Flaws in all-join-in startups

Zhongguancun Financial Center building in Zhongguancun, regarded as Chinese Silicon Valley, in Beijing.

The booming development of the mobile Internet, big data and cloud computing technologies, along with capital and favorable policy support, has offered rare opportunities for starting new businesses. But the encouragement of mass participation, which will result in almost identical business models, as well as the lack of professional managers, poses big potential risks for the all-inclusive business startup model.

In the first half of last year, the number of newly established technology businesses in Zhongguancun, a science and high-tech area in Beijing, exceeded 9,000; on average 49 new companies were set up per day.

However, the all-encouraging business startup campaign may be incompatible with the fact that entrepreneurship is only demonstrated by a handful of practitioners. Even in the United States, a country widely believed to be rich in entrepreneurship, there are only about 4 to 6 percent of additional entrepreneurs every year. The nature of entrepreneurship decides that the capability to successfully create and operate an innovative business belongs to a few rather than all. Without managerial ability or an entrepreneurial spirit, popular enthusiasm will likely lead to unattainable dreams.

The imitation of successful companies by China's business startups lowers the chance of survival. For example, after the success of Groupon, nearly 6,000 group purchase websites were set up within a short period. But only 3.5 percent of them have survived the fierce competition and few have realized large profits.

Participation in a competitive business environment in such a disorderly manner is a recipe for failure for most startups.

The odds against success are further lengthened by the lack of skilled professional managers to operate the companies through the minefields of the early days.

The above is an abridgement of an Ifeng.com article published on Wednesday.