Hong Kong start-up platform aims to find the next DJI
The start-up incubator believes that the city has an edge over China in innovation
Since its official launch in July last year, incubator Hong Kong X-Tech Startup Platform, is already working on 20 projects, according to Professor Chen Guanhua of the University of Hong Kong, a co-founder of the incubator.
The platform, which offers mentoring and financing for entrepreneurs and is not limited to Hong Kong-based projects, aims to draw founders to set up shops in the city.
The “vast majority” of the projects identified – some of which the platform has performed due diligence and drafted agreements to invest in – are from Hong Kong.
“Honestly, we were surprised [at the number of projects],” said Chen. “So many people were negative about hi-tech in Hong Kong.”
Chen, along with HKX-Tech’s other two co-founders Neil Shen, managing partner of venture capital firm Sequoia Capital and Professor Li Zexiang of the Hong Kong University of Science and Technology, who incubated Chinese drone maker DJI, are mentors to the founders as well as investors.
Various attempts by the Hong Kong government, such as establishing the Hong Kong Science and Technology Parks Corporation in 2001, to encourage growth in innovation and technology, have yet to yield results. But Chen believes that the current Hong Kong talent pool and appetite from investors are significantly different than it was 20 years ago.
Many entrepreneurs and researchers who began working in technology 20 years ago left Hong Kong due to a lack of opportunities and resources. However, some of them have returned to the city after accumulating experience and growing their expertise abroad.
Previously, investors were less interested in putting in money in early-stage start-ups, making it difficult for founders to raise capital to expand.
The goal of HKX-Tech is to focus on start-ups in hi-tech, such as health care and microelectronics, according to Chen, because China is already dominant in low-tech, which Hong Kong cannot compete with.
“We have to do something different from China,” said Chen. “In fact, I think Hong Kong has an edge.”
The first billion-dollar drone company, DJI, founded by Frank Wang Tao , a graduate of the HKUST, is an example of the types of start-ups that incubators such as HKX-Tech are interested in supporting, Chen said.
Wang’s drone start-up was first conceived in the city but the company, which now ranks as the world’s largest drone maker, is based across the border in Shenzhen.
To succeed in nurturing more start-ups such as DJI, Hong Kong has to work with Shenzhen, said Chen. While Hong Kong is strong in research and development, Shenzhen has the expertise making the prototypes and commercialising the products.
However, there are still challenges ahead, according to Chen, especially when it comes to research at universities, a prerequisite for keeping home-grown talent in the city.
But there are questions whether the Hong Kong government will maintain its current level of grants for research.
“Twenty years ago, there could be 200 people applying for one opening [at university], now we have just 10 to 20 applicants for one role although some of them are from India and Pakistan,” said Chen.
To support hi-tech start-ups, Hong Kong must also make changes to its legislation, which is dated in areas such as drugs or related instruments, according to Chen, making it impossible to register and certify a drug produced locally.
“Gaining a patent locally in Hong Kong would help valuation of start-ups,” Chen said.