The Next Big Thing

Hong Kong attracts Silicon Valley start-up in race with China to create technology hub

PUBLISHED : Friday, 17 April, 2015, 10:21am
UPDATED : Tuesday, 21 April, 2015, 12:35pm

Hong Kong’s efforts to attract Silicon Valley technology start-ups keen to bring their new technology to internet consumers in the booming China market are finally starting to pay off.

Among recent arrivals is Aivvy Inc, which has chosen Hong Kong as its base to launch its portable music player, seeking to benefit from the city’s stable and mature business environment and to be close to manufacturers in the mainland city of Shenzhen, Hong Kong’s near neighbour and its main rival in the race to attract new firms.

Aivvy co-founder Isaac Mao said it took just less than three months to complete the move to Hong Kong, where the firm has joined the Incu-Tech start-up incubation programme at the government-backed Hong Kong Science and Technology Park (HKSTP).

“We chose Hong Kong because it’s very close to Shenzhen, and we have the solid business foundation here, we see that and we feel that,” Mao said.

In March, US business entrepreneurship magazine Inc. named Shenzhen as one of the top five world cities for the next wave of start-ups, dubbing it "ground zero for technological serendipity". Hong Kong didn’t make the list.

On the surface, Hong Kong should be an ideal place for start-ups, with its tech-savvy population, low taxes, strong legal system, key position as a global trade hub and proximity to the booming China market.

The government set up the Cyberport tech incubator as early as 1999, but it struggled to find occupants and has been criticised as benefiting the developer more than the tenants. The HKSTP also faced criticism in its early days as some failed to see the benefit of clustering science and technology firms together and questioned whether Hong Kong was able to innovate

In addition, potential investors have more recently worried over rising costs in Hong Kong, particularly for housing, while an innate conservatism among many Hong Kong investors is a headwind for start-ups seeking funding because of the risks of failure. Many young Hongkongers also face family pressures to join established known companies.     

The city has faced stiff competition from Shenzhen, which during three decades of rapid growth became the centre of the world's tech manufacturing industry and is now the home of a growing number of entrepreneurs making use of its lwo-cost capabilities.

Living costs and office rents still remain cheaper in Shenzhen. One company, drone maker DJI, also abandoned a plan to set up in Hong Kong due to the difficulty of getting work permits for staff when it was still relatively unknown and had only a small registered capital.

But Hong Kong is making efforts. InvestHK, a department of the Hong Kong government responsible for attracting foreign direct investment, has helped Aivvy set up here, with assistance from the HKSTP, which seeks to create a global hub for technology innovation in the city.

Mao, a former employee of chip maker Intel and Harvard researcher, said Hong Kong’s broadband speeds, its skilled workforce with good English-language skills, stable legal system and the 3D printing labs available at Hong Kong Science Park were among the city’s benefits. The company also sees Hong Kong as a bridge between the US, where it expects its largest market to be, and China, where its products will be made.  

Aivvy’s wireless music player, which looks like a normal pair of headphones, will give listeners access to 40 million tracks through an unnamed global partner and will adapt to their musical tastes over time.

To skip a song, users simply swipe the side of the earpiece, which logs that they do not enjoy the track. Tapping for approval instructs the player to offer similar tunes.

“Our goal is to start from hardware, it’s smart, it can learn your preference and eventually it becomes your music companion,” Mao said.

Since the wireless headset downloads the music library to its 32GB of storage during a battery charge, the device does not need Internet access at all times. It can provide 40 hours of playback.

Mao said that by downloading the music, the device offers better sound quality than streaming services such as Spotify.

The player debuted at the South by Southwest music festival in Austin, Texas, in March. A Kickstarter crowdfunding campaign followed that reached the targeted amount in 26 hours and which has so far raised US$171,000. Contributors to the funding can buy the Aivvy Q device by pledging US$249. It will retail at US$300, which includes one year of the music service, and is set to ship at the end of October.

Aivvy will support local talent by offering tracks from upcoming artists in each country. If the songs prove popular they will then be offered in different markets. Aivvy retains a software development team in Silicon Valley in addition to its Hong Kong team, which currently covers marketing but which will expand to manage e-commerce and logistics. 

An earlier version of this article stated that a crowdfunding exercise raised $171,000. This should be US$171,000.