What can mainland offshore companies gain from Hong Kong’s startup ecosystem?
On the afternoon of 26th September, “More than Web3: Inside Hong Kong’s Startup Ecosystem” was broadcasted on a live streaming platform. Co-organised by StartmeupHK and a live streaming platform, the seminar featured 90-minute dialogues, round-table discussions and keynote sharing, in which entrepreneurs, investors and government representatives introduced startup incentives from various sectors in Hong Kong through stories of startups’ development that they have personally experienced or witnessed, demonstrating the diversity and vitality of Hong Kong’s startup ecosystem and its unlimited resources.
Coinciding with StartmeupHK, the festival will be held in Hong Kong from 8 to 17 November, with the theme of “Embracing the Future, Embracing the Possibilities”, focusing on a number of hot topics such as the third generation of the Internet (Web3), health technology, real estate technology, green technology, and game-based finance (GameFi).
In the online sharing session on 26 September, a number of guests from Hong Kong or with deep connections to Hong Kong brought memorable sharing, focusing on the advantageous resources of the Hong Kong market with the online audience and thinking about the opportunities that the Hong Kong market brings to Mainland Chinese companies going overseas.
Web3 in Hong Kong: Regulation for More Prosperity
Lui Chin-yung, Senior Manager of Startups (StartmeupHK), Invest Hong Kong, shared his views on the development of Web3 in Hong Kong. 2023, the Hong Kong Government’s budget at the beginning of the year, the Government proposed that Web3 and the digital economy are in order to promote the development of Hong Kong’s high-quality important direction. In addition to the application in digital entertainment, the core of Web3 - blockchain technology, with its decentralisation, security and transparency, immutability, low cost and other characteristics, is expected to be applied in all aspects of life.
Mr Lui added that in order to make Hong Kong an ideal base for sustainable and high-quality development of Web3 startups, effective and transparent regulation is essential. From June 1, Hong Kong’s virtual asset trading licence is officially open for application, the purpose of which includes avoiding the abuse of Web3 for money laundering, illegal fund gathering and other aspects. In fact, countries such as Japan and Thailand introduced similar licensing systems a few years ago, which greatly boosted the revenue generation of the local Web3 industry. By introducing strong regulation, Hong Kong hopes to foster a more prosperous and sustainable Web3 industry while protecting businesses and investors.
Cindy Zhang, Executive Director of Greater Bay Area at Gobi Partners, agrees with Jinyong Lui, who points out that many of the Web3 projects invested in by Gobi Partners value the regulatory services of the region in which they are developed, as a clear, unambiguous, and favourable regulatory environment can provide the Web3 industry with the assurance of long-term stable development. This is one of the key factors that Gobi Partners values.
Aidaa Wong, Investor Network Manager of Cyberport’s Ecosystem Development Group, believes that the Hong Kong SAR government’s support for the Web3 ecosystem and the promotion of related policies and regulations can be considered a breakthrough. Cyberport, as a government-supported Web3 Hub, has attracted more than 180 related companies. In addition to the Hong Kong government’s dedicated Web3 promotion budget, Cyberport also has an investor network of more than 170 investment organisations, large corporate investment departments and family offices, as well as a wide range of specialised funds and support programmes, which are able to provide significant financial support to start-ups from a wide range of industries.
Cindy added that Animoca Brands, a Web3 star project invested by Gobi Partners, is one of the Cyberport eco-companies that has benefited greatly from Hong Kong’s policy support. In addition to the availability of office space in Cyberport, Animoca Brands has been able to hire a large number of local Hong Kong talents through the government’s help to meet the needs of its fast-growing business. The company’s team also interacts with the government from time to time to make suggestions on regulation or to provide ideas for improvement in the development of the Web3 industry. In addition, the HKSAR government’s support for the Web3 industry includes the Cyberport Incubation Programme, talent grants, and a flexible business formation regime.
More than Web3: The Ground for Deep Tech Development
Apart from Web3, there are many other industries where startups are thriving in Hong Kong
Founder and CEO of Fano Labs, Hau-Fu Wen, said that Hong Kong has the perfect soil for deep tech development, whether it’s local and global talents, or policy support, many tech companies in Hong Kong have gained a unique advantage for their development. Arigatou Technology provides enterprises with recording analysis through AI technology, helping them to conduct compliance audits, financial crime investigations and other services. In this city where East meets West, Arigatou is able to reach out to corporate clients from all over the world very conveniently.
At the same time, Winhofer mentioned that Hong Kong has a similar legal tone to Europe and the United States, which provides an inherent advantage for Arigatou’s financial compliance services to expand to other markets around the world. After having served major multinational corporations and banks in Hong Kong, Arigatou can still enter markets such as Singapore and Europe with relative ease.
Sophie Yao, Managing Director of TMC Ventures China, believes that apart from the thriving financial sector that everyone knows, Hong Kong is still full of bright spots in many other sectors. The first is biotechnology. Hong Kong’s high quality higher education, developed healthcare system and dense clinical research institutes provide an excellent launching pad for biotechnology development; the second is software and artificial intelligence, which is closely related to Hong Kong’s longstanding emphasis on technological research and development; and the third is innovation related to smart buildings. Hong Kong has a high population density, and with the extensive attention ESG has gained in the market in recent years, there is a stronger willingness to experiment with smart buildings and to develop new technologies. The third is innovation related to smart buildings.
To sum up, Yao Xiaofei believes that Hong Kong has a large number of multinational enterprises and many central state-owned enterprises, which is very suitable for B2B enterprises to expand their business and polish their solutions. Even though there is a lot of pressure to open up to customisation in the face of large corporate clients, it is still worthwhile to plough into the field, taking into account the unit price and the possibility of expanding to other markets in the future.
Siu Kai Tung, founder of CHAZENCE, a new environmental protection material company from Macau, pointed out that Hong Kong has a core export position in the Greater Bay Area. Chazence has set up companies in Shenzhen, Zhuhai and Hong Kong, bringing together the industrial strengths of each place, and channelling the company’s capabilities and solutions overseas from Hong Kong in order to enter the global market. At the same time, Xiao Qidong also mentioned that Hong Kong has a large number of international brands, which is not only conducive to building a good revenue structure, but also expected to consolidate the development of environmental protection and sustainable industries with international partners.
Mr Siu also mentioned that Hong Kong has a very rich financing environment and opportunities, from angel investment to IPO, with a very complete and low-risk structure, which is crucial for Tea Yai, a company that focuses on sustainability. In addition, Hong Kong has high-quality accelerator and incubator programmes, and the resource-rich startup ecosystem touched Xiao Qidong deeply.
Many guests participated in the online sharing session
Leveraging Hong Kong’s startup policy to accelerate business development
Hong Kong’s startup ecosystem is actually still very young. According to the 2022 Startups Statistics Survey released by Invest Hong Kong, there are nearly 4,000 startups in Hong Kong, an increase of more than 50 per cent compared to five years ago. Behind such a growth rate, the HKSAR government’s policy support and positive attitude cannot be ignored. According to Yao Xiaofei’s observation, startups, whether from the Mainland or other overseas markets, who contact InvestHK will be given unfailing support and assistance to match the resources they need.
Yao also mentioned that Hong Kong tends to give people the impression that land prices are very expensive and start-up costs are high, but in fact, the HKSAR Government provides office facilities and flats for start-ups through the Cyberport and the Science Park, thus greatly reducing start-ups’ overheads.
When it comes to start-up costs, we have to mention Hong Kong’s widely known low tax rate, which enables both the entrepreneurs themselves and their start-ups to enjoy a very low tax rate. On this basis, Mr Wen mentioned that Hong Kong also has various special tax relief policies, such as R&D investment can be used for tax deduction; in addition, Hong Kong will also make use of tax relief to encourage large enterprises to co-operate with start-ups. For example, the Innovation and Technology Commission (ITC) has launched a list of “Designated Local Research Institutions”, and if a large enterprise cooperates in R&D with an enterprise on the list, the corresponding payment will be eligible for a tax rebate of at least 200%. Arigatou Technologies is on this list, and as a result, it has received many orders from large enterprises for the procurement of research results.
The HKSAR government sometimes also directly become customers of startups. Lui Chin-yung introduced, in cooperation with start-ups, the Government has put in a lot of effort. In the Cyberport, there is a “smart government lab”, will be displayed through exhibitions, public activities and other forms of government departments to introduce their own pain points, or government departments want to solve the pain points in a region of Hong Kong. In this way, start-ups can clearly understand the needs of government departments, thereby advancing the possibility of co-operation.
In the bidding process, the government will have engineers to communicate with the startups, assess their solutions in advance, and point out the standards of co-operation requirements in terms of safety, convenience, and care for vulnerable groups. In addition, the HKSAR Government’s tender guidelines will include 40 per cent of “innovation” rather than just price and past experience, thus enhancing the competitiveness of startups. Through government procurement, cleaning robots can be found in Hong Kong’s public housing estates, and more advanced cybersecurity technologies can be used by the police to combat cybercrime.
Based in Hong Kong, looking global
Internationalisation is one of the most important features of Hong Kong for mainland Chinese companies going overseas. According to Lv Jinyong, startups can find consumers from different countries in Hong Kong to test their products, and they can also find talents from different countries to help them develop business overseas in the future. For enterprises going overseas, Hong Kong is a base to familiarise themselves with overseas markets and reduce trial-and-error costs.
Yao Xiaofei added that Hong Kong’s diversified talent structure is very conducive to team building for overseas enterprises. No matter where the next stop is, you can almost always find talents in Hong Kong who understand the local language and culture and have an international perspective. In addition, Hong Kong has a very good reputation around the world. When enterprises communicate with overseas customers, Hong Kong’s success stories not only provide a good impression, but also make customers more trustful of the enterprise’s internationalisation capability.
Cindy particularly mentioned the convenience Hong Kong offers to multinational companies in acquiring customers. Many large corporations have internal lists of suppliers, and it is much easier for start-ups to reach out to other overseas markets once they have secured a co-operation and successfully implemented it in Hong Kong. Wen Haofu also mentioned this advantage, Arigatou Technology has successfully cooperated with very many multinational enterprises in Hong Kong, and after proving the feasibility of the product technology, the customers are likely to bring this solution to other markets, helping Arigatou Technology to open the door to more markets. The internationalisation of Hong Kong is also reflected in its technological framework and methodology, which has a high degree of international commonality. Products polished in Hong Kong will have a relatively smoother path towards the Southeast Asian, European and even Middle Eastern markets.
About StartmeupHK
This year’s Startup Festival is even more informative than before, with eight major events and a series of community activities taking place at various landmark hotspots in Hong Kong, and featuring speakers from global business leaders and innovative entrepreneurs. In addition, the Festival will offer a wide range of interactive experiences, including a venture capital competition, startup investment matching, a technology showcase, a job fair and a networking reception.
