3 Things You Need To Know About China’s Startup Ecosystem

Trends

November 25, 2017 | BY Lee Williamson

The opportunities and challenges that lie ahead in the mainland market, according to the China head of one of the world’s most active tech investors

Hong Kong native Edith Yeung is a partner at 500 Startups and head of the fund’s Greater China investments.

Since launching in 2010, the California-based VC has become one of the most active early-stage investors in tech companies worldwide. “We originally named it 500 Startups because we wanted to invest in at least 500 startups. After seven years we’ve now invested in over 1,800 around the world, but we’re not going to change the name!” jokes Yeung when we meet her backstage at Jumpstarter 2017.

Those numbers, as well as the fact that 500 Startups has three ‘unicorns’ (startups worth US$1 billion or more) in its stable, cement the fund’s status as a global player with significant insight.

It’s insight that’s needed when you consider the scale and potential of the Chinese startup community—the best estimates put the number of mainland startups at over one million. To better understand this huge, expanding scene, we ask Yeung for a few pointers.

Almost every industry will continue to grow—but especially these two

Every market is growing because the GDP is still growing so fast. At the moment, China is about 8,000USD per household—the US is four or five times that. As the purchasing power of the middle class increases, there will be more shopping, more online game players, more of everything.

The removal of the one-child policy, however, means there will be a sudden increased demand for both education and healthcare in particular in the next ten years. The developments in genomics are especially interesting, with many significant breakthroughs now happening in China. 

Photo: Courtesy of Edith Yeung.

Blockchain and AI are much more than buzzwords

Some of China’s most successful start-ups in the next few years will be in AI. The Chinese government is so bullish on it, and not just from an investment point of view—they want the country to be number one in AI. 

Mobile is web 2.0, but I believe blockchain will be web 3.0. A lot of blockchain developments have been B2B, but I’ve started to see some consumer-facing case studies. Food safety is a big issue in China, and there’s now a food logistics company that’s trying to use blockchain to keep track of a foodstuff’s supply chain so consumers can know the origin of everything they buy. This is just one of many examples.

Photo: Courtesy of Jumpstarter.

Beware of BATs

Competing with the internet giants Baidu, Alibaba and Tencent—or BAT—is really difficult. I know some startups that are actually hiding right now so the big guys don’t know what they’re working on.

When I was working for Dolphin, we were a Mainland Chinese company building a mobile browser. Obviously Baidu and Tencent both have browsers, so we almost didn’t want Dolphin to be in any major cities, because first of all we were worried about them stealing our team, and secondly, if we started to do really well it might make them refocus and pump up what they had—and faster than a small startup can. Chinese startups have to be really aware of what everybody else does—especially the big guys.

If you want to be another BAT, you need to tackle something these big guys are not. You have to think of something new and get ahead while they’re not looking. It’s no small feat!

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