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Tech has stolen the market cap crown from the oil tycoons. This change is perfectly natural according to a panel of regional experts last month at Innovation Weekend in Tokyo, but the Silicon Valley kingdom is also teetering on being overthrown.
“The day of America as the single IT leader is over,” writes founding partner Takeshi Ebihara of Rebright Partners on his blog. Citing PricewaterhouseCoopers’ MoneyTree report, Takeshi emphasises that the amount of funding for startups in China grew eightfold in just two years to US$37 billion in 2015.
That’s less than US$59 billion in the same period for the US. But Takeshi believes the US$37 billion pumped into Chinese startups in the first half of 2016 alone, as shown by the Tech in Asia Database, shows China is now on par with Silicon Valley.
The panellists agree it’s not just funding. Unicorn distribution and the amount of money spent on research and development are also shifting to Asia. “China is probably going to be the biggest winner the human race has ever seen,” explains Keith Teare, co-founder of TechCrunch and partner at Archimedes Labs.
Serial entrepreneur and host of Disrupting Japan Tim Romero pushed back on that and stressed that market capitalization and valuations are poor measures of innovation. While Tim praises the research being done in life sciences and fields like autonomous driving in China, he feels Silicon Valley is still unrivalled as the birthplace of truly innovative business models.
Keith admits the Bay Area is no longer exceptional, but it is incredible that it still produces 40 percent of the world’s unicorns. The good news for founders is that success is no longer limited to geography. Takeshi, for example, is excited for the future of India’s tech scene as well. He points out that the yearly economic growth rate in India is 7.9 percent, even faster than China’s 6.7 percent. “India will grow so much that you could even say it’s fine to ignore other places,” he laughs.
Many are quick to pin the economic boom in Asia to a simple increase in people, but Tim downplays the effect of population on the economy. “It’s entirely a function of change and the opportunities for startups to jump in.”
Founding partner of Golden Gate Ventures Jeffrey Paine has seen these opportunities grow first hand. He recounted a recent trip to China where he spoke with founders about how entrepreneurs and the middle class no longer have to work multiple jobs and finally have personal leisure time.
Young and growing economies like in Vietnam, Cambodia, and Indonesia do have the advantage of being able to create a surplus. “Last year you had ‘X,’ this year you have ‘X’ plus five percent,” explains Keith. “Suddenly you can take some new risks with that five percent and do some new things.”
Ageing countries like Japan, on the other hand, consume all their resources just to produce at last year’s levels. To stay competitive, Keith professes that such countries need another industrial revolution. He points to Lebanon’s investment program as an example to kickstart innovation. Banks are encouraged to take risks and invest in startups through the program and the central bank then guarantees up to 75 percent of the money put in. This has created another potential US$400 million available for venture companies in a country with about half the population of New York.
Finally, the panellists offered some advice for Japan. Jeffrey encouraged people to speak English and look for new business ideas by travelling. Keith joked that Japan should build an electric car that beats Tesla. Tim, a resident of Japan, suggested the island nation could benefit from a government-level competitive research project like the United States’ Defense Advanced Research Projects Agency. Such a program would get everyone, not just large corporations in solving big problems.
“Japan has got the knowledge capital of the world,” says Tim. “I think that would be a huge shot in the arm for entrepreneurship here.”
Feature image: Patrick Nouhailler via Flickr.