Shenzhen, the Silicon Valley of hardware and the capital of manufacturing for the rest of the world, can feel like an impenetrable place. David Li, one of the leaders of the Chinese hardware and startup ecosystem shared his insights in how to go about finding that local partner.
Do you really need a local partner? And if you do, where does one find a local partner in Shenzhen or the Greater China ecosystem?
David: Right now, one of the best parts of coming to Shenzhen and one thing to recognize is the huge industrial design ecosystem in Shenzhen. Most of the hardware startup founders have no experience with manufacturers. And that number is probably only going to increase. [Startup founders] have great ideas. But the best people to talk to make those ideas come to reality] are probably the industrial designers in Shenzhen.
What a lot of people don't realize about Shenzhen is that Shenzhen is the number one city in terms of design in China, even before Beijing and Shanghai. Right now, there are about 4,000 design studios in Shenzhen and about a 100,000 working industrial designers. These are the best entries to find partners in Shenzhen.
Do you Baidu them? How would you recommend someone, from Hong Kong, from Singapore, who doesn't have those contacts; how would you recommend them to find those people?
David: Shenzhen has a really great industrial design association, the Shenzhen Industrial Design Association (SIDA). One of the recent reasons I moved from Shanghai to Shenzhen was to set up the Shenzhen Open Innovation Lab and to increase collaboration with SIDA.
These industrial designers who have been helping people get into Shenzhen with just an idea and take it all the way to manufacturing. This is the strength of Shenzhen.
We gather different partners who are interested in working with small startups. Problem is that these startups don't look like their traditional customer. Their traditional customer came in with money in hand and said they wanted a crazy new electronic thing.
Industrial designers can take something from the design stage, figure out the user experience and figure out a way to bring it all the way through manufacturing and shipping. That's what Shenzhen Industrial Design been doing in the past decade.
How would you structure that partnership? Do you need to give an equity stake? A percentage of the proceeds?
David: The industrial designers here are very accustomed to getting a percentage of the proceeds. Equity doesn't work for them. Equity doesn't really work to structure a partnership, especially when it comes down to manufacturing. Manufacturing is a very cash-intense and cash-driven business. Anything you cannot turn into cash in a very liquid way is not very helpful for the ecosystem. A share out of the proceeds is the best way to approach the partner here.