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Incubators Are Facing Difficulty in China

The concept of incubators was first introduced to China by Kai-Fu Lee at Innovation Works, but after three years they are beginning to face a variety of issues.

Incubators are supposed to help entrepreneurs focus on developing excellent products by solving issues related to staff recruitment, laws and rules, as well as company culture.

Yet Yu Yongfu, CEO of UCWeb, says that the business incubator model is ushering in its own failure, mostly due to the business environment, rather than the model itself. New companies are required to be generalists to avoid being weeded out.

For entrepreneurial companies in the mobile Internet industry, what worries them most when starting up a business is not the capital or the office site that business incubators are likely to provide them, but it is the ability to endure intense competition with Internet giants. With giants dominating the ecosystem, entrepreneurs in mobile Internet now face more difficulties; they have fewer resources available and need to produce a stronger impact at a higher speed. A simple idea cannot ensure consistent success.

The trend in China has generally been that when entrepreneurs begin to explore new markets and develop new applications, Internet giants follow and take the fruits.

When it comes to investigating a new entrepreneurial program, investors are likely to ask the question:”What if Tencent or Taobao launched a similar product?” So startups in the industry always have to consider how to deal with the looming giants as they try to make products and attract more users.

During these past three years, the market has teemed with investment organizations devoted to incubation. However, according to angel investor and former President of Huawei’s Internet Service Department Zhu Bo, more than 95% of domestic business incubators have issues. They can’t really incubate companies able to withstand fierce competition.

As a pioneer in the business incubator industry, Innovation Works has incubated several successful projects including Wandoujia, Dianxin, Youmeng, etc. Now Innovation Works is beginning to pay more attention to early-stage investment. If a start-up company can’t grow up quickly in the early days, it’ll have a smaller chance of becoming strong. The longer the time it takes to grow, the fiercer the business environment it will face.

Translated and written by Stella Wang

Sources: TechWeb (1, 2, 3)

Edited by Matt Johnson

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