Chinese Startup Scene

Chinese Startup Scene

Chinese Startup Scene

“Zhongguancun” may not sound as familiar to you as “Palo Alto” or “The Valley,” but, one day, it might. Zhongguancun, located in one of Beijing’s northwest districts, is deemed by many to be the “Silicon Valley of the East.” While such “Silicon Valley of the <Insert Place Name>” claims seem to multiply faster than bloggers write articles, there is some merit to the hopes that Zhongguancun will emerge as a leading center for technology, software, and innovation in the Chinese startup scene.

Among the masses of office buildings and coffee shops, a thriving entrepreneurial community exists where young and ambitious techies meet, drink and do business with wealthy investors. These investors are increasingly becoming a source of capital that, at one time, was closed to all but the biggest companies. These startups are partially powered by a university system that pumps out between seven and eight million graduates per year. Many of China’s top universities are located very close to Zhongguancun, providing a constant supply of top talent into this business-incubator.

Among the thousands of would-be mega-companies in the TMT fields (Technology, Media and Telecommunications) are actual mega-companies. Firms like Google, IBM, Sun, Oracle and Sony Ericsson, among many others, have a presence in Zhongguancun. These firms are, no doubt, doing their own R&D, but are also interacting and cross-pollinating with entrepreneurs. In a world where buyouts of smaller firms and startups are common, any meeting or interaction could mean big bucks and tech glory for this new generation of entrepreneurs.

China has its fair share of large companies that dominate their respective markets and the R&D scene therein. Tencent and Alibaba, two of the most prominent internet-centered companies have been on spending sprees for the better part of the year. Where one firm invests, be it in eCommerce payment gateways or taxi-hailing apps, the other follows suit as if to counteract any growth in the market share or industries served by its rival. For tech startups around China, these two internet giants represent receptive audiences as well as the type of aggressive growth strategies that can help an app achieve national prominence and become the standard by which similar apps are measured and judged. Although WeChat was developed in-house by Tencent, its success indicates what is possible when a good app meets a huge company with substantial marketing budgets. Internet search engine giant, Baidu, recently acquired a company called 91 Wireless for a cool $1.9 billion. 91 Wireless was China’s third largest app store from which consumers can purchase apps for the roughly 420 million smartphones in China. As Google Play is largely inaccessible in China, local providers like 91 Wireless have filled the void, offering a place for Android-users to download games, apps, and other digital goodies.

Baidu’s acquisition of 91Wireless was widely acknowledged as a strategic move by Baidu to capture more of China’s booming mobile dominated- economy. While Baidu dominates the desktop search engine market, “it is not as well established in the mobile internet space,” noted Andy Yeung at Oppenheimer & Company. In addition to posing challenges for Baidu, the mobile realm is seeing the entry and rise of several local firms that are beginning to challenge companies like Apple and Samsung for market share. Xiaomi, which recently hired Hugo Barra to serve as vice president of its global division, is an up-and-coming player in the mobile realm and a producer of premium smartphones at bargain prices that has a knack for publicity-spawning sales and promotions. Huawei, based in Shenzhen, sells huge quantities of telecommunications equipment all over the world (the U.S. market being a major exception). Currently, it is the third largest smartphone manufacturer in the world, a peak it has reached on the back of strong sales on the Chinese market.

From where will the next Chinese technology giant emerge? Likely from one of the numerous coffee shops, like Garage Café or 3W Café,, that populate the streets, corners, and alleys of Zhongguancun. Fast internet connections and a plethora of power strips make Garage Café a location of choice for teams of entrepreneurs who work there around the clock to bring their ideas and apps to life. The café even draws its name from the birthplace of some of the world’s most well-known startups. Apple, Harley Davidson, Hewlett Packard and Amazon, and many others that make a long list of guts-to-glory firms—all started in garages. The Café’s founder, Su Di, wanted his coffee shop to be “a utopia for business startups.” It seems likely he has met and exceeded his goal, a startup-related victory in itself. 3W Café even allows patrons to register their startups using the café’s address and rents workspaces on a monthly basis. It has become a haven for internet related events, meetings, and brainstorming sessions.

The unique environment of universities, technology giants, entrepreneurs, and investors helped make Zhongguancun the dynamic and exciting place it is and has led many observers of the global tech and startup scene to begin whispering the “Silicon Valley” moniker in an effort to describe it. As for us in China, we’re content to wait and see what great app or product emerges from Zhongguancun next.

Mathew McDougall

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