A fresh start

China's young people, driven to change the world, are launching companies on a massive scale

The 1,000-strong audience buzzed with excitement as Li Gang took the stage at a grand exhibition hall in Beijing's 798 art district in early March.

Dressed in blue jeans and a black T-shirt, a la Steve Jobs, the 28-year-old was about to make one of his dreams come true by unveiling his startup company's smart bike, The Beast.

Premier Li Keqiang spends time with entrepreneurs at 3W Cafe in Zhongguancun Science Park in Beijing last year. Wu Zhiyi / China Daily

Young businesspeople talk at a meeting place for budding entrepreneurs and angel investors in Zhongguancun Haidian Science Park. Provided to China Daily

"It's perseverance that has brought me this far," he tells me after making his presentation to the crowd of technophiles. "Compared with our parents' generation, those of us born in the 1980s and '90s want to make a difference in the world rather than just finding a job.

"And we're grateful for today's society, which offers many opportunities to start our own businesses."

Li, founder and CEO of Beast Sports Technology, represents a large and growing number of young Chinese people who, encouraged by government support and gaps in the market, are going it alone.

According to a report in January by the Global Entrepreneur Monitor, which is complied by a collection of universities, including Beijing's Tsinghua University, young people in China are the most active in the world in terms of entrepreneurship.

The monitor covered 73 economies and interviewed about 5,000 people aged 18 to 35 in each, surveying them on their desire to start a business and explore new markets. China was top with an index number of 15.53, beating many developed nations, including the United States (13.81), the United Kingdom (10.66), Germany (5.27) and Japan (3.83).

However, experts on business and entrepreneurship warn that many young people in China fall short in preparedness, funding and the ability to innovate that is required to succeed.

Li, who comes from a well-to-do family in the northeastern city of Harbin, Heilongjiang province, says he first had aspirations to start a business while an undergraduate at Shanghai Jiao Tong University.

Initially, he opted for the "safe option" and landed a high-paying job on Wall Street. He quickly got bored, though, and in 2012 he persuaded his friend, Gao Jiayang, to quit his job as a senior engineer at Alibaba to develop a mobile app that optimizes the Android operating system for mobile devices. Li says it gained about 1 million users in its first month.

In 2014, the duo accepted an offer to sell the app to Qihoo 360 Technology, an Internet security company, and used the money to launch Beast Sports, which makes apps and smart devices for cyclists.

The company today has 3 million registered customers across all platforms and is estimated to be worth about 300 million yuan ($45.9 million; 41.1 million euros).

"The domestic startup scene is thriving, helped by opportunities in the tech and service industries that have emerged as a part of China's structural shift," Li says. "We always had an idea we wanted to start our own business to prove our value, to do things that we love, more than just earn money.

"If you set up a company just to make money, it'll be more suffering than fun."

Sowing the seed

The Chinese government is keen to see more like Li Gang.

As the country shifts from relying heavily on exports and infrastructure investment, policymakers are channeling their energies into boosting innovation and industrial modernization.

Premier Li Keqiang has called for "mass entrepreneurship" in his past two annual Government Work Reports to the national legislature. Last year, he announced a 40 billion yuan fund to provide seed capital for tech startups.

Innovation has also been placed at the core of the 13th Five-Year Plan (2016-20), the blueprint for China's development till the end of the decade. Over this period, the amount of expenditure on research and development is aimed at 2.5 percent of GDP, up from 2 percent in 2015.

Many have already answered the government's call. Official data show 4.4 million companies were registered last year, an average of 12,000 a day, with 90 percent started by individuals.

"Thanks to the efforts to stimulate mass entrepreneurship and innovation, startup businesses are no longer the preserve of a few wealthy people," says Ke Xiping, deputy director-general of Xiamen Hengxing Group, which has interests in real estate, mining, and trade and investment.

Ke operates the Aite Innovation Incubator in the southern city of Xiamen, Fujian province, which supports startups focused on breakthroughs in the Internet industry and consumption channels.

China is cultivating an innovation wave, "with startups mushrooming in many fields, not only in mobile apps and websites", Ke says. "Previously, China's development relied heavily on labor-intensive industries. Now, gradually it's moving to innovation.

"And it's not only in cities like Beijing and Shanghai. In second- and third-tier cities like Xiamen there is also a boom in startups and investors. There are also huge numbers of hardworking startup teams, supportive policies and active capital markets, which are essential to helping budding businesses grow."

Yet despite large-scale growth in Chinese startups, the Global Entrepreneur Monitor found that the country still lags behind developed nations in innovation.

In its report, China's young entrepreneurs ranked poorly in terms of adopting new technologies and developing new markets.

"When we interviewed startup business owners in China, they were confident and believed their products are innovative, but really they lack understanding about technological innovation," says Gao Jian, an official with Tsinghua University School of Economics and Management and head of the monitor in China.

"Currently, they're more focused on developing new products or services in traditional industries, such as online-to-offline apps."

China has more than 4,800 innovation incubators nationwide, covering a range of sectors, according to the Ministry of Science and Technology.

Kai-Fu Lee, the former head of Google China and founder of Innovation Works, one of the country's first incubators, in 2009, says he feels Chinese entrepreneurs are catching up with their Western peers and "have the potential to lead the trend in innovation globally in the next 10 years".

However, Lu Jinyong, an economics professor at the University of Business and Economics in Beijing, believes too much emphasis is being placed on the quantity of projects rather than the quality.

"We have so many innovation incubators now, but there is a real shortage in high-tech projects and disruptive innovation," he says, referring to innovations that create new markets that eventually disrupt established ones.

Ultimately, Lu says: "Young people tend to see startups as a favorable career choice to realize their personal value and become financially independent, but too many of them overestimate their capabilities."

Huang Fan agrees. He is president and CEO of Shoujia Group, which owns most of the convenience stores in Xiamen. With about two decades of business experience under his belt, he believes more young people should be made aware of the risks involved in starting a company.

"First, you should be clear on whether you're suited to running a business. Many college graduates have difficulty in finding a job so they choose to start a business, but it's not always a sensible choice," the 36-year-old says.

"It is not easy to start a company. You need to handle many aspects and relationships. For example, you need to know how to sell your ideas to investors, register a company, find sources of funding, prevent your intellectual property from being stolen by potential investors or competitors, and you need a strategy for expansion."

Huang was born to a wealthy family in Xiamen. In 1996, he decided against taking over the family business and instead started his own business.

"I saw it as the most effective way to demonstrate my ability, but it also meant more uncertainty and risk compared with working as an employee at a large company."

'More than money'

Huang is a mentor for budding CEOs through the privately run Fujian Haixi Youth Startup Fund and China Youth Startup Fund. Yet many others are flying blind.

According to the Global Entrepreneur Monitor research, 87 percent of China's entrepreneurs actually have had no formal training in how to start and maintain a business. This is compared to 68 percent in places like Europe and the United States.

The report also adds that Chinese startups find it hard to secure loans from banks or other financial institutions. It found that 9 percent received financing from a bank, while roughly 58 percent sourced funds from relatives, whereas in developed nations it was about 23 percent and 14 percent, respectively.

"Compared with developed economies, the financial support and vocational education for entrepreneurs in China lags behind," says Gao Jian at Tsinghua University. "However, the situation is getting better, as governments are putting in more effort."

Yi Ran is the founder and CEO of Beijing Juhuiwan Interactive Technology, a company that provides corporate team-building solutions and is based in an innovation incubator in Zhongguancun, the so-called Silicon Valley of Beijing.

The 29-year-old says conditions have gotten better for startups in China in recent years, but the boom time now means competition for financing is fierce.

"Local governments do now provide financing platforms and have improved the infrastructure for startup companies like us, which helps a lot," he says. "But globally speaking, startups are getting stronger, and it's not easy to get funding.

"Startups need to seek multiple investors for seed money, and how to cooperate with these investors is also a challenge," he adds, revealing that he has refused capital in the past from investors whose management philosophy differs from his own.

Li Gang, the head of Beast Sports, received seed capital from Innovation Works and says he has benefited greatly from the input from investors.

"Most are experienced entrepreneurs who can share business management tips with us young people," he says shortly after his smart bike launch. "They help in other areas, too, such as with recruitment, manufacturing, finance and legal, and introducing potential business partners.

"It's about more than just money."

huhaiyan@chinadaily.com.cn

(China Daily Africa Weekly 04/01/2016 page1)