ARTICLE:
SAN JOSE MERCURY NEWS
OCTOBER 25TH 2009
By John Boudreau
TIANJIN, China — This city in northeastern China is a long way from Sand Hill Road, home to the world's greatest concentration of venture capitalists. But a deal too good to pass up led Yong Li to leave his family in Palo Alto a few months ago and head here to pursue his dream of starting a company, with backing from an unlikely source — China's newest capitalists, its Communist leaders.
"The government is rolling out the red carpet," said Li, who rides a rickety bicycle through an open-air market every morning and evening, grabbing wok-fried meals on his way to building TerraBay Pharmaceuticals, which is working on a treatment for lung cancer. "The government takes the risks. And there are almost no strings attached."
China has quickly grasped the fundamentals of Silicon Valley innovation: Daring investments in aggressive entrepreneurs create world-changing companies. Officials across the country are luring back Chinese-American technologists and executives — many from Silicon Valley — in hopes of seeding an entrepreneurial culture that they hope will some day create world-class companies. As the U.S. economy sputters, provincial officials are finding a receptive audience on tours to the Bay Area and other parts of America.
Silicon Valley has long been a global revolving door for the bright and ambitious who use experience gained at successful startups and companies as a springboard to launch new careers in their homeland. China's efforts to entice star talent to return, though, represent a new wrinkle. It is tapping into the anxieties of Chinese professionals who increasingly feel the valley is a professional dead-end.
"We were able to get funding in the valley, but the fund collapsed," Li said. "So we ended up with nothing."
He now represents a wave of highly skilled immigrants flocking back to their homeland, which poses a threat to the Silicon Valley's innovative culture, said Vivek Wadhwa, a researcher on immigration and labor issues at the University of California-Berkeley. Others, though, see such movement as yet another strength of the region; those who return to their to countries of origin to start companies frequently come back to the Bay Area to set up research offices, as Li plans to do should TerraBay succeed.
Evidence of China's projected 8 percent-plus economic growth amid the global downturn is easy to find in Tianjin, a city of more than 11 million. Its skyline is clogged with construction cranes converting former rice fields into technology parks and high-rise office buildings.
"If you go down the streets of Beijing and Shanghai, the most common word on the signs is 'innovation,' " said Bill Miller, co-director of the Stanford Project on Regions of Innovation and Entrepreneurship. "They call it homegrown innovation. They are really trying to push the country up the value chain," moving beyond manufacturing products to eventually creating and designing them.
Talent-poaching has picked up in recent months as Chinese officials descend on Silicon Valley on a regular basis. "Their selling point is this: China is a big and growing market. If you don't come to China now, five years from now may be too late," said Bin Lee, founder of the Silicon Valley China Entrepreneurs Forum.
And the offer sheet is almost too good to be true. "The government doesn't take an equity stake in the company," he added. "It's almost like an interest-free loan. If your business fails, they don't care."
Government representatives have deep pockets, offering seed money of up to $1 million (which goes much further in China), rent-free offices and labs, favorable tax benefits, assistance in cutting through red tape and other goodies to those with business plans to their liking.
"For every entrepreneur, special requests can be negotiated on a case-by-case basis," said Xiao Sheng, a commercial deputy of Changsha, the capital of Hunan province in the southern part of China.
Officials in the city of Wuxi, a city northwest of Shanghai, wooed Haidong Wu, a Foster City entrepreneur, with free airfare, a stay at a five-star hotel and a lavish banquet after he agreed to take more than a half-million dollars in funding from the government and venture capitalists for a new media startup. "So many of my friends who are working as engineers have ideas and want to go back," he said.
The experience of Li of TerraBay reflects the sour venture funding picture in the United States; 2009 could be the leanest year for investments since the dot-com collapse. Li and his co-founder, Hui Zhao, have now received commitments of up to about a half-million dollars and other forms of assistance from government agencies for their pharmaceutical company, whose lung cancer work would address a pressing problem in China, with its culture of smoking. They have joined hundreds of other overseas Chinese who have returned to Tianjin, according to local officials.
Government agencies "are all chasing after the same group of people — people with a Chinese background who lost their job or just graduated from college and can't find a job" in the United States, said Zhao, a former Oracle software engineer who also left her family in the Bay Area to explore this new land of opportunity. "The bad economy has played a significant role in this movement."
Professionals like Li and Zhao also say that many Asian tech workers struggle to succeed in Silicon Valley. Census numbers reveal that while Asians represent more than a third of the work force at many valley companies, their ranks are thin when it comes to leadership positions. "In Silicon Valley, there is a lot of opportunity," she said. "But being a Chinese native, you don't have a lot of access to networking and business resources or prestigious government spending. Here, I feel we are in the loop."
Chinese recruiters also benefit from what some professionals say is a change in the political tone in the United States. "The general anti-immigrant sentiment is increasing," Li said. "I felt I wasn't as welcomed as I was when I first went to the United States" nearly 25 years ago.
Not long ago, talented entrepreneurs would have had little reason to return to China. But a new generation of business-savvy government leaders, many educated in the West, are trying to replicate Silicon Valley's entrepreneurial milieu, Li said. "And they don't ask for anything — no bribes."
China's recruiters draw inspiration from Wuxi, which financially backed Suntech Power, founded by overseas Chinese Shi Zhengrong in 2001, and now a leader in the global solar industry. This year alone, the city received some 870 business plans, many from overseas, Foster City entrepreneur Wu said.
Those who have returned, though, find China lacks many key ingredients needed for a high-tech entrepreneurial ecosystem. Government officials and Chinese VCs still need to understand that many ventures fail and that successful companies can take years to build, Li said. And while China is overflowing with sharp young minds, it does not have deep ranks of seasoned scientists and technologists.
"We thought the talent would be abundant and cheap," Zhao said. "But finding qualified talent isn't easy."
Some returnees also say they have become Americanized to the point of feeling culturally out of step in their homeland. Li, who dresses in valley casual — shorts and T-shirts — is often mistaken for a laborer. "In China," he said, "they judge you by what you wear."
There are also personal strains, such as being away from spouses and children. Zhao has a 4-year-old in Pacifica. Li has a son in college and an 11-year-old daughter in Palo Alto. The hardest hours of the day come after work: "That's the lonely time, when you start to miss your life in the Bay Area, your family," Li said.
Still, the returnees, known as Sea Turtles, keep coming.
Qian Wang returned to Tianjin shortly after finishing her post-doctorate training in basic medical research at Harvard University. With government support, she and her co-founders launched Genee Scientific, which has created a social network site for global life science researchers and produces software to manage research labs. "The world is changing," she said. "There are a lot of advantages to being here."
REFLECTION: "Ironic Revelation"
After reading this article, it reminded me of the popular term "reverse brain drain." This is when a huge shift of knowledge and skills leaves California (or any other state) and goes back into the developing world (i.e China). Due to this global financial meltdown, the collapse of many industries has forced thousands of highly skilled professionals from immigrant backgrounds back to their homelands. These individuals (from the article) are generally leaving because they believe prospects look better in the world's poorer half.
Based on the opportunities that are available in China, it comes as no surprise that these Chinese Americans believe their home countries offer better career and professional opportunities. It seems as though many of these professionals aren't simply victims of the crash, but entrepreneurs hoping to use their accumulated savings from their successful years to launch a wave of innovation in their home country.
Nonetheless, there is an "ironic revelation" within this article. When we learn about the Chinese in America we read about how difficult it was for them to get here and despite being discriminated against they made California their home. After all these years of sacrificing to come to California, now we have a reverse movement. In the end, we can see that where there is opportunity, that is where people go.
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