China's dynamic app industry lures foreign entrepreneurs

Posted by Staff on 2012-05-29 02:47:00 | Views: 39 |

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China's dynamic app industry lures foreign entrepreneurs

By Melanie Lee

SHANGHAI | Tue May 29, 2012 3:47am EDT

SHANGHAI (Reuters) - China, long known for its reputation as being a copycat nation, is emerging as a favored place for entrepreneurs looking to start mobile and Internet application businesses, due to the size and dynamic nature of the domestic tech market.

What makes China so attractive, say entrepreneurs, is a mix of lower operating costs compared to Europe or the United States, a willingness to work at start-ups, and the opportunity to feel first-hand the rapidly changing tastes of Chinese app users, which are seen to be leading the rest of the world.

"The Chinese market is probably the most dynamic market in the world right now for online games. There is also a lot of talent because gaming is so much a part of the ecosystem," said Ludovic Bodin, a Frenchman who moved the headquarters of his Facebook games startup to Beijing from South Korea, four years ago.

There is no industry data to show the growth in foreign-run start-ups over the past few years in China, but analysts and industry players say there has been a clear uptrend in relocating to Shanghai or Beijing.

"I can easily say foreign entrepreneurs working on apps, mobile and internet projects at large, easily double every year in China," said Bruno Bensaid, an angel investor and co-founder of Shanghaivest, a cross-border investment banking advisory firm based in Shanghai.

Cyril Ebersweiler, co-founder of Dalian-based start-up incubator fund, Chinaccelerator, also said there has been a marked increase in start-up groups featuring foreigners.

"We have had mixed groups (start-ups with both foreign and Chinese staff) for a while now, but last year was really an inflection point," said Ebersweiler, adding that his fund handled three such firms last year, compared with none in 2010.

South Korea, home to top smartphone maker Samsung Electronics and millions of online gamers, and the United States have long drawn innovators, given their high Internet penetration rates and tech savvy culture.

A key advantage in China, but also a challenge for app developers, is the high level of competition to meet the demands of tech savvy Chinese customers.

In China, the time it takes between designing a product and pushing it to the market and receiving feedback, is much faster than elsewhere, because the Chinese consumers move from product to product fast, said industry experts.

"In China, coders are always adding new features, getting things out, removing features that don't work. That's why it's interesting for entrepreneurs to work in this environment, the dynamism is here, the right carrot is here," Ebersweiler said.

Another alluring factor in China is the large pool of talent at relatively lower costs.

"China has a very entrepreneurial culture, people are very ready to work for start-ups. To ask someone to join a company with only 10 people is easier than in some other countries," said Bertrand Schmitt, the chief executive of App Annie, a mobile application analytics firm in Beijing.

App Annie, whose main market is the United States although most of its developers are Chinese, started out with only six employees but swelled to 20 after receiving funding from IDG Capital Partners.

"China is not just a low cost country, it has business potential for us. As you know, China is not easy to penetrate as a market, so being there from the beginning is not a bad thing," he added.

(Editing by Kazunori Takada and Michael Perry)

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