Showing startups a smarter way to get ahead
Intelligent hardware products such as smartphones, wearable devices and smart home appliances have been rapidly growing in popularity in China.
One person who sensed that this trend would lead to a new era of the Internet of Things was Kang Jingwei, founder, chairman and CEO of Hong Kong-listed Cogobuy, China’s biggest e-commerce platform for the corporate procurement of electronic components.
The Internet of Things is an industry focused on connecting traditional devices such as home appliances to the Internet, so they can be controlled remotely.
Kang’s conviction on the importance of the emerging sector came when Google paid $3.2 billion for smart hardware innovator Nest last year. He then decided to search for a way to service these hardware startups.
He expects that incubator programs, which offer companies office space, contacts with prospective clients and often early-stage investment, will grow in popularity in places where there is “a relatively low threshold” for small businesses to develop.
But due to intense competition in the sector, Kang decided not to set up another incubator. Instead, he decided to focus on an area where he already had considerable experience — supply chain management — and see how this could be interwoven with the new emerging technologies of the Internet of Things.
In addition, he believes that the supply chain is often the biggest headache for innovators, compared with capital, talent or marketing.
In 1995, Kang founded Comtech, a provider of electronic components and solutions in Shenzhen in Guangdong province. He brought the company’s service online in 2010 by establishing Cogobuy, which quickly grew into a major purchasing platform for electronic parts.
Drawing on two decades of experience in the supply chain, last year Kang established IngDan, part of the Cogobuy Group, which focuses on linking supply chain resources to hardware startups and innovators in China, and even globally.
Kang said IngDan aims to use Shenzhen as a hub to connect China’s manufacturing resources with the world’s innovators. He has since integrated some 3,000 suppliers in and around the city through the platform.
So far, more than 5,500 innovation companies have been established in Shenzhen, and more startups are looking for ways to connect with suitable manufacturers.
These budding enterprises often have questions, such as what are the perfect materials to use, and how can costs be minimized?
Speaking to China Daily, Kang said: “The supply chain is a very complicated process — from components buying, electronics solutions to sample production, assembly testing and volume production.
“It is difficult enough for those familiar with Shenzhen manufacturers, not to mention for young entrepreneurs with no experience.”
He suggested the key for startups is to match their needs with manufacturers at different stages — from the idea stage to the testing stage, and on to large-scale production.
But many businesses starting out find it difficult to match these needs. Kang explained that it is the information gap between the two sides that presents a challenge.
And startups also struggle as they often have a small team trying to cover many bases.
Kang gave the example of Chinese telecommunications giant Huawei, which has around 2,000 staff in its procurement team, while many startups often have only one person to deal with similar issues.
“To produce one watch, a company needs as many as 100 suppliers,” he said, referring to the manufacturing process behind a smart watch.
This illustrates that the procurement and production process for such a piece of hardware is just as complex for a small startup as it is for a major company.
He noted that the high trialand-error costs present a critical snag for most early-stage startups, recalling his own early entrepreneurial experience.
In 1999, he established Viewtran, an Internet video company. He tried 20 different models in six years, which used up all his funding from several big investors.
Having learned his lesson, Kang then vowed to make things easier for modern entrepreneurs by providing a hightech innovation platform for smaller companies. This would shift the focus away from the large businesses.
To achieve this, IngDan provides individual innovators, makers and startup teams — including research and development teams within large enterprises — with supply chain solutions for free.
At first, the IngDan Link service helps innovators evaluate projects and connects them with suitable supply chain resources such as electrical components, structure, assembly and testing.
Then, IngDan Direct provides the Internet of Things innovators with supply-chain services such as molding and designing.
The platform has so far accumulated 5,000 the Internet of Things projects and more than 3,000 suppliers. Revenue earned by IngDan has reached 339.6 million yuan ($53 million), accounting for 10 percent of the total turnover of Cogobuy, according to its secondquarter financial report.
In addition, IngDan also has a promotion team to provide innovators with branding.
The platform has accumulated more than 4 million fans, Kang said, which are the testing groups and the future users of these the Internet of Things projects.
He has also teamed up with Wechat, an instant-messaging app, to connect suppliers with innovators, and innovators with potential users. The next step is to help these innovators reach the international market, Kang said.
It is difficult enough for those familiar with Shenzhen manufacturers, not to mention for young entrepreneurs with no experience.”
founder, chairman and CEO of Hong Kong-listed Cogobuy