Alibaba fund to boost investments in Hong Kong biotech firms

Alibaba Hong Kong Entrepreneurs Fund, the US$131 million venture capital fund started by Jack Ma, plans to boost investments in Hong Kong’s biotech startups that could become the next unicorn, expanding its focus from fintech and AI.

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“We have come across a lot of good biotech technologies, the question is whether these are groundbreaking ones,” said Cindy Chow Lok Mei-ki, the not-for-profit fund’s executive director. “As biotech is not Alibaba’s core competence, we hope that we can identify some co-investment opportunities with experts in this field.”

Chow said that the fund, started by the former chairman of Alibaba Group Holding to support Hong Kong and Taiwan-based entrepreneurs, has already deployed US$35 million in more than 20 Hong Kong companies since its launch in November 2015, adding that it was open to co-investing with other VC funds specializing in biotech. Alibaba owns the South China Morning Post.

The fund has invested in Hong Kong-based Prenetics, which provides genetics testing solutions for cancer screening and pharmacogenomics or the study of how a person’s genetic profile affects their response to drugs. Some of Prenetics’ clients include top insurers such as Prudential, AIA, HSBC Insurance, and FWD.

A key direction of the fund, which is run commercially and managed by China and Southeast Asia-focused VC manager Gobi Partners, is to support four areas – biotech, fintech, AI, and smart city – identified by the city’s government to boost the economy.

Chow said Hong Kong has a pool of talent in AI and fintech, pointing to two unicorns – private companies valued at more than US$1 billion – that it has invested in, namely SenseTime, which is valued at US$7.5 billion and counts other investors such as Japan’s SoftBank Group, and Hong Kong-based virtual bank operator WeLab.

The fund will focus primarily on early-stage companies that are raising financing in series A or B round, which Chow said is where the biggest funding gaps lie in Hong Kong’s startup scene.

“Apart from capital, what we bring to startups are opportunities to become part of Alibaba’s ecosystem so that they could continue to grow their business.”

Chow cited the example of Pickupp, a logistics platform that provides on-demand same-day delivery. Since the fund invested in the company, Pickupp has had cooperation opportunities in Southeast Asia with Lazada, the largest ecommerce company in the region which is majority-owned by Alibaba.

Michael Zhu, managing partner of Gobi China, said the Greater Bay Area presents huge opportunities for Hong Kong tech companies in fintech and AI.

“I don’t think Hong Kong’s edge in professional services can be easily replaced,” said Zhu, noting that fears Hong Kong’s competitive advantage could increasingly be eroded by cities in the scheme were unfounded.

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