"At that time, if you walked down the street of Beijing's high-tech area of Zhongguancun, five out of 10 people you met were starting a business, and four out of 10 were planning to start one," said Wang Xinmiao, a Beijing-based mobile application expert. "And even the last one, the janitor, was on her way to share in the experience."
The boom, however, turned out to be short-lived. By the end of 2015, investment began to dry up.
"The stock market slump in July 2015 heralded a change in strategy for venture capitalists. Accordingly, they had to cash out some of their investments to maintain liquidity," Wang told the Global Times on Sunday.
The recent sluggish growth of Internet users and China's economic downtown in 2016 have also signaled that the honeymoon is over, experts said.
The bust after the boom
Allen Zhu, the managing director of GSR Ventures, sees the drying up of capital as just a normal part of the boom-and-bust business cycle.
"It's like the old Chinese adage - thousands of soldiers and tens of thousands of horses cross a single log bridge," Zhu told the Global Times.
"Unqualified companies will fall by the wayside, leaving only the competitive ones to excel in the market."
Many tech start-ups did fall off that log bridge. From the beginning of 2015 through the first half of 2016, 1,000 Internet start-ups declared bankruptcy, compared with 800 in all of 2014, according to a report published by information technology research institute itjuzi.com.
Wang said the companies that didn't address the "true" demand of ordinary people were the ones that fell by the wayside.
Wang cited the once-attractive O2O service industry as an example. "O2O services penetrate every aspect of our daily lives, from door-to-door manicures to car washing," Wang said. "But some of them, like car washing, ought to be done in physical garages, where customers can receive more professional services."
Companies that have been plagued by fraud and shady practices, such as some troubled peer-to-peer lending platforms, have also ended up going out of business.
Curbing their expansion
The start-ups that have survived now face the potential problem of "blind expansion," Liu said.
"It seems they want their businesses to grow big, to develop fast, and cannot wait to have the entire world in their hands," Liu said.
To fulfill that goal, some tech firms have built fancy offices and hired extra employees in second- or third-tier cities, while others have expanded their operations beyond their core businesses.
"In addition, almost all start-ups have burned through much of their capital to offer subsidies to attract users and reward loyalty," Liu said. "This is unhealthy."
The drying up of capital should serve as a warning, experts said.
For example, Fxiaoke is currently refocusing on its core business - sales management - which is why it cut 20 percent of its employees, the company's public relation representative said.
"It's fair to say that the recent layoffs are actually helping these tech companies reduce redundancy and improve efficiency," Liu said.
