360° Coverage : China's startups hope for boom after Alibaba IPO

10 Updates

China's startups hope for boom after Alibaba IPO

Jun 11 2014, 8:12am CDT | by

BEIJING (AP) — Nils Pihl has spent 18 months building what he calls cutting-edge software to crunch "really big data sets." But instead of going to Silicon Valley, the 27-year-old...

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7 weeks ago

China's startups hope for boom after Alibaba IPO

Jun 11 2014, 8:12am CDT | by

BEIJING (AP) — Nils Pihl has spent 18 months building what he calls cutting-edge software to crunch "really big data sets." But instead of going to Silicon Valley, the 27-year-old Swede and his four colleagues have been working on his invention from a small apartment overlooking smoggy northwest Beijing.

In typical startup fashion, they've raised hundreds of thousands of dollars after countless pitch meetings and were racing to prepare their product for launch. Their investors are in Beijing as well as the U.S.

China might seem an odd choice for young tech entrepreneurs. Instead of innovation and risk taking, the country is more associated with state domination of the economy, rampant intellectual property theft and heavy duty government censorship of social media.

Perceptions, however, are changing. The high profile success of Jack Ma's e-commerce company Alibaba, which is planning a giant initial public offering in the U.S. this year, has drawn attention to how the former startup outmaneuvered eBay in China to become the world's biggest online bazaar. More recently, use of smartphones and the mobile Internet has grown explosively, creating new opportunities for e-commerce and other tech ventures.

"We find this to be like the best incubator you could get," Pihl said in his building's courtyard, where children chased each other and couples took twilight strolls. "We don't consider ourselves a Chinese startup. We're a Valley startup hanging out in Beijing to keep our costs low."

Alibaba and a handful of other online ventures are the most visible examples of companies that began with a startup ethos and thrived despite bumps along the way. Perhaps the biggest challenge for startups came three years ago when several Chinese companies were caught in accounting scandals and forced off U.S. stock exchanges.

Such problems pushed Chinese regulators to halt all IPOs in China, another blow to the startup scene since going public is a common way for ambitious companies to raise additional funds after being nurtured by venture capital and other early investors.

Regulators lifted the ban earlier this year, making way for 11 IPOs in the first three months of 2014, just one short of the number in the U.S. during that time, according to accounting firm PwC. Analysts were expecting as many as 400 Chinese IPOs this year, but confusing new regulations issued by the government have again held back offerings.

Still, Chinese companies such as No. 2 e-commerce site JD.com have listed in the U.S. this year, and entrepreneurs and investors in China are expecting a flood of investment.

"If Alibaba goes public at say $150 billion to $180 billion and they continue to grow at 30 percent a year, in five years this could be the largest company in the world" by market capitalization, said Richard Hsu, managing director of Intel Capital China at a recent startup forum in Beijing. "And if the largest market cap in the world is now a Chinese company involved in e-commerce, how much attention is the rest of China going to get?"

Budding Chinese firms of all types raised more than $1 billion in venture capital in the first quarter, a 35 percent jump over the same period last year, according to Dow Jones VentureSource. That was far short of the nearly $10 billion raised in the U.S. during the same period, but enough to rank China ahead of Europe in venture capital.

Behind the numbers are China's vast market of more than a billion people and the eagerness of Chinese consumers to adopt innovations such as shopping via smartphone and the latest social media. Chinese firm iResearch forecasts mobile phone games alone to bring in $11 billion a year in revenue in 2017, triple the current amount.

"There's definitely a critical mass of talent that has been nurtured in the past 15 years by the mobile phone and the Internet," said Alan Guo, CEO of Chinese e-commerce company LightInTheBox, which went public on the New York Stock Exchange in June 2013. "We have a new generation of Chinese who are global."

Other draws for startups include the country's lower salaries. According to the online job site Glassdoor, average pay offered in software engineer job postings in Beijing was a quarter that for similar positions in San Francisco.

The Beijing city government also tries to support the fledgling industry by giving Chinese and foreign tech companies a 15 percent break on income taxes.

For some foreigners, those factors and an abundance of venture capital cash outweighed the country's negatives such as air pollution in many cities and the hard-to-learn language.

Entrepreneurs such as Substantial Games co-founder Pin Wang have built their companies here even if they don't plan on selling their products in the country.

Born in China but raised in Canada, Wang moved to Beijing five years ago and started his company in a small office, where he and his mostly foreign staff fine-tuned their tablet-based game, Ember Conflict, with a $320,000 investment from Shanghai-based investors.

"There was a stigma around doing a startup in China around three to five years ago for sure," the 28-year-old said. Getting a job at Google was considered more prestigious but "now Chinese are saying: Oh, I can see why, it's a chance to get rich."

Marketing 360 CEO Terry Ding said he made that leap and mounted a 20-person, all-Chinese team with some $1 million in investment to build a software platform for marketing companies.

Still, the Chinese startup world still has a lot of growing up to do, said Ding.

He expects to sell his company for $6 million at most, a humble sum by Silicon Valley standards, because Chinese and global markets still undervalue business support services such as his, especially those designed in Chinese that require translation to sell overseas.

"The Chinese aren't ready to support this kind of innovation — software, behind the scenes," Ding said. "But it will definitely change."

"I think people will start to trust that China's development and its startup companies can make some remarkable things happen."

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the De ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
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7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by r ...
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Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last m ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compensat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Dat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
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1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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