Admiring Hong Kong’s distinctive and impressive skyline, adorned by a thousand lights and built against the backdrop of its steeply sloped mountains, onlookers are bound to feel a rush of excitement and wonder what opportunities are in store.
Indeed, apart from being a bustling world city and a great place to dream, Hong Kong is one of the world’s leading financial centres, a hive for entrepreneurship and among the most favourable places from where to launch a start-up business.
Providing insight into Hong Kong’s thriving start-up environment, WHub recently published its Start-up Ecosystem Whitepaper 2018.
Here are some key takeaways.
Hong Kong: a safe haven for start-ups
Although Hong Kong was transferred back to China in 1997, after 155 years of British rule, it continues to operate as a Special Administrative Region (SAR), retaining its own capitalist economy, currency, legal and political system under the “one country, two systems” arrangement.
As a free port with a GDP of US $341.4 billion (2017), GDP growth of 3.6% (2018), per capita GDP of US $48,830, and a low tax rate, Hong Kong provides one of the most business-friendly environments and consistently tops the list as the freest economy in the world.
Apart from holding the number one position for connectivity in 2016 and its position at the doorstep on mainland China, with unrivalled manufacturing capabilities right across the border in Shenzhen, Hong Kong is situated at the heart of Asia which renders rapid expansion and international growth relatively easy.
In addition, unlike other (offshore) jurisdictions, Hong Kong law allows foreigners and non-residents to be the sole shareholder and director of a company, without the need to partner up with local residents to establish a business.
Last, but not least, Hong Kong is in a position to seize a key role in China’s One Belt One Road initiative, also known as the Modern Silk Road which involves 71 countries containing 65% of the global population and has massive economic, cultural and political implications through the connectivity and partnerships forged in its development.
Profiling Hong Kong-based start-ups
While funding, competition, market changes and high cost of living do pose as obstacles for young entrepreneurs, every year the number of start-ups in Hong Kong has consistently increased.
Coming from 998 start-ups in 2014, this year Hong Kong harbours over 2800, with eCommerce (22%), Fintech (12%), Software (12%) and Advertising (11%) companies comprising the majority.
At present, six homegrown start-up stars have been confirmed as so-called unicorns, defined as privately held start-ups with a valuation of more than US $1 billion. These companies are SenseTime, WeLab, Lalamove, Tink Labs, BitMEX and Klook.
Businesses that recently ceased to function as private companies, either through Initial Public Offering (IPO) or Acquisition, include GoGoVan, Guru Online and Xiaomi amongst others.
Initial Coin Offerings (ICOs), or token sales, have been on the rise as well. Currently, the US, Singapore and Switzerland are still the most important hubs for ICOs, but along with Gibraltar, Malta and Liechtenstein, Hong Kong has also seen considerable success in this field.
Notable among companies which have developed tokens are BlockOne which has raised US $4 billion in an ICO and Spark with its Zephyr token, which has recently launched SparkDex, Hong Kong’s first decentralised cryptocurrency exchange.
Growing start-ups that have been making headlines include Neat, which offers fintech services such as easily opening a bank account through their dedicated app in less than 10 minutes, and uHoo, which uses technology to create a healthier and safer environment.
Zooming in on FinTech
Compared to 2016, in 2017 Hong Kong FinTech investments doubled to US $545.7 million. Indeed, with approximately 70 of the largest 100 banks in the world operating in Hong Kong, the city has one of the highest concentrations of banking institutions worldwide and entrepreneurs aspiring to start a FinTech business in Hong Kong are in the right place.
Some of the major reasons why Hong Kong is a FinTech hub come from the fact that Hong Kong connects a vast network of customers and funding opportunities, has a sophisticated technological infrastructure, is Asia’s largest financial centre and consistently attracts talent from around the world.
In addition to FinTech, Hong Kong is also well-posed as a hub for companies developing internet of things (IoT) and artificial intelligence (AI).
Community and support programmes
While Great Ideas, determination and resources are crucial to a start-up’s success, community builders that create professional and social links within and to Hong Kong’s ecosystem are also vital contributors to the start-up scene.
WHub’s whitepaper lists close to 100 key community builders, both homegrown and notable names from other ecosystems such as Silicon Valley, Israel, China and Europe.
In addition to these individuals, Hong Kong’s government recognises the importance of entrepreneurship and is strengthening programmes and organisations to increase resources, activities and visibility. Notable government organisations include InvestHK, StartMeUpHK and Cyberport, with the latter able to provide accepted incubatees with substantial grants and a range of business and professional services.
On top of government-backed programmes, private companies have joined in providing acceleration programmes aimed at supporting and mentoring new entrepreneurs. Notable programmes include SuperCharger, power by Standard Chartered Bank, HSBC sponsored Sprinter, and ReadWrite Labs, which aims to accelerate the growth of the Business of Things and has offices in San Francisco, Hong Kong and Shenzhen.
Hong Kong’s start-up ecosystem is further rendered favourable by an abundance of coworking spaces, such as WeWork and the Hive, active investors, such as Alibaba, Brinc and Nest, and a substantial number of Chambers of Commerce.
Beyond the skyline
WHub’s whitepaper insightfully maps out Hong Kong’s ecosystem for start-ups. It is a must-read for any aspiring entrepreneur who is considering Hong Kong as a place to start a business.
For a start-up to grow it naturally needs to be nurtured in a healthy ecosystem which in the case of Hong Kong is characterised by some of the following elements:
favourable economic system
strategic regional position
high degree of connectivity
reliable legal framework
potential for partnerships
large collection of innovative peers
long tradition of trade and commerce
network of community builders
government support programmes
privately-run accelerators and incubators
active body of investors
The power of this ecosystem lies in the way in which all these elements and actors conspire together to make Hong Kong a vibrant seedbed of creativity and entrepreneurship where Great Ideas can flourish. What binds it all together is a shared commitment to leading with vision and seeking to drive true transformational change.