The Chinese Tech Landscape Is Maturing
Within a short span of two years, Chinese tech firms have swung from churning out mostly reverse-engineered products to becoming a leading player in the global tech landscape. Substantial positive developments have taken place in the Chinese tech landscape, which is being likened to the quick explosion of the tech companies in the dot com era of the ’90s.
A number of developments over the last year, some of which are seemingly negative, have actually propelled the Chinese tech industry forward in the right direction. The latest of these developments came in the form of the partial decoupling of the Chinese and US tech ecosystems as a result of geopolitical tensions and the looming trade war. However, such developments have actually forced the local Chinese tech firms to step up and evolve a more disciplined and rational approach to investments into tech startups.
All the stakeholders have been forced to reinvent and find newer models that work.
Entrepreneurs are placing greater emphasis on the economic viability of their ideas as they build up and pitch increasingly sound value propositions. Limited partners increasingly seek competitive rates of return on their investments in these tech startups and demand a promising track record. The crucially important human resource in these tech firms is also demanding greater rights.
In other words, the landscape has come to evolve into something that closely mirrors Silicon Valley.
Furthermore, the cross border venture capital flows seemed unaffected by the trade war and the strained relationship between the two largest economies of the world. In fact, the venture capital flows from the US into Chinese tech startups recorded a sharp increase by the end of last year. Of all the venture capital investments from across the border, US capital made up 64%. A total of 355 cross border investment deals were reached between Chinese companies and US investors last year.
US-based venture capital firms invested a record $19 billion last year, which was twice the amount from a year earlier. US-based venture capital firms such as Redpoint and Sequoia are favorites of the local Chinese tech firms who love the partnership for the global customer access that it provides.
Another major development has come on the heels of the recent foreign investment laws passed by China that greatly evens out the competitive field for local and foreign companies. This is making the local tech landscape more competitive. Foreign companies bring technical knowledge and the mindset that drives the top tech hubs in the world, such as Silicon Valley.
All of these developments have actually helped the local tech landscape to flourish and progress.