By Matt McGuire WG’16
Editor’s note: Lucy Peng and Lucy Zhang received a Wharton Innovation Fund award and won a Wharton Venture Award for 2015, and spent the summer in China, working on their company. Read about their experience here.
It’s really pretty tragic when you think about it. Imagine: You spend your entire life in a hyper-competitive system fighting for a spot in a prestigious university. You get to school at 6:30 am for an hour of intense pre-class reading. After classes get out at 5:30pm, you dine with your classmates for an hour then go back school and study until 10pm. Then you go home and study for at least another hour. And that’s Monday through Saturday—and then also Sunday, Lucy Peng (WG’16) tells me. Peng then proceeds to quote one of her teachers when she was a student in China: “You are free every Sunday afternoon to take a shower.”
That’s what school is like in China.
But the real tragedy is that despite putting in all that work to get into elite schools, Chinese students often experience difficulties while studying in America. It is this problem that Lucy Peng and Lucy Zhang (WG’16) are committed to solving with their innovative startup SetSail.
Peng and Zhang met at a Cohort G women’s event in September of 2014, where they discovered that they shared a mutual interest in entrepreneurship. Peng is from China, and Zhang was raised by Chinese immigrants. “I felt like there was a lot of opportunity in the space between the US and China. Given where I grew up – between two cultures – I wanted to be in that space.” Zhang notes. The two hit it off, and decided to become business partners.
Ever the good students of MGMT 610, they began by brainwriting, logging over 70 ideas into an Excel spreadsheet, then rating these ideas after assiduously researching each. During this process, they found a huge market need with Chinese students studying in the US.
From the IB Times, they found that in 2013, 1 in 4 Chinese students at Ivy League universities dropped out: “The study said that while students exhibited high academic achievement in their home country, many found it difficult to adjust and adapt to the new environment, citing problems like language barriers and differences in the education system.”
From The Street Journal they learned that 8000 Chinese students were expelled from American schools in 2014:
“The estimate by WholeRen Education, a U.S. company that caters to Chinese students, was based on official U.S. data and a survey of 1,657 students expelled from American universities last year. More than 80% of these students were expelled because of poor academic performance or dishonesty, the company said.”
It’s unlikely that these dropout rates are due to slacking off, given the incredible diligence these Chinese students showed in primary school. As Peng notes, students’ lives outside of studying consist of “one hour for lunch one hour for dinner that’s pretty much it”. Nor could it be a lack of intellect. Given the large Chinese population and hyper-competitive education system, it’s safe to say that Chinese Ivy Leaguers beat some very smart people. Finally, it could not be that these students do not value education, as Chinese culture places a high value on education, as is demonstrable by a research paper showing that, despite the Chinese government providing an expansive public education system, urban Chinese families spend over 30% of their income on additional education.
Peng and Zhang determined that the issue stems primarily from the differences in the Chinese and US education systems. Chinese schools, especially those outside of top tier cities, often have 60-70 people per class so, as Peng points out, “if you speak up in class in China, the teachers could never finish”. Further, as Zhang tells me, if a Chinese student raises her hand and gets a question wrong, she loses face. There is also, as Peng asserts, “absolutely no group work whatsoever.” Papers are rare, and when writing, students in China are encouraged to paraphrase and memorize—they are not forced to cite sources. In fact, the entire grade is exam-based. This incentivizes what “Zhang characterizes as “ rote memorization.” Peng maintains that in the Chinese system “if you can get all twenty textbooks in your head, you are great.” The incentives towards developing hard skills over soft skills are amplified by the super competitive system. Peng notes that “you can’t get any answers wrong” on exams, because if you do poorly on one exam, you could be removed from the advanced class necessary to get into a good university and your entire career pipeline could be negatively impacted. The “whole Chinese education system is based on the national exam, which you take in grade 12,” says Peng. “If you do well on the national exam, you get into a better university in China.”
Compare this to the contemporary US education system, where grades are a mixture of class participation, tests, and papers – where soft skills are required, risk-taking is rewarded, and plagiarism is forbidden. One almost wonders, given how different the educational systems are, why more Chinese students do not find themselves in trouble.
Peng understands the difficulty of the transition, as she experienced it personally. “My parents moved to Vancouver Canada when I was 16. So I finished one half of high school in China and the other half in Vancouver. And after that I went to college also in Vancouver. So it was a very painful process for me to adapt to a different environment…the Chinese and American education systems are very different. I had trouble making friends. I didn’t understand the local culture. I had trouble writing research papers. I had never written one before in China. Public speaking and making presentations—I never had to do in China. Before I left China, people kept telling me you’ll do great, you’re perfect. But then it was totally different,” she said.
Fueled by the data pointing to a large and growing customer base and personal experience demonstrating an unmet market need, Peng and Zhang decided to create transition classes for Chinese students who are studying in the United States, helping them transition from Chinese system to the US system, providing classes on critical thinking, communication, and culture. SetSail was born.
They received a Wharton Venture Award for $10k and $2500 from the Wharton Innovation Fund, which they used to set up their summer product development. They offered 40 students in Chengdu, Beijing, Taiyuan, and Mianyang free classes to see if their target customers wanted a product the two knew they needed. Zhang particularly remembers that cultural training. “The thing I would say during the first five minutes of each class was ‘The goal was … to make as many mistakes as possible in class.’ We got a lot of reactions because they had never heard someone say that before.” Moreover, Zhang realized how different norms were around research, plagiarism, and critical thinking between the US and China after asking the class if Wikipedia was a credible source and they all said yes. She taught them not only that this was wrong, but also that when writing a paper, you need an original thesis and evidence to support that thesis. Finally, she taught communication training, including political correctness lessons, especially around gender, race, and sexuality – what is polite and impolite to say in the US. Other lessons covered how to give and receive peer feedback, something totally absent in the Chinese system but prevalent in US. The +57 NPS these summer students gave SetSail exceeds the Net Promoter Score of most brands of smartphones.
Peng and Zhang have so much confidence in their idea that they’ve refused funding in order to maintain all of their equity. “The education industry is amazing, because your revenue comes in before your costs,” notes Zhang. This dynamic has allowed them to fund the pilot program in which they are in the middle of, where Chengdu students pay for a mixture of in-person and online classes.
In the Wharton Class of 2016, very few students forewent internships in order to pursue startups, and it’s safe to say, relative to the number of students who pursue traditional careers such as consulting and banking, only a tiny amount of us will become full-time entrepreneurs when we graduate. Peng and Zhang have already committed to this, and it is listening to Peng tell a story that I realize something.
“I tried to set up a book club for my class” regales Peng – “but it was all very secretive. There was no way we could let our teachers find out about it [her strict school did not allow clubs or extracurriculars]…So we actually were able to publish our own, similar to The Wharton Journal…newspaper. And we actually got to publish three editions- but then it got too popular…my friends cried when it was shut down.”
The kind of person that starts an underground literary newspaper as kid is the kind that starts a company as an adult. SetSail can teach enough independence and risk-comfort necessary to success in the US education system, but the level of independence and risk-comfort necessary to succeed as an entrepreneur have to be intrinsic qualities. Peng and Zhang are natural born badasses. You can’t learn what they have, you have to be born with it.
This post originally appeared in the Wharton Journal.