How the Hong Kong start-up ecosystem works

We already published an article about the Hong Kong start-up ecosystem with an interview with Stephen Phillips, general manager of InvestHk. Now we publish a more detailed article that describes the scenario and the opportunities for start-ups and innovative companies that Hong Kong offers. Overall start-up ecosystem The Chief Executive’s 2018 Policy Address outlining the key strategies for developing Hong Kong into an international innovation and technology (I&T) hub has received wide recognition from various sectors and good progress has been made in the past year. The Guangdong-Hong Kong-Macao Greater Bay Area has a strong focus on I&T and offers not just a huge market of 68 million people for technology enterprises, but a highly efficient manufacturing base for turning research outcomes into prototypes and products. The Government focuses on four key areas with notable strengths, namely biotechnology, artificial intelligence, smart city, and financial technologies, and is implementing a series of new policies to support their development. The infrastructure works of the Hong Kong-Shenzhen I&T Park at the Lok Ma Chau Loop has commenced in June 2018, with the objective of providing the first batch of land parcels for superstructure development not later than 2021. The Science Park expansion project will be completed one year ahead of schedule in 2019, the InnoCell residential building for talent, as well as the Data Technology Hub and the Advanced Manufacturing Centre at Tseung Kwan O Industrial Estate, will be completed progressively starting from 2020 as scheduled. Survey results Hong Kong’s startup ecosystem is thriving, and the number of startups continues to show strong growth. Invest Hong Kong’s startup survey reports a significant increase over 2017 on all key parameters, with a total of 2,625 startups operating in major public and private co-work spaces and incubators, up 18% from 2,229 in 2017. These startups employed 9,548 people, a 51% rise from 2017, across 13,756 workstations which increased 120% compared to last year. The startup community in Hong Kong is highly international. While 62% of the startup founders who provided origin information were Hong Kong locals, and 3% were Hong Kon returnees, 35% of the startup founders were non-locals, from countries/territories as diverse as the UK, USA, Mainland China, Australia, and France, among others. Top business sectors engaged include FinTech, e-Commerce/supply chain management/logistics technology, professional or consultancy services, information, computer, and technology or ICT. Funding Schemes Innovation and Technology To shine in the fierce I&T race amidst keen competition, Hong Kong must optimize its resources by focusing on developing its areas of strength, namely biotechnology, artificial intelligence, smart city and financial technologies (Fintech). In order to achieve results, the Government sets aside $50 billion for supporting I&T development in its 2018-19 budget. Of this, $20 billion will be used on the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop for, inter alia, site formation, infrastructure, superstructure, and initial operation. Innovation and Technology Fund Besides, the Government injects $10 billion into the Innovation and Technology Fund (ITF).  The ITF’s financial support for I&T development in Hong Kong has increased from about $700 million in 2013-14 to $1.5 billion in 2017-18.  It is anticipated that the demand for funds will continue to increase. Establishing Technology Research Clusters The Government also provides $10 billion dedicated funding to develop two research clusters in healthcare technologies and artificial intelligence and robotics. The Institut Pasteur from France, as well as the Guangzhou Institute of Biomedicine and Health and the Institute of Automation in Beijing under the Chinese Academy of Sciences (CAS), have expressed interest in joining the clusters at Hong Kong Science Park to work in collaboration with local universities and research institutions. The University of Hong Kong and the Harvard John A. Paulson School of Engineering and Applied Sciences have agreed to set up a joint laboratory of instrumentation for precision medicine in December 2018. Science Park To reinforce the role of the Science Park as Hong Kong’s flagship technology infrastructure, the Government allocates $10 billion to the Hong Kong Science and Technology Parks Corporation (HKSTPC).  Of this, about $3 billion will be used to construct research-related infrastructure and facilities, whereas the remaining $7 billion will be used for the HKSTPC to enhance support for its tenants and incubatees, and set up a Smart Campus in the Park, etc. Cyberport Moreover, the Government allocates $200 million to Cyberport to enhance the support for start-ups and promote the development of digital technology ecosystem.  Cyberport is going to launch an “easy landing” programme to attract multinational companies (including overseas and Mainland leading internet enterprises and Fintech companies) to set up offices and R&D units in Hong Kong.  It will also roll out a new support scheme, offering financial assistance up to $200,000 for each eligible start-up to conduct market research and promotion, as well as participate in business missions, trade fairs, and exhibitions, etc. outside Hong Kong.  The financial assistance offered under Cyberport’s incubation programme to individual start-ups will also increase by 50 percent to $500,000. Enhancing Innovation and Technology Cooperation In September 2018, the “Arrangement on Enhancing Innovation and Technology Cooperation between the Mainland and Hong Kong” was signed as an action guide and framework for the two parties to take forward the various I&T co-operation initiatives in the coming few years. The two sides will enhance co-operation in six areas, namely scientific research, development of platforms, nurturing of talents, transfer of results and incubation of I&T industry, integration into national development strategies, and cultivation of an I&T atmosphere. It will also promote transfer and translation of scientific research results, co-ordinate collaboration between the CAS and local universities, undertake technological education and promotion activities as well as setting up a Joint Laboratory Funding Scheme with the provision of one-off research grants up to $30 million. Encouraging Research and Development Hong Kong also offers a super tax deduction of up to 300 percent for the first $2 million of qualified R&D expenses and 200 percent for the remainder with no upper limit. It has also deployed $2 billion under the Innovation and Technology Venture Fund Scheme to co-invest, on a matching basis, with venture capital funds in local technology startups and has already entered into an agreement with six investment companies in July and August this year to invest, on a matching basis, in local technology startups. Technology Voucher Programme Technology Voucher Programme was launched in November 2016 to subsidize local small and medium enterprises in using technological services and solutions to improve productivity or upgrade or transform their business processes. The programme is implemented on a pilot basis for an initial period of three years from November 2016 with HK$500 million from the Innovation and Technology Fund. Since 28 February 2018, the eligibility of TVP has been relaxed to allow all local enterprises, irrespective of size and duration of operation may apply.  This will enable more medium enterprises and start-ups to benefit from the Programme.

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