Show­ing star­tups a smarter way to get ahead

China Daily (Canada) - - EXPATS -

grace@chi­nadai­lyhk.com

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

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