Start-up culture - China style

Author: Robin Tabbers

China’s large cities are a true breeding ground for entrepreneurs. In Shanghai, I have witnessed the birth of many small business initiatives, such as online/IT and e-commerce start-ups. Food & beverage ventures especially seem to pop-up in no time. It is inspiring to see this true ‘China entrepreneurship’ in its purest form.

Great business ideas are often astonishingly simple. I know of a couple that started a small restaurant in Shanghai, with a simple menu featuring salads, good pastas, some favourite Asian dishes and fresh juices to wash the food down. The store became a brand – Wagas – that stood for a clear, honest concept that people understood and recognised. After the success of the first outlet, the owners decided to roll out branches and new concepts in Shanghai and beyond.

Simple and clear concept
Wagas is a success story, thanks to its simple and clear concept, and therewith its scalability. The way the city of Shanghai is built up contributes to the successful rollout, as the city does not have one clear city centre, but  is rather a conglomerate of districts with their own centres. Why is that important? A store that works in a busy city centre may not work in suburbs and rural areas. In a city with several busy areas, a good concept can be replicated with a bigger chance of success. It also helps that in cities, demand can be high, middle and upper class people have money to spend, the business can charge higher prices, enjoy higher margins and can become profitable in a short period of time.

‘New place in town’
It is interesting to see success take shape in a city like Shanghai. In F&B, a successful business idea is often repeated in other areas. A ‘new place in town’ that seems to be successful attracts other businesses. A good store or restaurant may attract a coffee store to the same street, and other types of F&B outlets. Streets that were quiet before, become new centres of activity, true retail and F&B hubs.

I’ve seen several examples of concepts sticking together. After a pioneer restaurant decides to duplicate its success in another area, then the other businesses in the street join them – again. The interesting thing is that these start-ups are not necessarily long-term projects and do not require a large capital investment. These business ideas require some start-up capital, but when they start to make money, the owners often reinvest the cash in new outlets based on the same concept, with the same brand.

Café des Stagiaires
Obviously, the business concept should be creative and offer added value to be successful. In Shanghai, there is a cafe called ‘Le Café des Stagiaires’. Five friends started it as a place where international students and interns (in French: stagiaires) could hangout - and work for their money. You can imagine the crowd of international students the first cafe gathered. The cafe has gone from idea to major business in a very short time - with four outlets and counting.

This hands-on style of entrepreneurship, often by millennials, is also something I have seen outside the F&B arena. A day care initiative that started small in one apartment compound for foreigners in Shanghai quickly grew and made money. Next step: the owners took it to other compounds and it has really taken off.

Software parks
Not all of the start-up culture is located in city centres. In Shanghai, many small firms develop simple but very successful applications and add-ons for social media from a location in one of the software parks. Many of these parks, such as Shanghai Pudong Software Park, Zhangjiang Hi-Tech Park, Shanghai Lujiazui Software Park have been established by the Ministry of Industry and Information Technology and the local Shanghai government.

The parks are part of China’s masterplan to upgrade the economy to become more reliant on advanced technology. Some of China’s efforts in this area are in Shanghai and Shenzhen, but Chengdu is the more fertile breeding ground for IT, with many IT college graduates trying their luck with a tiny start-up in a Silicon Valley-like setting. If they become successful, some large corporation may come and buy them.

Development frenzy
Speaking of IT: the development of e-commerce is still going strong, even outside the big platforms like Alibaba. The development frenzy leads to the launch of different specialised platforms, for example for services, such as to find architects or even suppliers of organic food. The market for food delivery is still booming – small companies come up with very creative ideas. I recently discovered that some new apartment buildings have been fitted with small home delivery vaults on the ground floor. Every family can have its food delivered in one of these vaults – some regular and some refrigerated. The vault can be opened with a digital key using your mobile phone. Voilà and bon appétit, thanks to customer-driven Chinese entrepreneurship!

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