• Mon
  • Sep 22, 2014
  • Updated: 6:53pm
BusinessChina Business

Beijing gets its own Silicon Alley as bustling street becomes start-up haven

Beijing street becoming home to internet professionals looking to start businesses from scratch

PUBLISHED : Monday, 23 June, 2014, 3:08am
UPDATED : Monday, 23 June, 2014, 10:45am

Tucked in the heart of Beijing's bustling Zhongguancun area, the 300 metres of Haidian West Street, formerly filled with bookstores and small restaurants, was reborn on June 12 as Inno Way.

The Haidian district government sees it becoming home to dozens of incubators, internet cafes, funding and training institutions to help start-up entrepreneurs secure just about everything they need to build a business, from angel investment and free office space to media coverage and business partners.

"This is probably the best era for start-up entrepreneurs [on the mainland]," said Wang Zhuang, the chief editor of internet news portal www.36kr.com.

People, money and market ... you can find them all here in Beijing
Wang Zhuang, chief editor, 36kr.com

The operators of the website, which has focused on entrepreneurship since being founded by Wang and his friends four years ago, moved into the street about three months ago, before the name change, at the vanguard of the rebranding.

"People, money and market - the three most important things that a start-up company needs - you can find them all here in Beijing," Wang said.

Following in the footsteps of Silicon Valley in the United States, Beijing has in recent years become another hot spot for internet professionals looking to start businesses from scratch.

In Zhongguancun, where high-technology and internet-related enterprises are concentrated, the number of start-up companies exceeded 6,000 by the end of last year, almost a third more than in 2011.

The growth has been driven by people in their 20s and 30s who have decided to try to make their entrepreneurial ideas a reality, dreaming of becoming the next home-grown IT success story and emulating Tencent, Baidu or Alibaba in carving out a niche in local or even global markets.

Harry Man, a partner at venture capital firm Matrix Partners China, says the number of mainland internet start-ups with a market value of more than US$1 billion is rapidly catching up with that in the US.

"The basic driver behind this is the power of the consumer," Man said. "A great internet company will only appear in a market where there are enough consumers willing to pay for the services. And this is what we have seen in China."

There are about 671 million internet and 400 million smartphone users on the mainland, both world-leading markets, according to industry estimates.

Man's job is mainly to hunt down promising early-stage start-up projects across the mainland. Last year, he and his colleagues approached about 300 teams of entrepreneurs and ended up offering seed funding or first-round investment to about 30 of them.

"The whole market is getting mature and drawing more and more money," he said.

Both local and foreign venture capital and private equity firms are raising their stakes in early-stage start-ups on the mainland. The competition among major global venture capital firms such as IDG Capital Partners, Sequoia Capital and Matrix Partners is becoming more intense as they search for projects with high growth potential, something that Wang said would benefit the entire start-up ecosystem.

He said 36kr.com recommended a team that was developing a real-time message function for mobile applications to a partner at a global venture capital firm two months ago. It took just an hour for the partner to decide to invest in it.

"This was unimaginable three years ago," Wang said. "Investors used to spend several months to evaluate a project before giving money. But now most of them do it within a couple of weeks."

Wang and his colleagues receive 400 to 500 e-mails a month from mainlanders with entrepreneurial ideas and pick promising ones to feature on their website.

In 2012, 36kr.com covered 450 start-up projects, but the number soared to 950 last year.

About 90 per cent of the projects it covers ended up meeting angel investors or venture capital firms, and up to 7 per cent received seed funding ranging from 500,000 yuan (HK$622,000) to 3 million yuan, or Series A investment of between 6 million yuan and 30 million yuan.

After moving into the new office, the news portal team has bigger ambitions. "We are now repositioning ourselves," Wang said. "We will not solely be an online media outlet but will play a role in helping entrepreneurs secure their first round of money. After all, this is the most difficult part of the chain for them."

 


THE JOB SWEEPER

Li Guanzhi, who set up a website for hiring migrants, often found himself doubting his own career choice as he wandered in slum districts on cold winter nights, trying to accost people to ask them if they needed jobs.

Sulai24, founded by Li in Beijing two years ago, is an online hiring platform for migrant workers and employers in labour-intensive industries such as restaurants, logistics, electronic products and housekeeping.

At first, Li's decision surprised his parents and friends because he used to be an information technology expert at a national research institute. He has a master's degree from Oxford University and a doctorate in computer engineering and mathematics from the University of British Columbia.

"I got the idea for such a site because there's serious information asymmetry in the low-end labour market; workers cannot find proper jobs while employers are short of hands," the 34-year-old entrepreneur said. "An online platform can be a good solution."

Although Li firmly believed demand would be huge, making the idea a reality was not easy. A key problem was that very few migrants use the internet. So Li and his teammates had to go to the areas where migrants live to talk to them about the advantages of using the website.

"We call it sweeping the streets," he said. "This is hard and exhausting. But this is also the threshold for others who want to copy our business model."

Li's website has found jobs for more than 10,000 workers. It offers cash incentives ranging from hundreds of yuan to thousands of yuan to those who introduce friends to fill vacancies and makes its money by charging employers a commission.

"Our aim is build up a brand in the mid to low-end labour market on the mainland," he said. "We hope migrant workers can think of us and come to us once they want a job."

Li raised two million yuan (HK$2.49 million) of seed funding last year and is now in the middle of Series A investment negotiations.

"Some people choose a smooth path, and some a tough one," he said. "The day I turn 50, I hope I can say I had the courage to take action rather than just think about it."

 


CLOSER TO DREAM

Shen Si, the chief executive of mobile service provider Papaya Mobile, knew her career goal when she was still in high school.

About two decades ago, Shen read Microsoft founder Bill Gates' book The Road Ahead, in which he said his dream was that "everybody can have a computer on their desk". The book affected her deeply and she later chose computer engineering as her major at Beijing's Tsinghua University. She then went on to study at Stanford University in the United States, earning master's degrees in computer engineering and management.

With the hope of getting more management experience before starting her own business, Shen joined Google in 2004 as a product manager.

"At that time, the Android system was still in its early stage," she said. "But we could feel it would become something big."

Shen founded Papaya Mobile in Beijing with a partner in 2008, launching an Android-based mobile internet platform for game developers. Its target markets were the US and western Europe and it soon became the largest such platform in those regions.

Shen's company was already profitable in 2009 and it set up offices in London and San Francisco. Although the business was growing rapidly, she felt it was not what she really wanted to do. "I was struggling quite a bit because my ultimate dream is to be able to use mobile internet to change people's lives," she said.

In 2012, Papaya Mobile started to tap the mobile advertisement market with its AppFlood product, helping firms promote their products and brands globally. Last month, it launched a mobile application, Kiwi Calendar, that allows users to arrange their schedules more efficiently and share their leisure activities with friends.

"I'm now one step closer to my dream," she said. "We'd like to launch more products, not only on cellphones but probably also on wearable devices."

Four months ago, Shen gave birth to her first child, a son. "It's really hard to strike a balance between life and work as a new mother," she said. "But I am lucky to have the support of my husband. And I am also trying to outsource parts of my jobs to others."

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