2019 Startup Outlook
CHINESE STARTUPS PLAN FOR TEMPERED GROWTH
The outlook for the tech sector is strong, with a large number of startups saying they expect more M&A opportunities. Access to talent and raising capital remain challenging. Compared to the US and UK, a higher percentage of Chinese startups have women in senior company roles and at least one woman on
the founding team.
Fundraising grows more difficult
A growing number of Chinese startups say it is harder to raise capital, with 28 percent calling it extremely challenging. In comparison, 13 percent of US startups say it is extremely challenging. Investors may be pulling back somewhat, due in part to government actions around financial risk, and that affects some Chinese VC fundraising and investing. Companies with sustainable business models should still find support.
Most Chinese startups say M&A will increase
About two-thirds of Chinese startups believe that acquisitions will increase in 2019, while nearly one-quarter expect M&A to decline.
VC is the expected next source of capital
Looking ahead, 51 percent of respondents expect their next source of funding to come from venture capital — a more traditional form of financing in China, particularly for later-stage companies.
Most startups say IPO is their long-term goal
The majority of Chinese startups say they expect to eventually go public with an IPO. Fewer now expect to remain private. And, underscoring the difficulty of planning an exit, 15 percent say they don’t know.
Chinese startups plan for hiring
Six in 10 startups say they plan to add employees in 2019, but 32 percent recognize that it is extremely challenging to find talent with the necessary skills to grow their businesses. Another 60 percent say it is somewhat challenging. Startups are most in need of filling product development/R&D, technical and sales positions.
“I hope there are favorable taxes or training subsidies to develop high-level talent. It is critical to improve education policies.”
—Entrepreneur, information security company
Most Chinese startups have a woman in an executive role
Women in China have long held tech leadership positions. Now, 70 percent of Chinese startups have at least one woman in an executive position, and half have at least one woman on the board of directors.
SVB will publish an in-depth report on Women in Technology Leadership in H1 2019.
Taxes and access to talent are top policy concerns
Corporate taxes and access to talent are the top two public policy issues that Chinese startups say have the most impact on companies like theirs.
“Most of our budget is R&D to facilitate innovation and fuel industry breakthroughs. So we look forward to lower corporate taxes.”
—COO, software company
Startups say China-US trade policy will impact their business
Two in three Chinese startups say they are concerned that trade policy between China and the US will have a negative impact on their businesses. By comparison, 40 percent of US startups say they are concerned about a negative impact on their businesses.