Chinese entrepreneurs look to tap Web growth

The aggregate value of M&A deals in China's Internet industry jumped to $15.03 billion in 2012 from $870 million in 2008, according to figures from China Venture Investment Consulting Ltd..

The trend has gathered momentum since the beginning of this year, with cash-rich big shots anxious to expand and seek new growth points.

E-commerce leader Alibaba has announced investments in Sina Weibo, Amap and Xiami Music, while search engine Baidu declared a plan to buy smart phone application distributor 91 Wireless Websoft for $1.9 billion. This will be China's largest Internet M&A deal if completed.

Tao is looking for similar attention from large companies, with his website having seen a compound monthly sales growth of 30 percent since coming online last October.

"The rich resources and the huge platform offered by a large company are very important for our company if we want to make it really big. Money is not all we want," Tao said.

He finds Internet startups in China lack help from a well-organized community and strong policy support from the government. Rising salary levels and housing rentals are also paring his company's profits.

Altogether 443 Internet startups ceased operation in the first quarter of this year, most of them in the same areas that attracted the largest number of entrepreneurs, according to a report by 36Kr.com.

Those startups ran into dead ends because of shortages of funds, divided opinions inside the team, technology bottlenecks or weak market returns, the report said.

The latest word from the government may offer some comfort. The State Council, China's cabinet, promised recently to lower market barriers and strengthen fiscal and financing policy support to boost Internet-related consumption of information products and services.

But the relatively low industry threshold, combined with the near ubiquitous presence of large companies, means competition is extremely fierce.

"You deserve applause as long as you survive in China's Internet industry," said Qin Zhi, CEO of Autohome, a leading online auto information provider.

"As to how big you can make it, keep your fingers crossed," Qin said.