Start-up Environment in China
Carl Eschenbach, this week’s guest speaker, made a rather intriguing comment about the start-up environment in China. While comparing two lists of tech companies with top capitalizations in 1992 and 2017, he mentioned, “The companies from China already have the top capitalizations in the world. My guess would be, if we spent one year [. . .], this [would] look completely different. Not only these [companies] may move up, but you may see a lot more from China.”1 One of the similarities I saw between Google I/O2 and Apple WWDC3, held in May and June 2018, respectively, was the topic of artificial intelligence (AI) or machine learning (ML). For example, Sundar Pichai talked about AI and Google Assistant, which is intended to be “naturally conversational and visually assistive.”2 Apple’s shortcuts feature has also received improvements through AI and ML. These parts of the major tech industry speeches made me wonder where the technological advance of AI and ML is leading. I had to look far away from Silicon Valley, where those speeches were made, to China.
The Chinese tech start-up environment is rather vast, spanning from AI to biotech, where many start-up companies are competing to become the next billion-dollar “unicorns.” According to Financial Times, “The latest thriving corner of the Chinese start-up world is artificial intelligence.”4 The biggest among the Chinese AI tech start-up companies are SenseTime and Megvii, which both focus on facial recognition technology. The success of SenseTime is so monumental that many people have called the company, “the world’s most valuable artificial intelligence startup.”5 While obvious applications of facial recognition technology such as severance and identification are already exciting, potential applications of this technology could be mind-blowing. For example, the big data collected from facial recognition technology could be used to create more natural or human interactions between machines and humans. If the machines could recognize our emotions and other subtle non-verbal cues through our faces, Google Assistant would indeed become more “naturally conversational and visually assistive.” Apple’s shortcuts could perhaps suggest what music to play by reading our facial expressions.
The world is flat when it comes to start-ups. Eschenbach’s assertion about China being the dominant player in tech start-ups sounds correct, and his view is corroborated by another set of data from CB Insights.6 Silicon Valley, where this kind of innovation has dominated for so long, may not look the same when more and more competition comes from overseas in the near future. China seems to be at the top of the list when it comes to all things AI. I do not think anyone can predict precisely what is going to happen, but the trend seems clear. China is already starting to dominate this kind of technological innovation and showing no sign of slowing down.
References
- Eschenbach, Carl (2018), Remarks in MS&E 238 class, Summer Quarter 2018.
- Google Developers (2018), Keynote (Google I/O ’18). Retrieved from YouTube: https://www.youtube.com/watch?v=ogfYd705cRs.
- Apple (2018), WWDC 2018 Keynote — Apple. Retrieved from YouTube: https://www.youtube.com/watch?v=UThGcWBIMpU.
- Lucas, Louise (2018), Boom time for China’s billion-dollar start-ups. Retrieved from Financial Times: https://www.ft.com/content/b1d311f0-38b0-11e8-8eee-e06bde01c544.
- Ramli, David (2018), China Now Has the Most Valuable AI Startup in the World. Retrieved from Bloomberg News: https://www.bloomberg.com/news/articles/2018-04-09/sensetime-snags-alibaba-funding-at-a-record-3-billion-valuation.
- The Global Unicorn Club. Retrieved from CB Insights: https://www.cbinsights.com/research-unicorn-companies.
Users who have LIKED this post:
4 comments on “Start-up Environment in China”
Comments are closed.
Very interesting article on the start-up environment in China. As you say, the start-up scene is getting flatter and more and more key players in the industry are being built overseas in Asia. But what I find particularly interesting is – especially in the case of start-ups in China – the extent to which the government is involved in giving preferential access to vast pools of financial resources. In many Asian countries, start-ups are considerably backed by the state in return for the development of certain types of technologies. The example of SenseTime is quite good at visualizing this point. The Chinese government is highly interested in strengthening their community-policing via AI-powered surveillance tools and, therefore, does not shy away from splashing money so they can control the society better. An interesting article on this matter is the following: https://www.theverge.com/2018/4/11/17223504/ai-startup-sensetime-china-most-valuable-facial-recognition-surveillance. I personally doubt that the same start-ups would be able to grow at a similar pace and reach similar valuations elsewhere in the world. Of course, there are many more examples of Asian start-ups that profit from such extensive state funding. As a consequence, many Western companies have hard times competing against the East. Let me know what you think!
Great thoughts about this subject, Nic. Without getting too political, I do think it’s important that we start considering the reality that the “Silicon Valley startup culture” is no longer exclusive to just Silicon Valley. I do find it somewhat consoling that Eschenbach pushed the point about Sequoia minimizing their conflicts of interest across international borders – but this doesn’t change the fact that moving forward, start ups need to think even harder about what problems they can solve in the world so they can ensure longevity for their businesses and their socioeconomic influence.
Very interesting posts regarding Chinese startup environment especially for AI application. I think one of the reason why facial recognition company seems to gain more success in China is because surveillance camera is extremely common. Chinese governments and companies put camera on every single corner of the city and they rely on the cameras to crack a criminal case. These big AI companies usually work with Chinese government and they have a lot of data and also very big project. Another popular application of face recognition is for fintech. On the one hand, in China, mobile payment is very common. In many cities, people don’t need to bring cash or credit cards when they eat at restaurants and go shopping. On the other hand, mobile financial companies like those p2p companies are quite popular these years. These two aspects provide many application scenarios for face recognition on smart phones.
Hi Nic. I think that you point out an area where the Chinese startup ecosystem is strong and will continue to be. Given the country’s size, organization, and strength in fields trajectorial to artificial intelligence, you would only expect the position to continue to strengthen. The Chinse government seems the benefits of being the world’s leader in impactful technologies (like AI). They have publically stated the desire to become the world’s leader in the field and I believe that they have all the resources necessary to make that reality.