Start-ups on the rise in Hong Kong: InvestHK
InvestHK says 15 per cent of the projects it completed last year involved start-up companies, with the majority of them coming from Europe
Foreign direct investment success in Hong Kong may be defined by big brands and billion-dollar corporations. But start-ups, business ventures in their earliest stage of development, are potentially one of the biggest drivers of job creation and economic growth in the city.
Last year, 15 per cent of InvestHK's completed projects involved start-up companies, mainly from Europe.
Simon Galpin, director general of InvestHK, said: "In 2012, European companies as a whole had the largest number of start-up projects in Hong Kong. There has been a wave of entrepreneurs from that region."
The increasing number of start-ups from Europe establishing camp in Hong Kong can be explained by global economic conditions in the past few years. Emerging markets in Asia-Pacific and China especially have been experiencing exponential growth levels, and their markets presenting countless opportunities.
While cities like Seoul, Tokyo and Singapore present competition to Hong Kong, InvestHK is optimistic the city still holds several competitive advantages.
Galpin said investments in Hong Kong would continue to grow, thanks to the development of the mainland's offshore yuan market, the increase in the number of wealthy people in Asia-Pacific and Hong Kong's role as a potential springboard for mainland companies expecting to go global.
With the world recovering from the global financial crisis in 2008 and the European crisis in 2011, starting companies and investing may seem like a risk. Yet this is not the case for Hong Kong.
"The European financial crisis has resulted in European companies looking out of Europe for investments. This has been good news for Hong Kong as now there is not only a pull factor but also a push for foreign companies to invest in Hong Kong," Galpin said.
European start-ups like Localiiz and SmartCap IT-solutions have decided to capitalise on the opportunities that Hong Kong offers.
Aleksander Nikolic, the general manager of SmartCap IT-solutions, said that Europe was saturated and "growth is as good as dead".
"Asia, however, is the new goal for European companies," he said.
Richard Codron, founder and director of Localiiz, said Hong Kong was a tight, dynamic and compact city. "The barriers of entry are incredibly low, and it is also a good testing ground for East meets West," he said.
Localiiz, an online directory for small businesses in Hong Kong, is described as a "niche directory aimed at English speakers". Although just a start-up, it already racks up more than 1.2 million Google impressions per day and has 367 businesses registered in its directory.
"There are a healthy number of foreigners here who are constantly looking to network and search for relevant information on small local businesses. What Localiiz is trying to do is to bring the community together with digital media as its platform," said Codron. Hong Kong's main attractions were its service efficiency, coupled with a great work ethic, he added.
Localiiz plans to establish itself in Hong Kong before launching regional operations.
"As a foreign-established brand in Hong Kong, it will be much easier to access the mainland markets as we would have built a credible reputation," said Codron.
SmartCap IT-solutions, a software solution company, has been operating in Hong Kong for the past two years and counts PCCW among its partners. The firm initially set up in China and its founders then transplanted it to Hong Kong for greater international appeal and stability.
"The reputation of China in terms of company security is not the best. Hong Kong provides a more stable environment," said sales director Helmut Pieber.
"We went to hard school and learnt important lessons in China," Nikolic said.
Despite the fledgling success of Localiiz and SmartCap, however, not all is rosy for start-ups in Hong Kong. Pieber cites reluctance on the part of banks to support start-ups and a change of mindset.
"More communication is needed between the government and the private sector," he said.
Codron acknowledged Hong Kong also had high property prices, but he conceded: "You have to take it for what it is. If you want to be in a unique city like Hong Kong, you have to pay good money for it."
Foreign start-up companies bring value-added recognition to Hong Kong's economy as they introduce new ideas, expertise and brands, filling creative voids in the market. This can only improve the efficiency and infrastructure of the city in the future.
Although they may lack the financial muscle of bigger corporations and are only able to employ sometimes a handful of people, they will ultimately create more jobs and more incentive going forward.