Shenzhen

UNSW Event Helps Hardware Startups Get Established in Shenzhen

Ed:  Regular readers will recall numerous articles we have written on the importance of hardware startups moving to shenzhen for the first 6-12 months of their startup. In my day job we prototype hardware. I now have an engineer living in Shenzhen and we are turning round prototypes in 3-10 days vs 4-6 weeks locally and at much lower cost. Raising money for hardware startups is hard enough, wasting it by trying to build hardware in Australia where we don’t have sufficient manufacturing and assembly capability or component supply is just crazy.

Its not easy to get a foothold in China from the outside, relationships are much more important than in Australia so events such as these are critically important for new hardware startups.

Introduction

The rhetoric in the Australian start-up and business communities around “losing young, talented Australians to other competing markets” has been around for a long time, so when we announced a new partnership with the government of Shenzhen involving UNSW entrepreneurs I wasn’t surprised that we received a complaint.

The UNSW Startup Shenzhen event was a showcase of 6 start-ups chosen from a pool of close to 40 applicants, all with UNSW student or alumni team members, and all with China as an important part of their business or marketing strategies. With the generous prize of return airfares to Shenzhen and government led introductions to potential customers, partners and investors put up by SETRO (Shenzhen Economic & Trade Representative Office), the event attracted a diverse and high calibre group of companies which made for an entertaining evening for the 200 attendees. It was an interesting crowd, the event attracting people from the Sydney startup scene, people with business interests in China, academics and students.

The complaint we received just prior to the event suggested that by holding such an event we were supporting the economy of China instead of our local NSW economy.

Short sighted?

Here is why this suggestion is short sighted.

In both the Australian start-up and business spaces, it is old news to many that we need to do more to encourage globally scalable business models – or as Steve Blank says start-ups must be Born Global or Die Local. The star examples from our start-up ecosystem are Australian companies that have penetrated foreign markets, and, in markets like China, this would be next to impossible to do without partnering with a person or organisation that is based ‘in market’ – the only alternative being to make regular visits with a localised product, service, sales kit and marketing campaign.

Relationship & Network is Critical

 

Remembering back to my days as a Regional Manager for China & Hong Kong for another large Australian university, even when the product itself was Australia and education in the English language, we could not have been effective without a network of partnerships with China based agent partners, staff representatives, Mandarin language marketing materials (and channels) not to mention the “head nod” from relevant government bodies.

This is one of the reasons why a relationship with a government organisation from such a strategically important city in China is an exciting thing for Australian start-ups.

Co-founder of WattBlock, Brent Clark, who delivered the winning pitch on the night commented, “The old school model was for talent to leave Australia and move to Silicon Valley. The new model is to build global businesses from day one from Australia, particularly with countries in similar time zones in Asia. Building global businesses means venturing into markets with greater opportunity than those presented on our home shore and this type of event provides the platform for Australian companies, with limited funding, to reduce the risk of entry into new markets.”

The other reason these events and other entrepreneur development services like this are unlikely to contribute to brain drain from Australia is that they actually work to attract entrepreneurial students to come and study at our universities. A big differentiator for UNSW, for example, is that it produces more CEO’s and start-ups than any other university in Australia. With more support services and unique events like these associated with Australian universities, talented and entrepreneurial students are more attracted to Australia as a study destination and as I have seen firsthand, the number of ‘international student turned Australian start-up co-founder’ category will grow and grow.

Pitch Competiton

Over and above this, another of the participating teams that pitched on the night,Meetisan, worked with the UNSW Student Entrepreneur Development team and NSW Trade & Investment to secure a grant based on the value the company is bringing to the local NSW economy.

Hua Fan, its co-founder, just happens to be a native of Shanghai who has moved to Australia to pursue both a PhD inPhotovoltaics and his entrepreneurial dream. I challenge you to find a better example of brain drain in reverse.

Theresa Lim, who completed both a Commerce degree and later an MBA at UNSW Business School, is the co-founder of PLAY2LEAD felt that “the reality is that the Australian market is simply not big enough for startups. The startup ecosystem works when Australian startups like Atlassian and Big Commerce make it big by truly being global, and like them, can have presence globally including their founding home base (Australia).

These startups that make it big will always be Australian at heart, and their founders give back to the ecosystem by being angel investors themselves here, and mentors to other Australian startups.”

Different from most pitching events these days, not all teams pitching were what would be classified as a classic “tech start-up”. Project Bubba, founded by UNSW alumni David Cheng and Ivan Cheung together with current Masters of Financial Analysis student Tao Zhou is more of a small business than a start-up.

The team is taking on a massive problem relating to a depleting supply of shrimp in the China and is implementing a new technology related to more efficient and effective shrimp farming methods.

AGSM MBA student Eleanor Kollosovski pitched WL Diagnostics, with the support of UNSW Innovations SED service acquired a license to a technology available under the Easy Access IP license program and built a start-up that provides a non-invasive technology solution to enable early detection of inflammatory bowel disease – a life-long autoimmune condition of the gastrointestinal tract.

John Ng, who joined WL Diagnostics as Operations Director after being introduced to Eleanor via the UNSW SED services, found the event somewhat eye opening and sighted a valuable takeaway as, “information from the presenters about the scale, size and potential of doing business in Shenzhen, they are clearly larger, more productive and faster in their commercialisation abilities than Sydney. I previously thought that no Mandarin language skills means, no business dealings in China.”

Tripalocal was one of two teams currently part of the Muru-D accelerator program that made it to the final group of 6 to pitch on the night (the other being competition winners, WattBlock). Led by co-founder Jemma Xu, the team contained possibly the youngest entrepreneur competition wide, Backend Developer Joseph Hilsberg who completed part of his UNSW studies whilst still a high school student via the Open Learning platform.

Our judging panel was diverse too with Sarah Tritsch (China cleantech consultant), Benjamin Chong (Partner at Sydney Seed Fund and Right Click Capital) and Victor Wang (Director, SETRO) bringing startup, localisation and Australia-China business expertise in their advice to each team. The night was powered by UNSW Innovations Student Entrepreneur Associate, Melissa Ran, who fittingly is also a China born entrepreneur turned Sydney start-up mentor.

Congratulations again to the winners, WattBlock, who will be flying to Shenzhen in April next year to connect with local government officials, potential partners and future customers – a fine example of Aussie businesses thinking globally. Watch this space!

Shenzhen Hardware Hacker Scene – Key People & Places

Guest Post: Martin Pasquier

If you were waiting for a sign that China has changed and is an amazing huge thing adapting to the new industrial revolution, Shenzhen hosting a Maker Faire is probably a good sign.

Shenzhen_MMF_logos_long

Take what was a fishing village 30 years ago, with 200-300 000 inhabitants.

Shenzhen in the 70s

Shenzhen in the 70s

Credit: Chris  CC

Create a special economic zone to attract migrants from all over the country.

Make it the biggest factory-city in the world. Wait a few years.

When you feel the internet wave hitting the hardware and manufacturing industry, turn it into a capital city for prototypers and makers of all sorts.

Add new innovative stuff, from open-innovation into life sciences to think tanks.

Shenzhen, from the fishing village to the 20 million Population Manufacturing Juggernaut in 30 years.

 

Shenzhen Airport -Credit Forgemind ArchiMedia CC

Shenzhen Airport -Credit Forgemind ArchiMedia CC

Well, that’s quite a series of shortcuts but you get the bigger picture: Shenzhen, China, is increasingly recognized as the city in the world where creating hardware and real stuff is not only possible, but cheaper and better than anywhere else.

SEG Plaza Shenzhen - Credit Wikipedia

SEG Plaza Shenzhen – Credit Wikipedia

 

SEG Plaza

SEG Plaza

Here are the key facts and people in the Shenzhen Maker Movement

Original story and Slide Deck by Martin Pasquier from Innovation is Everywhere, a world tour of tech and startup ecosystems in the emerging markets. Mike Nicholls edited, adapted and contributed to this story.

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Is this the best place in the world to prototype hardware? Visiting Shenzhen

SEG Plaza Shenzhen - Credit Wikipedia

SEG Plaza Shenzhen – Credit Wikipedia

Shenzhen is the best city in the world for Makers, Hackers and anyone who needs to build physical product. After two visits I am convinced you are crazy to build electronics or hardware in any other part of the world.

I just returned from a trip to Hong Kong and Shenzhen. It was my first time into China, I found Hong Kong exciting but exhausting and despite the stories I had heard about Chinese cities I found Shenzhen to be very clean, safe and it just seemed to work really well as a city, traffic was ok, the metro was very efficient, streets were clean and the people polite.

Large buildings on spacious green city blocks stretched for as far as the eye could see for such a populated hub of industry it is very pleasant. 30 years ago Shenzhen was a small regional centre, now its estimated that there are ~19 million, 4 million above the official estimates as Chinese from all over the country come here for work because it has become one of the growth Chinese cities.

In my day job I run a team of people prototyping inventions, primarily electronics based devices. I had heard Shenzhen was the centre of the universe when it comes to electronics and making just about anything.

I was in Hong Kong for a short break and I decided to take a few day trips to across the border to see for myself. You can easily do it in a day and I will shortly publish details in another post to show you how but for now think of it as a 45 minute suburban train trip from Hong Kong with a low stress border crossing. If you look at it on a map, its like travelling from San Francisco to the Valley.

SEG Plaza Markets Shenzhen

The highlight of any day trip is the SEG Plaza Markets, they are absolutely amazing. If you work in Electronics, are a hobbyist or have ever dreamt of building your own electronic hardware you have to visit.

SEG Plaza

SEG Plaza

It is simply mind-blowing, the SEG centre is one of the largest markets, has 10 floors of electronics, with the bottom most levels given over to every imaginable component you would need to build any electronic device. All the surrounding buildings have similar arrangements, I lost count of how many of market buildings there are in the zone however it would be upwards of 15 surrounding the SEG Plaza.

Across the 10 floors there are literally thousands of little booths containing every chip, IC, memory,  screw, bolt, nut, LED, reels of components ready for Surface Mounting (SMD), strips of LEDS in reels stacked 6ft high.

IMG_1121

Adhoc soldering on counters is the order of the day, workers are soldering components together, mounting chips or LED onto boards etc with Children running around as the day gets later. Occupational Health and Safety is not really a known concept.

As you get higher up the floors (there is a maze of escalators, with no apparent logic to it) the floors start to progress from components and accessories to fully assembled computers and notebooks, many are touting that they are from major brand names like Samsung, Acer (they probably aren’t) Lenovo (they might be) and then hundreds of motherboard resellers which may or may not be as described.

There is an amazing buzz to the place, literally it doesn’t stop, every moment there are dozens of people running from trader to trader, or wheeling trolleys stack with reels of components.

But unlike markets you will find in tourist ares the markets are really not for Westerners to buy a few gadgets, although they are welcome but they are not really looking for tourists.

The markets exist to trade components between suppliers and factories in the surrounding districts. Thousands of these little booths represent factories in the province, and other factories buy and ship whatever they need to each other.

Most of the traders are friendly

Most of the traders are friendly

Aside from just about every component, nuts, bolts, LEDs, lights, switches, SMT Rework stations, SMD ovens, CNC Routers just about anything you need to build an electronic project can be had within a few city blocks. The amazing thing is that they are just taking orders and shipping product all day, non stop people wheeling trolleys stacked high with reels of electronic components whizz past every few seconds.

CNC Routers

CNC Routers

A few words of warning

I don’t want to be alarmist or negative on doing business here because I think from my short visit the place is amazing and we will be establishing a presence sooner than later, but it was clear to me after a few days in the markets you could easily get taken for a ride.

Its not clear to me the sort of consumer and legal protections you expect in the Western world are available here to a Western visitor.

Whilst there are many honest suppliers it pays to beware. Many are selling used components, many sell substandard or even mislabeled products. No one is particularly worried about your needs, they may not give you the time of day to get the right thing for you or may not understand you, understandably most don’t speak English, Spanish, German or whatever you speak. Its very much caveat emptor.

Some might be genuine brands, and may actually work. Others less so. In their defence the Chinese Authorities are apparently trying to stamp out blatant counterfeit products according to some of the senior business people I spoke to.

Some of the companies do a great range of knockoffs including this very well engineered Jambox knockoff, interestingly there are many vendors of very cheap iPhones and Samsung phones, story is that they work and they have real smart phone components inside them but they are not at all the genuine article.

IMG_1018

I think the secret is that if you are looking at phones that cost less than costs for Apple or Samsung to make them then its a pretty good bet that they are not genuine.

The companies who make these knockoffs are known as Shanzhai which comes from the old stories of bandits who live in the mountains and evade the authorities, their products used to be mostly poor quality, however many of them are now making much higher quality products and starting to produce products which match the big guys for quality and innovation and some of the first double SIMM phones came from these companies. Some of these companies are turning into major brand names for the domestic Chinese market.

Successful Manufacturing in Shenzhen

It would seem that if you want to build product, you need to build solid relationships with local businesses, in my opinion the best way to start these relationships is to find yourself a fixer or sourcer of components who for a fee can introduce you to suppliers and manage the process when you are not in country.

To quote one of our guides,

“Product comes first it must be the right thing, then relationship, then price. Relationship is much more important to us than price”

To be successful manufacturing here I think one of your team has to be here regularly, many Kickstarter projects appear to have come off the rails for this reason, they completely underestimate the complexities and costs of managing the manufacturing process offshore.

Some of the expat old hands in the area talk about quality fade, where what you specified and ordered is gradually (or suddenly) substituted with lower quality or cheaper components and you might not get the good news until its in your customers hands.

Perhaps the only way to guard against this is to find someone who is trusted and recommended by a western manufacturer you know and trust and to have someone on hand inspecting the factories on a regular basis.

I think you also need to take some risks, check out some of the suppliers but not bet the farm on them until you build a longer term relationship.

If it is important that you know the exact components you are getting and where they came from for quality control reasons or certification requirements ie Medical Devices or other such, there is every chance this is not the right way for you to obtain components or develop new products.

Shenzhen is FAST

The upside is when you have someone here managing the more intense aspects of the development cycle such as rapid prototyping or getting the assembly and manufacturing process right you can rapidly accelerate your product development. As an example you can build prototypes at 2-5 times faster in Shenzhen than you can if you are sitting in Sydney or San Francisco (SF might be a little easier).

The convenience of being able to walk down the street and pick up the parts you need cannot be underestimated especially compared to being in a western city where you could face 1-2 weeks delay to get components in from overseas and $70 in express airfreight fees.

In Sydney if I want to order a new board, it can take 3-5 weeks to be fabricated, assembled, tested and then delivered.

In Shenzhen PCBs can be ordered and delivered within 2 days, assembly can be turned around in a few days, and if you have your engineer there you can have them work through the process with the assembly guys rather than 10,000 km away waiting two weeks for it turn up not knowing if it will work.

Its difficult to imagine building products in China and not having a member of your team here monthly if not during the whole process, certainly if you manage to get any level of success with your product you will need to establish a presence here.

Getting to the SEG Plaza Markets

Getting to Shenzhen from Hong Kong is fairly easy, but you need to do your homework before you go as once you are in the China its much more difficult to get access to Google Maps and many of the online Google tools you might be used to. If you are coming from Hong Kong take the metro from Luohu to Huaqiang Rd, its very cheap and very fast. I will post a separate article on getting there and through immigration later this week.

At the time I wrote this, 5 day Shenzhen Special Economic Zone Visas are available to most nationalities who wish to visit the city but the fees vary depending on your country (basically China just treats your citizens the way they your country treats their citizens). Note there are some nationalities that cannot get in via the 5 Day visa, in particular the USA. You should confirm your eligibility before you hope on the train at Hong Kong.

IMG_1041

Helpful Resources

There is a very active expat hardware community making cool stuff.

The guys from Dangerous Prototypes run these great Hacker Camps where for a very reasonable fee will take a group through the details of getting established and building product in Shenzhen, factory tours, where to eat, live, the markets and all the things that on your own you probably would struggle with for months or years.

They have another camp 3rd week in Sept 2014.

They kindly videoed the last one
Other resources