China Startup Outlook 2018
Key insights from the Silicon Valley Bank Startup Outlook Survey
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LETTER FROM SVB CEO
CHINA STARTUP OUTLOOK 2018Startups enter 2018 with confidence
For the ninth year, Silicon Valley Bank is pleased to share the thoughts of more than 1,000 startup companies from innovation hubs around the world. In our Startup Outlook 2018 report, we monitor the perspectives of technology and healthcare founders and executives who are part of the expanding startup ecosystem.
We ask about business conditions, access to the funding and talent necessary to grow their companies and the public policy issues that affect them most. Their outlook matters because the innovation economy is a high-powered engine, driving job creation and opportunity, creating wealth and stability and inventing what comes next. The majority of survey respondents are based in the United States, the United Kingdom and China, but many do business across borders. Despite political and economic volatility, the good news is that large numbers are signaling confidence and optimism for their businesses in 2018. In fact, 30 percent of startups globally believe that 2018 will be much better than 2017, and very few believe that it will be worse. Chinese entrepreneurs tend to be more optimistic about business conditions overall, and this year is no exception. Startups globally are forecasting a strong M&A environment. The percentage of US startups that say they plan to hire is at a five-year high. US and UK startups believe that raising capital is getting easier. That is not the case in China, however. New sources of funding, such as initial coin offerings (ICOs), are available to the innovation economy, yet startups globally still expect to rely largely on the wellfunded venture capital industry. There are challenges of course, including difficulty finding the talent needed to grow their businesses, which is the No. 1 policy issue reported by startups for the fifth straight year. In comments collected from respondents in the US and the UK, we heard this common refrain: Innovation succeeds when you have the ability to attract the world's best and brightest. Overall, more than 90 percent of startups globally again report that hiring is a challenge. Seeking growth and opportunity, nearly 30 percent of US and UK startups are locating critical divisions of their operations offshore due to immigration policy, tax policy or the regulatory environment. Despite significant growth among US startups reporting that they have programs to increase the number of women in leadership positions, the percentage of US startups with female executives and board members remains low, and little has changed. We live in dynamic and fast-changing times. The innovation economy now contributes to most of the key measures of overall economic health and is the major driver of job growth. For those reasons, we are more committed than ever to promoting innovation and the companies that are working to invent the future. Thank you for your interest in this report. Let us know what you think.
Greg Becker CEO, Silicon Valley Bank
ABOUT THE STARTUP OUTLOOK SURVEY
CHINA STARTUP OUTLOOK 2018About the Startup Outlook survey
Our annual survey of technology and healthcare startup executives offers insights into what is on the minds of today's technology and healthcare leaders. For this year's survey, we received responses from startup executives in innovation hubs around the world.
Total respondents
Industry sector
Size
Company age
Profitable
64% 70%
(net)
1,045
< 5 years old Technology Healthcare Other
(net)
58%
Yes
13%
17%
59%
05 employees
23%
2600100 employees employees
18%
36%
5 years old
42%
No
Primary place of business
Ownership
95%
Private
US companies with at least one founder born outside the United States Founder gender
Revenue stage
63%
53%
$25 million in revenue
60%
US
11%
UK
18%
China
11%
Other
5%
25%
Public
Female founder(s)
75%
Male-only founder(s)
20%
17%
Pre-revenue
$25 million in revenue
BUSINESS CONDITIONS
CHINA STARTUP OUTLOOK 2018Chinese startups are optimistic about 2018
Eight in 10 Chinese startups say business conditions in 2018 will be better than in 2017. This reflects the optimism in the country's economic prospects and a growing demand by mobile-first consumers for goods and services.
Describe your outlook on business conditions for your company this year compared with last year.
Much better or somewhat better
85% 74%
80%
2016
2017
2018
FUNDING
CHINA STARTUP OUTLOOK 2018Fundraising remains difficult
More Chinese startups (88 percent) say the fundraising environment is extremely challenging or somewhat challenging compared with peers in the US and the UK.
What is your view of the current fundraising environment
Extremely challenging or somewhat challenging
84%
88%
2017
2018
FUNDING
CHINA STARTUP OUTLOOK 2018Most startups say M&A will increase
More than two-thirds (69 percent) of Chinese startups believe that acquisitions will increase in 2018. The percentage is up significantly from a year ago. In September 2017, the China Securities Regulatory Commission (CSRC) revised rules to encourage more domestic M&A activity, and large, successful tech companies such as Tencent and Alibaba are making acquisitions. Additionally, large companies themselves have merged to dominate certain sectors.
How do you think the M&A market will change in 2018
Expect more acquisitions
No change
Expect fewer acquisitions
54%
14% 5%
69%
2018
26%
2017
32%
FUNDING
CHINA STARTUP OUTLOOK 2018VC and private equity are top sources of capital
Looking ahead, 55 percent of Chinese startups expect their next source of funding to come from either venture capital or private equity. Those saying angel/micro VC/individual sources increased substantially in the past year, from 2 percent to 14 percent, signaling that companies hope to raise money earlier in their life stage.
What do you expect to be your company's next source of funding
2016
38% 32%
2017
2018
35% 28% 20% 16% 8% 2% 14% 10% 7% 9% 6% 11% 9%
Venture capital
Private equity
Angel/ micro VC/ individual investor
Corporate investor
IPO
Note: Asked of private companies that successfully raised capital. Other sources of funding include bank debt, organic growth, merger, government grants and crowdfunding and represented 22% in 2016, 20% in 2017 and 13% in 2018.。