Venture capital managers ask Hong Kong government to speed up vetting process for US$257 million tech co-investment fund

The Innovation and Technology Venture Fund is part of government efforts aimed at stimulating private investment in local start-ups

The fund is in its fourth year, but the government has invested only about 6 per cent of the fund’s overall size across 20 companies

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Hong Kong’s Victoria Harbour waterfront. There were about 3,360 start-ups in the city employing more than 10,600 employees as of last year. Photo: AFP

Published: 11:00am, 9 Aug 2021

Venture capital managers have called upon the Hong Kong government to speed up its vetting process for a HK$2 billion (US$257 million) technology co-investment fund amid concerns that entrepreneurs could be discouraged from using the fund if they cannot access life-saving capital in time.

The Innovation and Technology Venture Fund (ITVF) is part of government efforts aimed at stimulating private investment in local innovation and technology start-ups. It was launched by the Innovation and Technology Commission in July 2018 after the commission selected five venture capital funds as co-investment partners for the scheme. Each co-investment manager must invest twice as much as the government in each round of investment in a start-up.

“The programme has encouraged venture capital funds like us to take on additional risk by investing in Hong Kong start-ups. It is also helpful for start-ups, especially those that are in early stages and are in need of life-and-death capital,” said Lap Man, co-founder and managing partner of Beyond Ventures, which has invested in 10 ITVF funded start-ups.

There are concerns, however, that a lengthy application process and the frequency of reporting that the commission requires from start-ups might have caused some entrepreneurs to get cold feet. The ITVF is entering its fourth year of operations, but the government has invested only about HK$120 million – or 6 per cent of the fund’s overall size – across 20 companies. Moreover, the number of co-investment partners has grown to nine, but five of these venture capital funds have not yet made any investment, according to the ITVF’s website.

Entrepreneurs often need quick disbursement of funding because running a young start-up, they often do not have ready access to bank financing and they are, therefore, more reliant on early investor funding. The lack of this funding could readily close down their businesses, some managers said.

Lap Man, co-founder and managing partner of Beyond Ventures. Photo: KY Cheng