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China tech

Hangzhou, China: Where Alibaba alumni and unicorns play

Billion-dollar startups thrive in city where talent and experience mix

Hangzhou startup Tongdun Technology works closely with Zhejiang University.

HANGZHOU, China -- The city where Alibaba Group Holding was founded just over 20 years ago has flourished into a tech hub populated by billion-dollar unicorn startups helmed by veterans of China's e-commerce leader.

The city has long held a special place in the hearts and minds of Chinese. Located 150 km southwest of Shanghai, Hangzhou is home to West Lake, a popular tourist attraction and UNESCO World Heritage Site that has been celebrated by poets and artists for centuries. But recently, the city's rich past has given way to its notoriety as a startup town.

One startup, systems developer Tongdun Technology, is pinning its fortunes on the Chinese government's plan to pour public funds into improving the country's tech sector through the so-called new infrastructure initiative.

Among other applications, Tongdun develops artificial intelligence-based systems to detect online fraud and perform credit checks for consumer financing. The company sees new business opportunities through the initiative in the post-coronavirus era.

"We will raise the level of security technology in preparation for new infrastructure," Tongdun CEO Jiang Tao said when announcing new services in August.

Tongdun is worth $2 billion dollars, according to a July estimate by 36Kr, which runs a database for Chinese startups. That puts the company in second place among Hangzhou's 11 unicorns, or startups valued at $1 billion or more.

Nikkei owns a stake in 36Kr's parent company 36Kr Holdings.

Jiang once served as an executive in Alibaba's internet security team before co-founding Tongdun in 2012. The company does business with over 10,000 customers, including financial institutions and local governments, and has expanded to Southeast Asia.

From tourist town to 'Alibaba City'

Hangzhou's status as Alibaba's hometown has only helped startups grow here. What was once a minor e-tailer grew into one of the largest tech heavyweights on the planet, with over 100,000 people on the payroll. Companies affiliated with Alibaba have concentrated in Hangzhou, transforming the tourist town into Alibaba City.

At the same time, there has been an increasing number of startups launched by former Alibaba employees who leveraged their technical expertise and connections built up during their time at the tech group.

"There are over 30,000 Alibaba veterans in Hangzhou," said Hansen Qiu, an associate professor at Alibaba Business School. "The roster includes executives, engineers, investors and entrepreneurial talent."

In this close-knit ecosystem, everything needed to launch startups is provided by Alibaba alumni, from CEOs to engineers. In some cases, former Alibaba executives who have built wealth become investors and back startups founded by former colleagues.

Tuya, a startup involved in the Internet of Things, was also founded Alibaba alums. The company develops modules installed in appliances to easily turn them into smart devices. Tuya markets a cloud platform as well.

Tuya CEO Jerry Wang previously founded a tech company as a college student, which he sold to Alibaba in 2008. Alibaba hired Wang as the first chief of the group's cloud business. Wang later left Alibaba to start Tuya.

Besides Alibaba, Zhejiang University is another major influence on the Hangzhou startup scene. The school is among China's most prestigious -- behind only top-tier institutions such as Tsinghua University -- and is known for producing business talent.

Two members of the four-person team that founded PingPong are Zhejiang University alumni. The fintech company, which ranks third on the city's valuation list, uses AI to facilitate payments to Chinese companies that sell products abroad. PingPong does business with major e-commerce players in Japan, including Rakuten and Amazon Japan.

Zhejiang's most valuable unicorn is WeDoctor, which is valued at $5.5 billion. The startup connects doctors who have free time with patients who are unable to see a physician in person. More than 240,000 doctors were registered on WeDoctor as of March, and the service was accessed 160 million times in the first half of the year amid the coronavirus pandemic.

China has no shortage of ambitious tech unicorns keen to expand their unique services abroad. But the Zhejiang contingent is not known for its swagger and seems to focus on supporting existing businesses' efforts to improve efficiency, which makes them promising potential partners for foreign companies looking to expand in China.

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