Asian cities are competing to woo tech start-ups with incentives

Asia is now home to many of the world’s most innovative and valuable technology start-ups.

Investors have continued to pour capital into these companies, thanks to the implementation of business-friendly policies to help nurture their growth in major Asian cities.

Last year, nine out of the 10 largest public venture capital deals involved start-ups in Asia – seven of which were based in China, according to capital market research firm Preqin.

The cities in Asia that have succeeded in attracting a steady stream of venture capital and start-ups have relatively strong economies, highly educated populations, major academic institutions and well-developed infrastructure. To stay competitive, these cities also offer a range of tax incentives, subsidies and related programmes to support entrepreneurs.

China created a unicorn every 3.8 days in 2018

Major cities in China, for example, have various government-backed funds on offer for start-ups. The biggest source of venture capital funding in the world’s second-largest economy are government institutions and state-owned enterprises. In 2016, these entities accounted for 35.3 per cent of all venture capital funding in the country, according to a report by Mitsui & Co Global Strategic Studies Institute.

That state-backed funding support for start-ups is reminiscent of how entrepreneurship in the United States received a big boost after the Small Business Investment Act of 1958 was passed into law. It helped create privately organised and managed investment firms, which provided new and established businesses with funding – consisting of money borrowed at favourable rates from the US government. That programme later on helped foster the development of hi-tech businesses at a vast, sprawling area in northern California that is now known as Silicon Valley.