Smart money pouring into Shenzhen as city becomes hotbed of innovation

Shenzhen Mayor Xu Qin helped cement Shenzhen’s reputation as an entrepreneurial hotbed when he noted earlier this summer at an investor forum that fully one third of China’s venture capital and private equity companies hail from his city.

Smart money is chasing opportunity in Shenzhen, which has an entrepreneurial culture boosted by public and private support for emerging startups. It is no wonder the city has China’s highest ratio of business owners, coming in at 73.9 per 1,000 residents in 2013, according to city officials.

Shenzhen’s established pool of high-tech companies, broad talent pool and extensive constellation of hardware factories give it formidable advantages when competing against cities like Beijing and Shanghai for top talent and emerging businesses.

Shenzhen’s tech scene has achieved a critical mass that draws top talent in the software and hardware industries. “It’s where the jobs are and if you’re interested in those areas as an engineer or any kind of computer scientist, there are all kinds of exciting opportunities to be there”, says Eric Harwit, adjunct senior fellow at the East-West Centre and professor of Asian Studies at the University of Hawaii.

“A lot of the most dynamic companies in China are based in Shenzhen, not just Tencent, but also BYD, Huawei, ZTE and others”, he adds. Top talent from those companies often strike out on their own and establish new companies in the area, leveraging their local connections and experience to branch out in different directions.

Numerous incubation programs exist in the area to nurture these green shoots. “There weren’t really many incubators when I first came in 2007, now they seem to be popping up like crazy everywhere”, says Michael Michelini, the vice president of marketing and business development at UnchainedApps.com.

That’s no coincidence, Michelini notes. He suggests that “2010 was the end of cheap China” in terms of manufacturing and that the local government “is investing heavily in innovation and technology and startups with office space and grants” to help create a sustainable economy not simply grounded in assembly and manufacturing.