How an entrepreneur went on to clone Rocket Internet’s tech hub in Asia

May 8, 2014

May 8, 2014 at 12:30 pm by Joshua KevinWhat do you do when you’re commanded by Rocket Internet to tear down a 160-person powerhouse tech center responsible for the launch of over 50 global online ventures within a 12-month period? You clone it.“Company shutdowns come fast and furious at Rocket, often without any notice,” says Sean Liao (pictured above).Liao has been at the center of a tech revolution in Asia during the last six years. He was co-founder and managing director of Rocket Internet China where he built and managed a tech center that brought to life over 50 global Rocket online properties including behemoths Lazada and Zalora. He was also personally in charge of building and initially operating the first Airbnb of China, Airizu, as well as executive producing the ill-fated Pinterest clone, Pinspire. Both of these companies, along with Rocket China, were shut down."After just 18 months of operation, Airizu was just a signature away from being Rocket’s first success story in China,” says Liao. The eight-figure term sheet put on the table by a major online property rental company was rejected by Rocket HQ as being too low. “I guess we needed another ‘0’ on the term sheet,” Liao jokes.He has come back swinging and is now handling technology development for ex-Rocket executives worldwide through his new company, Imaginato. “I hate to say it, but I’ve been a part of one too many failed ventures, especially at Rocket. On the flipside, I’ve gained an enormous amount of invaluable insight that hopefully will help my clients succeed,” Liao says.

Entrepreneurship, technology, and independence

Born and raised in the U.S., Liao got his first computer at the age of nine and began teaching himself programming. He built his first database application soon after, and an animated game before a year was up. “Computing has been a strong point of focus for me since fourth grade. When I’m on a computer, I tend to zone out and go into my zombie-mode,” Liao says.“I was exposed to entrepreneurship and independence at a young age,” he says. His father was self-employed, starting multiple businesses, while his mother encouraged Liao to generate his own spending money doing things around the neighborhood. “As a young teenager, I was delivering newspapers at 5am, mowing lawns, and painting houses. My friends had no idea.”Post college, Liao dabbled in tech consulting before joining a startup. His first role at that startup involved building online enterprise applications in what Liao refers to as “crazy, unreasonable timeframes.”“I spent my first few years there programming 18 hours a day, catching a few hours of sleep under my desk. No weekends, so I could make milestone after milestone.” His effort made an impact as the startup matured into a strong cash flow business. Later, Liao would engage with several Indian outsourcing firms to help accelerate progress on those same software systems he had architected. He found the quality appalling and vowed he could do better. “I had been visiting China for about five or six years by that time and saw such transformations year after year. It seemed like the right time to go and try it out,” says Liao.In 2008, Liao moved his family to China to establish, at first, a small development extension to his U.S. company. The experiment proved successful, and soon the extension grew into a full-fledged tech center, servicing other U.S.-based clients. With another entrepreneurial itch to scratch, Liao pitched an idea back to headquarters to do tech business incubation from China. The result: a social and mobile gaming company co-founded by Liao that raised $1.5 million in funding, and a Chinese group buying site. Around the same time, Groupon was looking to expand into China, and Rocket Internet was handling its expansion.In a pitch to Rocket head and Groupon’s then-Global COO on his trip to China to vet out potential group buy partnerships, Liao demoed his site’s technical, operational, and sales components while also highlighting the capabilities of his tech outsourcing center. “After what felt like only a few minutes, he turned the table and began pitching to me on Rocket. Then he made me a great offer on the spot for me to join him as Rocket co-founder for China. I was totally caught off guard. It wasn’t quite the deal I was expecting to make,” says Liao. He jokingly refers to this time period as when he had unknowingly joined “the dark side.”

Lessons learned

Seeing a project that Liao was particularly passionate about fail became a painful early lesson – but one that has motivated him throughout his entrepreneurial journey. Before the Rocket Internet days, he was an executive producer and design lead for his company’s first Facebook game, he had invested himself fully into making a great social game. “My dev team had never made a game before, let alone a complex, pseudo-3D, isometric online social game like Farmville,” says Liao. Within a few months, Liao developed the team skillsets and development workflows necessary for game production. Four months later, it beta-launched a nightclub-themed social game. “It was one of the coolest games on Facebook, and now we just needed millions of players,” he says. A few weeks in, with a combination of online buzz and targeted Facebook marketing, players started to pile on.As the game approached 100,000 players, a decision was suddenly made, against Liao’s objections, to halt user acquisition and push monetization on sales of virtual goods. “We were just getting good with player funnel optimization and seeing improving player return rates when talk of ‘break-even’ started. We hadn’t really established a strong player community at that point, and players aren’t going to spend a dime in your game if they have no one to show off to or share their game experience with,” Liao says. The result was catastrophic: players started dropping off while sales were barely detectable. Once the decision was made to turn marketing back on, it was too late. All the momentum was gone and players were not coming into the game. After a year and half of development, the company pivoted from a social game developer to a game developer for businesses.According to Liao, the lessons he learned during that time stayed with him through his Rocket years and into his own ventures. “I was fortunate to come away with a lot from that experience,” he says. Among them he mentions finding the right business partners, knowing when to scale, understanding your cash runway, importance of strong user communities, and becoming data driven. “If we looked at the data right from the beginning, we would have put less effort into designing hundreds of virtual goods for the store and more time on core game experience. This has had direct application to many of the online ventures I’ve been involved with. I often see founders making similar mistakes of wanting to build out too many features, and not getting their primary offering really solid,” he says.Later for Rocket, Liao felt he had a chance to redeem himself when starting Pinspire, and he worked on it as if it was his own personal venture. However, after producing and launching the platform in under four weeks, the actual operators were Rocket MDs in five other countries, each with just out-of-reach monthly KPIs.“Pinspire could’ve been really great. Ideally we would have focused on just one region and developed an authentic and creative community there, and then understand what it took for these users to return and share and interact,” said Liao. He says instead Pinspire was scaled up prematurely Rocket-style to over 30 languages in more than 20 countries within seven months. “We had stuffed in every feature from Pinterest and focused on building traffic to over 10 million PVs a month after only four months online, but we weren’t seeing enough users stick around, not to mention actions by those users. And that’s what mattered,” says Liao. Without those strong transactional numbers, additional investment never came in, and Pinspire ceased active operations eight months after launch, Liao explains. “We tried to accelerate something that took Pinterest three years to do in just in one country into half a year for over 20 countries. Sounds crazy, but the crazier part is we were actually close to succeeding and getting additional funding,” he says.

Cloning Rocket’s Launch center

With Rocket’s global network growing at such a rapid pace, so apparently is the ex-Rocket network as managing directors, executives, and entrepreneurs get burned out and leave, or worse, have their businesses shut down. This revolving door has created an unexpected but welcome source of opportunities for Liao to continue to help others launch their online businesses. “I’ve had a steady stream of these smart guys I’ve worked with looking for help in developing tech platforms for their own online business. It’s very satisfying knowing that I can provide quality development services for this expanding group of (Rocket Internet) ‘graduates,’” says Liao.Now, at 50 people strong and growing, Imaginato has been rebuilt from the ashes of the former Rocket China tech hub. Liao says the goal of Imaginato is one more of partnership rather than outsourcing. “These guys need tech they can count on, not just for getting them live with a great platform, but also getting them through their early phases of adjustment and growth. These are smart business or ops guys without access to a CTO. So that’s a key role Imaginato fills out for them,” he says. Liao looks forward to the day when the world map of Imaginato-launched sites surpasses Rocket’s. At Rocket’s torrid pace, this day might take a while to arrive, but according to Liao, Imaginato is beginning to see an acceleration of launch requests come in.When asked what he is doing differently now at Imaginato than from his days at Rocket, Liao replies that he is much more forward with advice, one of which is proving out a minimum viable product (MVP) before building out too many features. “Founders spend a lot of time brainstorming up all these great, seemingly must-have features for their platform, but then I challenge them on the need to spend their limited time and money on all those things. Sure, it’s great for me to launch bigger, robust sites and mobile apps, but it’s better that I do what I can to help you survive your current round of funding,” says Liao.Ultimately, Liao adds, an entrepreneur on the ground should have the best sense of what is needed in his locale. “The key is to be very in touch with your users, understanding precisely why the ‘super-users’ use your service, and why the ones who visit once never return. I conducted focus groups early on at Airizu on both types of users, and the feedback was eye-opening. We made key changes to our site and service that had a measurable impact on repeat bookings and basket size,” says Liao. “And never stop looking for clues from your data. Good BI is not optional at any serious startup.”He also re-emphasizes that striking the right balance between execution speed and quality is critical. “Can you have both? Sure, if you’re well funded and can find great people. But most startups don’t have that luxury. So understand your team skill sets, your business model, your customers, and choose your execution path carefully,” warns Liao. “At Rocket Internet, we never talked about ‘Rocket-quality’, only ‘Rocket-speed’. At Imaginato, quality and speed will hopefully be what we’re known for.” Lesson learned.Editing by Paul Bischoff and J.T. QuigleySource: TechinAsiaRead more: How an entrepreneur went on to clone Rocket Internet’s tech hub in Asia