Why Hangzhou's province is a hotbed for successful startups

❤

The following is an edited excerpt from Chinnovation: How Chinese Innovators are Changing the World by Ying Tan, on how startups like Alibaba, Geely and Goji found success in the province of Zhejiang. The excerpt was provided by Wiley Publishing. 

MIT’s Edward Steinfeld identifies an aspect of Chinese thinking responsible for high rates of entrepreneurship. The Chinese are not easily deterred by economic or political conditions unfavorable to business formation. “Chinese entrepreneurs, whether because of cultural or other factors, have consistently proven willing to establish businesses… in a number of high-risk, deeply unstable environments.”

This trait is particularly prominent in Zhejiang entrepreneurs, whose approach can be boiled down to Five Ms (to go with the Eight Rs): markets, masses, mobility, management, and meshing.

Markets

Zhejiang entrepreneurs joke that they listen to needs of the market (shichang 市场), not the needs of the governor (shizhang 市长) – a pun in Chinese, as the words sound even more similar than the characters appear. A lot of entrepreneurs are swayed by generous government grants in the sectors the local government favors and so choose to establish their business in those sectors. This practice is avoided by Zhejiang entrepreneurs, who are cognizant of market needs.

Instead, Zhejiang entrepreneurs feel the pulse of the market, assimilate the vital signs, and adapt their strategy. They gravitate either toward large existing markets where they feel they can displace the incumbents or new markets they believe to be large. Frequently, they may not deliver the right products the first time, but they tenaciously keep adjusting their strategies to reach the market. They are also not afraid to enter markets most believe to be dead categories; indeed, they favor such markets where competition tends to be less stiff, thus lowering the cost of doing business.

Masses

Zhejiang people move in masses, often going to where the market is. Because the city is surrounded by mountains, it has traditionally been neglected by the central government. This leaves the people of Zhejiang with little choice but to take care of themselves and become self-reliant. They often do so by pooling money in their families and community organizations (known as a meng 盟) and starting businesses. They frequently lend to each other based on simple agreements, with not even a note to document the loans. Jason Yuen, a reputable angel investor and former executive at Beijing Unihub (a successful company founded by Premier Wen Jiabao’s son Wen Yunsong), is no stranger to Zhejiang.

To explain the puzzle of why entrepreneurs in Wenzhou and Hangzhou are faring better than those in big cities such as Shanghai and Beijing, he lauds Hangzhou as the capital city and economic center of wealthy Zhejiang province, and he strongly feels that it has a better investment climate than the one in Shanghai. If you were to ask anyone in China who makes the best businessmen in China, he maintains, the answer would not be Shanghainese but the businessmen of Wenzhou and Hangzhou in the Zhejiang province. He suspects that it is not because the innate human talent of Wenzhou and Hangzhou is superior.

And it’s not that the probability of succeeding in Hangzhou and Wenzhou is higher; instead, everyone there is trying to succeed as an entrepreneur, so the sheer numbers of attempts generate a lot of successes. In addition, the only option when an entrepreneur fails in Zhejiang is to try again. The option to fall back on a comfortable white-collar job (easy enough in big cities such as Shanghai and Beijing) is not available in Wenzhou and Hangzhou. The wage disparity makes little difference.

Even though the typical wage is RMB3,000 (about US$375) in Hangzhou, compared to RMB6,000 (about US$750) in Shanghai, many would choose to work in Hangzhou in return for the lifestyle which enables them to focus on what they are doing without the distractions of a big city like Shanghai. Yuen suspects that the focus is what leads to many Hangzhou entrepreneurs becoming successful. Shanghainese are famous in China for their astute business sense. Nonetheless, Wenzhou businessmen are able to take advantage of the astute business sense of the Shanghainese to make money off them.

Mobility

Wenzhou entrepreneurs move to Milan to sell bags once they sense the business opportunity. Wenzhou entrepreneurs in Zhejiang are known for their courage, but they also have an unusual tendency to take risks. It has been said that for every dollar, a Shanghainese would save 50 cents and invest 50 cents. A Wenzhou businessman would invest his dollar and borrow 50 cents from the Shanghainese to invest. For example, I once met with a group of Zhejiang entrepreneurs who had visited Bama, a place that has an inordinate number of centenarians; about one out of every 3,400 people. The Wenzhou entrepreneurs were so impressed that they began to study and analyze the water, soil, and air of the county; within a year, they set up shop offering water filtration, air filtration, and supplements to the general public based on their findings.

Management

Entrepreneurship is about innovation and operations. In the early stage, there is a greater degree of innovation. In the later stage, it is about operations. Wenzhou entrepreneurs are known for both their innovation and operations. In addition, Wenzhou entrepreneurs are also renowned for their deal-making flair – a Wenzhou businessman might have absolutely no clue on how to make the targets in a negotiation but agrees to the deal readily, going back in the evening to figure out how to make it happen and raise the funds. He will reappear at the negotiation the next day, brimming with confidence. This trait can be a double-edged sword as Wenzhou businessmen are deal-makers but will sometimes fail to deliver on their promise.

Meshing

Wenzhou entrepreneurs react rapidly to market restructuring and are adept at meshing best practices from one industry to another. They also spot opportunities in the interstices between industries. Renowned for turning junk into popular products, a typical Wenzhou venture capitalist scales rapidly to trade in immense quantities. Usually, the margin is slim but sheer quantities make the business very profitable. For example, in a typical deal on Nike shoes, a Wenzhou-based joint partner would take in 10 percent of the profits but the remaining 90 percent would be accrued to Nike. This is in contrast with firms with intellectual property, who get the majority of the revenue. However, Wenzhou entrepreneurs, with the cash base from scaling, would invest in R&D and mesh best practices in other industries to innovate products customized for China’s needs – antibacterial shoes (Augustus), nanoair shoes (Gilda), and eco-friendly shoes (Liuzhou Dili).

Source: Tech in Asia

https://www.techinasia.com/5-reasons-zhejiang-china

^

Follow us to keep you updated about 

what's happening in Hangzhou and what the expat community concern

杭州的外国朋友，海龟，外企白领都在看

..............................................

Anything to share with us ? 
有什么与我们分享，吐槽吗？请添加加小编微信

∧

Get an account and publish NOW !