California has long been a center of entrepreneurship and innovation, but the economic crisis has forced entrepreneurs to reconsider the high cost of doing business in The Golden State. Plagued with a $26 billion dollar budget deficit and some of the highest taxes in the country, many are looking beyond the borders of California for opportunities.
For Phil Sheu, focusing on Asia was key to the success of his company. Sheu is a co-founder of a company called DeviceVM that developed Splashtop, a software technology that can create an “instant-on” Internet experience for notebook computers. Started three years ago with just five people, it now has over 200 employees spread across California and Asia.
“For this piece of software to really proliferate, we wanted to be bundled on the PCs as they come out of the factory, so we wanted to work directly with the PC makers,” Sheu says.
Taiwan-based companies make 90% of the world’s notebook computers so it was natural for Sheu to set up offices in Taiwan to be closer to the computer makers and to lower costs.
In addition to venture capital funding from Silicon Valley, Sheu also received financing from executives at Taiwan-based computer makers.
“It was a really strategic move to try to enlist those guys on our side, later on when we really wanted to extend our software offerings to all sorts of computer companies, those various investors from the IT industry helped bridge the connections for us.”
The recession has reduced the volume forecast for Splashtop, but Sheu remains optimistic about future growth.
“The volume forecast really dropped a lot in the US. In other regions, in the rest of Americas and in China, it’s still very healthy,” says Sheu. “The potential market is still really big, and the PC market is about 300 million units last year worldwide. We are hoping to have our software on 10% of that by end of this year. Right now we are probably 1%, so there is huge room for us to grow.”
Recent graduate Mike Chang has also shifted his entrepreneurial ambitions away from California. Chang was always interested in starting his own business, but after a failed bid marketing a liquid hand soap that removed onion and odors, he opted to pursue something more international.
Feeling the fierce competition of doing business in California, Mike looked to India.
“Everything is about value added in the US and in India there are more opportunities for small value added,” says Chang.
With his sights set on India, Chang found that lingerie is a billion dollar industry growing by 13% a year.
“The whole bra industry is completely unorganized and segmented. 95% of the bras sold are from street vendors and only 5% of the bras are branded.”
Chang’s enthusiastic and daring move to India is an indicator of a wider shift among immigrants with overseas ties.
“Ten years ago, you would get students from Asia or India studying here and then staying in the United States,” says Kathy Allen, a professor of entrepreneurship at the University of Southern California’s Marshall School of Business and an adviser to startups.
“Now you are seeing a lot of them going back home because they can get an equivalent quality of life in their own country and the culture is one they are familiar with and they know how to do business there. So I m seeing more students from other countries choosing to go back to their home country.”
Mike is among a wave of entrepreneurs seeking opportunities abroad to beat the recession. For the most part, the majority of entrepreneurs seeking opportunities abroad are the ones that have ties to Asia.
“I have five friends who moved back to China within the past year to start businesses as result of the recession and growing opportunities in China.”
Chang does not seem to be phased by the impact of the recession on India in the long run. The key in setting up a retail shop in India is to have a fully knowledgeable staff that can provide one-on-one education to customers, says Chang.
“But if I don’t go in right now, I cant built that presence,” says Chang.