How can western startups be successful in China?

Current start-up dates

Silicon Valley is considered the epicenter of the digital revolution worldwide. All eyes are directed towards Palo Alto to see and question how dynamic the digital start-up scene in the USA is and what impulses it emanates from around the world. At the same time, however, innovative and successful digital start-ups from the Middle Kingdom are beginning to shift the global balance of power noticeably towards the digital transformation in the direction of China. So far, China has been decried above all as the home of the so-called copy cats, i.e. the copiers of ideas, and the country has been criticized for being behind in the development of innovations.

This has changed a lot in the past few years, mainly due to a high level of entrepreneurship and government support for start-ups in China, which is unique in the world. As an example, we present some start-ups that have emerged from one of the most important incubators, the Dream Town in Hangzhou.

Incubators of digitization

New methods in teaching and massive funding for business start-ups create ideal conditions for a flourishing start-up culture in China and thus for extensive innovations. The state-supported incubators are an example of the unique promotion of digital innovations and business models. These are complex institutions that support founders in setting up a company. In addition to the use of office space, these institutions offer an extensive infrastructure with professional advice options, funding measures and cultural and tourism offers. The incubators typically have the following characteristics: highly specialized industrial sector, comprehensive administrative support, agile and flexible system processes.

The success of the incubators can be seen particularly in the Chinese e-commerce metropolis of Hangzhou. Institutions with various digital focuses were set up there and recorded flourishing growth within a very short period of time. Incidentally, Hangzhou is home to China's largest and most well-known Internet company, the e-commerce giant Alibaba, which has become a training center for budding entrepreneurs.

Dream Town - the Chinese Silicon Valley

One example of this growth is the Dream Town digital incubator, also known as Hangzhou’s Silicon Valley. Once a poorly developed area in the neighborhood of Alibaba, the institution has grown into a high-tech center with newly built office parks. Since it opened in March 2015, more than 6,700 young Chinese - the majority are 30 years or younger - have worked in over 710 start-ups and are emulating the example of Alibaba boss Jack Ma. These start-ups do not have to give up equity, pay rent and have access to free services so that they can fully concentrate on developing their company.

Approximately US $ 3 billion from government institutions and private investors is available as start-up funding. The young entrepreneurs, whose business idea is convincing, are given 10 square meters of office space free of charge for three years and have extensive funding provided by the government. The special thing about Dream Town is not only the rapid growth of digital start-ups, but the unique infrastructure: The incubator is built like a small town, with numerous apartments, shops and leisure facilities such as fitness studios, bars, cafes and restaurants.

The strong support from the Chinese government, investments from the Hangzhou-based Alibaba group of companies and the strong concentration of the academic elite in Zhejiang Province are further success factors for the strong growth of Dream Town. A large number of innovative start-up ideas from different industries were implemented here. We briefly present some of them here.