How Hong Kong’s tech hub status can expand beyond Asia Pacific

There’s a Latin phrase that describes Hong Kong’s tech ecosystem well: “Plus ultra.”

Meaning “further beyond,” it represents how even though Hong Kong has become a strong bastion in Asia Pacific’s tech sector – it has almost 4,000 startups and counting – it’s still looking to take everything one step further in the coming years.

Photo credit: Shutterstock

“The government has been putting in a lot of resources recently. These results will only happen in a couple of years but we can see glimpses of these benefits coming online,” says Winnie Leung, general partner at local VC firm Transcend Capital Partners.

Here’s a peek at what stakeholders in Hong Kong’s tech sector can keep their eyes out for.

Till death do us part

One of the biggest eggs in the Hong Kong government’s metaphorical basket is the plan to integrate the territory even further into the rest of the Greater Bay Area. It aims to help develop the region into a tech hub that’s as strong and robust as Silicon Valley.

Already, it seems like the government is pulling out all the stops to enact this planned integration. In 2022, it announced that it would earmark around HK$10 billion (US$1.3 billion) for a new healthtech hub in the Hong Kong-Shenzhen Innovation and Technology Park.

The park itself – which is slated to open in 2024 – is a joint development between the two cities’ governments.

The view of Shenzhen from Hong Kong isn’t too shabby / Photo credit: Shutterstock

On top of that, the Hong Kong government announced that it’s trialing the implementation of a cross-boundary policy to cooperate on information and tech matters, which should help drive interest and resources to the local tech ecosystem.

With China as a closer partner, Hong Kong startups will have much to look forward to.

“This has the potential to not only generate a large amount of GDP but also allow Hong Kong to work with other regions to drive stronger R&D and tech expertise,” says Leung.

A match made in heaven

Another important measure that should bear fruit over the next few years is theInnovation and Technology Venture Fund (ITVF), a HK$2 billion (US$260 million) initiative that was launched in 2017.

The ITVF helps funnel more funds to local startups as it matches the capital offered by the VC firms at a 1:2 ratio. As such, even though it launched six years ago, its impact on early-stage startups – which are often the riskiest investments – may not be apparent yet.

Still, Leung believes that the ITVF will significantly impact Hong Kong’s startup ecosystem in the coming years.

“If early-stage companies aren’t funded or helped, then there won’t be any later-stage companies to invest in anyway,” she points out.

Winnie Leung, general partner at Transcend Capital Partners / Photo credit: StartmeupHK

Initiatives like the ITVF are a far cry from where Hong Kong was in previous years, says Patrick Tu, CEO and co-founder of Dayta AI, a local video analytics startup.

“Just six years ago, founders typically had to look to angel investors for capital,” he shares. “It meant that you’d have to give equity away quite early, which could be an issue in the long run. But now, with VCs willing to invest more resources with support from the government, it’s a lot easier to access starting capital.”

As more investment initiatives get launched, Tu believes that Hong Kong will see “a lot more” startups in the next three to five years.

“There’s a lot more motivation and encouragement to start a business today as it’s easier and cheaper to do so,” he adds.

From top down to side by side

Amid these changes in the local tech ecosystem, Hong Kong VC firms are also seeing an evolution in their roles. According to Transcend Capital’s Leung, the philosophy of providing more than just funding and acting as a strategic partner has become a lot more prevalent among investors.

“We always want to take strategic money,” says Tu. “Traditional cold calling and sales are always really slow so the relationships and networks you get from investors are so much more valuable than just the capital.”

Patrick Tu, CEO and co-founder of Dayta AI / Photo credit: StartmeupHK

According to Leung, one trend that’s helping this shift toward strategic growth is how more corporations are getting directly involved with investing in the local startup scene.

This is a stark change from just five years ago when “the atmosphere in Hong Kong was not quite ready yet,” says Leung. The onset of the pandemic drove many corporations to adopt tech at a faster pace, which also opened up their mindsets to investing in startups.

“It’s great for startups because corporations provide an avenue for them to test their solutions. And being able to get immediate feedback is extremely important,” she adds.

Tu concurs, saying: “Having good connections to bring you around the market and showcase your solutions saves so much time.”

Be quick, be ready

Evidently, the opportunities are starting to reveal themselves in Hong Kong. But can startups take advantage of these new initiatives?

“It’s important to bear in mind that Hong Kong is an international city. With all this support and development for the Greater Bay Area and integration with China, startups need to have a growth mindset and be open-minded to fully capitalize,” says Leung.

Tu adds that founders will need to be proactive to benefit from these new developments. Reaching out to investors personally to get feedback, going to conferences – for example, those hosted by industry stakeholders such as the StartmeupHK Festival – and other similar actions are key to establishing a path to success.

“I can’t emphasize enough how important the human touch is,” he says. “And with Hong Kong being such an agile market, founders will also need to be adaptive to make quick, value-generating decisions.”

Currency converted from Hong Kong dollar to US dollar: US$1 = HK$7.82.

StartmeupHK is an initiative by InvestHK aimed at helping founders of innovative and scalable startups from overseas to set up or expand in Hong Kong. Get in touch with StartmeupHK to explore opportunities in Hong Kong as a startup or investor.

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This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.