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MBAs Become Founders As China Embraces Entrepreneurship

A flood of venture capital and angel investment is stirring China's entrepreneurship scene – sending MBA students in Shanghai and Beijing into start-ups.

Sun Oct 12 2014

One of Helen Jihan Zhong’s role models is Jack Ma, the founder of Chinese e-commerce company Alibaba which became the world’s largest ever stock market-floatation, a record $25 billion, in New York last month.

“His successfulness will encourage more people [in China] to start their own businesses,” says Helen, a Shanghai-based entrepreneur who launched Nature Gift, a child-care business, earlier this year.

“We should learn from him: that when we face difficulties in our own businesses we should insist on our initial goals. Never give up,” says Helen, a master of finance student at the Shanghai Advanced Institute of Finance.

She started her company with two MBA students from the private Chinese business school, and two from other schools, after entering a competition for MBAs to win funding. They came second-place. But SAIF has invested about $80,000 in the fledgling business.

Nature Gift provides child care services to companies and universities. By setting up a childcare centre within offices and campuses, it is able to charge institutions who want to provide more flexible working for their employees.

Its first client is the Shanghai University of Finance and Economics, but Helen is expecting to sign-on six or seven businesses. “We have approached local companies in shanghai,” she says.

When MBA students aririve for classes at the weekend, Helen’s team comes to the rescue. “We help them take care of their children – so they can bring their children to school,” she says.

The start-up is small, with only a handful of employees, but the ease with which Helen founded the firm and secured funding will interest anyone with a sense of China’s stirring entrepreneurial scene, and represents a shift in mentality at the country’s leading business schools and universities.

“China is changing,” says Martin Zhu, head of the MBA program at the Cheung Kong Graduate School of Business in Beijing“Ten years ago the vast majority of our MBA students chose to work in multinationals, but over the last few years we see a clear change in that trend… Quite a few [now] choose to start their own businesses.”

Alibaba has become the symbol of China’s ambitions to turn itself into a tech powerhouse and a source of innovation. Its charismatic founder is a graduate of CKGSB’s non-degree programs. While most of the school’s executive enrolees are heads at large corporations or work in state-owned enterprises – its alumni network includes 2,500 chairmen and CEOs of Chinese businesses – many of them are also investors, or can connect MBA students to private venture capitalists, says Martin.

“Those success stories of our alumni are very inspirational – which encourage our young MBA students to think about their future,” he says.

Many of CKGSB’s students also study undergraduate degrees in Europe or the US first, giving them exposure to the “Silicon Valley culture”.

Venture capital and early-stage funding is one of the biggest barriers to entrepreneurial growth – but entrepreneurship in China is booming, fuelled by abundant venture capital, angel investors and private equity funds.

VC firms have invested an average of $54 million into series C rounds and $84 million into Series D rounds of Chinese businesses so far in 2014, according to Preqin, the data provider, up from $26 million and $76 million in 2013.

There have been sizeable investments in Chinese companies including Daojia, which raised $50 million from Macquarie Capital, among other firms, and, a car auction platform which raised $260 million in September.

Chinese and Asian investors are also leading direct investments.

According to Crunchbase, a start-up ecosystem database, investment firms including Singapore’s Temasek, China’s Horizons Ventures and Tencent, as well as Alibaba, have joined in private equity and venture capital deals worth $2.4 billion this year, up from $1.7 billion in 2013.

Roy Chason, an assistant director at Shanghai’s China Europe International Business School, says it is easy to access capital in the city through private angel investors and VC firms.

“There is plenty of capital for businesses with sound business models and aggressive growth prospects,” he says.

CEIBS has two in-house VCs available for students and alumni with combined capital of more than $100 million.

“This year we have record interest in entrepreneurship,” says Roy. “We also observe that some students begin to take a liking to entrepreneurship during the MBA… And may change their plans to launch a business instead of searching for a full-time job.”

The Entrepreneurship Club is driving much of this demand. Last year about 100 students of CEIBS’ intake of 178 students joined, making it the most popular of the school’s 40 societies.

It is a similar story at CKGSB, according to Shawn LIU, who just finished a full-time MBA there. In July, his business, which he hopes will grow into chain of tea houses, opened its first store in Beijing.

His company, Tnta, is like “Starbucks [but] with creative tea drinks – all natural [ingredients] without any additives”.

“We have a lot of entrepreneurs and a lot of the graduates are doing their own start-ups,” says Shawn, who worked as an investment banker at Bank of America Merrill Lynch before his MBA.

He personally funded the store’s launch but is confident he will raise funding from angel investors: “In current days in China, the funding is pretty sufficient. If you’re doing a sexy business, money is going to come to you.”

Copies of Crowdfunding sites – “Kickstarter clones” – have also started to prove their mettle in China, according to Liansheng Wu, director of the MBA program at the Guanghua School of Management in Beijing.

“They at least provide motivated entrepreneurs with big ideas another investment channel,” he says.

Economists believe that entrepreneurs are crucial in the rebalancing of China’s economy towards a more consumption-led service economy, away from its previous dependence on heavy industry and manufacturing for export.

For entrepreneurs like Shawn who are tapping into increased consumer demand, opportunity in the Chinese domestic market is largely the product of years of imbalanced regional economic development, says Liansheng.

Nevertheless, Roy believes that China will continue to see the entrepreneurship trend grow – and business schools will play a starring role in the fostering of this growth.

“We will see more… Start-ups and companies being launched based on indigenous innovation, the rise of more sophisticated services, as well as technologically based products,” he says.