Although research indicates nine out of 10 start-ups fail, a growing number of support services have been springing up in Hong Kong hoping to beat the odds in their search for new talent.
Obviously, start-ups are not created equally, but neither are the incubators and accelerators they rely on to make their dreams successful. Some entrepreneurs in the city have found more support and experience by looking farther afield.
Hongkongers Johnny Au Yeung Chun and David Tang Chun-yat moved to Taipei last month to join Appworks. The largest accelerator programme in Asia, its alumni include table booking app Eztable and e-commerce company Kuo Brothers, which is now listed on the island’s stock exchange. Although the duo were rejected by a Hong Kong incubator, their start-up GetMeCV, an online job matching platform, was selected to be part of Appworks’ latest cohort.
While incubators inject funds into start-ups hoping they will eventually “hatch” into successful businesses, accelerators take a more hands-on approach. They offer intensive courses that run for a fixed period, usually from three to six months, during which the teams are guided by experienced mentors.
Tang is no stranger to failure. Neither of his previous start-ups – Mews, a user-driven news website; and Beehive, a market research app that offered users a financial incentive for answering basic questions – took off. Nevertheless, driven by the entrepreneurial spirit, Tang remains undeterred. “We don’t do it because it’s easy,” he says.
A factor that helped them stand out from other Appworks applicants was team dynamics – a key criterion evaluated by accelerators and investors. Best friends since secondary school, the duo have complementary qualities. Eloquent and gregarious, Tang is a natural salesman brimming with ideas. Though more reserved, Au Yeung is disciplined and attentive to detail, keeping the team grounded.
They are now refining GetMeCV. With access to Appworks’ extensive network and resources, the process is running smoothly. “We need a lot of students to implement our platform, and Appworks is able to connect us with local universities because they have a very close relationship with them,” says Tang. In addition, the accelerator helps with accounting, finance, marketing and legal issues.
Hong Kong still lacks an independent accelerator that’s comparable to Appworks in scale and reputation. However, in recent years, corporations have begun launching in-house programmes to nurture start-ups. These programmes serve as a marketing function in that they help with brand-building. And by focusing on specific areas related to their core businesses – such as fintech, retail or the Internet of Things – the start-ups they adopt can hopefully give something back.
Hong Kong has Blueprint, a business-to-business-focused accelerator run by Swire Properties. The company describes blueprint as a no-strings-attached programme and part of its corporate innovation strategy. Start-ups taken under its wing in the past two years have tested their products with various Swire companies and received feedback. Unlike regular accelerators, the company does not take an equity stake in the start-ups.
“We are really looking for a way to integrate innovative concepts … how to build these companies up using the resources we have, and also how to disrupt our own group of companies with these new ideas and foster a belief and curiosity in innovation,” a Swire Properties spokesman says.
It has so far had mixed results – although the start-ups raised an impressive US$13.5 million through the programme, only 19 of 41 have received funding. Swire Properties is now revamping the programme.
Amid the hunt for start-up talent, Cyberport is also stepping up its game. It rolled out a HK$200 million macro fund last year. The publicly funded digital hub operates a one-stop platform – from boot camps to incubators, accelerators and a co-working space, which also hosts external accelerators.
Accelerator programmes are naturally an appealing proposition to start-ups, but relinquishing a stake in their baby can be a dicey trade-off. Success in raising venture capital, or making a meaningful exit through acquisition or a stock exchange listing, is not guaranteed. Consider the experience of Y Combinator, for example – the influential accelerator behind Dropbox, Airbnb and Reddit. Out of the 1,464 companies it has funded, only 52 are now worth more than US$100 million, and many others have been dissolved.
Most accelerators take a standard equity stake of between 5 per cent and 7 per cent in start-ups they support – despite often limited funding and uncertain returns. Some are so new that they, too, could also be considered start-ups – and may have no credible track record to act as consultants.
(Source: South China Morning Post)