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Thursday, May 19, 2016, 01:28

Let’s get it started

By Luo Weiteng

Young Hong Kong entrepreneurs are seeking lucrative startup options on the mainland, but a keen understanding of the market and consumer behavior is a key requisite. Luo Weiteng reports.

 Let’s get it started
As the buzzing startup scene on the Chinese mainland continues to produce a dazzling array of success stories and showcase the country’s determination to shift away from a reliance on heavy industry toward creation and innovation, more and more Hong Kong young entrepreneurs are relishing the idea of heading north to make their mark.

“With the central government vigorously encouraging mass entrepreneurship and mass innovation, and rolling out a slew of stimulus measures, why don’t we seize the opportunity to scale up our business?” asks Alan Tso, founder of Beijing-based China Mini Storage Ltd. Tso did just that, setting up his company making storage boxes in 2013, after four years at a Beijing-based State-owned enterprise.

Data from DBS Bank show that the central government’s startup investment fund stands at $337 billion, larger than the gross domestic product (GDP) of countries like Denmark or Singapore. Of this, as much as $100 billion have been earmarked for financial technology (FinTech), the latest sector where nations are vying globally for excellence.

Hailed as a dynamic hub for global finance, Hong Kong has long jostled with a cluster of cities like Shanghai, Singapore, Tokyo, New York and London for the leading edge not only in traditional financial industries such as equities, banking and currency exchange, but also in the much-discussed area of the startup ecosystem.

Admittedly, the city has witnessed a handful of startups survive and thrive in the local market, including online fashion rental and sharing site Yeechoo, on-demand logistics company GoGoVan, and merchants’ e-commerce platform Shopline, all three recently picked for investment by mainland e-commerce behemoth Alibaba’s $130 million Hong Kong Entrepreneurs Fund.

Tough first hurdle

Though there is ardent talk of Hong Kong’s fast-growing startup scene as the city seeks to diversify its economy away from the decades-old pillars of property and financial services, Tim Lee Ying-ho still believes the startup business may not be a promising choice for Hong Kong, at least for tech companies.

Lee, co-founder of Beijing-based e-payment startup QFPay, notes that the pasture across the border would typically seem greener as long as local entrepreneurs have their eyes trained on the vast mainland market.

The former IBM consultant says his decision to go north to Beijing in 2009 and set up a business from scratch two years later was the turning point of his career. Lee, like many Hong Kong-born tech talents, started out with trying his hand in Hong Kong’s app development sector, where local tech startups are most likely to succeed.

However, Lee felt somewhat hamstrung by the conservative attitude of Hong Kong consumers toward FinTech products, as well as the small size of the local market, and what he felt was a comparative lack of local tech talents and relatively difficult access to venture capital.

Hong Kong-based entrepreneur Vincent Lam may have a solution for young entrepreneurs facing similar hurdles. “That’s why I always recommend that young Hong Kong entrepreneurs go out and see what’s going on across the globe. The world is much bigger and grows much faster than we imagine,” said Lam, who has worked with startups like Taiwan-based restaurant reservation firm EZTable and Hong Kong’s GoGoVan.

Lam was very impressed with the vibrant entrepreneurial atmosphere and can-do spirit of Beijing, which he believes is comparable to that of California’s Silicon Valley.

In fact, Lee of QFPay, which secured series B funding worth $16.5 million in 2014, is betting big on the mainland’s lucrative e-payment boom.

He aims to outstrip US peer Square, a listed mobile payment company founded in 2009 by Twitter founder Jack Dorsey, in terms of income over the next three years. In what could be an indication of greater things to come, QFPay has already been dubbed the “Square of China”.

To be sure, the country’s robust market demand goes well beyond tech startups in terms of opportunities to cash in on, said Tso at China Mini Storage Ltd.

Having seen Hong Kong’s mini storage market already carved up by local property giants, leaving nowhere for Tso to put his business idea into practice, it was a natural move for him to look north for fresh pastures.

Tso sees the four years he spent at Beijing-based fund manager Everbright Ashmore China Real Estate Fund as a great opportunity to understand the workings of the world’s second-largest economy. A lack of awareness about the mainland market and consumers is a weakness that most Hong Kong-born young entrepreneurs with business across the border may take years to correct, Tso noted.

Tso’s sentiments were echoed by Lee, who recalled being bombarded during a 2010 presentation with a flurry of questions from an angel investor about how much he understood the consumption habits of mainland buyers. “Having lived here for decades, I cannot even dare to say I understand them. How can we expect a Hong Kong person who has lived in Beijing for just a year to have a better idea?” the angel investor asked.

For ambitious Hong Kong entrepreneurs who long to carve out a career on the mainland, Tso believes working in a mainland company first is a way to make them more “down to earth”.

And for the idea of taking the plunge on the mainland to become more compelling for Hong Kong entrepreneurs, they need to just look across to the city at the border — Shenzhen. The fishing village-turned-megacity stands as the poster child of the nation’s “new economy”, a buzz word for what is expected to be the country’s next growth engine.

The coastal metropolis, dubbed the China’s Silicon Valley and tech capital, is already home to a wealth of household names including internet behemoth Tencent, telecoms equipment and smartphone makers ZTE and Huawei, and commercial drone manufacturer Dajiang Innovation.

The city’s government is also spending big to attract new entrepreneurs, with the startup investment fund reportedly surging to $7.7 billion last year, from $2.3 billion in 2014.

Innovation in focus

According to a report from the brokerage China International Capital Corporation, venture investment going into startups in Shenzhen was about $1.5 billion in 2015, dwarfing the $50 million earmarked in Hong Kong.

And while 17 out of 1,000 people in Shenzhen work in research and development, the number in Hong Kong is just three in 1,000.

The Qianhai free trade zone is among the symbols of the city’s entrepreneurial boom, where nearly 3,000 Hong Kong companies have registered as of February, contributing to 20 percent of the zone’s GDP, said Witman Hung Wai-man, principal liaison officer of the Hong Kong office of the Qianhai authority.

The Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub, in particular, has seen almost 50 Hong Kong-based startups move in.

“While embracing a relatively new business model and rules of the game on the mainland, and carving out their own paths, Hong Kong startups should retain their characteristics, delicacy, finesse and relentless pursuit of product development,” Charles An Nan, CEO of Hong Kong-based app firm CardApp, told China Daily.

“That can be described as a ‘drive for excellence’, a dream that the founder of every outstanding Hong Kong company cherishes,” An said.

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