International Incubators in China: a perfect way for everyone to start up a business
One place of great interest is an incubator called the K-tech Innovation Hub. It’s a host for Chinese and Foreign startups that provides businesses with a good environment and lets entrepreneurs try out their skills in the Chinese market. Located in Hongqiao hub, a developing area with quick access to bullet trains, air travel and other convenient modes of transportation, making it one of the highlights of this incubator and accelerator. Considering that entrepreneurs often visit factories in Zhejiang and Jiangsu provinces, the location was a pretty good choice. Exciting startup profiles vary from tech to fashion. Just recently a French entrepreneur who started his business in China by tapping into the field of AI, joined K-tech. With the aim of developing a pilot product prototype, he is looking to obtain proof of concept, right after which he will be able to receive his first funding by a K-tech investment fund or from an outside investor.
Entrepreneur visa to China
Another reason entrepreneurs are joining K-tech is because it enables them to apply for China’s new “entrepreneur visa”, for which K-tech is providing full support. Private incubators work with the government, in order to assure a smooth landing procedure (visa, tax and document declaration, internet access etc.).
“60% of investments fail”
The entrepreneur visa is issued for a period of one year, without the possibility to extend it. In order to obtain this visa, your project must meet the criteria of the incubator. The rest of the documents are collected easily, and your visa and a space in K-tech is something that can be arranged within a few days! K-tech is gaining its respectable reputation for a great community of mentors, pitching meetings and startup boot camp programs. It’s a perfect place for a students and young entrepreneurs to try out their luck and skills in China. As a private incubator, K-tech provides a special space for founders from China and abroad to meet and exchange ideas and even cooperate and find the benefits of both ecosystems. The incubator and accelerator welcomes cooperation of any kind. One popular activity involves organizing weekly pitch events on different topics, inviting startups from outside as well as within the K-tech community to pitch to a potential investor, and find a match. There is a mix of Chinese and foreign startups pitching weekly, with a possible translation option on-site.
Your start up in China: How to join an accelerator program
The procedure for joining the incubator is quite easy! A startup presents a tech related business plan, after which K-tech will evaluate it and in case of acceptance, will propose one of the various program packages they provide.
“To reach 5M RMB in revenue, it takes a minimum of 2 years”
Mr. Zhang, the director of Investments of K-tech also stated that in order to be financed by the incubator’s fund, a company needs the following requirements:
- Incubation in K-tech
- Within the first two years reach up to 20 or more employees
- Have a yearly revenue of 5 million RMB (750K USD), and feature on the list of possible K-tech investments.
How much can you receive in funding from incubator funding? K-tech will provide funding of 5-10 million RMB, and assistance on finding local resources and clients. That is against 10-20% of the shares. The screening process includes:
- Product core advantages
- CEO and CTO profiles, skills, compatibility with the new business model/product/market, ability to find clients, etc.
The screening time is 3-4 months. Keep in mind that after 4 years (from the investment date) K-tech will withdraw the investment or sell their shares to other investors.
Raising funds: what types of startups are receiving the most funding?
According to Mr. Zhang the best sectors to invest in are technology and AI. Some special industries such as medical tech are attracting fewer investors, due to longer lead times from research and development to product launch (at least 5 years). One of K-tech’s startups called Cleantonic, was running a business generating 20M RMB in revenue, when Mr. Zhang noticed them. After evaluation of the company, Mr. Zhang on behalf of the investment fund he represents invested 10M (which is approximately 15% of the shares). In just over a year, Mr. Zhang sold his shares for 25M. The main reason of such success is that after the investment, the companies’ revenue went from 20M to 1.5B. K-tech invests in 2-5 companies in a year, with a maximum fund available per startup of 30M RMB. K-tech is ready to support their startups during the first two years, including policy support (up to 1M RMB), and help in finding customers. Fully foreign owned companies can’t profit from policy support, but can still benefit from tax breaks.