The rise of China’s entrepreneurial spirit

In the cold basement of an office block in northwest Beijing, a group of would-be entrepreneurs huddle around a computer screen, poring over their latest prototype. A few miles away, in a well-heated and distinctly more luxurious underground lecture room, a group of 30 managers and entrepreneurs also debate ideas for new products and ventures.

Both groups are testament to the growing appetite for start-ups in China. Just as business schools in the US and Europe have reported a surge in student interest in running their own companies, business schools operating in China are also reporting a thirst for all things entrepreneurial.

“Start-ups are the new sexy thing,” says Yi Wang, co-founder and chief executive of Liu Li Shuo, which developed an English language app for Chinese smartphone users, the only education app selected by Apple in the 2013 App of the year award in China.

“Definitely you’re seeing an increasing trend in entrepreneurship in China. Top-tier venture capital firms are looking for young entrepreneurs — there’s a whole ecosystem coming up,” Mr Wang enthuses. “In recent years companies that have been making the biggest impact on people’s lives have been internet companies and behind them encouraging stories about ordinary people making it big.”

Mr Wang is one of the participants on the 10-week Stanford Ignite programme, which the Silicon Valley business school ran in Beijing for the first time in October and November. There, in the Stanford building in the heart of the Peking University campus, a select group of 30 entrepreneurs and intrapreneurs devise business plans that may one day prove to be highly successful companies.

Mr Wang’s own history is typical of many of China’s new breed of entrepreneurs, he says. He went to the US to study for his PhD, worked for Google for two years and then returned to Shanghai to work for an internet marketing company. His two co-founders report a similar history. As more and more Chinese students study overseas, behaviour at home is changing rapidly, with young people eschewing the traditional large corporation he says.

The sentiment is echoed in the spartan basement that is Tsinghua University’s x-lab, where angel investors rub shoulders with students and alumni from across the university, arguably China’s most prestigious. Between them they are developing everything from the latest electrically powered scooter to moderately priced 3D printers and wearable health monitors.

Since the x-lab launched 18 months ago, some 400 start-ups have used the facilities, says Pearl Mao, executive director. Close to 300 of them continue to flourish and more than 30 of them already have substantial funding.

What is more, every Thursday the x-lab’s team holds project meetings and each week 10 new ventures pitch to become part of x-lab. Those that succeed can use the facilities free of charge.

Michael Ma, who graduated from Tsinghua SEM in 2006 with an Executive MBA, fits the bill. He believes there is much to be done in creating English language teaching technology. “China is the biggest market for foreign language learning in the world,” he points out.

His company, Beijing Peapad Education and Technology, targets parents of young children with its small, green, talking pea character, which is controlled through a parent’s smartphone and uses songs and games to teach English.

“There was no such product in the market. We think it is important for Chinese kids to learn English,” he says. “Also we believe there is a lot of money to be made in the industry.”

Mr Ma has ambitions for the Peapad to be on the market in the first half of 2015, and will offer the Peapad hardware for free, with parents buying software, services and access to the community.

“Our ambition is a bit more than language learning,” he says. “There is no smart device [like this] in the market for kids. We believe in the next 10 years this will be a real trend.

“Currently early childhood education is offline all over China, but we believe over the next few years it will all go online. Hardware is a channel and we are providing the channel.”

In developing his product Mr Ma has taken advantage of other start-up ventures in the x-lab — a computer graphics company helped design the website and Peapad games and a 3D printing firm helped develop a scale model. The x-lab offers legal advice on patents and access to Tsinghua’s industrial design centre as well as advice from angel investors and venture capitalists.

It has also performed a more specific educational role, acting as the intersection between Tsinghua’s academic departments, says Ms Mao. So far between 10 and 20 per cent of all Tsinghua students are involved in some way.

Stanford Ignite faculty director Yossi Feinberg says that while New York is the home of media start-ups and Silicon Valley of biomedical and technology companies, there is demand across the board in China. “China is everything. There is a lot of low-hanging fruit.”

The growing middle class in China means high demand, but this can in turn create issues, says Prof Feinberg. “The biggest problem to any venture in China to me is the [low] barriers to entry. The only barrier is, can you create something big enough so others can’t enter the market.”

Now the entrepreneurial genie is out of the bottle, Mr Wang says it is unlikely the process can be reversed. His company resembles a US internet start-up, with free meals and company-funded holidays. Why would people who have operated in this environment all their working lives want to work for a state-owned enterprise, he asks.