Why tech-savvy Shenzhen has left Hong Kong at the starting gate

PUBLISHED : Sunday, 31 May, 2015, 4:50am
UPDATED : Sunday, 31 May, 2015, 4:50am

For Gu Ying and his two friends, Shenzhen was the only place to start their new tech venture. Hong Kong, where they attended university, just wasn't an option.

Following in the footsteps of Frank Wang Tao - who chose Shenzhen over Hong Kong for his start-up, DJI Technology, the world's leading consumer drone maker - 24-year-old Gu and Leo Fuji Zhang and Zhang Shinan, both 25, set up TT-Kuaiche, a mobile carwash app that swiftly expanded across the mainland.

Gu, a graduate of City University, Polytechnic University graduate Leo Zhang and Zhang Shinan from Baptist University, launched their app in June last year in Beijing and Shanghai, building a bridge between car owners and the cities' car washes.

"In the beginning when we decided to start up, we targeted our app at the mainland market, where there would be hundreds of millions of users," Gu said in a recent newspaper interview.

"We never thought of Hong Kong because its market is too small for such an app and the costs are too high for a start-up.

"And it's also hard to partner with young Hongkongers because most of them know little about mainland customers."

Their decision highlights the growing lead Shenzhen is taking over Hong Kong as a centre for technological innovation. The Nanfang Daily reported last week that more than 10 per cent of Shenzhen's 15 million people were launching companies.

In March, Inc magazine named Shenzhen as a top global hub for start-ups, thanks to its low-cost manufacturing base, with Hong Kong not listed. This month the Chinese Academy of Social Sciences named Shenzhen as the mainland's most competitive city, unseating Hong Kong for the first time in a decade.

DJI's Wang Tao wanted to set up his start-up in Hong Kong, but a lack of funding and government policy support and other operational issues dissuaded him.

Hong Kong is however making efforts to attract start-ups, mindful of finding ways to drive growth other than the traditional finance and services industries. A HK$50 million fund to help new companies will launch in July.

Meanwhile, TT-Kuaiche drew more than 10,000 users before the end of its first month, and had 3.3 million by April, and links 6,000 businesses in 25 cities.

"We had four employees last year, including ourselves," said Gu. "Now we have 120 staff. We will expand to 200 by the end of this year and 600 next year."

The company raised its first round of financing from Sequoia Capital China, an arm of the California-based venture capital firm. Gu would not specify the amount but it was less than US$10 million. The company was very close to a second round of financing, he said, and he expected the number of users to reach 10 million by the end of the year and sales to reach 100 million yuan (HK$126 million).

"Sequoia Capital China was approached by over 20 start-ups focusing on auto after-market apps. I think they chose us because our group was the youngest and we developed our idea to the first edition of the app within one month," Gu said.

But although the company didn't choose Hong Kong, as a base, co-founder Leo Zhang said it may never have happened if the trio hadn't studied in the city.

"We are thankful to Hong Kong. It shaped and sharpened our business sense, and its freedom of internet and speech provided effective access to free and fast information from all over the world," Zhang said.

"If we had gone to college on the mainland … we might simply have prepared for civil service jobs, instead of seeking venture capital when the app was still a raw idea in our minds."