Inside Shenzhen’s startup community

No longer just a shoe or toy manufacturing hub, Shenzhen today hosts the hottest tech startup scene in the Greater Bay. Grace Zhang has a view on it from the ground floor, as chief organizer of Startup Grind’s Shenzhen chapter.  

When Hunan native Grace Zhang decided to return to China after a five-year stint in Chicago studying and working, she chose Shenzhen as her career destination for an unlikely reason. “It’s the weather,” she says, beaming. “It’s a lot warmer and milder than Chicago’s and the air better than many other places in China.” 

Although it has indeed shed its image as a smog-blanketed city in recent years, Shenzhen is not known for great weather. It clearly requires a sunny outlook, however, to do what Zhang does. As chief organizer of the Shenzhen Chapter of the global startup community Startup Grind, Zhang is part tech evangelist, part motivational speaker, and part mentor to young entrepreneurs. 

She is quick to point out how technology has been embraced by the city to help support that sunny outlook: the reason it is now smog-free is because Shenzhen’s entire bus and taxi fleet is battery-powered. Moreover, she says she genuinely has seen a remarkable change in the positive and dynamic energy in the country since she went to the US in 2008, returning in 2013, and this is manifest strongly in Shenzhen.

“The country has become unrecognizable after those years away,” she says. “It seemed just overnight China got high-speed railway or 4G or everything else that was technology-focused.” 

This heighted sense of the need for innovation has created an ideal stage for Zhang, who trained in media management and previously worked as a bilingual tech reporter, to help build a vibrant startup community in Shenzhen. 

Rolling along

Not that Shenzhen was in dire need of Zhang’s help. This is the city that famously bred tech industry heavyweights such as Tencent, Huawei, DJI, ZTE, and many others. According to official data, Shenzhen has the highest startup density in China. In the six years since Shenzhen officially started its new commercial registration system, the city has seen more than 2.14 million registrations, equivalent to every thousand Shenzhen residents having 249 commercial registrations and 157.6 operating enterprises. 

Zhang is focused on a different mission than the city government is. Her goal is not so much to find the next great tech unicorn story, but to do something much simpler: Give a helping hand to someone who needs it in the tech startup space. No returns necessary.

She began here with low expectations. A leading U.S.-based seed accelerator, Y Combinator, needed a local organizer to help promote its “How to start a startup” online courses, as well as organize offline discussion groups. Zhang took the job and got the ball rolling. The offline course attracted an overwhelming number of participants, coming not only from Shenzhen but also Hong Kong, Guangzhou and as far away as Xiamen. “There wasn’t something like this here at the time, very Silicon Valley-like, completely free and open,” Zhang says. 

The course, in partnership with Stanford University, invited well-known venture capitalists or successful entrepreneurs to the Startup Grind space, to offer insights on building and running a startup. It wasn’t easy to get going. To cater to a Chinese-speaking audience, Zhang had to download and translate the weekly session into Chinese and then create a presentation based on some of the highlights. “We did it every weekend for four months straight. It was very intense but awesome and I think that was what got me to dive into the startup world of Shenzhen,” she says. 

Now working as a brand manager with a state-owned energy company during the day, Zhang still devotes her remaining energy into building the Startup Grind community in Shenzhen. Founded in Silicon Valley, Startup Grind claims itself to be the largest independent startup community that has been “educating, inspiring and connecting more than two million entrepreneurs in over 600 chapters”. 

The organization is best known for its monthly event series, a format Zhang has adopted for her Shenzhen chapter, featuring fireside chats with successful local founders, innovators, educators and investors. 

The network, in partnership with Google for Startups, adheres to a mantra that carries a hint of Silicon Valley idealism: “We believe in making friends not contacts. We believe in giving not taking. And we believe in helping others before helping yourself.” 

Zhang acknowledges that all mantras sound warm and fuzzy – until one has to execute them. “I think the most important part is how you implement it into helping the community or the startups and bring value to them. These mantras are there not only because they sound good, but also give us some kind of guideline as how you choose to do things and who you’d partner with for your community.”

She says that as a community builder, these mantras have helped her the most when she only had limited resources and had to focus on what was most important.

Zhang remembers that at the beginning they did not have a dedicated venue for events and had to use coffee shops. “The coffee shops didn’t like us because we didn’t drink enough coffee; and we didn’t like the coffee shops because they didn’t have equipment like a projector screen or sound system. But we didn’t have any other choice. That was when I decided we must focus on providing quality content through the events we organize.” 

These days, Startup Grind Shenzhen, staffed by volunteers, launches at least one event a month, each time attracting more than 100 participants. “Good content brings good crowds and more people would like to be associated with you and that’s where our success took off,” Zhang says. The chapter currently has 1,598 group members and is widely regarded as one of the most active startup networks in China, supported by local partners such as the San Francisco headquartered coworking accelerator Rocketspace and the decentralized AI network SingularityNET. 

In May, Startup Grind Shenzhen organized an event called Decode the DNA of Tech Media. It invited Jackson Wightman, founder of tech PR agency Proper Propaganda, to provide practical tips and principles about communicating innovation. Especially tailored to Shenzhen-based companies going overseas, Wightman talked about how large tech media organizations work and offered a slew of practical tips on how to get high-value coverage when a Chinese company is looking to expand internationally. 

Earlier this year, Startup Grind Shenzhen teamed up with Harvard Business School to create a video about the entrepreneurial ecosystem in the Greater Bay Area. To celebrate the occasion, the group also organized a panel discussion with such “catalyst leaders” as Cristina Ventura of Hong Kong-based premier fashion retail group Lane Crawford Joyce, Yan Yan of the closed-door tech summit Mars Summit, and Trent Barnes of blockchain VC firm ZeroCap, to discuss what key roles they hold in building an ecosystem. 

Future-focused

Among all the startups in Shenzhen, Zhang says she is most excited about 5G, biotech, robotics and IoT. “These are the sectors that will define our tech landscape in the next five years,” she enthuses. 

Referring to Shenzhen-based drone maker DJI, among the most successful young companies launched here in recent years, Zhang recognizes the challenges ahead. “Other companies want to follow in DJI’s footsteps, but how to commercialize research in AI and robots is still a question for investors and startups. I have strong hope that this can be a sector that sees genuine collaboration between Hong Kong and the mainland cities in the Greater Bay Area, especially Shenzhen.”

The city is generous in offering incentives and subsidies to lure top talents, especially from other cities in China, Hong Kong and Macau. Last year, Shenzhen added nearly half a million residents into its population, the largest increase among all Chinese cities. Its openness and inclusiveness is a major attraction, especially to someone under 35, according to Zhang. 

“In Shenzhen, a degree is only meaningful in an academic context and doesn’t matter as much socially as it does in Beijing or Shanghai,” she says. “People don’t care which university you graduated from or which alumni network you belong to; they care about what value you have created. It’s really liberating!”

Just like in Silicon Valley, and perhaps even more so, being young is glorious in Shenzhen – and a highly-valued commodity. “If you go to Nanshan, the city’s tech base, most people you see are under 25 with a backpack and a bubble tea in hand,” she says. It helps that the government is handing out startup funding only to under-40s. 

“This can be problematic,” Zhang acknowledges. “I think young teams can benefit greatly from the experience and expertise of someone older. But, in China, 35 is already widely considered middle-aged.” She points to the one-child policy as having pushed more people into settling down earlier to satisfy their parents, meaning people in their 30s are more risk-averse. Venture capitalists have exacerbated the trend by being wary of the energy and commitment required of older entrepreneurs.

Cashflow is king

Probably the biggest challenge facing startups in Shenzhen, however, is raising capital and managing cashflow needs. “China’s tech industry is getting increasingly capital-driven,” Zhang says. The success of start-ups like Luckin Coffee, which listed on NASDAQ in May after two years in operation, relies largely on the founders’ ability to get large amounts of capital in at an early stage to fund market-share acquisition. This model is very difficult, however, for hardware companies, which is what Shenzhen is best-known for. Biotech, AI, robotics or IoT are not able to get as many adopters in such a short time as online-service companies are, Zhang says. This really tests the founders’ ability to execute on their visions, leading their teams, creating viable products, efficiently delivering them and maintaining a close relationship with the supply chain. “In other words, it’s real work!” Zhang says. 

Having said that, Shenzhen has its advantages, and should be taken more seriously by foreign entrepreneurs than probably any other city in China. The fact that everyone in Shenzhen is from somewhere else in China has created a very non-discriminating culture. “I’ve seen foreigners who have built very successful companies in Shenzhen and they’re still running them,” Zhang says.

She also notes the barriers foreigners must face here, as they would anywhere in China. They have to overcome differences in language and culture, and must be prepared for fierce competition. Moreover, government funding for foreigners is scarce. Indeed, although barriers are coming down quickly, the process of bringing foreign capital into China is a complicated process and this has increased the difficulty of obtaining funding for foreign startups in China. 

Still, they keep coming. In the past five years, a number of new startup communities have emerged in Shenzhen, including the popular international brands Startup Weekend, Slush, and Angelhack, while some of the older ones are being weeded out. “Compared to five years ago, the startup communities are getting a lot more external support from for-profit or non-profit organizations these days. They’ve generally acknowledged the importance of these communities and are willing to provide various support. This allows us to continue exploring and growing,” Zhang says. 

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