Struggling startups search for investors

A long journey

While Gao is optimistic, the reality is that survival is a tough business, irrespective of the quality of the new technologies being developed.

The demonstration zone is home to thousands of agrotechnology startups, but many will never make a profit in the short-term as a result of problems related to funding and marketing.

Zhu Junqiang, general manager of Shaanxi Zhongxin Technological Co, has registered 13 patents to cultivate eucommia ulmoides, commonly known as the hardy rubber tree, whose bark and leaves contain elements that are highly valued in traditional Chinese medicine.

Using the patents as a base for his business, Zhu decided to build a factory.

In 2014, he received funding from a real estate developer in Xi'an, which enabled him to hire workers to break down leaves and bark collected in the Qinling Mountains in Shaanxi. The resultant powder was exported to Japan as a food source.

Although Zhu made about 1.3 million yuan a month in his first year, the money didn't roll in fast enough for the developer. At the end of the year, he withdrew his funding, with the result that Zhu's first startup failed, even though his products were highly prized overseas.

The blow taught Zhu that in addition to a business plan, solid funding and a sophisticated industry chain are essential elements for startups.

Last year, when the State Forestry Administration announced that 2 million hectares nationwide would be sown with eucommia ulmoides by 2030, the business potential spurred Zhu and his older brother, Zhu Mingqiang, to keep their business in operation.

The announcement came at exactly the right time for the brothers because they had started a crowdfunding project late in 2015 that raised 65 million yuan.

In addition to financing Zhu Junqiang's factory, they rented 1,320 hectares of land in Xinjiang on which they planted eucommia ulmoides.

The fledgling trees were easier to handle than those in the Qinling Mountains, which grow to a height of more than 2.5 meters, making it difficult to strip the leaves and bark.

The farm is easy to manage and the abundant sunlight in Xinjiang helps to produce higher yields, according to Zhu Junqiang.

Now, the brothers make a net profit by exporting eucommia tea, and they plan to develop a range of products, such as glues made from the plant.

Survival

"I failed once as a result of financial problems, so now we are very cautious about the capital chain," Zhu Mingqiang said.

Li Guoxiang, the CASS researcher, warned that agricultural startups and innovations take time to develop, and therefore early survival is the key to long-term success.

"Rural areas are less developed than cities because of a lack of infrastructure and talent," he said. "Many investors seem less interested in agricultural startups than other fields, such as the financial sector, because it's impossible to make quick profits. That lowers the chances of survival, so young people should be aware of this when they start businesses."

 

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