Silicon Valley is not the only holy grail; why High Tech startups should consider China.
“Zhongguancun” may not sound as familiar to you as “Palo Alto” or “The Valley”, but one day, it might. Located in one of Beijing’s northwest districts, is deemed by many to be the “Silicon Valley of the East.” I had the pleasure to visit the area recently and met with numerous Chinese startups, incubators, accelerators and investors and was deeply impressed with what I saw.
I have been travelling to China frequently the last decade, but the speed of development keeps amazing me. While the “Silicon Valley of the East” 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. 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 innovation ecosystem.
At Startupbootcamp HighTechXL, we support disruptive teams who build hardware. In Eindhoven we eat high tech hardware for breakfast, lunch and dinner. Hardware combined with embedded software is what is making us hungry; ‘web & app’ innovation is just not our cup of tea. With global leaders such as Philips, ASML and NXP and over 125 other high-tech companies located on a single square kilometer, we provide a dream location for startups active in the high-tech hardware domain. This got recognized last year by Forbes as well, when they announced Eindhoven to be “hands-down the most inventive city in the world”, well ahead of second placed San Diego (measured by number patents per capita). So if we have this great ecosystem in place in Eindhoven, why should we care about China?
Attending this year’s Consumer Electronics Show (CES) in Las Vegas, I observed another example of China accelerating in high-tech innovation, and I was not the only one. Shortly after CES, Forbes wrote the following: “One thing for sure about this year’s Consumer Electronic Show – China tech was there, and big-time, among the latest and greatest wireless gadgets, self-driving cars, 3-D printing machines and wearable tech devices. The Chinese presence at the show was one more demonstration that Chinese tech is going global — and in little more than a decade after entrepreneurs first got going in Beijing and Shanghai. Of course, all the leading Chinese brands — Alibaba, ZTE, Hisense and Huawei — had large and attractive booths displaying their latest wares front and center on the convention floor. From what I observed, China had the biggest representation of all overseas markets, although the LG exhibit certainly was huge! A group of small and innovative startups from Beijing such as Linxee Wireless, Leyard and ShineOn were also there. They were clustered together to try to have more impact. Unfortunately, these weren’t noticed all that much but maybe so in a few years when?if some of these companies mature. The startups made the trek to Vegas courtesy of a delegation led by Zhongguancun Software Park – China’s Sand Hill Road — in Beijing”.
The importance for startupbootcamp HighTechXL to strengthen relations with China, became very clear during our recent roadshow in China where we visited Beijing, Shanghai, Wuxi, Taichang, Changsha and Shouzhou. Let me summarize why we have been developing strategic relations in China so much during the last year.
- High Tech hardware startups need to build a supply chain, which is scalable. China being the ‘factory of the world’ is providing excellent opportunities to build and scale high volume supply chains (even when labor costs are raising rapidly). Economies of scale are crucial and our hardware startups need to bare that in mind at a very early stage.
- The Chinese domestic market is huge and growing. This provides great opportunities to quickly grow big. Although not easy, we have the local networks, government relations and partnerships in place to make inroads into the Chinese market.
- There is a great appetite in China for embracing foreign disruptive high-tech hardware technologies. Through the creation of strategic partnerships with Chinese tech giants we help our startups to enter the Chinese market and grow fast. Because we only work with startups that have disruptive high tech technologies, we were able to open doors in China which normally remain closed for foreign startups. Chinese stakeholders are very hungry to engage with breakthrough innovations, but you need to play the game ‘the Chinese way’.
- Access to Chinese investors and expansion capital. We have learnt that through the creation of strategic partnerships with Chinese tech giants, we are able to mobilize investors and capital, fueling the growth of our startups. Capital to make the inroads into the Chinese market, but also to accelerate an innovative roadmap.
- Access to state-of-the art research facilities, equipment, tools and talented engineers. China is investing massively in Science Parks. The problem is that they are building these facilities faster than new startups are being created. This explains, why our high tech startups are being welcomed with red carpets rolled out, investors lined up and research facilities being made available.
We will continue to accelerate our startups in Eindhoven, but we will further strengthen our relations with China. We will create Chinese branches for our startups through strategic partnerships with local tech giants, prepare the scaling up of global supply chains, facilitate the inroad to the domestic growing Chinese market and organize access to capital. We accelerate life changing companies and China plays an important role in our model.
Web and app innovations are not our cup of tea in Eindhoven, we eat hardware. But the Chinese ‘hardware and embedded software tea’ we do like. In fact we like it a lot and since we made it to Chinese national TV (see video), no doubt it was mutual!