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Startups

Beijing's 2nd 'Silicon Valley' is smack in city center

Chaoyang offers talent reservoir for 80 education, e-commerce and other unicorns

MissFresh stores about 3,000 types of goods, including food products, in its warehouse in Beijing. (Photo Courtesy of MissFresh)

BEIJING/TOKYO -- Beijing already boasts one "Silicon Valley of China." Now, the city is getting another, as generous government support and a deep talent pool help turn the Chaoyang district into a startup hotbed.

The district, which is also a center of foreign businesses and embassies in the city, was home to eight of Beijing's top 20 unicorns, privately held companies each valued over $1 billion, as of the end of September, according to tech news and data portal 36Kr.

While Beijing's original Silicon Valley -- in the Zhongguancun district -- grew up around prestigious universities, Chaoyang offers an ideal setting for startups to try out consumer-focused services.

These include produce delivery app MissFresh.

"I use the app all the time because vegetables and fruits are delivered around 40 minutes after I place an order," says a 30-year-old who works in the Chinese capital. Her weekly shopping is mostly done via MissFresh, which boasts a network of about 300 storage sites in Beijing, each about the size of a convenience store with refrigeration and freezer facilities.

Founded in 2014 and backed by internet conglomerate Tencent Holdings, MissFresh has expanded to 10 major cities, including Shanghai and Guangzhou. MissFresh's strengths are its purchase data analysis and efficient warehouse operation, Chief Financial Officer Wang Jun said.

MissFresh is valued at $3 billion and ranks 14th among unicorns based in Beijing, according to 36Kr.

The Chinese capital hosts the world's largest concentration of startups. Eighty-two unicorns are based in Beijing, compared with 55 in second-place San Francisco, according to an October report by Chinese private think tank Hurun Research Institute. Beijing offers access to the latest developments in the government's tech innovation drive.

The Chaoyang district gives "easy access to downtown, which makes it easy to see what's trending," a staffer at MissFresh said.

Other startups in Chaoyang include Meicai, a platform that links farmers and restaurants, and two online learning platforms. VIPKID offers online English classes to young children; it has 70,000 registered teachers in North America and uses American course materials.

Meanwhile, Zhongguancun, the traditional tech hub on the northwestern edge of Beijing that includes the campuses of the prestigious Peking and Tsinghua universities, is located in the Haidian district -- home to nine of the city's 20 biggest unicorns.

Once a cluster of stores selling computers and peripherals, Zhongguancun was dubbed China's Silicon Valley in the 1990s. The area grew into a tech hotbed when graduates of area universities and those who had studied overseas began founding companies around 2014.

Zhongguancun offers a perfect environment for entrepreneurs with business incubation centers affiliated with universities and venture capital firms. Cutting-edge companies there include Beijing ByteDance Technology, the owner of the hot TikTok app, as well as face-recognition specialists SenseTime and Megvii.

Further north, the Haidian district houses the big headquarter campuses of search engine giant Baidu, Sina Weibo, known as the Twitter of China, and ride-hailing app Didi Chuxing.

In the eight years since its founding, Kuaishou, a TikTok rival, has grown into a company of 10,000 employees with an average age of 27. Its low-rise headquarters building on a college-campus-like site across the street from Baidu includes a gym and cafeteria, where staff can enjoy free food from breakfast to dinner -- perks similar to those offered at American IT companies.

It is not all rosy, however. One challenge is the surging cost of getting a business off the ground. Office rents are on the rise in Beijing, prompting some to "consider moving to a different province that's trying to attract startups," said a senior executive at one of them.

The fizzling startup IPO boom is not helping either. American coworking space provider WeWork suffered an implosion earlier this year, as a once highly anticipated IPO underwent a steep valuation cut before eventually being scrapped altogether.

The changing climate comes as ByteDance's TikTok faces a national security probe in the U.S., complicating any potential plans by its parent go public.

Still, for startups with either profitability or the government in their corner, IPOs are still on the table, as Megvii's plan to list in Hong Kong show.

Nikkei has a minority stake in 36Kr parent 36Kr Holdings.

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