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Investors’ insights: Why did the Facebook of China fail?

"Growing Vegetables" is Kaixin001's most famous online game. Photo credit of
“Growing Vegetables” is Kaixin001’s most famous online game. Photo credit of

Chinese social network website Kaixin001 was recently acquired by Sunwin Intelligent Ltd, a company that designs IT solutions for the construction and logistics industries. Chinese investors shared their insights on Kaixin001’s failure.

Lesson 1 Started big, ended small  

Kaixin001 started as a social networking website in 2008. But its social networking business failed. When it was acquired, the core of its business was games: people no longer use Kaixin001 for social networking, preferring to use its rivals.

Jiang Haotian, managing director of Northern Light Venture Capital, one of Kaixin001’s early investors:

Kaixin001’s founder saw that Facebook had adopted the open platform trend. But he thought the trend did not fit in the Chinese business environment, as it would damage the user experience. If he set his vision differently and allowed the platform to be more open, it could have prolonged the life of the platform.

Lesson 2 Too much game, too little platform

Zhou Wei, a managing partner of investment firm KPCB China:

Kaixin001 put so much attention on games that it could not properly operate the platform, or attend to the needs of its users.

Lesson 3 Policy barriers

Kaixin001 had an idea of launching its own microblog like Sina Weibo, but policy then would not allow it.

When the platform was founded, it targeted office workers in China, providing them with social tools including an online diary, photo album and social games. The website’s registered users surpassed 130 million in April 2012.

Sina Tech reported that Kaixin001 had failed to quickly expand itself, despite heavy financing: The website landed USD three million in Series A financing in 2008, USD 20 million in Series B in 2009 and USD tens of millions in 2011.

In his Weibo last Friday, Cheng Binghao, founder and CEO of Kaixin001 reflected on the past eight years of Kaixin001 after he resigned from his post. He admitted that he was not “commercial” enough as a former technical engineer, and that it was the website’s business model that killed itself.

Anyway, it is important for entrepreneurs to learn from the Kaixin001 story.

(Top photo from

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