Start-ups build confidence with govt help in Chengdu

CHENGDU — Asked about his choice of Chengdu as a base for his start-up technology company Topplus, Mr Adam Xu, its founder, is fond of quoting Mao Zedong, who called for his followers to “encircle the cities from the countryside” to attain victory.

An entrepreneur with a background in the military, he started Topplus to pioneer augmented reality software that is used in cameras, drones and goggles.

But before storming the bastions of Beijing and Shanghai with his new products, he wants to spend some time “in the country”, as he puts it. For start-up companies and communist guerrillas alike, it turns out, confidence is important. “If we started in Beijing or Shanghai, the confidence of the team would be battered,” he said.

Like Topplus, the vast majority of the start-ups in Chengdu are based in the Tianfu Software Park, a government-owned complex that attracts high-tech companies by offering incentives on rent and office equipment, as well as providing training and help connecting with investors.

Most entrepreneurs are from Sichuan but some, like Mr Xu, who hails from Changsha in Hunan province, have specifically chosen Chengdu as the place to launch their businesses.

Camera360, a photo app that has 100 million users worldwide, is one of the main success stories. The company that makes it is still headquartered in Tianfu even though it has opened offices in Beijing and even Silicon Valley.

Mr Gary Gu, the chief operating officer, recalls the time six years ago when he founded the company with two friends from school. They were able to take advantage of incentives that saved them at least 100,000 yuan (S$20,253) and received another 100,000 yuan in the form of a government grant. “When you’re (in the) very early stage without any investors, this amount means a lot because you’re paying for everything out of your own pocket,” said Mr Gu.

Ms He Lei, general manager of Tianfu Software Park, says success in attracting outsiders to Chengdu is important for the park’s reputation, and cost is a major draw. “They could set up shop in Beijing, but the longest they could last on their own capital is two to three months,” she said. “Here they could last for a year at least. This ‘survival-ability’ is key for start-ups. How long can they last with the money they have?

“As of yet we have not had a unicorn,” she admits, referring to start-ups which have achieved valuations of more than US$1 billion (S$1.3 billion).

Mr Zhang Yi, chief executive of iMedia, a consulting firm, agrees that Chengdu is “ideal for a fledgling company”. Staff turnover is low, and entry-level programmers flood out of eight universities in the city, content with wages that are 60-70 per cent less than they could earn in Beijing.

“I’ve tried Beijing, it’s too stressful for me,” said Mr Tony Ho, a game developer, as he served tea. One reason for setting up his gaming company, Skymoons Digital Entertainment, in Chengdu was the abundance of skilled game programmers — a legacy of the big gaming companies such as Tencent, which opened there before him. Though the salaries Skymoons pays are equivalent to Beijing’s, the lower cost of living means employees feel better off. Rents are one-third of that typically charged in Beijing.

Another difference between Chengdu and Beijing is the work-life balance. Many companies admit overtime is not common. Mr Ho says his philosophy is to let his employees keep “a stable pace like a marathon, as opposed to the 100m dash of Zhongguancun (Beijing’s technology hub)”.

Tianfu Park is also home to companies such as Maiziedu, a platform that trains professional programmers. Maiziedu collects feedback by monitoring each student’s concentration rate with a brainwave detector headset.

“Visit us in 10 years and hopefully we’ll have a helmet teaching you to fly a helicopter in five minutes, because if we can read brainwaves, we should be able to write them,” said Maiziedu’s chief executive Zhang Linghua.

He adds that they are starting to outgrow Tianfu. “When your business is software development, Beijing is the place to be. The park won’t let us leave, however, because we are their poster child,” he said, explaining that Maiziedu has committed to providing training for many IT employees in the park.

Mr Shen Bo, chief executive of fitness app start-up Codoon, divides his time between Chengdu and the new office in Beijing. He says the company’s needs have evolved from the early days when the priority was to keep costs down. Now, he says, the company’s focus is on staying ahead in the industry. “As the market leader, competition lies in talent, and the top programmers are in Beijing,” he said.

Mr Robin Luo, vice-president of GSR Ventures in Beijing, agrees controlling costs is important to early-stage businesses. He argues companies lose something by choosing costs over the buzz of being in the heart of the industry, which for now is in Beijing.

“Cutting back on expenses was never the key to any company’s success. It’s all about the business idea, hanging out with the right crowd, (and) there is still a certain vibe here in Beijing,” he said. “Looking at some of the ideas coming out of Chengdu, we’re unimpressed. To us it’s ‘been there, done that’.”

Though he says he does not discriminate against second-tier cities such as Chengdu, or even third-tier cities, he says they do not enjoy the same success as first-tier cities such as Beijing. As he points out: “There haven’t been any unicorns from Wuhan or Chengdu so far.” FINANCIAL TIMES

This is the second instalment of a two-part report on Chengdu’s high-tech investment zone. Read part one at bit.ly/chengdutech.