To some, Shanghai-based startup incubator INNOSPACE+ seems like it’s taking a different path. While there are over 10 startup accelerators in Shanghai, it’s rare to see a startup incubator in the fast-paced city which actually spends money and puts in a great deal of effort to help promising startups to grow.
Taking a lonely path might have been difficult for new players, but now 7-year-old INNOSPACE+ has incubated nearly 400 startups, with a 75% 3-year survival rate. Having incubated and accelerated 10 startups with a valuation exceeding RMB 100 million ($15 million) within 12 months of inception, INNOSPACE+ Ventures’ 1st RMB 40 million ($6 million) Angels Fund recorded a book gain internal rate of return (IRR) of 42%. The Shanghai Tech Bureau has acknowledged them as the #1 ranking accelerator in the region.
“We get over 8,000 of applications a year, and we only pick out the ones that match our investment strategy,” Richard Tan, CEO of INNOSPACE+ told TechNode.
INNOSPACE+ Ventures’ investment is not constrained by a startup’s location and has, in fact, invested in projects outside its physical space including projects in Beijing and Shenzhen. All of their events, resources, and the selected startups are centered on their investment strategies and directions to harness the maximum synergies from all these activities.
“Our model is using the return on investment to cover the cost of running an incubator as well as providing an acceleration program,” Tan said. “Space is just a tool to observe and identify quality startups from the not so good ones, as well as for more effective portfolio management.”
“Unlike other co-working spaces, INNOSPACE+ has an incubation+investment model. This means that we would only set up presence in locations with a strong pipeline of investible projects as well as the need for localized portfolio management support,” Tan elaborated.
This means that all their resources and activities align with investment strategy. Together with their VC Alliance, consisting of the top VC players including Gobi Partners, PreAngel Fund, Innoangel and Atom Ventures, they have been referring projects to each other. And if there is a need, INNOSPACE+ could always request their Alliance members help provide portfolio management support in locations where it does not have a presence.
There are other Chinese startup accelerators in Shanghai, such as Cyzone, Feimalv, iStart, and Suhehui. When asked about other Chinese startup accelerators in Shanghai, Tan explained that iStart’s model is somewhat closer to INNOSPACE+. Cyzone’s main business is media while most others are co-working spaces.
Betting on emerging sectors
INNOSPACE+ Ventures’ 2nd Angels Fund of RMB 200 million ($30 million) is currently being set up, with a focus on three sectors: automotive, smart manufacturing and new retail.
The Shanghai-based incubator is working with BMW, which is trying to find innovative solutions for their cars, and is working closely with Siemens and 3M on developing smart manufacturing and new materials. Together with Acer, the world’s 4th largest PC maker, they set up an innovation lab in Hongqiao Tiandi focusing on IoT projects. Recently, the supply chain conglomerate Li & Feng Group (which dates back to 1906) set up incubator Explorium (利程坊) on Shanghai’s Hechuan Rd focusing on new-retail and new experience and is collaborating with INNOSPACE+. So why are these multinational corporates eager to partner with INNOSPACE+?
“We have amassed much knowledge and resources after years of experiences working with MNCs in these three sectors. We are confident that their 2nd Fund would continue to do well,” Richard Tan explained. “Multinational corporates have a strong need to look for innovation. They partner with us as we are able to help grow startups to a stage that is suitable for these MNCs to consider for technology sourcing.”
Overseas governments are also tapping into INNOSPACE+ to help accelerate their startups to grow in China and to find innovative solutions. Most recently, Malaysia’s Ministry of Trade and Industry brought 29 CEOs from big banks and insurance companies to INNOSPACE+ to source innovative projects and fintech solutions. The South Korean government also sent two batches of five startups to join the INNOSPACE+ Acceleration Program to help them expand into China. As for Hong Kong, Cyberport provided grants to Hong Kong startups that successfully entered the INNOSPACE+ Acceleration Program.
A one-stop service platform for startup gurus
When over 10 co-working space players are jostling to take the best spot in the center of Shanghai to lure young and trendy startup people, INNOSPACE+ decided to locate itself where young people dwell the most: the University area in Yangpu. More than 10 universities and engineering colleges such as Fudan University and Tongji University are located within 3 km of INNOSPACE+. As a pioneer in building up the startup ecosystem, other players like Tencent Incubator, and South Korea’s Hanwha Dreamplus are now located near Daxue Rd (literally meaning “University Road”).
In the lobby of INNOSPACE+, an animated video of a CEO spending a day here is screened for visitors; from work to meeting investors, exercising and finally going to bed after a hard day at work–startup staff can spend their entire day in INNOSPACE+ without having to take a step out of the building. INNOSPACE+ not only has incubator and accelerator, but also an entrepreneurs café, a hardware lab and accommodation, and even a gym. For those startup people who want to devote their time solely on work, and minimize their time on other things, INNOSPACE+ has got everything covered.