Innovation accelerator
The SPD Silicon Valley Bank is another important player that has boosted China’s tech innovation during the past few years. This Shanghai-based joint venture was set up by the US lender Silicon Valley Bank and Shanghai Pudong Development Bank and focuses on budding Chinese tech entrepreneurs.
This first-of-its-kind bank extended credit to Secoo.com, a Chinese cross-border luxury e-commerce platform, at its early stage.
The lender also provides this startup a data report based on its knowledge of the relevant industry as well as the Silicon Valley Bank’s insight on the global markets, which will help the e-commerce site expand its footprints globally.
“Our ability goes beyond lending loans to the innovative companies. We put the right information in front of the right people and build up the thought leadership. By leveraging our own network in the innovation ecosystem, we make endeavors to help startups grow and increase their probability of success,” David A. Jones, President of Silicon Valley Bank Asia and SSVB, told Shanghai Daily.
With a distinct business model of assisting buyers and suppliers by setting up offline stores and an online mall to serve customers directly, the e-commerce site has been endorsed by a number of outstanding venture capitalists.
“In addition to technological innovation, business model innovation is another area that SSVB attaches great importance to,” remarked Jones.
“The innovative model of Secoo is in line with our definition of innovation and its excellent offline service ability is where the core competitiveness of the luxury e-commerce industry lies,” the bank said.
Asked how SSVB differentiated itself from other Chinese lenders, Tim Hardin, the vice president and head of corporate banking of the bank, said, “We are the only bank in the world that is focused on the innovation sector.”
Target clients of the Sino-US lender include those in the hardware, software, Internet, mobile, consumer technology, life science, biotechnology and clean-tech sectors.
As a comprehensive financial service provider for the small-and medium-sized enterprises, Bank of Shanghai has also been offering financial products and services to startups.
Linked-F, a Shanghai-based “venture star” Internet education startup, was slow to take off at the start because of lack of funds.
“Back in 2013, we were turned down by banks when we approached them for financial support. The big lenders rejected our request for loans as we were a light-assets innovative company without much to pledge,” admitted Tai Shan, the founder and managing director of the company.
To help this new business, Cowin Venture, which had invested 4 million yuan in 2015, referred it to Bank of Shanghai, Chen Zhong said.
“It was at this very critical moment that Bank of Shanghai bailed us out in time and helped resolve our urgent need for money,” Tai said. “Since then, the bank has supported our development step by step.”
Helpers in need
Thanks to financial support from the bank, Linked-F has evolved into a leading provider of finance and taxation training and consulting services in China.
“Bank of Shanghai has lowered our financing cost greatly,” Tai said. “As our company grows, we would like to turn to banks for more help instead of venture capitals.”
The Shanghai branch of South Korea’s Hana Bank China, which does over one third of its business on the mainland, is also targeting small Chinese enterprises.
“At the present time, we are joining forces with the venture partners, high-tech zones and small business incubator parks to expand our capability to better serve the startups. And we are keen to leverage the Internet of Things technology to explore more scenarios for better financial services. This will definitely be a ‘blue ocean’ market,” a senior executive from the Korean bank said.
“Blue Ocean” refers to uncontested market space for an unknown industry or innovation. It is usually associated with high potential profits.
When it comes to banks, investors and startups working in this innovation ecosystem, Zhang said that money from banks is “an important short-term complement to venture capital.”
“In this innovation chain, the new businesses are the core part that links capital market and banks. From my experience as an angel investor, only a very low proportion of the entrepreneurial firms can win favor of venture capitalists, which means that a vast majority of those companies will have to look for debt financing,” Chen said.
“As our previous collaboration with lenders was mainly made on a case-by-case basis, a more market-oriented internal mechanism is necessary for the sustainable growth of this new business area for banks,” Chen added.
The local government too has intensified its support to these innovative companies.
To facilitate the city’s transformation into a global innovation center, the Shanghai branch of the China Banking Regulatory Commission mapped out a plan to funnel more financial services to the technology and innovative companies last month.
It involves providing stronger backup to support the drive for up to 7,000 startups by 2020. The outstanding loans to the small- and medium-sized innovative enterprises is expected to reach 270 billion yuan, with an average growth of over 15 percent per year. Among this, 20 billion yuan loans are expected to be devoted to the startups under the investment-loan linkage pilot program.
