HKMagazine: Hong Kong's Startups Grow Up

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Cover story to the October 4 edition of HK Magazine.

Transcript of HKMagazine: Hong Kong's Startups Grow Up

  • Hong Kongs startup scene is going from coffee mornings to public offerings. By Adam White

    The Anatomy of a StartupAt heart, a startup is a few people with a new idea who want to change the world. Its quite the goal. But the people behind startups have to want something big: otherwise, they wouldnt be

    wasting their time. When we say startup we usually refer to a tech

    startup. These are companies that dont have clear revenue models

    and are about building a platform that people want to use, says

    Casey Lau, one of the founders of networking and community org

    StartupsHK. In Hong Kong, I see it more about entrepreneurs that

    use technology to make things betterwhether it be stock trading,

    booking a taxi or a hotel room, education or social innovation.

    I think the startup scene has grown a lot since we started

    meeting in a coffee shop back in late 2009 at the first Startup

    Mondays, agrees Jon Buford, whos another of the founders of

    StartupsHK and also behind 3D printer Makibox. We started with

    six members, says Lau. Now we have 5,000-plus. We had 1,000

    square feet of co-workspace in January 2012by the end of 2013,

    we will have 150,000 square feet. Floor space, in Hong Kong?

    Thats how to define a business.

    Take the great success case: silly-image-sharing site 9Gag.

    Founded in 2008 by HKU student Ray Chan, the site raised $21.7

    million in seed funding back in July of last year. These days it gets

    in the region of 60 million visitors a month. Of course, its not

    all easy. You have to truly love solving problems to stay in the

    startup biz, says Chan. 9Gag makes a lot of money, but theres

    not much profit. If youre interested in making money, there are

    much better ways to do that in Hong Kong.

    Why Hong Kong?I think Hong Kong is probably the easiest place in the world to startup, says James Beacher of venue-booking platform venueHub. The process is incredibly simple, cost-effective and the government really understands the importance

    of startups to the local economy. The ease of doing business in Hong Kong has

    always made it a draw, and startups benefit from the same advantages. The

    government is now stepping in and bringing a spotlight on this industry, and

    making it easier for startups to get visibility, says Casey Lau. Thats a great thing.

    But its also something about the nature of our city that makes Hong Kong

    prime startup soil. The diversity of the population makes Hong Kong a great testing

    ground for your idea or product before you consider expanding elsewhere, says

    Winston Wu, founder of recommendations app Pingspot. Jon Buford agrees. With

    a larger market, like Taiwan, you have enough people to do local products, but not

    really enough to scale to be much more than a comfortable business. With more

    established and larger markets, like the US, you tend to only see the local market

    and completely miss the opportunities elsewhere. Hong Kong is a good mix.

    The other great advantage is the sense of community. Networking events and

    venues exist to help startup founders meet and help each other out. Hong Kongs

    blessing and curse both lie in its size, explains Michael Gasiorek of fashion app

    ShopHop. The startup scene is tight-knit, incredibly supportive, and youll have

    more difficulty picking the events worth your time than finding them. Still, while its

    a great test market, its an even better launching pad to the rest of Asia. Pingspots

    Wu points out, seven million people is a small market. Most startups need to think

    cross-border from the get-go. As Simon Squibb of angel investors Nest says,

    Were not running businesses that are successful in Hong Kongwere thinking

    globally. A lot of people have missed this point. They say Oh, Hong Kong, dont

    bother. But if you only think locally, you wont go anywhere.

    Dont believe what your grandparents tell you: being successful in

    Hong Kong doesnt mean that you have to be a doctor or a lawyer

    (or enter the lucrative world of journalism, for that matter). These days,

    forward-thinking entrepreneurs are entering the world of startups, where Hong

    Kongs can-do spirit has found its next natural home. These people are in it to

    remake Hong Kong in a startup imageand make a fortune while theyre at it.

    14 HK MAGAZINE FRIDAY, octobeR 4, 2013

  • Startup StoppersIts not all good, of course. Hong Kongs startup scene is still nascent, and there are obstacles to overcome if its ever going to be a truly successful scene. Were missing three great things at the moment: talent, government

    infrastructure andof coursemoney.

    The lack of talent comes down to something elegantly predictable: Asian

    parents. The culture for university students to form or work for a startup is still

    not strong enough, says Andrew Chan of package-tracking site Aftership.

    Top students still aim to work in an investment bank or big corporate firm.

    People are always asking when are you going to make money? explains

    Simon Squibb. The government wants to know the business plan, how youre

    going to get revenue, when will you be profitable, will you employ local people.

    All fair questions. But the problem is, I dont know when its going to make

    money. The reality of startups doesnt really fit into Hong Kongs traditional

    business mindset, just yet.

    The lack of cash is a knottier problem. Hong Kongs not a cheap place

    to live or work, although more and more shared office space has helped to

    shoulder the burden. But the real problem is capital. There seems to be a

    large gap between risk appetite amongst angel investors in Hong Kong and,

    say, Singapore, says Asif Ghafoor, one of the founders of property search

    engine Spacious. Most of the angel investors in Hong Kong seem to be

    looking for a company that is already making money, or very close to. Thats

    a tricky position for startups to be inafter all, it took Twitter years to work

    out how to turn a profit. Most of our seed money came from abroad, says

    Jeffrey Broer of social media translation app Surround. When youre talking

    to investors in mainland China, theyre all expecting the new Angry Birds.

    He says itll take a whileand a little bit of experiencebefore they begin to

    invest more diversely.

    What Next? The startup founders identify a few solutions. The newness of it all is the biggest drawback. Hong Kong is definitely on the right track, but it will still take some time, says Pingspots Wu. He points out that

    we are a city that got rich on traditional business and land. Wealthy

    investors have only recently started to turn their attention to angel and

    venture investing as an alternative investment option.

    But the thing we need above all else is an enormous success story:

    an exit. An exit is a successfully executed exit strategy, wherein a

    startup is sold to a corporation for a huge amount of cash. I think the

    main thing people are waiting for is that first big exit from a company

    here, says Jon Buford. It will be those companies that form the next

    round of growth and will act as both investors and mentors to the next

    generation of companies. Wu agrees, pointing out that a high-profile exit

    would validate and energize the startup community, provide a model for

    new startups, encourage entrepreneurship as a career amongst young

    people (and their parents), and demonstrate to investors the value of

    Hong Kong companies. Its a powerful cycle, and I think Hong Kong is on

    the cusp of setting off that cycle.

    Weve seen the startup community grow like crazy and I think 2014

    will be a landmark year. In Asia we have so much potential with so many

    people, and so many problems that affect people, from Kowloon Bay to

    Makati City. There are some great startups Ive seen in HK and around

    Asia that are ready to be international successes, says Casey Lau.

    These will change the game. This city was built on entrepreneurs,

    Nests Simon Squibb points out. Li Ka-shing was an entrepreneurhe

    started out selling plastic flowers. A lot of people have forgotten that.

    Hong Kong is a city thats grown rich on people wanting to make great

    things happen. Meet the next generation.

    HK MAGAZINE FRIDAY, octobeR 4, 2013 15

  • Hong Kong is rammed full of exciting, interesting startups at the moment.Weve picked just 10 herebut there are many, many more.

    HotelQuicklyRApHAel CoHeN (pICTuRed),

    TomAS lAbouTKA, CHRISTIAN mISCHleR,

    mICHAl JuHAS, mARIo peNg

    Launch March 2013.

    The Elevator Pitch HotelQuickly is

    the largest last-minute hotel booking

    smartphone app in Asia.

    The Deal Stuck in a foreign city and in

    need of a last-minute hotel room? Load

    up HotelQuickly and it gives you a list of

    deals on hotel rooms in your city. You can

    make a reservation right up until 4am that

    same night, in 11 countries across Asia and

    Australasia. Hotels fill their empty rooms,

    and you get a bed. Everyones a winner.

    The app has just raised $9 million in

    Series A (first round) funding.

    The Dream We aim to become the

    reference app for spontaneous hotel bookings in the Asia Pacific. We

    are building up a lifestyle brand for spontaneous travelers in the region.

    Business travelers, flashpackers, staycationersanyone who makes last-

    minute changes in travel