VR & Beyond — Tips from Shenzhen’s VCs

As we mentioned in our prior article, Virtual Reality & Shenzhen, many of Shenzhen’s VC institutions operating in the VR sector are now looking outward to find and capitalize on the new developments in the industry. Ultimately, the US-based companies that are funded by these institutions then have a much smoother transition to the China market — which is on the radar of a huge portion VR startups today.

Earlier this year, a delegation from Shenzhen visited Silicon Valley and Seattle to develop a stronger understanding of the emerging technologies and companies surrounding the VR ecosystem in the United States. NAROS assisted the delegation with organizing some of their meetings, and had a chance to meet with and discuss their views on VR in Shenzhen as well as emerging opportunities for bilateral cooperation between the US and China.

While their purpose in the US was specifically to visit companies and events centered on virtual reality, the insight they gave can really be applied across any innovative tech sector. Thus we won’t focus so much on VR, as much as we will share a piece of their mind.

We spoke briefly with:


Market

As often discussed, key for US-based VR companies seeking to work in or with China is the size of the market. VCs in China expect the market to grow rapidly. There’s really not so much to say here that we haven’t already said, but the VCs on the trip really wanted to emphasize that since there is a market for new VR products, companies with a new take on the technology can easily find a niche to thrive in. Especially in Shenzhen, which has a population of 18 million (mostly young) people and is part of the larger Pearl River Delta region, with a population over 60 million.

Funding & Cooperation Opportunities

One of the key points stressed by the VCs was that smaller companies are also welcome in Shenzhen; indeed, most of the larger western companies already have a counterpart in China doing similar work, if not even more advanced in some areas. Shenzhen is unique in that its environment for capital and funding, as well as the unprecedented amount of opportunities for collaboration with China’s highest concentration of high-tech enterprises both small and large, results in a location where startups seeking to go from “nobody” to “unicorn” can thrive.

During their visit, they also made a trip to Seattle, and each VC seemed to take away the same observation from their time there. Seattle, they say, reminds them of Shenzhen — the Shenzhen of 10 years ago. Seattle has multiple large companies and a growing wealth of talent, but is lacking in venture capital compared to a place like Silicon Valley. Shenzhen, they say, has the large companies, the talent, and the financial ecosystem to support a variety of new, innovative startups.

They are also very aware that a lot of small, US companies are looking to China for funding. Sometimes that’s a sincere component of their building a China strategy. Other times, they are just a small company looking for easy money. Not to dash anyone’s dreams of Chinese money, but they also stressed that you can’t just waltz in to Shenzhen and grab funding without any substance. Investors there are shrewd, and they will be sure you have a strong business plan and technology in place.

Speed

We mentioned in our opening article that products generally take about 20% of the time and 30% of the cost to be developed in Shenzhen, in comparison with the world average. The VCs also discussed how technology in Shenzhen tends to be ready for market in 2 months, where it would take at least 6 months in the US. They cited cheaper engineers and the abundance of hardware and service providers in places like Huaqiangbei (we at NAROS would also like to emphasize the business-friendly policies of the city 😉).

HAX, the first and largest hardware accelerator based in Shenzhen, was one of the examples they used to show how small, US-based startups with solid ideas can leverage Shenzhen’s ecosystem and capital opportunities to find success. HAX is located in Huaqiangbei, and has a program centered around giving startups access to everything they need.


“Shenzhen is China’s representative for innovation.”

In conclusion, it’s not only private companies that see Shenzhen’s connection between tech in the West and East — VC firms are also using that pathway to build a bridge for culture, technology, and innovation between Shenzhen and Silicon Valley. Strong ideas can take off incredibly fast in Shenzhen, and VR is just one of the many fields seeing rapidly growing interest from both businesses and consumers.

175游戏’s Jack Huang told us that he sees Shenzhen as “China’s representative for innovation.” It is from this tech-savvy city that China’s VCs can help fledgling US startups grow and reach the world’s largest market.

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The City of Shenzhen

Written by

The North American Representative Office of Shenzhen (NAROS) represents the city of Shenzhen, China in economic matters in the North American region.

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