(Yicai) Dec. 2 — Technology startups along the Shanghai-Nanjing corridor, characterized by “funding in Shanghai and production in Jiangsu province,” still primarily rely on self-financing despite the emergence of a division of labor, with 72 percent unable to secure loans yet, according to a new survey.
Shanghai, Nanjing, Wuxi, Changzhou, Suzhou, Nantong, Yangzhou, Zhenjiang, and Taizhou, the nine cities along the Shanghai-Nanjing corridor, are gradually forming a collaborative network for technological innovation, according to a report on the findings of The Paper Institute’s funding demand survey released at the recent Shanghai-Nanjing Corridor Urban Bank-Enterprise Matchmaking Conference.
However, despite the active regional innovation ecosystem, funding gaps remain significant, with about 42 percent of startups saying that securing funds is difficult or very difficult, while many entrepreneurs still rely on self-financing to sustain research and development and operations.
Shanghai has gathered many established investment institutions, demonstrating significant advantages in early-stage investments, including angel and Series A financing rounds, the report said. Suzhou leads the region in the number of tech startups, boasting strong manufacturing and R&D capabilities, while the innovation capacity is rapidly extending from Jiangsu’s southern areas to its northern ones.
The traditional financing model of issuing loans based on collateral assets is highly incompatible with the “asset-light, R&D-intensive” characteristics of tech companies, with around 41 percent of respondents attributing the lack of loans to the absence of traditional collateral.
Tech firm’s core assets, including intellectual property and R&D accumulation, still struggle to be incorporated into banks’ quantifiable risk assessment systems, making it difficult for a significant number of innovative companies with good potential to obtain credit support, according to the report.
Some 61 percent of startups strongly urge financial institutions to quickly introduce new models of unsecured credit loans, which could significantly alleviate the funding pressures faced in the early phases.
Regarding tech support policies that have been launched in various regions along the Shanghai-Nanjing corridor and the weak sense of actual benefits for companies, a third of firms that have not utilized the relevant support policies believe that the application process is too complicated, while 28 percent feel that the approval cycle is too long.
In the face of real challenges, the startups expressed their expectations for improvements in the financing environment, with nearly two-thirds of founders hoping to see more investment institutions willing to invest in early-stage, small, and hard technology ventures. Over 36 percent of companies are looking for investment from industry capital, hoping to leverage product sales channels, customer resources, and application scenarios that these investors possess to significantly accelerate the commercialization of relevant technologies.
The nine cities along the Shanghai-Nanjing corridor have established a leading domestic innovation foundation, the report noted. However, to enable more startups to truly grow into new engines of regional economic growth, it is still necessary to further optimize the local early-stage financing system and enhance the collaborative efficiency among capital, policies, and the supply chain.
The survey used the Shanghai-Nanjing corridor economic geographic concept to specifically refer to a cluster represented by the nine coastal cities along the banks of the Yangtze River, with all except Shanghai located within Jiangsu.
Editors: Tang Shihua, Martin Kadiev
