Chinese entrepreneurs look to tap Web growth

"Zuckerberg, the Facebook guy. And Elon Musk." When asked who he admired, Wang Dechao gave two names that were probably on the mind of everyone else sitting with him at an Internet startup forum during the 2013 China Internet Conference (CIC).

Wearing T-shirt and shorts and fiddling with his tablet and smart phone while listening to a speaker sharing an innovation idea, 25-year-old Wang looked more like a college geek than what his name card showed: chief executive officer (CEO) of an online shopping guide website in the making.

Looking to Silicon Valley big names like Zuckerberg and Musk for inspiration, aspiring entrepreneurs like Wang are eager to carve out their own niche in China's burgeoning Internet industry.

Wang was among some 1,600 participants of the forum, one of the most popular during the three-day China Internet Conference which concluded on Thursday. Many of them, like himself, came to get acquainted with investors and seek inspiration or cooperation.

Wang quit his previous job in another Internet startup earlier this year and started working on his website with a friend, against the wishes of his parents, who would have prefer him to work in a government institution or a state-owned company.

"They have changed their mind and are supporting me now that I'm getting my website together. At the bottom of their hearts, parents want to see their children go out and make a difference," said Wang.

In a report released on Thursday, 36Kr.com, a technology information website for Internet entrepreneurs, said it found 1,378 new Internet startups in China in the second quarter of this year, the majority of them are in the areas of e-commerce, mobile apps, consumption guide, social networks and online tools.

Entrepreneurs of today are lured by ballooning opportunities in fast moving mobile Internet in China and an increase in mergers and acquisitions (M&As) in the sector.

About 464 million Chinese had access to the Internet via mobile phones by the end of June, according to China Internet Network Information Center. That's more than the population of the United States and the United Kingdom combined and represents a 10.5 percent growth from half a year before.

Those numbers may open up new ground for Tao Wei, CEO of an emerging cashback website for online shoppers of overseas goods. His company launched a mobile application about two weeks ago.

"The mobile Internet is the big thing now. There are a lot of opportunities out there," said Tao, once a software engineer at a Chinese telecom giant before joining a startup team to pursue his interest in what he describes as "buying and selling things."

Lei Jun, founder and CEO of Xiaomi Technology Co., a maker of android-based handsets, said China's mobile Internet business is just two or three years into a growth phase of at least 10 years.

Promising areas of investment include social network sites catering to specialized needs and web-based entertainment services, said Zhang Chaoyang, chairman and CEO of Sohu.com, a major Internet media company in China.

Increasingly active M&As by industry heavyweights also offer fresh hopes for startups. Small innovators once had to struggle for opportunities to go public, or saw their revenues eaten away by larger rivals who could roll out similar products.

"Acquisitions are very common in the U.S. Internet industry, but they only became more frequent recently in our country, which is good for the health of the industry," said Tao.

The aggregate value of M&A deals in China's Internet industry jumped to 15.03 billion U.S. dollars in 2012 from 870 million U.S. dollars in 2008, according to figures from China Venture Investment Consulting Ltd..

The trend has gathered momentum since the beginning of this year, with cash-rich big shots anxious to expand and seek new growth points.

E-commerce leader Alibaba has announced investments in Sina Weibo, Amap and Xiami Music, while search engine Baidu declared a plan to buy smart phone application distributor 91 Wireless Websoft for 1.9 billion U.S. dollars. This will be China's largest Internet M&A deal if completed.

Tao is looking for similar attention from large companies, with his website having seen a compound monthly sales growth of 30 percent since coming online last October.

"The rich resources and the huge platform offered by a large company are very important for our company if we want to make it really big. Money is not all we want," Tao said.

He finds Internet startups in China lack help from a well-organized community and strong policy support from the government. Rising salary levels and housing rentals are also paring his company's profits.

Altogether 443 Internet startups ceased operation in the first quarter of this year, most of them in the same areas that attracted the largest number of entrepreneurs, according to a report by 36Kr.com.

Those startups ran into dead ends because of shortages of funds, divided opinions inside the team, technology bottlenecks or weak market returns, the report said.

The latest word from the government may offer some comfort. The State Council, China's cabinet, promised recently to lower market barriers and strengthen fiscal and financing policy support to boost Internet-related consumption of information products and services.

But the relatively low industry threshold, combined with the near ubiquitous presence of large companies, means competition is extremely fierce.

"You deserve applause as long as you survive in China's Internet industry," said Qin Zhi, CEO of Autohome, a leading online auto information provider.

"As to how big you can make it, keep your fingers crossed," Qin said.