To the unfamiliar, this city of 21 million may look like another banal Chinese metropolis but to tech entrepreneurs, this is a technological wonderland.
Rewind thirty years, the city that we now know as Shenzhen was a fishing town that was declared as China’s first Special Economic Zone in 1979. Something so heavily regarded that it warranted the protection of an 85-mile long barbed-wire fence. Fast forward two decades, the population had climbed to over 5 million as investment and migrant workers flooded in from the countryside. Factories and apartment blocks rose overnight to accommodate the dizzying growth. With the resources, materials and diaspora of skilled workers, entrepreneurs emerged from the chaos in the most unlikely of places — copycat products. Ranging from Louis Vuitton handbags and replica Rolexes to fake MP3 players and mobile devices, these products slowly made their way to the mainland and Hong Kong. As the Internet became more robust, and online marketplaces like eBay came to existence, it wasn’t long before their counterfeits were readily found mixed in amongst the genuine.
Despite the disregard for intellectual property laws, the counterfeit market was the engine that undeniably powered the rise of Shenzhen to the modern metropolis that it is today. This boom, that is still in operation today albeit on a calmer scale, laid the all-important foundation that the current startup scene is dependable on.
Today, Shenzhen is host to about 10 percent of the country’s new startups and most notably it hosts Chinese internet giants Tencent and Daijiang Innovation Technology, one of the world’s largest drone makers. To the unfamiliar, this city of 21 million may look like another banal Chinese metropolis but to the small global community of hackers and tech entrepreneurs, this is a technological wonderland. As China continues its mission to become the World’s dominating economy, Shenzhen is the place of opportunity. It’s a vibrant metropolis of creative exploration where circuit board manufacturers, injection-moulding companies and fleets of packagers and shippers are a walking distance away. It is also home to Qianhai, a special economic zone intended as a test bed for China’s yuan liberalisation and other financial reforms, has attracted many foreign banks and leading financial institutions in the past two years.
In Shenzhen, you have everything you need to create, produce and test an idea in a matter of days — something that is unimaginable in the U.S. That’s the kind of dynamic flow that is possible when you’re neighbours with some of the leading hardware manufacturers in world. It isn’t surprising then that the city is slowly becoming home to leading hardware companies of drones, wearable tech and robots as it carves its name as the Silicon Valley of hardware. The city also finds itself home to numerous tech incubator schemes such as HAX, the world’s first and largest hardware accelerator. Headquartered in a typical tower block Huaqiang North, the office houses startups from all over the world. Dispatch, an autonomous delivery vehicle founded by a team of MIT and University of Pennsylvania computer vision researchers can be found there. The reknown accelerator also housed alum including Carbon Robotics who developed KATIA, their Kick Ass Trainable Intelligent Arm, to bring the functionality of an industrial robotic arm to mainstream consumers; and PRYNT, a case for smartphones that prints photos instantly.
Traditionally, the domain of hardware development carried with it more complications and costs than software. It was more common to find innovative hi-tech products coming out of R&D labs that had the required equipment and budget to pursue these projects. However, the advent of crowdfunding platforms like Kickstarter has redefined what it means to be a hi-tech entrepreneur. You can now go long way with a proof of concept, prototype and the backing of a group of excited fans and potential customers who pledge not only their excitement but also their cash in return for the finished product.
Spurred by the budding startup ecosystem attracting jobs at the growing number of internet, tech and finance companies, Shenzhen has also become the country’s priciest real estate market — inflating almost 40 percent in 2015. This puts it above Beijing and Shanghai, China’s two largest cities. Meanwhile, the city’s population has surged from 18 million to 21 million in a mere 2 years. Not dissimilar to San Francisco where space is a premium and dictated by universal rules of supply and demand, the cost of living is expected to rise as much as 10 percent this year as new startups continue to flood in. Meanwhile, a patch of land in west Shenzhen fetched a record 80,000 CNY ($12,000) per sq m at auction in December, ranking as the most expensive nation-wide last year.
Despite the city’s unique position in the industry, it’ll be some time before the Silicon Valley comparison truly lives up to its title. Silicon Valley has spent decades developing a complex innovation ecosystem that has mothered the likes Facebook, Uber and Airbnb to become the giants they have grown to become. The San Francisco Bay area has been able to establish and retain such talent because it is founded on the ethos of attracting top creators and innovators alongside now well-established free-spending venture capital firms. It is also home to world-class universities that are responsible for breeding some of the most influential tech entrepreneurs: Four out of the five founders of LinkedIn cofounders, Instagram cofounder Mike Krieger, Snapchat cofounders Evan Spiegel and Bobby Murphy. The list goes on.
At the moment, Shenzhen lacks most of these ingredients that make up the Valley’s architecture. Though recently, Shenzhen government announced that it plans to spend 4.4 billion yuan ($680 million USD) in 2016 to attract the top talent from China and around the world. Encouragement for qualified academics and tech innovators comes in the form of a one-off payment of up to 6 million yuan (approximately $930,000 USD) they can apply to. However, what the lively metropolis does offer is potential. The potential of a budding tech ecosystem that though still juvenile will continue to grow and attract talent from within and without. It has all of the raw materials for tinkering and building and a financial district in Qianhai that could give birth to China’s version of Greylock, Sequoia and Andreessen Horowitz.
Shenzhen is still several dozen billion-dollar ideas behind Silicon Valley. That’s an enormous gap and one that won’t be closing anytime soon. But for the people who are watching Shenzhen shed its reputation as a haven for low-cost copycats, the excitement is palpable.
This story was originally posted on Noise Corner, a digitally native platform for nuanced ideas, original thoughts and trending stories that are redefining our world.
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