Chinese ‘ac­cel­er­a­tors’ aim to bring star­tups home from Sil­i­con Val­ley

Many of the Chi­nafo­cused ac­cel­er­a­tors in Sil­i­con Val­ley are fo­cused on bring­ing the up-and­com­ing star­tups from the U.S. to China, which re­port­edly reaf­firms the al­le­ga­tions that U.S. tech­no­log­i­cal know-how is be­ing moved to China

Daily Sabah (Turkey) - - Business -

BEI­JING’S un­slake­able thirst for the lat­est tech­nol­ogy has spurred a pro­lif­er­a­tion of “ac­cel­er­a­tors” in Sil­i­con Val­ley that aim to iden­tify promis­ing star­tups and bring them to China.

The surge in the num­ber of China-fo­cused ac­cel­er­a­tors - which sup­port, men­tor and in­vest in early-stage star­tups - is part of a larger wave of Chinese in­vest­ment in Sil­i­con Val­ley. At least 11 such pro­grams have been cre­ated in the San Francisco Bay Area since 2013, ac­cord­ing to the tech-sec­tor data firm Crunch­base.

Some work di­rectly with Chinese gov­ern­ments, which pro­vide fund­ing. Reuters interviews with the in­cu­ba­tors showed that many were fo­cused on bring­ing U.S. star­tups to China.

For U.S. gov­ern­ment of­fi­cials wary of China’s grow­ing high-tech clout, the ac­cel­er­a­tor boom reaf­firms fears that U.S. tech­no­log­i­cal know-how is be­ing trans­ferred to China through in­vest­ments, joint ven­tures or li­cens­ing agree­ments.

“Our in­tel­lec­tual prop­erty is the fu­ture of our econ­omy and our se­cu­rity,” Se­na­tor Mark Warner, the Demo­cratic vice-chair­man of the U.S. Se­nate In­tel­li­gence Com­mit­tee, said in a state­ment to Reuters about Chinese ac­cel­er­a­tors. “China’s gov­ern­ment has clearly pri­or­i­tized ac­quir­ing as much of that in­tel­lec­tual prop­erty as pos­si­ble. Their on­go­ing efforts, le­gal or il­le­gal, pose a risk that we have to look at very se­ri­ously.”

The U.S. has al­ready moved to block many Chinese ac­qui­si­tions in the tech sec­tor, and is con­sid­er­ing sev­eral mea­sures that could im­pose sweep­ing new stric­tures on Chinese in­vest­ment in Sil­i­con Val­ley.

U.S. Pres­i­dent Don­ald Trump’s crack­down down on visas for foreign tech work­ers and threats of a trade war with China are also chang­ing the land­scape.

And to be sure, the Chinese pro­grams are a small part of the picture; there are 159 ac­cel­er­a­tors and 70 in­cu­ba­tors of all types in the San Francisco Bay area, ac­cord­ing to Crunch­base.

Yet the ac­cel­er­a­tors re­flect close ties be­tween en­trepreneurs, tech in­vestors and top engi­neer­ing tal­ent in the U.S. and China.

U.S. uni­ver­si­ties re­main a ma­jor train­ing ground for Chinese en­gi­neers, for ex­am­ple, and U.S. com­pa­nies such as Mi­crosoft have long had re­search lab­o­ra­to­ries in China.

Of­fi­cials at sev­eral China-backed ac­cel­er­a­tors told Reuters their goal was to help star­tups gain ac­cess to the China mar­ket and nur­ture re­la­tion­ships be­tween en­trepreneurs and in­vestors in both coun­tries.

“We are build­ing the door or bridge to the China mar­ket,” said Wei Luo, chief oper­at­ing of­fi­cer at ZGC Cap­i­tal Corp, which runs the ZGC In­no­va­tion Cen­ter.

The cen­ter is backed by Zhong­guan­cun De­vel­op­ment Group, an en­tity funded by the Bei­jing lo­cal gov­ern­ment; its name refers to the Zhong­guan­cun neigh­bor­hood, which is some­times called China’s Sil­i­con Val­ley. Ac­cel­er­a­tors like ZGC “help U.S. en­trepreneurs un­der­stand China bet­ter,” Luo said.

CHINA CON­NEC­TION

Ethan Schur, an Amer­i­can en­tre­pre­neur and co-founder of Grush, a smart tooth­brush that com­bines brush­ing with gam­ing to en­cour­age chil­dren to clean their teeth, has teamed up with ZGC and called the part­ner­ship “very help­ful.”

ZGC helped Grush set up shop in China, Schur said.

“We’re able to meet the man­u­fac­tur­ers we want to work with, are trustable, re­li­able and have a good price,” he said.

For en­trepreneurs David Lee and Grace Wang, who founded a ZGC-backed travel plan­ning app called The Ex­plorer.io, run­ning a com­pany that is not well con­nected to China is bad for busi­ness.

“It’s all about col­lab­o­ra­tion,” said Wang, who was born in China and moved to the United States in 2011 for col­lege be­fore at­tend­ing grad­u­ate school at the Univer­sity of Cal­i­for­nia Berke­ley. “There should be some way where we can help coun­tries grow to­gether and work with each other.”

Dur­ing a Reuters visit, the ZGC In­no­va­tion Cen­ter in Santa Clara, in the heart of Sil­i­con Val­ley, was bustling with tech en­trepreneurs of both Chinese and Amer­i­can ori­gin. Since its 2014 open­ing, the cen­ter has hosted 55 star­tups and has in­vested in more than 40.

Other ac­cel­er­a­tors in the val­ley that help bring U.S. star­tups to China in­clude Plug and Play, a non-Chinese ac­cel­er­a­tor that col­lab­o­rates with sev­eral lo­cal Chinese gov­ern­ments; In­noSpring, whose in­vestors in­clude Legend Cap­i­tal, a unit of Legend Hold­ings, the par­ent of com­puter group Len­ovo Group Ltd; and Shang­hai Lin­gang Over­seas In­no­va­tion Cen­ter, which is linked to the Shang­hai gov­ern­ment.

Jaunt, in which In­noSpring is an in­vestor, has raised more than $100 mil­lion in fund­ing. And the Chinese-backed in­cu­ba­tor Amino Cap­i­tal has a stake in Hu­man Longevity, a health data com­pany, which has raised more than $300 mil­lion.

Many lo­cal gov­ern­ments in China - like their coun­ter­parts in the United States - are ea­ger to sup­port star­tups in the name of eco­nomic de­vel­op­ment.

The ac­cel­er­a­tors work with com­pa­nies in fields in­clud­ing ar­ti­fi­cial in­tel­li­gence, au­tonomous driv­ing tech­nol­ogy, big data and health sci­ences.

They of­ten help U.S. com­pa­nies set up joint ven­tures or li­cens­ing agree­ments to en­ter China - the type of deals some U.S. pol­icy hawks have crit­i­cized as con­duits for trans­fer­ring in­tel­lec­tual prop­erty.

The Shang­hai Lin­gang Over­seas In­no­va­tion Cen­ter will “serve as a bro­ker in tech­nol­ogy trans­fer,” the Shang­hai gov­ern­ment said in a brief state­ment on its web­site in May 2016 to mark the open­ing of the cen­ter in down­town San Francisco.

There have been no high-pro­file ex­am­ples of such theft from com­pa­nies helped by the Chinese ac­cel­er­a­tors. But Amer­i­can heavy­weights such as Ap­ple, GM and even Michael Jor­dan have faced fights in China over pro­tect­ing their in­tel­lec­tual prop­erty.

Xiao Wang, co-founder of In­noSpring Sil­i­con Val­ley, a Shang­hai-head­quar­tered ac­cel­er­a­tor that has in­vested $3.5 bil­lion in 70 U.S. and 15 Chinese star­tups in the last five years, said those who be­lieve in­tel­lec­tual prop­erty theft is the price for en­ter­ing need “to un­der­stand China bet­ter.”

Although China’s pro­tec­tion of in­tel­lec­tual prop­erty is not as good as in the United States, it has im­proved, she said. Risks for star­tups are out­weighed by the ben­e­fits of mov­ing into China, which in­clude ac­cess to a huge mar­ket and a grow­ing pool of tal­ent, Wang said.

Sue Xu, a gen­eral part­ner at Amino Cap­i­tal, said her firm had in­vested in more than 130 star­tups and helped more than 30 per­cent of them en­ter China.

“The Chinese mar­ket is huge, so the com­pa­nies we in­vested in say ‘We won’t stop until we get into the Chinese mar­ket,’” she said. Still, even deals in which U.S. star­tups gladly wel­come Chinese in­vestors con­cern some pol­i­cy­mak­ers in Wash­ing­ton, D.C.

An ex­te­rior view of the ZGC In­no­va­tion Cen­ter in Santa Clara, Cal­i­for­nia, April 12.

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