Meet the most unfortunate entrepreneur of China

World Consumer Rights Day, on March 15 every year is closely watched by all consumer-facing tech companies and investors.

On this day, CCTV, the most prominent broadcaster in China, hosts a gala exposing businesses which violate consumer rights. The law enforcement typically would act on the businesses exposed.

This year, e-cigarettes are hit really hard. CCTV quoted multiple health hazards of e-cigarettes, which just started getting good traction from VCs this year.

Almost immediately, popular e-commerce platforms such JD.com blocked all search results related to e-cigarettes.

Although the blockage has thus been lifted, the regulatory risks for e-cigarette businesses in China have become more apparent than ever.

A side casualty of this episode might be Luo Yonghao (罗永浩, or 라영호 in his native Korean), a famous public figure in China, who just announced (in January) a new e-cigarette brand called Flow for one of his long term lieutenants, after multiple failed attempts in tech.

A bold life

Luo, a high school dropout, did many businesses, including training and second-hand car dealership, before becoming an English teacher at New Oriental (NYSE: EDU).

At New Oriental, he became an internet celebrity after recordings of his humorous teaching went viral online.

A famous quote of his, “彪悍的人生不需要解释” (which loosely translates as “One does not have to explain his bold life”), has become the motto of many young people.

In 2006, he started bullog.cn, a blog site. The site attracted quite a number of public figures, before being closed down by the government in 2009 for “inappropriate content”.

In 2011, Luo was famous again by smashing a few defective Siemens refrigerators in front of Siemens building together with a few volunteers. It forced Siemens to apologise to Chinese consumers about the quality problems, which they had denied before.

The Hammer

In 2012, Luo started a smartphone brand called Smartisan, whose Chinese name 锤子 literally means “the hammer”. Many of his fans feverishly followed his every release, cheering him.

However many in the public and media remained very sceptical whether Luo, who had never done any business with a complex (or any) supply chain, could ever pull this off.

His entrepreneurial journey with Smartisan was captured in the documentary film “Startups”, which was released in January this year.

By that time, Smartisan already ran into serious cash flow problems, with rumours that it had already ceased operations.

Bullets

In addition to smartphones, he also launched an instant messaging app called “Zidan Duanxin” (“Bullet Short Messages”), which he rebranded as “Liaotianbao” (“Treasure of Chat” earlier this year amid much fanfare.

The service claimed to have 2 million users activated within 48 hours of the initial launch.

However, because of challenges with fundraising, Liaotianbao had to fire almost 90% of its employees just a few days ago.

Just when Luo wanted to focus his attention more on the e-cigarette business, the 3.15 Gala threw a wet blanket.

Luo, who remained quiet over the latest saga, will probably carry on. Ultimately I do not think he would change his life to be less bold.

However, the ensuing debate on how much passion should matter versus actual, cool-headed calculation and professionalism, will probably linger for a while.