Hong Kong Startups
Don’t believe what your grandparents tell you: being successful in Hong Kong doesn’t mean that you have to be a doctor or a lawyer (or enter the lucrative world of journalism, for that matter). These days, forward-thinking entrepreneurs are entering the world of startups, where Hong Kong’s can-do spirit has found its next natural home. These people are in it to remake Hong Kong in a startup image—and make a fortune while they’re at it.
The Anatomy of a Startup
At heart, a startup is a few people with a new idea who want to change the world. It’s quite the goal. But the people behind startups have to want something big: otherwise, they wouldn’t be wasting their time. “When we say startup we usually refer to a tech startup. These are companies that don’t have clear revenue models and are about building a platform that people want to use,” says Casey Lau, one of the founders of networking and community org StartupsHK. “In Hong Kong, I see it more about entrepreneurs that use technology to make things better—whether it be stock trading, booking a taxi or a hotel room, education or social innovation.”
“I think the startup scene has grown a lot since we started meeting in a coffee shop back in late 2009 at the first Startup Mondays,” agrees Jon Buford, who’s another of the founders of StartupsHK and also behind 3D printer MakiBox. “We started with six members,” says Lau. “Now we have 5,000-plus. We had 1,000 square feet of co-workspace in January 2012—by the end of 2013, we will have 150,000 square feet.” Floor space, in Hong Kong? That’s how to define a business.
Take the great success case: silly-image-sharing site 9Gag. Founded in 2008 by HKU student Ray Chan, the site raised $21.7 million in seed funding back in July of last year. These days it gets in the region of 60 million visitors a month. Of course, it’s not all easy. “You have to truly love solving problems to stay in the startup biz,” says Chan. “9Gag makes a lot of money, but there’s not much profit. If you’re interested in making money, there are much better ways to do that in Hong Kong.”
Why Hong Kong?
I think Hong Kong is probably the easiest place in the world to startup,” says James Beacher of venue-booking platform VenueHub. “The process is incredibly simple, cost-effective and the government really understands the importance of startups to the local economy.” The ease of doing business in Hong Kong has always made it a draw, and startups benefit from the same advantages. “The government is now stepping in and bringing a spotlight on this industry, and making it easier for startups to get visibility,” says Casey Lau. “That’s a great thing.”
But it’s also something about the nature of our city that makes Hong Kong prime startup soil. “The diversity of the population makes Hong Kong a great testing ground for your idea or product before you consider expanding elsewhere,” says Winston Wu, founder of recommendations app Pingspot. Jon Buford agrees. “With a larger market, like Taiwan, you have enough people to do local products, but not really enough to scale to be much more than a comfortable business. With more established and larger markets, like the US, you tend to only see the local market and completely miss the opportunities elsewhere. Hong Kong is a good mix.”
The other great advantage is the sense of community. Networking events and venues exist to help startup founders meet and help each other out. “Hong Kong’s blessing and curse both lie in its size,” explains Michael Gasiorek of fashion app ShopHop. “The startup scene is tight-knit, incredibly supportive, and you’ll have more difficulty picking the events worth your time than finding them. Still, while it’s a great test market, it’s an even better launching pad to the rest of Asia.” Pingspot’s Wu points out, “seven million people is a small market. Most startups need to think cross-border from the get-go.” As Simon Squibb of angel investors Nest says, “We’re not running businesses that are successful in Hong Kong—we’re thinking globally. A lot of people have missed this point. They say ‘Oh, Hong Kong, don’t bother.’ But if you only think locally, you won’t go anywhere.”
Startup Stoppers
It’s not all good, of course. Hong Kong’s startup scene is still nascent, and there are obstacles to overcome if it’s ever going to be a truly successful scene. We’re missing three great things at the moment: talent, government infrastructure and—of course—money.
The lack of talent comes down to something elegantly predictable: Asian parents. “The culture for university students to form or work for a startup is still not strong enough,” says Andrew Chan of package-tracking site Aftership. “Top students still aim to work in an investment bank or big corporate firm.”
“People are always asking ‘when are you going to make money?’” explains Simon Squibb. “The government wants to know the business plan, how you’re going to get revenue, when will you be profitable, will you employ local people. All fair questions. But the problem is, I don’t know when it’s going to make money.” The reality of startups doesn’t really fit into Hong Kong’s traditional business mindset, just yet.
The lack of cash is a knottier problem. Hong Kong’s not a cheap place to live or work, although more and more shared office space has helped to shoulder the burden. But the real problem is capital. “There seems to be a large gap between risk appetite amongst angel investors in Hong Kong and, say, Singapore,” says Asif Ghafoor, one of the founders of property search engine Spacious. “Most of the angel investors in Hong Kong seem to be looking for a company that is already making money, or very close to.” That’s a tricky position for startups to be in—after all, it took Twitter years to work out how to turn a profit. “Most of our seed money came from abroad,” says Jeffrey Broer of social media translation app Surround. “When you’re talking to investors in mainland China, they’re all expecting the new Angry Birds.” He says it’ll take a while—and a little bit of experience—before they begin to invest more diversely.
What Next?
The startup founders identify a few solutions. “The ‘newness’ of it all is the biggest drawback. Hong Kong is definitely on the right track, but it will still take some time,” says Pingspot’s Wu. He points out that we are a city that got rich on traditional business and land. “Wealthy investors have only recently started to turn their attention to angel and venture investing as an alternative investment option.”
But the thing we need above all else is an enormous success story: an exit. An “exit” is a successfully executed exit strategy, wherein a startup is sold to a corporation for a huge amount of cash. “I think the main thing people are waiting for is that first big exit from a company here,” says Jon Buford. “It will be those companies that form the next round of growth and will act as both investors and mentors to the next generation of companies.” Wu agrees, pointing out that a high-profile exit would validate and energize the startup community, provide a model for new startups, encourage entrepreneurship as a career amongst young people (and their parents), and demonstrate to investors the value of Hong Kong companies. “It’s a powerful cycle, and I think Hong Kong is on the cusp of setting off that cycle.”
“We’ve seen the startup community grow like crazy and I think 2014 will be a landmark year. In Asia we have so much potential with so many people, and so many problems that affect people, from Kowloon Bay to Makati City. There are some great startups I’ve seen in HK and around Asia that are ready to be international successes,” says Casey Lau.
“These will change the game.” “This city was built on entrepreneurs,” Nest’s Simon Squibb points out. “Li Ka-shing was an entrepreneur—he started out selling plastic flowers. A lot of people have forgotten that.” Hong Kong is a city that’s grown rich on people wanting to make great things happen. Meet the next generation.
Get Networked
These people will get you off the ground.
Catchy name for a series of government-funded startup incubators. Offers a variety of programs for app, tech and biotech startups. www.hkstp.org.
AcceleratorHK
Three-month-long startup “accelerator” program for mobile startups. Provides $116,000 in seed capital, mentors, guidance and space to work. acceleratorhk.com.
Nest
Incubator for scalable lifestyle startups. Known for its “Dragon’s Den”-style pitch days, where participants have 15 minutes to present their idea. If they like you, they might mentor you and invest up to $500,000. nestideas.com.
General Assembly
Launched in New York in 2010 as a startup, General Assembly now holds courses in tech, business and design across the world. It’s just kicked off its first full-time training program for web developers. generalassemb.ly.
A fully serviced 8,000-square-foot office space in Sai Wan with private offices and communal areas. Casual use starts at $2,000 per month, while offices start at around $20,000 per month. Cheung Hing Industrial Building, 12P Smithfield, Kennedy Town, 2542-1035, www.innovationlab.hk.
Two-year program run by the Hong Kong Design Centre, for design-, fashion- and branding-related startups. www.hkdesigncentre.org.
$530,000 of funding for tech startups for two years. www.cyberport.hk.
Online legal consultancy designed for startups. Create legal documents, contracts and agreements with easy templates. Find answers to legal conundra, or get in touch with a lawyer. Launches Nov 1; pre-register at www.dragonlaw.com.hk.
For more resources and information, visit www.startmeup.hk.