CEO of UC Web, Yu Yongfu, wrote an article summarizing 2012 startup scene in China and gave talks at a couple of events on the mobile Internet. The conclusion is like that 2012 didn’t turn out to be a good year for Chinese startups.
“At the beginning of the year, a lot of people were full of confidence, believing that the spring for entrepreneurship was coming finally. When reaching the end of the year, however, we didn’t find many startups standing out. Look at the download charts of app markets. There still are the old guys. The reason is its too risky that some friends of VC circle even turned to UC, hoping to make strategic investments together with a platform.”
Big opportunities become smaller, while the small become bigger.
“In one hand, China Internet industry has been through the times of grass-root heroes. There’s few chances for entrepreneurs who’d want to build the next Baidu or Tencent. On the other hand, investments or acquisitions by big companies became the new normal. The chances of selling startups to big companies are big. There are more exits for entrepreneurs.”
It wasn’t until 2011 that internet giants in China like Tencent started making investments in startups or even acquired them – Yes, previously Tencent was accused of simply copying creations by others, startups or not. From then, Tencent invested in more than twenty companies, and acquired or took controlling stake in a handful of domestic startups, covering e-commerce, online travel, mobile apps, games, etc. Other big players, such as Baidu, Alibaba, Shanda, Qihoo and Sina, have invested in or acquired many Chinese startups in 2012 alone.
UC Web has invested in more than ten startups in mobile sector and several of them were acquired by big companies, according to Mr. Yu.
He estimates that there will be further consolidation in 2013. To startups, he suggests them “don’t waver” that there are way more choices to exit although few chances to build big platforms.
He thinks future opportunities lie in “redefining” and technology. Redefining refers to revolutionizing traditional industries, “like how Joyo, Vancl, 360Buy and Xiaomi transformed and disrupted traditional book, garment, home appliance and mobile phone transactions.” He also points to Weixin, which, he think, redefines instant messaging that voice and picture messaging disrupted text communication.
As China is full of copycats, technology is what to help startups stand out, Yu believes. The factor of technology will become the differentiator between products of similar ideas. “What we compete will be whether you can make it happen over whether you can come up with the idea.”
How much is a Chinese startup?
“In today’s China, the acquisition price for a startup, with five to ten million users and less than one hundred employees, is about ten to fifteen million dollars”, Mr. Yu gives you an idea.