At the September's Startup Grind event at The Naked HUB in central Shanghai..
there was not only the usual spirit of listening to Startups, sharing ideas and getting inspired, but there was something more in the air. Even though it is hard to name the exact feeling there was an atmosphere filled with more empathy, genuineness and excitement that I have not yet experienced in the same extent at other startup events.
If you look to numbers of the Chinese startup sector, it gives a good explanation to the many excited and optimistic entrepreneurs walking the streets of Shanghai. Last years record of $69 billion in venture-backed deals is an increase with 56% from 2014 (Bain & Co, 2016). China’s, and especially Shanghai’s, startup scene are blooming. The country now has 36 unicorn startups, which means a company with a valuation of $1 billion or above (CB Insights, 2015). This makes China second in the world after the home to all the Silicon Valley fairytale stories, the U.S.
The fact that Facebook, Google applications and others services as Twitter Inc., New York Times web page and Instagram are unreachable in mainland China, as long as you not are making your way there through VPN, makes room for a lot of internal services for the population. Hence, it is a great opportunity for entrepreneurs to build new digital services without the dominating tech giants as main competitors. Many tech analysts actually argue that China’s three internet giants Baidu, Alibaba and Tencent, has their billions of dollars in market value to thank the firewall for, which speaks for the great opportunity to build digital firms here in China (The Wall Street Journal, 2015).
Curious about the strengths and challenges Shanghai startups face, I talked to Eva Yoo who is a tech reporter from TechNode, a leading tech media covering news from startup entrepreneurs, investors and large tech companies in China. She explains that the Shanghai startup industry has a very welcoming and sharing culture that is dominated by young people lucky to be backed by a lot of funding. She also sees a great governmental support for this industry, which makes it easier for entrepreneurs to both found and developing their businesses.
“The startup scene in Shanghai is young in age, mature in its depth and holds a sharing and welcoming culture”
May Shi is currently the Community Manager for Chinaccelerator, one of the biggest startup accelerators here in Asia, and I asked her to describe the differences she sees in how startups in Shanghai are operating. Compared to the US and Europe, she experiences a more agile environment in China, where startups are using lean methodology in a bigger extent and hence are focusing more on numbers of followers, clicks and views rather than retention rate. When asked about the difference between Shanghai startups and other startups in China, she sees a trend of Shanghai startups being more international in terms of background, founders, funding and market focus.
With previous experience from Silicon Valley, Tel Aviv and Seoul, Eva Yoo emphasises the importance of really understanding China’s market as a key factor for succeeding in Shanghai’s startup jungle, especially as a foreigner. Her top advices are to have previous experience of Chinese markets and having at least one Chinese co-founder. The reason behind that is the two big barriers for foreigners: the Chinese culture and the language.
Besides the many difficulties to manage, there are also many strengths of choosing Shanghai as the place to run your startup business. Eva Yoo experience is that the entry barrier to Shanghai’s startup scene is lower compared to Silicon Valley, which is dominated by high profile people. Also, it is more competitive and challenging to differentiate your business there. Compared to the industry in Seoul, which is very culture driven and dominated by top university alumni and ex-employees from big corporations, the Shanghai scene is welcoming to everyone and has a broad set of areas for its startups. If you can manage to base your social media strategy on their huge platform WeChat, will say.
Wanting to dive more into the other areas of which Shanghai startups are in the forefront of, I asked May Shi what areas she sees trending. She pinpointed the many virtual reality tech startups working with VR in different ways, including one company Chinaccelerator recently invested in. A quick search on Dian Ping, China’s correspondence to Yelp, shows 47 virtual reality arcades only in Shanghai. Eva Yoo mentions the finance sector also is huge, where many shanghai based startups are working with bitcoin and blockchain. One example is BitMEX that are describing themselves as The next generation of bitcoin derivatives.
Especially big in Shanghai are its many O2O startup services, which means Online to Offline. Since China’s food culture keep flourishing, it attracts tonnes of entrepreneurs eager to build companies for meal delivery, restaurant recommendation services and fresh food e-commerce stores. Some big players within this market is BonApp, Dmall.com and Chishen.ma. The O2O industry does not only include meal ordering, but the online ordering for home delivery is on the rise in several other fields. As examples, there are companies that will get your car fixed, give you a back massage or fix your laundry on demand. The successful startup company Edaixi is doing just that, they promise you to pick up, wash, dry and deliver your laundry in just 72 hours for a few RMB.
Another example of the O2O on-demand services is the car maintenance company Bopai. Unfortunately it got bankrupted along with hundreds of O2O companies after funding started to decrease from Q4 last year (Forbes, 2016). Many tech analysts speculate that this crash could spread to the whole startup scene later this year when investors becomes more aware of unsustainable business models.
At the same time, many tech influencers speculate a bright future for Shanghai based startups. I asked May Shi which startups she is most excited about and she mentions Robin8, a smart platform that is analysing which journalists, influencers and key opinion leaders (KOLs) that will be the best fit for your campaign. Also, she mentions SnapAsk which is an on demand learning companion where tutors answers school related questions on demand. Another interesting startup she mentions is TrainersVault, a platform for finding personal trainers and training programs nearby. Eva Yoo pointed out Mobike, which is like UBER but for bikes, Pricax VR who develops a PC-based VR headset with low price and high quality. Last, she also mentions mei.com, which is a company working in the intersection of VR and fashion, as startups she looks forward to follow.
The sparkling eyes and the exciting conversations I experienced at the Startup Grind event are clearly based in a young, promising startup era. I think that the world, with its feature mega cities and different demands in terms of behaviour and resources, will have a lot to learn from both the innovation excitement, service spirit and the including and warm startup atmosphere here in Shanghai.
References
Bain and Company. "Asia Pacific Private Equity Report 2016" Bain and Company. Bain.com, Web. 13 Oct. 2016. http://www.bain.com/Images/Bain_and_Company_Asia-Pacific_Private_Equity_Report_2016.pdf
CB Insights. "The Complete List of Unicorn Companies." CB Insights. 13 Oct. 2016. Web. 13 Oct. 2016.
https://www.cbinsights.com/research-unicorn-companies
Chen, Te-Ping. "China Owns "Great Firewall' ; Credits Censorship With Tech Success." The Wall Street Journal. Wsj.com, 28 Jan. 2015. Web. 13 Oct. 2016.
http://blogs.wsj.com/chinarealtime/2015/01/28/china-owns-great-firewall-credits-censorship-with-tech-success/
Wang, Yue. "O2O Leads Chinese Startups' Boom And Bust Cycle." Forbes. Forbes Magazine, 21 Apr. 2016. Web. 13 Oct. 2016. http://www.forbes.com/forbes/welcome/?toURL=http://www.forbes.com/sites/ywang/2016/04/21/o2o-leads-chinese-startups-boom-and-bust-cycle/&refURL=https://www.google.com/&referrer=https://www.google.com/