Following the success of Kaifu Lee’s Innovation Works, startup incubators have sprung up all across China. But Innovation Works is now turning away from internal incubation and moving towards a focus on early-stage outside investment. And there are some serious questions about some of the other tech incubators popping up in China, and whether they’re really helping anyone.
Kaifu Lee says that the decision to incubate companies internally back when Innovation Works launched in 2009 was just a reflection of the reality at that time. Most people were taking a wait-and-see attitude about the company, so it had little choice but to carry its own projects internally, hoping to prove its success that way. But with graduates like SnapPea, Innovation Works no longer has to convince anyone what it is capable of.
Most incubators can’t say the same, though. Former Huawei internet services chairman Zhu Bo once said that 95 percent of China’s have problems. A Tencent tech report calls them “sublandlords” who “just hang up a sign” and then sit back and collect rent and taxes from struggling startups. Internet analyst Xie Wen told Southern Weekly that many of these incubators are accepting subsidies and other forms of cooperation with local governments, but that the money is spent recklessly, embezzled, or used for corruption.
And even Innovation Works isn’t immune from criticism. Netease CEO Ding Lei has pointed out publicly that Kaifu Lee doesn’t have much in the way of startup experience, and has suggested that startups would be better off coming to Netease with their products, since Netease can offer them money, management, a userbase, and more. SnapPea founder Wang Junyu defended Innovation Works’s model to Tencent Tech, crediting it with his company’s success so far.
Another problem may simply be China’s online environment. UCWeb CEO Yu Yongfu has said that incubators may be doing a disservice to Chinese startups, because growing too fast too quickly can leave companies too focused and unable to adapt, which is a veritable death sentence on China’s internet. And in China where the cost of living is low and young engineers don’t expect princely salaries, many startups don’t lack for money or office space, so the prospect of giving away a lot of equity to join an incubator isn’t all that appealing.
If you read Chinese, the full Tencent Tech article on Chinese incubators is worth a read, although it is quite long. And if you run a startup, let us know what you think. Is it worth joining an incubator to get some support for your company, or do Asia’s low overheads for tech companies make bootstrapping a better option?
[Tencent Tech via TechWeb]
Stay updated on the go with our mobile app.
Get latest insights with smoother, more personalized experience through TIA mobile app.
