China's fast-growing Shenzhen Special Economic Zone will be the site of a Silicon Valley-style high-tech incubation center under a plan unveiled today by Hong Kong investment company Cyber City Holdings Ltd. and U.S. venture capital company Dynamics Technology Inc. (DTI).
In a 50-50 joint venture, the companies will establish the China Innovation Center in the existing Shenzhen CyberCity complex, where local entrepreneurs will be able to develop innovative products and even line up relationships with well-connected foreign firms.
Shenzhen today is much like Taiwan's Hsinchu Industrial Park was in the early 1980s, when DTI helped several electronics manufacturing firms get started, DTI Founder and Chairman Denny Ko said here today.
"The fundamentals are the same," Ko said. "We know exactly what it takes to get a new high-tech industry going from our own experience -- both successes and failures."
The partners will focus on ventures related to e-commerce, wireless, telecommunications, and Web site design, Ko said. DynaFund Ventures, a DTI unit that will be involved in the Shenzhen project, specializes in early-stage investments in IT companies. One of its more successful investments was online toy retailer eToys Inc.
Officials of the two companies would not specify the size of their investments, but Ko said some support will come from medium-sized and large U.S. companies.
However, their interest may be strategic rather than financial, he said.
Companies that want to gain access to newly developed technology in China but lack the expertise to navigate the business environment will be able to link up with entrepreneurs at the incubation center and invest in or contract with their new ventures, he said.
If a company such as Cisco Systems Inc. needed a new type of software, for example, "they could come to the center and have them develop that software," Ko said.
The center would follow the pattern set by U.S. venture enterprises such as incubator specialist Idealab and CMGI Inc., Ko said. It would give entrepreneurs the freedom to develop their ideas, rather than buying them out to control the technology. This goes against common practice in China, he added.
"Control is the wrong way to do it," Ko said. "We have to make the Chinese understand this."
Shenzhen is an ideal location for nurturing high-tech firms in China, said Simon Jiang, chairman of Cyber City Holdings. The young city has grown up over the past 20 years with new companies taking advantage of its status as a Special Economic Zone located near Hong Kong, he said.
"In a sense, Shenzhen is an incubation center," Jiang said. He said the city is young, with residents an average of 26.5 years old, and is home to one-fifth of China's doctorate degree holders.
The city's lclose proximity to Hong Kong also makes it an attractive place to host high-tech development work, he added.
"It's like a floodgate, with a difference in water level," Jiang said. "That difference in water level can create electricity."
Cyber City Holdings has made a number of IT-related investments in China, including involvement in 11 state-run science parks in major cities, including Beijing and Shanghai. It is based in Hong Kong and can be reached at +852-2511-8878. DynaFund Ventures is at http://www.dynafundventures.com/.