Venture capitalism (VC), a business model native to the Western world, has recently gained traction in the Asian market and will only continue to flourish in the future. Thanks to the rise of VC, innovative ideas native to Asia are being discovered and supported, which may inspire the construction of new Silicon Valleys across the continent.
Consumers have frequently criticized goods and services produced in China as lacking in originality and quality. Since so many global companies outsource their production in China, the Chinese businessman’s mindset has been molded into copying whatever is trendy to make cheap knockoffs and quick money. Since the PRC government has blocked access to social media sites like Facebook and Twitter, or video streaming sites like Youtube, the Chinese have come up with copycat sites. Since the Chinese Internet market was quite undeveloped at the turn of the 21st century, the knockoff version of Facebook and Twitter – Renren and Weibo – quickly dominated the market and became almost as popular as their originals by the number of registered users.
Renren is now listed on New York Stock Exchange (NYSE) with a market capitalization of $1.22 billion. DCM, the renowned VC firm that invested in Renren during its early stages of development, currently manages funds of about $3 billion and has over 143 companies in its portfolio. Out of the 143 companies, 41 companies were founded and are currently operating in China, 16 in Japan, 80 in the US, and 6 from elsewhere in the world. Although US companies still occupy more than half of DCM’s portfolio, Chinese companies are quickly catching up.
Chinese companies have also received more global media attention than ever before. Jack Ma’s Alibaba Group, a tech company that has successfully evolved itself into an e-commerce conglomerate, has just changed its IPO filings recently revealing that the company would be listing its shares under the symbol “BABA” with the NYSE. This news has started a frenzy among the business people across the world. Newspapers like the Wall Street Journal, Financial Times, Forbes and even the Irish Times have written about Alibaba within this past week. Steve Schaefer, a Forbes correspondent, even went as far as saying Alibaba’s offering can maybe surpass Facebook’s 2012 debut as the largest tech IPO on the record, and challenge Visa’s hold on the title of the biggest US listing.
One of the most famous subsidiaries of Alibaba Group is Taobao Marketplace, the dominant online shopping website in China and beyond. Although Amazon’s service is global, its popularity and market share in China pales in comparison to Taobao’s. A sizable portion of the population, especially younger generations, purchases everything they need exclusively online. And even if they were to go shopping in a physical store, that would be only for the purpose of comparing prices. People would still go back online to purchase from Taobao, because goods are often cheaper there. Before Taobao was created, Softbank Corporations of Japan invested $20 million in Alibaba Group without getting any of its shares. Softbank made a bigger offer to Jack Ma, in return of getting 30% of Alibaba’s shares. However, Jack Ma was too smart to give his company shares away at the time. The investment turned out to be very profitable for Softbank, since it became to own 34.3% of Alibaba, and has gained 45% over the last year.
Modern China has been known for its cheap labor, but never before has it been known for organic economic innovation and growth. More young people are becoming entrepreneurs and many successful companies have been born from this unique kind of creativity, the kind that attracts capital and endless opportunities. VC will further encourage entrepreneurship among youngsters, and this is a hopeful sign of diversifying China’s economy to support sustainable development in the future.
Update: The featured image was changed on July 29th
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