This report is part of our series on startups in China in which we focus on the startup ecosystems in Shenzhen, Beijing and Shanghai to provide insights into how these three cities are incubating businesses with global potential. In this report, we examine the growing presence of incubators and accelerators in Shanghai.
The number of incubators, accelerators and co-working spaces in Shanghai has grown rapidly—from fewer than 40 in 2014, to 60 by mid-2015. Currently, there are over 500 entities in Shanghai that can be classified as incubators, accelerators or co-working spaces.
The lines that define incubators, accelerators and co-working spaces have blurred in China. These entities are collectively referred to as “mass incubation spaces” (众创空间) in everyday vernacular as well as in government policy, as further explained below.
The explosive growth in incubator-style entities has several implications:
Shanghai is not alone when it comes to rising concerns about an overcapacity in “mass innovation spaces.”
Below, we highlight a few accelerators that have significant overseas partnerships.
Chinaccelerator―A Shanghai-Based Startup Accelerator
Chinaccelerator, a branch of SOSV—an early-stage startup investment firm with $300 million under management—was the first accelerator in Shanghai to focus on cross-border innovation, helping international startups enter China and Chinese companies expand internationally. Chinaccelerator picks a small number of promising startups twice a year.
The accelerator program includes an investment of $30,000 for approximately 6% of equity, and provides office space, training and mentorship support. In addition, startups can collaborate with a network of corporate partners through Chinaccelerator’s corporate innovation program.
Microsoft Accelerator―A Professional Network Provided by Microsoft
Microsoft Accelerator provides startups with access to top Microsoftpartners and customers, business connections and technical knowledge. The program has offices located in seven cities, including Seattle, London, Berlin, Tel Aviv, Bangalore, Beijing and Shanghai. Some 647 companies worldwide have joined the accelerator program and have generated an average of $5.2 million in follow-on funding.
Microsoft supports the tech startup community by offering technology enablement through programs such as BizSpark, which gives free access to Microsoft Azure cloud services, as well as funding through its Microsoft Ventures fund.
Plug and Play―A World-Leading Startup Accelerator
Plug and Play is a global innovation platform and startup accelerator with 22 offices around the world, including in Silicon Valley, Shanghai, Beijing and Shenzhen. Plug and Play runs 12 industry-specific accelerator programs twice a year, which act as a platform for major corporations and high-quality startups to connect and collaborate.
Plug and Play has helped market leaders such as PayPal, Danger, Google, DropBox, LendingClub, Zoosk, SoundHound, CreditSesame and Skytree, and has over 400 more early-stage startups in its portfolio.
Shanghai Valley―An Online and Offline Investment Platform
Shanghai Valley is a China-focused accelerator that provides an online and offline investment platform for institutional investors. Startups, as part of the platform, receive investment money from pre-screened institutional investors. Institutional investors, after investing, become local partners to provide resources and connections to help the startups grow. The online and offline platform also gives startups a secure way to communicate to build visibility and credibility with investors.
X-Node―An Accelerator Operating Multiple Co-Working Spaces in Shanghai
X-Node operates multiple co-working spaces located in core commercial areas around Shanghai—Jingan, Zhangjiang, Hongqiao and Donghu. The company holds three to four events weekly, including lectures, networking sessions and focus workshops for small teams. X-Node also partners with 10 incubators and innovation programs from around the world, among which are Rocketspace and NUMA.
The New Breed―Mass Innovation Spaces
Below, we take a closer look at a local community café for integrated circuit startups that benefitted from government funding. In early 2015, 36 of these Shanghai “mass innovation spaces” formed an alliance to coordinate better amongst themselves and with the government.
Among the founding members of this alliance is SuHeHui, an angel investor institution. Apart from running a co-working space and helping angels find startups, SuHeHui offers a four-month program in which selected startups are required to participate in training and networking once a week. However, the startups are not required to have their team work from SuHeHui’s offices. Like an accelerator program, a demo night is held at the end of the four months.
Another mass innovation space, Tech50, is located in the suburban Jiading District. It combines co-working with co-living, pitch competitions and training for entrepreneurs.
Featured below, IC Café was also one of the pioneers of these incubator-style entities in Shanghai.
IC Café was set up in 2012 as a café for enthusiasts in the semiconductor industry (the name IC stands for integrated circuit). Eight cofounders contributed a total of ¥160,000 for the initial setup capital. It took about two years to break even. By early 2015, the immensely popular coffee club had expanded to Beijing and Shenzhen, hosting community events to a full house every other night. However, despite its popularity, the café was struggling financially.
Early 2015 was also a time when several privately-owned startup incubators and tech community spaces in Shenzhen and Beijing were shutting down or laying off staff.
Thanks to government support, IC Café was saved from the same fate. The Science and Technology Committee of the Pudong District government rented a 300-square meter office to serve as an incubation space that could accommodate 12–15 startups at a time, and made IC Café the operator. IC Café has since expanded to Hefei and Wuhan in China, and also overseas to Singapore and Silicon Valley.
Accelerators, incubators and co-working spaces play an integral part in any startup ecosystem, and the same is true for Shanghai. Spurred by government incentives and a proliferation of entrepreneurs, the number of entities that support startups in the city has increased rapidly over the past three years.
While the presence of accelerators and incubators is good for entrepreneurs, there is a case to be made about an overcapacity of innovation spaces in the city. Naturally, players in this space are increasingly looking to differentiate themselves in an effort to attract the best startups, and those offering the best “soft” support services, such as access to mentors, potential clients and investors, are the ones that will likely remain relevant.