Hangzhou emerges as China’s new Silicon Valley

HONG KONG — Last month, Alibaba Group’s Mr Jack Ma invited 1,600 former employees to its home turf in Hangzhou, China. The company’s US$25 billion (S$33 billion) initial public offering had made many of them wealthy and Mr Ma urged them to start businesses that would be meaningful in the long term.

“He knew a lot of us got rich and wanted to tell us not to waste our money,” said Ms Sun Shuihua, who had worked at Alibaba for a decade. “He told us to treat our wealth responsibly.”

Ms Sun, 36, has already started — she is spending 5 million yuan (S$1.1 million) to found an online retail business, becoming part of a generation of Alibaba workers who have made their fortune and are putting the money into start-ups.

China is beginning to emerge as a legitimate contender to Silicon Valley as the centre of the technology industry, fuelled by an Alibaba IPO that brought in more money than any other in history.

Chinese technology companies have raised US$30.3 billion in IPOs this year, much more than the US$4.97 billion by their peers based in the United States, data compiled by Bloomberg showed.

“Today in Hangzhou, you can be having dinner at a night market and hearing people around you talk about their start-ups,” said Mr Wang Huadong, a partner at Matrix Partners China, which manages US$1.2 billion of assets.

Chinese start-ups benefit from the country’s position as the world’s largest Internet market, with 632 million users.

Venture investments in Chinese firms climbed to US$8.1 billion in the first three quarters — more than double the US$3.5 billion for the whole of last year, said Ernst & Young. China trails only the US, where venture investments reached US$37.3 billion this year.

Hangzhou, a city of eight million, is emerging as the latest technology hub in China because of the wealth created from Alibaba, adding to those in Beijing, Shanghai and Shenzhen.

Ms Jenny Lee, a Shanghai-based partner at GGV Capital, said Hangzhou accounts for a third of about 20 investments the firm had made in China this year, compared with none a year ago. GGV manages US$2.2 billion of funds and invested in Alibaba before the IPO.

Co-founded by Mr Ma in 1999, Alibaba gives many employees company shares, usually in the form of stock options or restricted shares, which they can hold on to after they quit.

Mr Qiu Jinliang, 33, another former employee who said his shares are now worth about US$1 million, left Alibaba in August to start an online furniture shop.

“I felt bigger opportunities awaited me outside,” said Mr Qiu, who had spent nine years at Alibaba. With the burgeoning local start-up scene, “the timing for starting a business is great”, he added.

Even before the IPO, Alibaba’s shares were being bought and sold by employees on an internal site called Aliway.com.

Ms Sun, who stocked up on shares, said she does not need to seek venture capital for her business, which will sell baby health and safety products. She added that she is not planning to sell her shares for another three years.

“This is going to attract a lot of hatred and envy when I say it, but we really don’t lack money,” said Ms Sun. “We won our first bucket of gold and, now, what we want to do is something grand and meaningful.”

The ease of setting up a company in Hangzhou and a good support network are the reasons Ms Sun decided to base her company in the city, she said.

Ms Sun added that she had realised success is not easy and her newfound wealth has not changed her lifestyle. She still shops for groceries, cooks and takes care of her children herself.

“We were luckier than others because we joined the right company,” said Ms Sun.

“That just means we should work harder than others, with the opportunity we were given.”

BLOOMBERG