Hong Kong is buzzing with entrepreneurial energy as startups rise on fresh capital ideas. The city’s vibrant tech landscape, bolstered by proactive government support and expanding investment channels, is transforming Hong Kong into a thriving hub for venture capital. However, industry insiders are calling for improvements in the funding vetting process and a more diverse investment spectrum. Here’s a closer look at how Hong Kong’s startup scene is evolving and what challenges lie ahead.
Hong Kong’s Thriving Startup Ecosystem
In recent years, Hong Kong has witnessed a significant surge in its startup ecosystem. According to a report by InvestHK, the number of startups in Hong Kong reached 4,257 in the past year, marking a 34 percent increase from 2019. This growth reflects a dynamic shift towards innovation and technology, driven by a combination of government initiatives and entrepreneurial spirit.
Success Stories and Strategic Moves
Kerr Xu Ke, co-founder and CEO of LaSense Technology, is a prime example of the startup success emerging from Hong Kong. Specialising in laser sensing instruments, Xu’s company secured millions in angel investment from mainland China in early 2021. This move was not just a strategic decision but a response to the limited funding options available locally. At the time, a survey by the Hong Kong Trade Development Council showed that only around 10 percent of local startups had received funding from angel investors or venture capital.
Xu’s decision to seek investment on the Chinese mainland was a crucial step, especially given the travel restrictions imposed by the COVID-19 pandemic. This limitation restricted access to international funding sources, compelling many startups, including LaSense, to look beyond local borders.
Expansion and Demand in Tech Hubs
Hong Kong’s major tech hubs, such as Hong Kong Science Park and Cyberport, are reflecting the growing demand for startup spaces. Science Park, which saw its tenancy surpass 90 percent by May last year, is set for a significant expansion, adding over 13,000 square meters by early 2025. Similarly, Cyberport, another pivotal player in the city’s digital landscape, is embarking on a fifth expansion phase to provide an additional 66,000 square meters of space.
Academic Support for Startups
Universities in Hong Kong are increasingly fostering an entrepreneurial mindset among students and faculty. Almost all tertiary institutions now support startups through guidance programs and funding initiatives. For instance, the University of Hong Kong (HKU) has launched the Entrepreneurship Engine Fund, a “fund of funds” designed to invest in venture capital firms supporting seed and early-stage technology companies.
Huang Mingxin, a professor at HKU, founded Dynano Semiconductor Technology in October last year. His company, focused on developing innovative chip packaging materials for electric vehicles, represents a growing trend of academic figures diving into entrepreneurship. Huang’s involvement reflects a broader shift in academic attitudes towards business ventures, previously seen as divergent from academic pursuits.
Government Initiatives and Funding Programs
The Hong Kong Special Administrative Region (HKSAR) government has prioritised innovation and technology in recent policy addresses. To support this focus, several funding programs have been introduced:
- Technology Startup Support Scheme for Universities (TSSSU): Provides up to HK$4.5 million for startups.
- Research, Academic and Industry Sectors One-plus Scheme (RAISe+): Offers up to HK$100 million, with a co-investment model involving both government and private sectors.
Xu Ke’s experience with TSSSU highlights its role in aiding startups. LaSense benefited from the scheme’s financial support during its early stages, which was crucial for its development. Despite the increased funding caps and efficient disbursement process, there are calls for a more professional vetting process and broader investment options.
Evolving Capital Pools and Investment Trends
The venture capital landscape in Hong Kong is evolving, with more opportunities for startups to secure funding. Datality Lab, an ed-tech startup, is one of many that has benefitted from government support, allowing it to advance its AI-driven communication skills training system.
However, some entrepreneurs remain sceptical about the effectiveness of new funding programs. Concerns have been raised about the RAISe+ program’s vetting process, with critics noting the high proportion of academic rather than market-focused evaluators.
Mainland Interest and Global Investment
Mainland China’s venture capital market is experiencing a downturn, prompting Chinese investors to explore opportunities in Hong Kong. In 2023, six Chinese venture capital firms invested 1 billion yuan ($140 million) into City University of Hong Kong’s startup incubation program, HK Tech 300. This trend underscores a growing interest in Hong Kong as a viable investment destination amidst a challenging mainland market.
Looking Ahead: Challenges and Opportunities
While Hong Kong’s startup scene is thriving, challenges remain. Investors often favour specific sectors like biomedical and materials science, leaving other innovative areas underfunded. The venture capital market’s recovery from COVID-19 is still uncertain, but increasing mainland interest could boost Hong Kong’s investment climate.
Conclusion
Hong Kong’s startup landscape is rapidly evolving, driven by a blend of entrepreneurial zeal, government support, and expanding investment channels. The city is transforming into a bustling hub for innovation, yet there is a clear need for improvements in funding vetting processes and a broader investment focus to fully realise its potential.
