This week, China-based e-commerce giant the Alibaba Group, founded by former English teacher Jack Ma, announced they would be opening a Melbourne HQ to complement their other outposts in America, the UK, India, Taiwan and Italy.
The story of the Alibaba Group, which consists of three e-commerce sites – Taobao, Tmall and Alibaba.com – Is one every start-up founder dreams of: a gathering of 17 friends in a cement basement in Hangzhou grew to a company that holds a recording breaking IPO listing worth more than Amazon and eBay combined just fifteen years later. Last year, the company also logged their biggest day ever: making $23.39 billion worth of sales in just one day – the Chinese equivalent of Black Friday.
But who is Jack Ma and what were the ingredients to his success?
Leveraging his rookie advantage
It was only in 1995 that Jack first discovered the internet – during a trip to the US, his friend gave him a crash course. So, when he began his fledging start-up, he was clueless and he happily admits it. In fact, he feels it was the making of him and his company.
“I’m 100% ‘made in China.’ I learned English myself, and I know nothing about technology,” Jack has said of his success. “One of the reasons why Alibaba survived is because I know nothing about computers. I’m like a blind man riding on the back of a blind tiger.”
Staying true to his vision
In 1999, Jack gathered a handful of friends in his basement and began to build the bare bones of Alibaba.
“Our competitors are not in China, but America’s Silicon Valley,” Jack was captured explaining to his friends on an employee video. “Americans are strong at hardware and systems, but on information and software, Chinese brains are just as good as theirs. This is the reason we dare to compete with Americans.”
That night, all the people gathered agreed to pool their money to start the business – a total of US$60,000 worth – and Alibaba was born.
This wasn’t his first try at business though: Jack had already started and failed at one business venture (the now defunct China Pages, which aimed to collate Chinese data online) but he held tight to his vision.
Sheer determination to take on the big players
Jack and his company was consistently challenged by the leading online retailer at the time, eBay, who insisted that his first company Taobao, which is the group’s largest shopping site, was easy to dominate as he didn’t charge his selling customers for posting their products.
In 2005, the companies went to war, with Jack calling for eBay to make their platform free for users. They shot back with a statement: “free is not a business model.”
“That’s good,” Jack said of the statement. “The day when they disappear in China, they will regret… what they said today.”
Soon, Jack had discovered another own way of generating income – the escrow payment system Alipay, which held funds once a payment was made until the receiving customer was satisfied – both built trust with customers and earned revenue, as they made a return on the funds.
Keeping an eye on expenses
While Jack managed to raise funding from Goldman Sachs later in 1999, he and his colleagues initially started out with their own money and this, Jack insists, was the key to their success.
“There were three reasons why we survived. We had no money, we had no technology, and we had no plan,” he says. “Every dollar, we used very carefully.”
Never, ever giving up
In 2002, the writing was on the wall for Alibaba – the company only had enough cash to survive for 18 months. There were layoffs. But for Jack, giving up wasn’t an option so he developed a product for Chinese exporters to meet American buyers online, which managed to turn $1 in profits for 2012. But it was really the charismatic founder’s attitude that kept the company afloat.
“The lessons I learned from the dark days at Alibaba are that you’ve got to make your team have value, innovation, and vision. Also, if you don’t give up, you still have a chance. And, when you are small, you have to be very focused and rely on your brain, not your strength.”