China’s New Silk Road
A few months back I ran into an article that casually mentioned China’s new drive towards building a modern version of the Silk Road. It was right after I had gotten back from a trip to Hong Kong and had a sense of the ambition that the Chinese government had when it came to technology. I decided to take a look at the path of the new Silk Road and see what the impact was going to be on startup ecosystems. I put my thoughts together as a 3-part post on my blog (www.pacificstandardtime.io) that I’ve reposted below in it’s entirety:
A few weeks ago, the Financial Times publishes an article on China’s new economic policy known as the “New Silk Road”. Announced in Kazakhstan in 2013, the plan has focused on ways to strategically use China’s overcapacity in manufacturing. This plan is comprised of a number of trade deals and large infrastructure investments along a route that’s nearly identical to the original Silk Road from hundreds of years ago. After reading through this, there’s a few highlights that I think are particularly important when looking at this from the angle of startups. The first one I wanted to look into is what this plan means for ecosystems outside of China that might be off the radar.
New Regions to Focus On
A few rapidly emerging technology ecosystems are part of China’s path for the New Silk Road. Markets such as SE Asia, Central Asia, and East Africa are all places that have been largely ignored up until now by tech companies as viable markets to launch products in. Markets such as Indonesia, Kenya, and Pakistan are all places filled with young, mobile-first populations and rapidly-growing middle classes. They are also all English speaking countries. It’s important to think that these countries will be receiving large infrastructure investment from China, increasing bandwidth for mobile and high-speed internet penetration to businesses. Entrepreneurs that are looking for big areas of disruption should take notice of these countries in particular as the infrastructure investments continue. Also, incubators like Skystar (Jakarta), 88mph (Nairobi), andPlan 9 (Lahore) will be good places for international teams to go to learn about what’s happening on the ground.
China as the Gateway to Launch a Consumer Electronics Startup
The route of the Silk Road covers around half of mankind from a population standpoint. I mentioned the investment in internet technologies but there will also be new roads, ports, and better ways to deliver goods and services to those populations. The focus here is on goods. Shenzhen, the world’s capital for making electronics, is only a quick trip from massive ports in Hong Kong and a 2 hour flight (with 17 per day!) to the center of the New Silk Road in Xi’ian. With the infrastructure rolling out from south China like a rd carpet, it’ll be extremely easy to connect a consumer electronic device to any market along the New Silk Road. Incubators such as Brinc.io in Hong Kong and HAX in Shenzhen are going to have increased value over the next few years as they continue to give access to the top consumer electronics startups from around the world that need to take advantage of the areas manufacturing know-how. It’ll be interesting to see how Shenzhen/Hong Kong’s startup scenes change as this economic policy matures.
What Ecosystems Will Capitalize?
Tech companies in the US have done a good job of serving our domestic market and have made it very hard for international competitors to gain traction. It’s very hard to find examples of foreign startups being extremely successful here (Spotify, Waze, any others I’m missing?). Indian and Chinese tech startups have both seen crazy growth by focusing domestically as well. On the flip side, it will be interesting to see where startups will come from that capitalize on China putting money into building out internet infrastructure in emerging economies. Places like Singapore have done a good job of positioning itself as a place to go international across SE Asia and India. Will a new tech ecosystem emerge from somewhere such as Dubai or Pakistan that will capture all of this growth long-term? Will traditional powers like the US, China, or India start pushing more mobile apps, SaaS products, and ecommerce plays into those countries? Will local winners take everything in their respective market? Will RocketInternet rule everything?
It’s all up in the air. I do know that with these announcements it’s showing that a lot of people will be brought into the global market. How startups react to all of this internet growth led by China will be interesting over the next few years.
I’d love to hear what you think. Do you know of some startups that are good examples of focusing on those areas? See the situation panning out differently than how I paint it?