Funding proves major problem for startups
Updated: 2015-09-07 09:03
By China Daily(China Daily USA)
Lai Shenzhong has been turned down again - the third time in a week.
The 32-year-old entrepreneur has been trying to find investors who will pump around 500,000 yuan ($77,639) into his high-end tourism mobile app service.
"They (investors) are interested in the idea, but most of them have already invested in the online-to-offline tourism sector," he said. "They worry about conflicting interests if they pour money into us."
Lai returned to China in 2014 after working for a Caribbean cruise company for five years. In April, he set up Beijing Traveling Agent online and moved into the crowded Internet tourism sector.
Raising cash has been a major problem. "To be honest, we missed the best time for online tourism investment," he said. "During the past five months I have had to live off my savings."
"Now, I'm in desperate need of money to market and promote my app," he added.
Finding funding is the biggest headache entrepreneurs like Lai face. Among the 30 budding businessmen that China Daily interviewed in Beijing last month, 60 percent of them cited investment as the key issue.
"Despite the influx of investment from the real estate sector and government funding, the supply of money still fails to meet the huge and growing demand for financing," Zhang Kai, general manager of the Beijing branch of Techcode, a company that specializes in helping startups, said.
More than 570,000 people, aged between 18 and 40 years old, started businesses in the Chinese capital by the end of 2013, according to data from Beijing Administration for Industry and Commerce.
But that figure only reflects half the story as analysts point out that the number of new entrepreneurs has surged in the past year as they ride the online innovative wave.
In Beijing, Zhongguancun Science Park, which is commonly referred to as China's Silicon Valley, has more than 13,000 tech companies. According to data from the park, Beijing creates more than 120,000 startups every six months.
"Financial problems are affecting grassroot entrepreneurs who have limited resources in Beijing," Zhang added.
Xiang Liang falls into that category. The 28-year-old came to Beijing in April after dropping out of a startup team in Wuhan, capital of Hubei province.
His plan is to launch an app delivery service for parcels and goods. So far, he has yet to tempt, or even meet, a single investor into funding his startup.
"One of the problems is that I don't have a social network in Beijing," Xiang, who hopes to raise 1 million yuan, said. "It is next to impossible to entice venture capitalists with just an idea. Now, I'm racing against time to develop my product first."
Rapidly running out of money, he has spent the past few months in the Cheku Cafe, an entrepreneurship-themed coffee house in the Haidian district of Beijing.
Xiang pays 25 yuan for a Latte coffee and works on his keyboard for the rest of the day. In order to keep his expenses down to the bare minimum, he pays 600 yuan a month to share a university dormitory.
"But I don't think life is tough, because I am creating value ... It's better than working for other people," he said.
Even if Xiang does manage to tempt an investor with his idea, there is no guarantee he will end up with funding. Promises in the entrepreneurial business are often made and then broken.
Liu Lei, co-founder of Hehe Yunying, an app where Internet experts offer professional advice, suffered a similar fate. "Our company has had problems in that direction," Liu, 26, said.
"After being in discussions for a month, the investors knew almost everything about our team and promised to plow money into our project. But suddenly they took a stake in a rival company. It was a huge waste of time and resources."
Ma Si contributed to this story.
Young entrepreneurs gather at an entrepreneurship club in Zhongguancun, Beijing.Provided To China Daily
(China Daily USA 09/07/2015 page13)