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China Moves Closer to Having Its Own Silicon Valley

Alibaba’s spectacular, $25 billion IPO earlier this year made many of its former employees sudden millionaires. Now, the company’s Executive Chairman Jack Ma is encouraging his old team to spend their earnings wisely – and preferably on Chinese startups.

Those former employees are now the backbone to China’s efforts towards emerging as a contender to California’s Silicon Valley, reports say. And if the numbers are any sign, China is well on its way. In addition to Alibaba’s initial offering, Chinese technology firms reportedly raised $30.3 billion in IPOs this year – compared with $4.97 billion for their U.S. peers.

Ma reportedly brought 1,600 former Alibaba employees to his home last month to encourage them to spend their new wealth wisely and start new companies in China. One of those former employees, Sun Shuihua, is investing more than $800,000 for her new online retail business. Another, Qui Jinliang, launched his own online furniture shop after nine years at Alibaba, a venture now worth about $1 million. It’s just a small fraction of the money being pumped into China’s startups. Earnst & Young data showed venture investments in Chinese firms hit $8.1 billion in the first three quarters of this year – that’s more than twice the $3.5 billion investors spent in Chinese startups in the whole of the previous year.

The U.S. still holds the top spot for startup investment, however, with venture investments topping $37.3 billion this year. But China’s new focus on building a challenger to Silicon Valley, its unwavering position as the world’s largest Internet market, and the city of Hanghzhour’s emerging status as China’s technology hub, are all generating an environment of startup frenzy.

“Today in Hangzhour, you could be having dinner at a night market and you’ll hear people around you talking about their startups,” Matrix Partners China partner Wang Huadong says. “You’re seeing a wave of people trying to set up their own businesses, trying to find the next big opportunity.”

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