Hong Kong tech start-ups need more active help

There's new life in the tech start-up scene, but science parks may not be the best way to nurture innovation, says Mark Sharp

PUBLISHED : Tuesday, 28 May, 2013, 12:00am
UPDATED : Tuesday, 28 May, 2013, 3:30pm

Studying for his master's degree in 2008 at Stanford University, Daniel Cheng Yuen was struck by how fragmented information was when looking for campus club activities, which run into the thousands.

He returned to Hong Kong with a solution: a mobile application called Purpella that centralises the search for events on and off campus. But he lacked the resources to get his start-up off the ground. "For more than three years, I approached people for help. Then, in 2011, I met Kevin," Cheng says.

That's Kevin Yeung Ka-wei, an investor and philanthropist who heads the local branch of the UN's World Food Programme and co-founded food bank Feeding Hong Kong. He had never invested in technology before.

But Yeung agreed to back Cheng on condition that he first help develop a free app that could help people in Hong Kong search for the most suitable medical professional for their condition.

Cheng and a small team came up with FindDoc, which went on to be named Hong Kong's best app last year by the non-profit Internet Professional Association (iProA).

Despite the achievement, Yeung laments that the government didn't reach out to Cheng's team beyond a handshake and a photo.

In contrast, as Cheng's team prepared to launch Purpella on campuses in America, the offices of New York mayor Michael Bloomberg and his San Francisco counterpart, Edwin Lee, e-mailed to ask if they could offer any assistance.

"San Francisco and New York really take innovation seriously because they've both witnessed all the benefits technology created in their cities," Cheng explains, citing tax revenue and job creation as examples. "They really want to help promising start-ups build in their cities.

"Their approach is really useful because each start-up has different requirements, in addition to money. There are not enough people like Kevin who appreciate innovation here," he says.

Purpella has just launched in New York and Columbia universities. Early results have been encouraging and Cheng and his team are ramping up efforts to launch in more universities.

But it irks Yeung that Hong Kong should take a lackadaisical attitude while two US cities actively courted Purpella.

Innovation is created when great ideas are brought to life by brave and brilliant people
Kevin Yeung, investor

"There's only so much individuals like myself can do. Our government needs to want innovation and technology, and it needs to engage meaningfully to help. They need to take the lead in creating that ecosystem.

"The current dependence on individuals is just not healthy and not scalable. The fact is that Dan could have built Purpella four years ago," says Yeung.

For all the talk a decade ago about fostering a tech hub with multibillion-dollar projects such as Cyberport and the Hong Kong Science Park, the environment for tech entrepreneurship has yet to match the hoopla.

San Francisco's richer culture for investment and innovation is one reason Geng Cong is moving there to develop his website for personal histories, called Waslu. He got the idea when his grandfather died, and is leaving his job at an investment bank in Hong Kong to launch his site.

"I realised at his funeral that his story, because he's an everyday person like 99 per cent of people, will be forgotten in time. And it's a shame because his story is every bit as valuable as somebody like Steve Jobs or Bill Gates. So I wanted to create something that allowed us to preserve the stories of everyday people," Geng says.

He says he found little useful information for local start-ups on the Hong Kong government website. "Even if we look at InvestHK, the investment arm of the government, they primarily target overseas and mainland entrepreneurs and SMEs, and multinationals that are setting up an office, or retaining foreign direct investment," he says.

A spokesman for the Innovation and Technology Commission says a start-up or tech entrepreneur can apply for financial assistance under the Small Entrepreneur Research Assistance Programme (Serap).

Funds are intended for "activities from research and development all the way to commercialisation, helping them to turn innovative technology ideas into some commercially viable products and services."

Applicants for Serap funding must provide details on the project, including justifications for funding in terms of innovation and technology, commercial viability, team capability and relevance with government policies or overall public interest.

Applicants who pass an initial screening are then assessed by an independent panel drawn from a pool of technologists, professionals, academics and venture capitalists. The ITC says it usually takes fewer than 50 working days to process an application.

At the government-run Science Park, start-ups are offered subsidised office space, support services in marketing, finance, technology and management. Financial aid packages range from HK$300,000 for app developers to HK$860,000 for biotechnology start-ups. Its incubation programme has a high survival rate: more than 70 per cent of graduated start-ups are still in operation. "Three of them have been listed in Hong Kong and one in the US," the ITC spokesman says.

"These companies have filed over 600 intellectual property registrations, received 220 technology awards and attracted over HK$800 million of angel [or] venture capital investment." But Yeung has doubts about the ability of such parks to nurture true innovation and encourage young "technopreneurs" to realise their ideas.

"Innovation has never been about hardware. Innovation is created when great ideas are brought to life by brave and brilliant people with hard work. People and ideas are the key ingredients for innovation.

"As an investor, my wish is to play a role in the growth stories of world-class start-ups; ideally, ones that utilise Hong Kong's untapped talent," he says.

"But to thrive, innovation needs a healthy ecosystem that supports these people and their ideas. Flashy buildings in remote locations coupled with endless bureaucracy for innovators to obtain much-needed early stage funding helps nobody.

"Look at all the most successful tech companies - Apple, Google, Facebook, HP, eBay and Microsoft. Not one started life in a science park. Each was created in a garage or a bedroom. They built their own science parks only after they made it," Yeung says.

Adam Lindemann, co-founder of investment firm Mind Fund, says that Hong Kong has lacked the spirit of technology-based innovation and entrepreneurship despite its pro-business environment.

But this is starting to change, he says. "What is required is not government support, but acceptance by conservative people that it is good to aim for the next Mark Zuckerberg to come out of Hong Kong."

The city has to create home-grown role models - "a few brave pioneers to pave new paths", Lindeman says.

The owners of the MaBelle Jewellery chain aim to nurture that pioneering spirit through their social enterprise, CoCoon.

Launched a year ago, the Tin Hau-based venture offers a co-working space where tech entrepreneurs can meet fellow start-up founders.

"If we have 200 people here, and everyone employs three people - themselves, a co-founder and an intern - that's already 600 good jobs," CoCoon co-founder Theodore Ma Heng says.

His father, Maximillian Y.K. Ma, who chairs the Lee Heng Diamond Group, had long lamented a decline in entrepreneurial spirit as the financial sector grew to dominate Hong Kong. His grandfather, who came from the mainland with just a change of clothing and founded the family's diamond trading business 64 years ago, was their original entrepreneur.

"My father and his brothers picked up the wholesale business and created another 12 companies. We are the beneficiaries of the Hong Kong society that embraces entrepreneurship."

So the family decided to help reverse the decline. "It started off with the vision of building a start-up community, to revive it in Hong Kong", he says

Ma believes the tide is starting to turn on the entrepreneurial front. "The banking community is shrinking, to a certain degree, due to the [unfavourable] global financial situation, and it has released a lot of talent. A lot of bright people got into banking first, but they are thinking, 'What's next?'"

The ecosystem is changing, Ma says, and organisations like CoCoon, Startups HK, universities, M21 by the Youth Federation and Good Lab are building up entrepreneurship-related programmes.

"I think we'll be reaching a critical mass soon," he says.