Papaya Incubator: A New Type Business Incubator Established by Ex-Googler

I don’t know anyone who works at Papaya even though I have recently become a fan of mobile internet technology, with Papaya being one of the successful social mobile gaming companies in China today. A few weeks ago, I attended a mobile social game development competition held by Papaya Mobile and had the chance to talk with ZHANG Liang, Managing Director of Papaya Incubator.

Papaya Incubator is a new strategy by Papaya Mobile, which focuses on the investments and incubation of mobile social game developers. According to ZHANG Liang, Papaya Incubator has offices in Beijing, Chengdu and Silicon Valley, and will establish a new office in Shanghai in May, 2012.

Papaya Incubator was established in June of last year and has invested in 16 startup teams to date (it’s the end March as I write this). ZHANG told me that two to three new teams join Papaya Incubator on average every month, and so far one of these 16 startup teams has been able to meet with venture capitalists, with the aim of securing A-round financing.

The Story of SHEN Si and Papaya Mobile

SHEN Si, the founder of Papaya Mobile, completed a bachelor's degree in Computer Science at Beijing’s Tsinghua University and went on to pursueher graduate studies at Stanford University.
SHEN had apparently wanted to be an entrepreneur since she was in high school, but at the time hadn’t known of any concrete approach to being a successful entrepreneur. Then, one day in 2004, SHEN Si met DENG Feng, a fellow Tsinghua graduate and venture capitalist.

SHEN was about to graduate from Stanford at the time, and DENG had told her, ”You’d better go to a technology company to work as a product manager--you’ll know how to be a CEO after gaining some experience there first hand.”

Taking this advice, SHEN joined Google, which had just listed on NASDAQ at the time, as a project manager. After working in Google for four years, SHEN then moved on to found her own company--Papaya Mobile. In the following four years, Papaya Mobile was able to secure angel investment funds from DENG Feng and two rounds of venture capital financing: 4-millon-dollar A-round financing from DCM and 18-million-dollar B-round financing from KeyTone Ventures.

Business Incubators in China

As I mentioned in a previous blog article, The Five Models of Angel Investment in China, by the end of 2010, there were nearly 800 business incubators in China, 346 of which were state-level technology incubators.

Papaya Incubator also falls under this category, but is at the time different from nearly all other incubators in China. The key difference is Papaya Incubator doesn’t ask for shareholdings of startup teams; the incubator’s income comes from the gain sharing of the mobile social games that startup teams release.
With the exceptionally competitive situation in China’s private equity and venture capital industry, more investment institutions have been trending towards investing into earlier investments (that is, earlier then their original investment stage). Additionally, more business incubators have been released, such as Innovation Works, which was founded by former Google China boss Kai-Fu Lee.

Not only that, there are also more startup events being held by venture capital companies, such as TGIF (Thank God It’s Friday), held by KPCB China. Many venture capital companies use these kinds of events to find excellent startup company candidates and startup teams. For example, Huaban.com, an emerging social network in China based on interest sharing, has recently received a round of financing from KPCB China after attending a TGIF event at the end of 2011.