On 2nd November, Juven CEO Edmond was invited, along with another young local entrepreneur, to speak on a panel as a guest at an Oxbridge Alumni event focusing on startups and entrepreneurship in Hong Kong. The other two speakers included Irene Chu from KPMG and Cindy Chow from Alibaba Entrepreneurs Fund, who co-wrote this fascinating study together. We will be looking at some of the key findings in that study.
Co-authors of report Irene Chu from KPMG China and Cindy Chow from Alibaba Entrepreneurs Fund
Source: Alibaba
The purpose of the study is to understand current developments in entrepreneurship in Hong Kong, as well as the impact that entrepreneurship has on the economy and society. On top of that, the study wants to identify any gaps in the start-up ecosystem in Hong Kong for the sake of driving developments that will cover any such gaps.
Source: Joint KPMG/AEF Study
Through two surveys and series of interviews, key opinion leaders, industry stakeholders and entrepreneurs were asked to answer four questions:
1.What are the defining factors driving entrepreneurship?
2.What mindset is required for entrepreneurship?
3.How is Hong Kong perceived as a start-up destination?
4.How are Hong Kong entrepreneurs capitalizing on the Greater Bay Area?
Hong Kong has long had a strong tradition for entrepreneurship. The World Bank doing business 2019 report ranks Hong Kong as #4 on its list of easiest places to do business. Nevertheless, as we shall see later on, it is less perceived as a good environment for startups.
Source: Joint KPMG/AEF Study
According to the joint KPMG/AEF study, Hong Kong has aspiring entrepreneurs who have a strong sense of purpose. These enterprising individuals recognize that entrepreneurship has much to contribute to society and economics because they can develop new ideas, maintain society dynamics, address social issues as well as create new opportunities. Moreover, the study shows that the people who become entrepreneurs are often motivated by a desire to develop new technologies, reach under-served markets, or advance the development of their communities. Entrepreneurs also report that they are less motivated by monetary factors or personal career agendas.
As can be seen in the graph, it would seem that many entrepreneurs’ highest motivation after developing new technologies or products all have a social dimension to them.
Source: Joint KPMG/AEF Study
According to the study, the entrepreneurs reported fairly modest outlooks of their ventures, with only 31% expecting to only generate revenues over HKD 10 million by 2020. This modesty has a negative impact on start-up investment, as many institutional investors would only invest in businesses that are perceived to have strong growth potential. It is also part of the reason why start-ups in Hong Kong are having to rely so much on personal savings (82%)as well as family savings (54%), as opposed to business or venture capital funds (34% and 23% respectively) for financing.
This finding resonates with our own understanding and experience within the Hong Kong business environment. We think that overall, there are very weak safety nets in the entrepreneurship ecosystem in Hong Kong, with no real fallback options available to startups if they should fail.
Source: Joint KPMG/AEF Study
Broadly speaking, societal expectations in Hong Kong means that local individuals are more risk-adverse — risk and chance of failure being inherent in any startup — which may affect their desire join a startup as opposed to an established corporation. In the graph above, findings show that support from family and friends tend to be quite low. Generally speaking, the education system in Hong Kong does not inculcate an entrepreneurial mindset. The upshot of the above is that local talent supply for startups is somewhat constrained, and we find this to especially be the case for technology. Juven, as a technology firm has had difficulty in finding competent and motivated software engineers locally. Fortunately, it is quite easy to access talent from the mainland or from overseas; visa processes are very clear and generally quick as well.
Source: Joint KPMG/AEF Study
Thus, what we think this means is that Hong Kong is geographically and human resources-wise outward facing. It can serve as a good stepping stone or beachhead for startups to go into the mainland market and international markets. A very real step towards this is to capitalize on the Greater Bay Area for supplying resources, human or material.
Hong Kong needs to be well prepared its policies and its people to maintain its competitiveness in a world that is increasing volatile, uncertain, complex and ambigious. There is a definite need for Hong Kong to develop a stronger entrepreneurial mindset as only 15% of entrepreneur respondents believe the city’s entrepreneurial mindset can be considered a competitive edge. Moreover, most entrepreneurs are highly motivated by social issues that they want to tackle through innovation,something which the government should definitely support give more support to.
Source: Joint KPMG/AEF Study
Anthony Leung, the former Financial Secretary of Hong Kong and is also the Steering Committee Convenor of Education 2.1, a group dedicated to enhance Hong Kong’s education, thinks the key lies in our education. “Hong Kong should improve our education in STEAM as well as providing other learning experience to equip our younger generation with the necessary attributes including creativity, teamwork, leadership skill, grit, self-control, self-confidence and entrepreneurship, and positive values for them.”
We’ll end this exploration with a quote from Alibaba Group co-founder Jack Ma, with which we at Juven resonate:
“Don’t wait for the environment to be ready. Don’t wait for government policies to be ready. When everything is ready, there are very little opportunities left.”
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