China fund backs small companies


While innovative start-ups receive great attention, the Chinese government has rolled out a 60 million yuan fund to support small and medium sized firms in their start-up period. The fund is aimed at solving a major problem of start-ups - money - by buying shares in the small firms.


Line0 is a food ordering e-commerce platform aiming at high-end and white collar workers. It was set up three years ago and now has over 2,000 employees. Wu Hao, the founder of Line0 says the company had encountered difficulties including financing and lack of human resources at the beginning of its expansion. He says the new government fund will provide important help directly to companies like his.

"The funding approach is more marketlized and effective than the government's simply passing out allowances. Entrepreneurs need more capital in the start-up period than after they have become sizable companies," said Wu Hao, CEO of Line0.

"When the fund buys a company's shares the company owners will attach more value the money. It is more marketilized, effective, and motivational."

Last year, over 3.6 million new companies started up in China, up 46% from the previous year. In addition to the government, there are of course many venture capitalists and private equity investors putting money into the startups.

A lot of that money is channeled through the Shanghai Technology Entrepreneurship Foundation, where Wu Xiujuan works. She points out that far from every start-up will be a success - of the 12,000 they have supported, two-thirds have failed.

"Entrepreneurs start out with a big idea but then due to low demand or fierce competitions, they wind up with a smaller market share than they expect. So there is a gap between what they expect and what they can really get from the market," said Wu Xiujuan, EFG Assistant Secretary-general.

EFG also acts as a channel for funding from large donor firms like Unilever. The company provides guidelines for projects they are interested in, and those selected for investment can then also become corporate suppliers. The start-ups wind up with funding, and also a major client.

"Some of the challenges we have, we cannot solve by ourselves. We believe it is very relevant to our business, many of our brands can benefit from having the partnership with some of the best entrepreneurs in China, start-ups in China," said Marijn van Tiggelen, Executive Vice President of Unilever China.

"Part of what we do and the way we partner is to insert money to the partnership to help people get started, to get their best ideas and bring them to the market."

Wu Hao was fortunate enough to get his money direct from Unilever, and he says the food delivery sector that his company now works in is highly competitive. He believes that partnering with Unilever could help them understand consumers more as well as surviving the tough competition that a startup faces.