Launching a new enterprise, whether it’s a tech startup, a small business, or an initiative within a large corporation has always been a hit or miss proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can.
A New Startup Trend
Some young Chinese’s entrepreneurs are rushing to launch their dream business as investors and policymakers enthusiastically encourage a new startup trend, opening doors for people to strike gold and reverse the economic slowdown.
In the first quarter of 2015, Chinese investors staked about 260 million US dollars in angel capital, tripling the amount registered in the same period a year earlier, venture capital and private equity research. The money went to finance 349 business ventures, doubling the number of projects launched in the first quarter last year. Of the money invested, 43 percent was put into companies related to telecommunications and 37 percent on the Internet. Some analysts said the investment was over-concentrated in those sectors.
The Chinese Government Pledged to Encourage Innovation
The Chinese government has been propping up a mass entrepreneurship scheme, vowing to unleash the full potential of innovation by cutting off policy hurdles and rolling out financial support.
It comes as the central government launches broader efforts to reduce administrative interference, bolster the private sector and reform state-owned enterprises as Chinese economy slowed to a six-year-low of 7% in the first quarter. Policy makers believe more innovation and high-tech industries can help renew the made-in-China image and help support the world’s second-largest economy. New efforts have caught the eye of both rich company owners and professionals as tales of fortune and declining corporate profits prompted many of their peers to leave their jobs to ride the startup wave. The wave has seen hundreds of new mobile applications taking new approaches to taxi-hailing, health care and finance in the hope of catching the eye of venture capitals. New technologies like “big data” or “cloud computing” provide a lot of new business opportunities as they offer easier access for young entrepreneurs.
According to government data, nearly 3.7 million new companies were registered in 2014, 46% more than the previous year. Statistics from the Ministry of Human Resources and Social Security showed Internet-related industry greatly contributed to the 13.2 million new jobs last year. To gather more money in the investment pool, the central government has decided to set up a state venture capital fund.
Local governments are also moving to launch venture funds. In dozens of cities like Beijing and Shanghai, university graduates and professionals alike can be rewarded free rent or tax cuts in their startup’s endeavour. State-owned enterprises are encouraged to either take part in or establish venture investment funds.
China’s Start-up Investment
China’s startup investment, however, is still in a fledgeling state compared with that in the United States. About 28.8 billion dollars was spent as angel capital in the United States last year, which financed 75,000 projects. Guidelines issued by the Chinese government on Tuesday may give investors more incentive to finance startups. The government plans to make new rules for startups. As such, a plan for a new strategic emerging industries board at the Shanghai Stock Exchange is being considered. The Shanghai bourse is mulling relaxed criteria for listings on the new board, and the government will look into ways to allow the listing of the Internet and high-tech companies that are still unprofitable.
The government can encourage more money to pour in venture investment if tax breaks are offered to offset losses. This new startup boom includes a mixture of people, including Chinese who have studied abroad and returned to China, people who quit their jobs to start their own businesses, migrant workers who have gone back to their hometown and started their own business, and university students, according to Gu Shengzu, a prominent economics expert and official.
When Chinese Premier Li Keqiang walked into a café a month ago in Beijing’s Zhongguancun – China’s answer to the Silicon Valley – the startup community in the country received a huge boost. The café is the Internet and entrepreneurship-themed community where startup owners and future entrepreneurs, usually hang out.
It was not the first time that startups have been endorsed in China. The Chinese government pledged to encourage innovation and new businesses in the annual legislative meeting held in March. Following that, various local governments have marked funds to support emerging entrepreneurs. startups in China are experiencing a new boom.