Slump has little impact on startups

Chinese startup companies are still confident of their future, despite the stock market slump, but said the flow of venture capital financing has tightened.

Liu Chunhe, founder and CEO of the Beijing-based New-Born Town, the fast-growing developer of mobile-based search platform Solo System, said the company had not been adversely affected by the A-share turmoil of the past few weeks.

"The nation's mass innovation and entrepreneurship strategy will not be halted by the stock market turbulence, and we are confident about our company's prospects," said Liu.

But Liu said, though financing from venture capital investors has tightened, his team finished the first round of fundraising at the end of last year, and still had enough working capital.

Startup companies typically receive investment in at lease three stages, or tranches, to meet their needs at different stages of development.

Liu said Solo System, which has 150 million users worldwide, had a valuation of around $100 million after its initial round was completed but declined to reveal how much it received.

Wang Hongliang, the founder and CEO of Beijing-based Space-time Co, which claims to produce the world's lightest smart glasses, said it too is focused on meeting user demand rather than having to worry about financial performance.

"Alibaba Group Holding Ltd, Baidu Inc and Tencent Holdings Ltd all survived when the Internet bubble burst in 2001, and an important reason for that was they were able to meet customer demand well," said Wang.

Space-time will finish its initial stage of fundraising at the end of this month, and Wang said its valuation will not be influenced, sitting at around 100 million yuan ($16.13 million).

The money will be spent on producing smart glasses that can allow users to watch 3D videos and play Counter-Strike, a first-person shooter video game.

As for any future stock market listing ambitions, Wang said he still considers the A-share market a good choice, because of China's strong economy and huge market.

Jixun Foo, managing partner of global venture capital firm GGV Capital, also said the market slump has had little influence on its investment strategies, and in fact could be good as it has cut the amount of speculative investment cash, often short-term, flowing into the market.

Wang Mingfu, chairman of Hejun Consulting Group, one of the largest consultancies in China, however, said he was concerned the shock may still have an effect on startups, especially those in the Internet sector.

"The size of Internet startup deals will shrink sharply, influenced by a slump in valuations of larger Internet firms on the secondary market," said Wang.

"As a result, financing will become more difficult and many companies will die, starved of funds."

Figures from Zero2IPO Group, a service provider for China's venture capital and private equity industry, show that 297 deals were completed in the country's VC and PE markets in June, a 68.8 percent month-on-month rise. But the value of 219 of those was $5.1 billion, a 4.79 percent fall.

The government unveiled its Internet Plus action plan earlier this month, aimed at integrated the Internet with traditional industries to fuel economic growth.

The countrywide digital drive was first revealed by Premier Li Keqiang in March, during his Government Work Report to top legislators.

It mapped out a number of development targets and supportive measures which Beijing hopes can establish new industrial models, integrating the Internet with key sectors including entrepreneurship and innovation, manufacturing, agriculture, energy, finance, public services, logistics, e-commerce, biology and artificial intelligence.

caixiao@chinadaily.com.cn