German materials manufacturer Covestro intends to tap into the Chinese start-up landscape. For this reason, the company, together with the market research consultants of ‘KAIROS Future’, facilitated a comprehensive study of the vast ecosystem that the country has developed over recent years in order to achieve the switch of a manufacturing- to an innovation and service-based society.
Nurtured through government policies, guidance and investments and triggered through entrepreneurial success stories like Alibaba, Tencent and alike, a new ideal of becoming entrepreneurs has emerged among young talented Chinese. What’s more, the ever-better education and environment enables them to pursue these ideas and found their own companies within China. In 2017, over 100 Chinese start-ups were listed in stock markets around the world, and more than 270 companies were in the list of Chinese ‘unicorns’, meaning companies younger than ten years and valued with USD 1 billion or more.
With venture capital assets of over 5 trillion RMB (USD 730 billion), China is now second only to the US when it comes to global venture capital. Covestro wants to take part in this development and looks into ways to cooperate, invest, teach and learn from the start-up environment in China.
“Business models are rapidly developing and changing. Although we have a history of innovation and even invented many of the products we sell today, we can’t rest on our laurels. Entire industries might look different in merely a decade,” said Dr. Michael Schmidt, Head of Innovation Management APAC at Covestro. “Lead innovation times shorten rapidly. So we need to source ideas outside of our own innovation processes to leverage speed, new technologies and new business models. Tapping into the highly dynamic start-up environment in China can be a big chance for companies like us. We look forward to being inspired.”
Comprehensive pool of data taken into consideration
To analyze how best to do this, Covestro, with support from ‘KAIROS Future’, conducted an analysis of the landscape and possible approaches. For this study, dozens of interviews and discussions with internal experts, other corporates, incubators, accelerators, entrepreneurs and academia as well as several workshops on the topic have been conducted. Furthermore Covestro and KAIROS for this study acquired, merged, cleaned and structured data covering 133,500 funding deals, 30,900 companies that have obtained funding and 14,000 investment institutions. The data were used to analyze geographical, sectoral, topical and stakeholder aspects of the Chinese start-up landscape. The overall study also contains knowledge from 900 reports and acedemic articles as well as 4,600 news articles, as well as other information.
“This is one of the most comprehensive studies on the Chinese start-up landscape to date,” said Tomas Larsson, General Manager at KAIROS Future in China. “With this hands-on information, based on extensive data, Covestro can define a clear objective and focus for its approach.”
Overcoming corporate rigidity and risk aversion
In an environment like China, the number of competing businesses in many industries is huge. That also means a huge competitive pressure and forces businesses to scale-up and roll-out new products fast. In such an environment, the start-ups of today can be tomorrow’s giants. Covestro wants to help them in early stages and learn from the agility of the overall system – thereby refreshing its own culture towards a more risk-taking mindset and less rigidity as well. The recently completed analysis of the Chinese start-up landscape is a first step.
With 2017 sales of EUR 14.1 billion, Covestro is among the world’s largest polymer companies. Business activities are focused on the manufacture of high-tech polymer materials and the development of innovative solutions for products used in many areas of daily life. The main segments served are the automotive, construction, wood processing and furniture, and electrical and electronics industries. Other sectors include sports and leisure, cosmetics, health and the chemical industry itself. Covestro has 30 production sites worldwide and employs approximately 16,200 people (calculated as full-time equivalents) at the end of 2017.
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This news release may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro’s public reports which are available at www.covestro.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.