A reader was preparing for a debate. The debate topic is,
Will Shanghai be the next Silicon Valley by 2009?
He sent me a list of questions. I’d like to answer from an individual’s perspective and share with everyone. Disclaimer: I am not a professional on economy, politics, or culture. The opinions and data may not reflect the truth.
Q: Is it difficult for start-ups to obtain funding from local and foreign VCs? Is it difficult to find funding in general? How about transferring funds in and out of Shanghai?
A: I would say, it is not easy. I saw some foreigners who start companies in Shanghai and could easily get some fund from their existing relationship in U.S, but it is not the case for local start-ups. There is no good way to get funds. The public service to help small companies is not ready yet.
Local residents have huge amount of money in banks; the house and car mortgage transactions are very active; but there is not a good market for local start-ups to get money. The Small-Medium Enterprise Stock Market just opened in Shenzhen. It is good news but it didn’t start operation yet.
Transferring money to Shanghai are easy. Wired transfer and check all work well. I can get my Google check with local bank. It costs 20 RMB per transaction in China Merchant Bank.
However, PayPal and most other credit card gateways do not support direct transfer money to China yet.
Q: Is getting loans from the banks difficult? What other difficulties are there associated with banks?
A: It is easy to get small-amount investment loan in Shanghai. But the upper limit is 100,000 RMB. Any individual can apply that. But obviously, it is not for start-ups. To get higher loan is not easy (I didn’t try it yet).
Q: What tax incentives are there for start ups? Are they similar to what we find in Silicon Valley?
A: If you register at a software park, like the Shanghai Pudong Software Park, you enjoy 0% tax policy for the first three years and 50% tax cut in the next two years. (Disclaimer: Check with the park for latest information. Use the data at your own risk.)
Q: Is there a general entrepreneurial fervor among recent grads from the universities in Shanghai (vis a vis grads from Stanford and Berkeley)?
A: I am not sure. The job market is very hard nowadays. Many students were forced to look at the option to setup companies by themselves.