Dear startup Community, we are excited to explore the insights from our recent interview with Christoph Hering, Director Innovation Center at AHK Greater China. He sheds light on the vibrant Chinese startup ecosystem and its attractions for German companies while also highlighting the considerable interest of Chinese startups in the German market.
Christoph Hering at the AHK Innovation Night
Could you briefly introduce the AHK Greater China?
AHK Greater China is part of the German Chambers of Commerce Worldwide Network (AHK) which encompasses 150 offices in 93 countries and regions. As an official institution of Germany's foreign trade promotion, AHK Greater China has been representing the economic interests of German companies in China for over 25 years. The primary objective is to promote bilateral trade and investment between Germany and China by advising, supporting, and representing German companies looking to establish or expand their business presence in China. AHK Greater China’s main offices are located in Beijing, Shanghai and Guangzhou with seven more offices throughout the country.
Can you tell us something about the AHK’s involvement in the Start.up! Germany Tour?
Since 2019 AHK Greater China is part of the Start.up! Germany Tour (SUGT). We are responsible for the local selection of startups in China and Hong Kong. This year, 2024, we received over 50 applications from Chinese startups across different industries and sizes. We thoroughly reviewed all the teams and subsequently let the top 12 teams compete in a pitch competition. In the end, the team from “MechMind” in Beijing emerged victorious. In general, SUGT is a fantastic platform to get to know new innovative startups from various countries and regions. It also offers local startups the chance to introduce themselves to German companies, build new partnerships and potentially find customers or even investors.
How would you describe the Chinese start-up ecosystem?
The Chinese startup ecosystem, with its size, diversity, and innovative power, is a thrilling yet challenging prospect for foreign observers. The landscape can be likened to a jungle; success requires intense effort to penetrate the market. Many innovative startups remain under the radar, and without Chinese language skills and industry insights, discovery from the outside can be complex. Moreover, larger Western platforms such as techcrunch.com and LinkedIn are not prevalent in China, and Chinese startups are less likely to have websites or participate in international startup events, adding to their invisibility. Relationships and personal networks hold as much sway in Chinese startups as they do in business dealings, underlining the value of the right network partners and universities for gaining access.
The fact that only 3 to 4% of university graduates establish startups speaks volumes about the competition and financial struggles young founders face. Investors' high ROI expectations and risk aversion often lead to a landscape where the most successful entrepreneurs are in their mid-thirties to forties, armed with significant professional experience and robust personal networks. These founders, particularly those from large Chinese corporations like Alibaba and Huawei, can command vast startup capital and a ready customer base, often from their previous employers.
Chinese startups excel at rapidly transforming ideas into products and scaling existing products, driven by an impressive development speed. Innovation in China often involves multiple small adjustments to the product rather than massive breakthroughs. This agility and speed set Chinese startups apart, propelling their success on the national and global stages.
What makes the Chinese startup ecosystem attractive to German companies, and conversely, how does the German market appeal to Chinese startups?
The Chinese startup ecosystem presents several fascinating aspects for German companies. A notable facet is the rapid innovation speed of Chinese startups, which is largely due to their adoption of agile methodologies from the software sector. This 'fail fast forward' mentality, combined with excellent basic research and a worldwide lead in patenting new materials and processes, results in startups that are rapidly pushing the boundaries of technology. Furthermore, Chinese apps like WeChat, Dianping, and Meituan are fostering a significant digital shift. Through these platforms, Chinese startups can create and distribute new digitally networked products at a remarkable pace. This wealth of smart products interfaces with smartphones, providing German companies with a unique insight into the potential future of a digital society. However, the high competition level within China means that the successful startups are those that have not only managed to find a product-market fit but have also secured proper financing and developed strong teams. With the current economic downturn in China, these startups are now expanding into the global market, often outperforming local competitors in Southeast Asia, Latin America, and Africa.
On the other hand, the German market is appealing to Chinese startups as both an additional sales platform and a source of novel technologies. In addition to securing a larger market share, these startups are also looking to out-innovate their Chinese counterparts, using Germany's competitive tech environment to drive their own innovation. Germany is also popular for its good universities and central location in Europe. As a result, many Chinese startups choose Germany as their European headquarters. These benefits, however, come with the challenges of high employment costs, high taxes, complexity in bureaucracy, and sourcing suitable employees. The latter remains a significant obstacle, with many Chinese startups in Germany preferring to hire Chinese workers and German employees often leaving after a short tenure. Navigating these challenges is essential for Chinese startups wishing to establish a long-term presence in Germany.
In what ways do startups benefit from collaborating with AHK Greater China?
We offer a comprehensive network for Chinese startups to the German industry by helping them to win new customers, cooperation partners, and investments. Many of our members are actively looking for new partnerships and insights into the Chinese startup market. As AHK, we regularly organize events on the topic of innovation, host pitch events like SUGT, and provide a valuable networking platform. We are also in contact with several startups from Germany and China and invite founders as speakers for our events. In our Innovation Newsletter, we also regularly interview startups and present them. This year, 2024, we also offer a new program for AHK members, the AHK Innovators Club in China. In this program, we connect German companies with Chinese companies as mentor and mentee pairs to promote the exchange and innovative power of the participants. Thus, we offer Chinese startups a great opportunity to work with German companies, and for German companies to gain a better insight and understanding of the Chinese startup ecosystem.
About AHK Greater China
AHK Greater China is part of the German Chambers of Commerce Worldwide Network (AHK) which includes 150 offices in 93 countries and regions. As an official institution of Germany’s foreign trade promotion, AHK Greater China has been representing the economic interests of German companies in China for over 25 years. Its primary objective is to promote bilateral trade and investment between Germany and China by advising, supporting, and representing German companies seeking to establish or expand their business in China.
With main offices in Beijing, Shanghai, and Guangzhou and seven more offices throughout the country, the widespread presence enables the AHK to offer deep insights into the local business environment. The team of over 130 specialists are experts in their fields and have years of experience in helping German companies navigate the complexities of doing business in China.
