Building an Ecosystem for SMEs

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Building an Eco-system for SMEs

• Frank G.Liang
• China Torch Program Administration

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Outline
The Importance of SMEs
1
Why an Eco-system
2
Practices in China
3
3
The Importance of SMEs

• SMEs in China
• Rapid Growth since 1978
• Currently 42 million SMEs, 99 of all businesses
• Major Economic Players
• 60 GDP
• 75 urban jobs
• 68 export
• 53 tax revenue
• Vital Innovation Driving Force
• 65 invention patents
• 80 new products

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Why an Eco-system Entrepreneurship

• Entrepreneurship Headstream for Firm Creation
  Innovation
• .
• Entrepreneurship Developed via Practice in Real
  World, with influences from related aspects
• Education entrepreneurial spirit and culture,
  not only MBA
• Culture mercantile doctrine vs. venturing spirit
• Policy only 20 tech-based SMEs are incubator
  tenants

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Why an Eco-system SME Growth

• SME Growth Demand at different stages

Income
Mature
IPO/MA
High Growth Expansion
Development
Prototype
Idea
Death Valley
FFF
Time
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Why an Eco-system Growth-Driven

• Entrepreneurship and SME Growth are Driven from
  various aspects

Culture Influence
Government Behavior
Entrepreneurship SME Growth
Market Competition
Resource Availability
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Practices in China Concerted Efforts

• Government (The Visible Hand)
• Policy SME Law, Tax incentives for high-tech
  enterprises
• Investment Leveraging Innofund
• Institutional Arrangement Incubators, Clusters
• Market (The Invisible Hand)
• VC Profit-driven to high-growth, high-return
  businesses
• Capital Market
• Main Board
• SME Board (2004)
• Growth Enterprise Board (2009)
• Competition
• Natural Selection
• Core Competence

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Practices in China Policy Framework
Innofund
SME Board
CB
FFF
VC

• A policy framework conducive to the creation and
  development of tech-based companies along the
  innovation chain has been basically formed up.
  

Entrepreneur Tutors
Incubators Univ. Science Parks
Entrepreneur Tutors
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Practices in China Promoting Entrepreneurial
Culture
University Science Parks
Entrepreneurial Environment
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Practices in China Strategic Arrangement
Torch program
863, Key Tech
973, Nature Science
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Practices in China Torch Program
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Practices in China Seedling
Seedling Engineering
Technology Business Incubators
Tech-based SMEs (Future Stars)
Start-ups (Seeds)
Entrepreneur Mentors Program
Innovation Fund for Tech-based SMEs
The Roadmap Scheme for SME Growth
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Practices in China Forestation
Forestation Engineering
Fostering Technology Innovation Alliances
STIPs Software Parks Specialized Bases
Innovation Clusters
Reinforcing Technology Transfer Activities
Promoting Industrial Upgrading
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Practices in China Technology Business Incubators

• A major policy tool under Torch Program
• The first TBI established in Wuhan city in June
  1987.
• Currently 614 TBIs across the country, 197 of
  which identified by MOST as national-level TBIs.
• A strong force to promote entrepreneurship and
  innovation, providing (by end of 2007)
• a total incubation space of 22.7 million square
  meters, housing
• 44,750 tenant enterprises which employed
• 933, 000 people and generated
• a total business income of 262.19 billion RMB
  with
• 25, 214 patents applied
• 23,394 enterprises graduated accumulatively

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Practices in China Entrepreneur Mentors

• Torch Entrepreneur Mentors Action Program
• Bringing professional and practical business
  mentoring to entrepreneurs and tech-based SMEs,
• Reinforcing the incubation capacities of TBIs,
  which will serve as the bridge between the tenant
  companies and the mentors
• supported by a volunteer team composed of working
  and retired technopreneurs,
• executives and corporate leaders
• investment and financial experts
• notable business counselors as well as
• other professionals with extensive experience in
  ST fields.

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Practices in China Innofund

• Aim
• Addressing the problem of Market Failure
• Leveraging Investment into SME Innovations
• Funding Tools
• Grants for Tech-based SMEs
• Subsidies for SME Service Agencies
• Tech-based SMEs Venture Capital Introductory Fund
  (Seed Fund)
• Investment Subsidy
• Equity Investment

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Practices in China Innofund

• Facts Figures (1999-2007)
• Applications 40,324
• Projects approved 11,980
• Total funding 7 billion CNY.
• Average funding per project 585,000 CNY.
• Leveraged funding 40 billion CNY
• local governments
• Commercial banks, VC private capital

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Practices in China Roadmap Scheme

• Aim
• To create a favorable environment for the
  development of tech-based SMEs at various stages
  via joint efforts from various aspects
• Main Players
• Innofund Administration Center (Innofund)
• Shenzhen Stock Exchange (SSE)
• State Development Bank (SDB)
• National Incubator Association (Incubators)
• National VC Association (VCs)

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Road Map Scheme A Total Solution
Incubators
Stock Exchange
Com. Banks
Services
Loans
Training, OTC, IPO
Tech-based SMEs
Exit
Tech-based SME Loans
Equity
Grant Funding
VCs
Default Reserve
Fund of funds
Policy Bank
Innofund
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Thank You !
Website www.ctp.gov.cn E-mail
gliang_at_ctp.gov.cn