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Based in Shanghai, iStart Ventures is a technology incubator and angel fund co-founded by the local government, SB China Venture Capital (SBCVC) and angel investor Cha Li. Managing an area of about 10,000 square meters, it offers office rental, training programs and other services for young entrepreneurs. It mostly invests in seed stage and series A round with a fund size of RMB200 million and a focus on wireless internet, new media, health service and environmental technology. TechNode interviewed iStart founder Cha Li, about how iStart attracts young entrepreneurs and invests in them.

Where do iStart Ventures’ funds come from?

Until 2010, our funds mainly came from U.S. and Europe. In 2010, the government’s foreign currency policy changed, and it took about a year for foreign capital to invest in startups here. Startups need money instantly, so it became hard for foreign investors to invest in early stage Chinese companies. For that reason, iStart Ventures’ current fund is mostly from the government fund of funds and domestic investment. The typical government fund is total RMB 1 billion or more, with 30% invested in early startups, 30% invested in grown companies and 30% for IPO or private equity. Domestic funds are from large corporations and high net worth families, I should say. Minhang government is one of the LPs.

In which area do you tend to focus on and invest in?
As an angel investor, I don’t go with crowds, so I don’t have a limitation on the areas I invest in. We try to invest in new technology in broad areas like new materials, health, and environment. We have 50 portfolio companies, with tech startups occupying half of our portfolio and internet startups the rest.

Screen Shot 2015-04-14 at 11.21.17 PMNew technology is developing in China. In 2000, only research centers and universities had high level technology, but nowadays the private sector also has access to it. I see people all around me who used to work for government research institutions and quit to start their own businesses.

Tell us about the iStart Ventures incubation program.

The three-month program targets young entrepreneurs with an idea, at a time when they have neither products nor customers. We usually select only the best 20 projects out of up to 1000 applications. In our open space, we invite successful entrepreneurs or VCs to give entrepreneurs intensive training in business models, team building, and product development. After three months, we invite investors to review the projects. In the seed round, we invest between RMB500,000-5 million. By providing a free course for entrepreneurs, we maintain a strong flow of deals for investment. In each incubator, we have an annual turnaround of 200 to 300 projects. About 60% of these projects become startups. The top performing companies can ask for an extension for three to six more months. Some exceptional companies, such as Eleme, have stayed in our incubator for two years.

Tell us about a startup that graduated iStart Ventures incubation program.

Eleme, the largest online food ordering service company in China was started by three college students at iStart. When they first came to our training program, they had only 2000 daily orders; by the end of the first year it had reached 100,000. Now orders are at over 2 million a day. The Eleme team shock me every time I talk with them, since I remember when they were only college students with no business experience. This year they plan to achieve their goal of 500 million orders a day.

I see a lot of post-90s entrepreneurs in China. How can you feel secure investing so much in them, when they don’t have much experience in the business world?

Our current focus is investing in individuals, mainly post-90s born entrepreneurs. They are the internet generation and we try to pick up the best people and invest in their companies. In venture business, we all try hard to create miracles. In this respect, I believe “Experience is a limitation”. Being young and inexperienced is an advantage. Many will argue that experience is a key success factor, but I don’t agree. For those who have worked for a big company for many years, how many of them have had experience of fundraising, finding partners and having to fire people to survive? Doing a startup is a learning experience and entrepreneurship is a lifestyle.

How does iStart Ventures bring young entrepreneurs into its incubator program?

Through our close relationships with Jiaotong University, Shanghai Foreign Language University, and Tongji University, we have many programs organized for Chinese students, such as our Big Idea Competition.

What are iStart Ventures’ future plans?

To make iStart a much more international incubator, we’ll be launching a campus exchange program for the U.S. and European colleges to bring in students to start their business in Shanghai. We’re planning this for a conference held in September. We have also partnered with Fortune 500 companies and their innovation programs. We have hosted SAP executives in our incubator to assist startup entrepreneurs. We also brought Amazon to establish a cloud computing incubating center in Chongqing, an intense city with lots of industry and millions of people.

I believe that young Chinese companies are joining the global wave of innovation and China is becoming a big Silicon Valley.

 

Image Credit: iStart Ventures

 Editing by Mike Cormack (@bucketoftongues)