The China Phenomenon — Tech Startup Edition

The team from Matrix Partners China division was in Redmond last night, and they talked about the startup scenes in China. What surprised me was the talk about the pace of growing a multi-billion-dollar company in China.

According to the talk, quite a few Chinese companies with valuation over 1 billion dollars were founded from 2012 to 2015, and several of them went IPO in the U.S. stock market.

Wow! Building a billion-dollar company in just 3 years! This really intrigued me, so I did a research on the Chinese Unicorns, and I found the interactive graphics from the Wall Street Journal. I refined the search to Asia, and I found out that, out of the 42 companies, 28 were in China.

You can go here to see the interactive version.

The most recent number from CB Insights is 37 from a total of 176 (in the whole world).

Why is China churning out so many unicorns? My guess is the result of three major conditions:

  1. Open source software
  2. Mobile phone
  3. Dense population

I don’t think I have to explain the first two items, because you can see how they are affecting the startups in America. The third item is unique to China because most people live in high-rise apartments in urban cities, and there are lots of people.

According to a post from World Economic Forum, “ More than 100 Chinese cities have a population of over 1 million people. For comparison, as of July 1 2015, just 10 US cities were home to more than 1 million people.” According to OECD, there are 15 megacities in China.

The image is from this Bloomberg article. I don’t know the validity of the data.

To put the number into perspective, Shanghai (a city) has 34 million people, and Canada (the whole country) only has under 35.8 million people.

Due to the dense population, platform business can grow rapidly in China, but the competition is extremely high. According to this article, “ Take the example of food delivery services; you might have thousands of companies competing in this one area. Not so in the US, where even a handful of rivals is rare.”

If you’re interested in going to China to start a company or join a startup, you should go to some of the Chinese tech meetups, you can easily meet important people from China. If you live in the Seattle area, you can join Seattle Technical Forum, and once awhile, you will see a Chinese specific meetup. These Chinese specific meetups usually have mostly Chinese attendees. The Chinese attendees communicate with Mandarin, but they do speak English. I don’t speak Mandarin well, but I do mange to survive the social interactions by mixing broken Mandarin with English.

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