saw many clients gobbled
up by larger rivals in the weakening tech economy.
In record time, they came up with a second idea: copy a rapidly ex-
panding Boston-based content delivery network called Akamai Technologies,

Baidu—China’ s Boldest Internet Start-Up 11