Needing their space

BEIJING—Light streams through the floor-to-ceiling windows at the Woo Space onto long desks where graphic designers and computer engineers furiously tap away on their laptops and swivel around their ergonomic office chairs to chat with co-workers. Walk past workstations, glass-enclosed meeting rooms, discrete sleeping areas, and you reach an open meeting space in the center of the office complete with beanbag chairs, seat cushions, and steampunk-style lighting fixtures. The whir of a coffee grinder and the smell of freshly ground coffee beans waft over from the coffee bar steps away. On an opaque window to a standalone office read the words “Startup is the new sexy.”

Startups truly have a scintillating appeal in the Chinese capital of Beijing—working for yourself, seeing your ideas come into fruition, and of course, the potential of making a ridiculous amount of money. As most startups don’t have the budget to pay for a traditional office, shared office spaces such as the Woo Space are popping up all over the city, providing not just the physical needs, but also creating a community for often lone-ranger entrepreneurs. Kaye Han and Randy Wan opened the first Woo Space office in 2015 with only three employees. One year later, the Woo Space has ballooned to seven locations, around 50 employees, and three more offices in the pipeline.

The great demand for co-working spaces reveals the rapid growth of startups in the past few years as the Chinese government pushes for more innovation: During the National People’s Congress in March, Premier Li Keqiang announced that “innovation is the primary driving force for development and must occupy a central place in China’s development strategy.” As China’s economy slows, Li sees the answer in startups, making public appearances at well-known co-working spaces and business incubators in cities like Beijing and Shenzhen.

The great demand for co-working spaces reveals the rapid growth of startups in the past few years as the Chinese government pushes for more innovation.

To drive innovation, government-backed venture funds raised $231 billion in 2015, according to Zero2IPO Group, making up a total of $338 billion. This is the largest pool of money for startups in the world, a gold mine for millennials who grew up admiring Steve Jobs or Jack Ma, founder of e-commerce giant Alibaba.

Yet even with abundant capital, Chinese entrepreneurs face serious challenges—internet censorship, lack of free speech, and an education system that inhibits thinking outside the box. All the while, the Great Firewall shuts out connection with the rest of the world. Entrepreneurs with dollar signs in their eyes but no long-term vision quickly burn through their money and watch their company go belly-up. For Christians in the Chinese startup world, there’s also the maze of ethical issues to traverse through, as bribery and navigating gray areas of the law are commonplace and necessary for survival.

A PERFECT STORM of economic factors contributed to the Woo Space’s success. At the end of 2014, Alibaba snagged the largest-ever IPO at $25 billion, spurring Chinese interest in entrepreneurship. At the same time, the government push for innovation—combined with the cap on foreign investments and the real estate bubble—led wealthy Chinese investors to look toward startups. Woo Space CEO Wan started to see many of his friends leaving their corporate jobs to strike out on their own, but struggling to find an office that fit their needs and budget.

At the same time, the rise of e-commerce meant physical retailers were struggling, and thus commercial real estate prices were low. Wan and his former Cornell classmate Han, both of whom graduated in 2012, decided to open a co-working space in the central business district in Beijing. Well-known venture capitalists backed the project, which gave the Woo Space legitimacy and attracted other startups to the co-working space, as they hoped to get funding as well. Around 750 people attended the Woo Space’s kick-off carnival in July 2015, and since then Woo Space’s locations have quickly filled up: The branch I visited in July had opened in March but was already at 85 percent capacity in the 480-seat office space.

Besides providing a quiet workspace for about $270 a month, the draw of co-working spaces is the community, said Han, the company’s COO. Sitting next to other entrepreneurs in different fields helps spur new ideas and locate needed talent. The Woo Space also connects startups with services they might need: professionals to help entrepreneurs register their company, take care of administrative duties, or even help them move to a bigger location. “Startups are lonely,” Han said. “You’re facing a lot of challenges that no one really knows the answer to, so we want people to feel supported, like they’re doing it with friends. It makes this experience less stressful.” Twice a month the co-working space holds events like karaoke competitions or NBA-viewing parties to connect entrepreneurs.

Some of the startups at the Woo Space are trying to renovate traditional industries in China. For instance, one startup noticed the stressful and corrupt environment at driving schools in China. Typically 20 students sit through a lesson before taking turns driving for about 10-20 minutes each with an instructor. Much of the time is spent waiting, and instructors are infamously short-tempered and rude, yelling at students’ mistakes. Trainees often need to ply their instructors with cigarettes or other small gifts to get better treatment, Han said.

This startup followed models of driving schools in the United States to increase the service standards of driving schools—students use their app to reserve a time slot, and the instructors drive to their house for a one-on-one lesson. Recently the startup raised more than $15 million.

As the Woo Space quickly expands, Han is adjusting to a completely new role. While a year ago each member of the team had to wear multiple hats, now Han is supervising managers at their branch offices. This has been the most difficult part of the startup process, as she struggles to figure out how to manage well without years of experience leading such a large team. Specifically, Han wants to maintain a close-knit company culture even as the company grows. “Most companies die not because of market or regulations but because of internal challenges: How do you find good employees? How do you manage them and help them grow?”

WHILE INTERNET CENSORSHIP does not greatly impact startups like the Woo Space, tech and social media startups need to learn to work around the different restrictions inherent in working in China. For instance, creating even a simple mobile game has now become an arduous task: In July, the State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT) started requiring all mobile gaming companies to submit their games to SAPPRFT for approval before going online.

The process includes obtaining pricey licenses and waiting months for approval, and even then, some face rejection for silly reasons such as using English words. One game developer is suing SAPPRFT over the regulations, telling the state-funded news site Sixth Tone that “with these new regulations, all independent game developers and small enterprises will be driven out of the market, with no glimmer of hope for survival.”

Nathan Chester also faces the squeeze of regulations in his work at the foreign-owned startup Clearcut, which focuses on events and online payments. Clearcut gives customers the option of paying with both Chinese and international payment options, a big help for foreigners living in China. Yet with complicated and ever-changing laws, he noted that foreign companies need to hire a full-time local staff just to navigate the waters and ensure that they’re doing things as legally as possible.

There’s a lot of opportunities. The question is: Are you able to navigate the waters and keep a long-term vision? Without a vision, many of these short-term thinkers will be forced out. —Nathan Chester

Censorship affects even something as basic as fonts—if a website uses Google Fonts, the page will have difficulty loading, as China blocks Google. This will then discourage users from visiting the page, hurting business. To skirt the Great Firewall, internationally minded businesses use virtual private networks (VPNs), which allow them to enter banned sites through a server outside China, while keeping in mind that their users typically don’t have that benefit.

Startups in China also face other unique challenges: China’s internet speed ranks 91st in the world, stymieing tech companies that often need to send large files. Employees are often overworked—Chester visited startups where workers sleep at the office next to their computers. The focus on getting rich quick also means that often entrepreneurs lie, cheat, or steal to make a profit and lack a long-term vision for the company.

Yet Chester, who also pastors a branch of Beijing International Christian Fellowship, sees how startups can create opportunities for Christians. For instance, Clearcut provides a legal way for churches to collect payments for church events or camps. Through Clearcut, Chester is also working to help Mongolian small-business owners sell their crafts to Americans, and to promote an Israel trip led by U.S. seminary professors. “I think with the proper usage of technology, the opportunity for creative, innovative Christians to do great things is tremendous.”

Chester rejects both extremes in the West’s view of Chinese entrepreneurship. On the one hand, he disagrees with observers who claim China is merely copying ideas—he’s seen himself the creativity within the startup community. Yet he also dislikes those who gush that China is the most innovative place in the world—it has deep-seated problems that can’t be ignored. The truth is somewhere in the middle.

“It’s the right time to be in China for entrepreneurship,” Chester said. “There’s a lot of opportunities. The question is: Are you able to navigate the waters and keep a long-term vision? Without a vision, many of these short-term thinkers will be forced out.”