Is Guangzhou China's next startup hub?
Guangzhou’s appeal to Chinese entrepreneurs is apparent. e27 Correspondent Elaine Huang explains more as she recounts her trip to the cityBy Elaine Huang 22 Jul, 2014
A fancy position at a big firm wasn’t what Jessica Zhang, a 24-year-old in Guangzhou, China, was looking for. She learnt that during her internship at a large corporation. It was sclerotic, unlike iMaibo, a two-year-old stock market social networking startup that she is currently working for.
“The iMaibo management has a lot of passion,” she told this author in Mandarin, over the phone. While the word ‘passion’ is often associated with ‘youth’ and ‘energy’, Ricky Wong and Water Cheung, both Founders of iMaibo, aren’t exactly “youngsters”. In fact, the two entrepreneurs are currently in their mid-fifties.
Most employees at iMaibo, however, are in their twenties. A lot of them are fresh graduates, like Zhang, who want more than just a pay cheque to bring home. As for Zhang, she explained, “Products attract me. I am interested in finance and want to help stock marketeers in China.”
“Young people are more creative, more innovative,” said Wong in a chat with e27.
Most of the hiring at iMaibo is done through head hunters, recruitment sites and the general word-of-mouth. Wong noted that recruitment sites have proved to be the most effective for his company. Zhang echoed his sentiments in our conversation. She said that she had chanced upon the firm through an online job search, specifically looking for startups.
She added that students in University typically show a fair bit of initiative. A lot of them are active in student councils or hold part-time jobs to gain more work experience.
When hiring, Wong further explained, it is always about finding a good fit — someone who understands how a startup works and can identify with the values held dear to the company. “(We) make sure that his (the candidate) boss is not the only person to hire him,” he said, noting that interviews are conducted with the different heads of departments. After all, in a startup, there is no such thing as working in a silo.
My trip to Guangzhou (disclaimer: sponsored by iMaibo) was planned rather spontaneously. A few days after I confirmed that I will be travelling to the third largest Chinese city — home to some 10 million citizens — I found myself on an airplane next to a perfume-spritzing lady. Then, after cradling myself to sleep in a mostly foetal position for three odd hours, I arrived at Guangzhou Baiyun International Airport.
Guangzhou, located two hours away from Hong Kong by train, wasn’t that difficult to get used to. The Guangzhou Metro was easy to navigate with helpful, accurate English translations on most signs. However, daily life there might prove to be challenging for monolingual English speakers. After all, most people in Guangzhou are more comfortable with speaking Cantonese and Mandarin.
This was observed at iMaibo’s office as well. While most staff members have an English name, most conversations — both work-related or personal — were carried out in Mandarin or Cantonese.
Where’s the money?
Guangzhou is no Beijing or Shanghai, in terms of technological advancements or the saturation of startups in those markets. But more entrepreneurs are starting to eye Guangzhou as the next place to start up in, thanks to lower living costs, said Cheung.
Carel van Apeldoorn, Co-organiser and Chapter Director of StartUp Grind Guangzhou and CEO of Ink361.com, also shared his thoughts. He told e27, “Guangzhou is a smaller startup scene compared to Beijing, which attracts a lot of teams because of the availability of funding from this region. Shanghai tends to have more pure software startups. Hong Kong has an active startup scene, but has two disadvantages.”
Firstly, in Hong Kong, operational costs can be exorbitant for the typical Chinese startup, he continued. Thus, many of these companies leave for Shenzhen. Secondly, the investment climate for startups, he said, is not optimal in Hong Kong. “Hong Kong investors expect returns in a very short time and favour investments in cash flow positive businesses and real estate,” explained the entrepreneur.
Of course, change is not going to happen overnight. But it will start soon. With co-working spaces like Yi-gather and Inno-Valley based in the city, and incubator programmes like a new initiative known as 6cit.com, entrepreneurs are able to connect and learn from like-minded people.
“There are venture capitalists and angel investors that can help teams with the funding of their projects, but all in a relatively modest scale with huge potential,” added Apeldoorn.
The flip side
However, while potential is brimming, there are a few disadvantages and limitations to bear in mind. Good team members are still difficult to find. “Chinese startups tend not to be as open as Western startups that like to share and help each other more frequently,” said Apeldoorn, adding that a stable income in a big and respectable company is still considered ideal to most people. “Startups … (come) with high uncertainty and less prestige,” he noted.
Another point to note is that having trusted partners locally is integral to setting up in Guangzhou, shared the Founders of iMaibo, who are both originally from Hong Kong. Their investors include Guangzhou’s Nanfang Media, which has a long list of magazines and newspapers under its umbrella.
Furthermore, people in Guangzhou are very conservative, said Cheung. He added, “They work before they talk. It (the entrepreneurial scene) is still budding here.” While being in ‘stealth mode’ can help the company focus on delivering a product that users want, it can also be detrimental in terms of funding and user acquisition opportunities.
Turning to a go-to place
The growing appeal of Guangzhou as a new startup hub is apparent. Its proximity to manufacturing heaven Shenzhen and urban jungle Hong Kong where investors are gathered is working in its favour.
In conclusion, Apeldoorn said, “With the current trend of ‘Internet of Things’ and ‘Robotisation’, Guangzhou is going to be the go-to place for startup entrepreneurs who want to play a leading role in these upcoming and rapidly developing industries.”