HK making progress in becoming tech startup hub

Raised on an Irish dairy farm as a child, young Paddy Cosgrave followed his father's advice: 'stay in the house with the computer and away from the cows', said Cosgrove Snr, convinced technology was more likely to be the next big thing.

He was right. And today, just like his father, who also used to convince his farmer friends to use Excel instead of ledgers in the early 1990s, Cosgrave has become an evangelist for technology, by bringing the world's greatest minds together for his own tech conferences.

He founded Web Summit in Dublin in 2010, which is now one of the biggest technology conferences in Europe.

And after noticing an increasing number of web summits were being held in Asia, not the West, he was also drawn to the region by a vibrant startup scene.

So he created Rise－taking place in Hong Kong on 31 July and 1－a new tech event that Cosgrave says will give the region's new generation of tech leaders a place to congregate and demonstrate their expertise.

Calling Hong Kong "the obvious location," Cosgrave told an audience gathered at the local startup incubator StartupsHK at the start of the week, he considered the special administrative region as the prime location to be the "center of the Asian universe".

Despite his optimism, however, Hong Kong has hurdles to clear before it can truly be described as a regional innovation hub, even though the city already enjoys a flourishing startup landscape.

The obvious one is a lack of funding, and a disconnect between fund providers and startups, say insiders, and many in fledgling startups report struggling to access venture capital.

Benny Hui, founder and core member of a series of startups and now head of operations for Asian property listing platform, Spacious, said what's needed is a startup ecosystem.

He believes the local market is too small to attract major VCs, whose eyes are still fixated on Chinese mainland and the US.

Irene Chu, partner and head of the high growth tech and innovation group at KPMG China, agrees.

"One of the major complaints from startups is that getting initial funding is usually not that difficult－but once you get to the secondary round of financing, it becomes a lot trickier," she said.

However, she noted the problem often stems more from a lack of investor experience in funding local startups, than an shortage of funds or interest from the VCs.

Hong Kong is a well-established financial hub with abundant fund and investments at hand, she said, yet most of the sophisticated investors usually invest in more mature companies.

"They just don't know how they can invest," she said, especially those investing in the new economy, rather than backing older traditional types of businesses.

Donny Siu, an adviser at the Entrepreneurship Center at Hong Kong University of Science and Technology, insists that government funding, on the other hand, has been robust as the authorities continue to push for an economy driven by innovation.

He pointed out there are various government schemes and organizations, such as InvestHK, and the Labor Department, offering funding and advice, but added the landscape is "confusing".

Insufficient planning and coordination of these existing resources has now created what he describes as a chaotic scene.

Siu said the situation is so bad that many who have tried to source funding, ended up concluding that they could have actually better-spent their limited time and resources developing their products or businesses, rather than the often-tortuous process of applying for various funds.

A study by Google Inc and the Chinese University of Hong Kong Center for Entrepreneurship in late 2014 did reveal that Hong Kong's startup ecosystem has tripled in size since 2009, with notable growth in startup accelerators and incubators, as well as funding sources.

One notable example of the progress has been in the mushrooming number of venues and outlets offering shared office space, whose numbers have grown from a handful a few years back to more than 40.

An increasing number of incubators and accelerators, meanwhile, has helped boost the number of startups by also providing finance or in-kind resources that are essential to growth.

Experts encourage a joint approach

Hong Kong needs to join forces with neighbor Shenzhen to turn itself into a true innovation and startup hub, observers in the southern city in Guangdong province say.

Renowned as the heaven for hardware companies given its proximity to the huge Pearl River Delta manufacturing base, Shenzhen is already luring many entrepreneurs from Hong Kong to join its burgeoning startup scene, they claim.

Ricky Leung and Data Ng, both University of Hong Kong graduates, are among the growing group. They first set up their business in Hong Kong but have now relocated their 3-D printing business to the Qianhai Free Trade Zone, in Shenzhen.

"Hong Kong investors are mainly from a banking or financial background, while new investors from the Chinese mainland are normally second-generation, who understand the ways of the entrepreneur and his needs far better," Ng said.

Donny Siu, an adviser at the Entrepreneurship Center at Hong Kong University of Science and Technology, said mainland investors are also more willing to take risks than their Hong Kong counterparts, who generally make smaller, more cautious investments.

Deng Yongqiang, chairman of Qianhai Houde Entrepreneur Incubator, also believes the ecosystem in Hong Kong and the local government are not supportive enough to young entrepreneurs, stressing that officials often have little understanding of new innovations or the needs of startups.

"Hong Kong is not suitable for entrepreneurship. But Hong Kong people are," he said, adding he is a strong supporter of Shenzhen-Hong Kong cooperation.

Deng said good ideas and projects in Hong Kong need the support of the massive mainland market, however, as well as the funding and services on offer there.