The HK$2 billion co-investment scheme (VC Matching Scheme), which was announced by the previous Chief Executive in his 2016’s Policy Address has launched.
The Innovation and Technology Commission (ITC) has launched the “Innovation and Technology Venture Fund” on 15 September 2017 and it aims to stimulate private investment in local innovation and technology startups.
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It is now open for application by venture capital funds to become co-investment partners of the Government, under a specially set up investment vehicle, the Innovation and Technology Venture Fund Corporation.
The deadline of application is 15 January 2018. A briefing session will be held on 3 October 2017 at the Hong Kong Science Park. Interested venture capital funds are welcome to attend.
The scheme is technology and sector neutral, meaning that all startups that meet certain requirements can benefit.
They can be startups engaged in financial or blockchain technology, or in the fields of application development, intelligent manufacturing, robotics, e-commerce, artificial intelligence, internet of things, or cloud computing.
To be eligible for the co-investment, the startups must have a strong presence in Hong Kong. That means they must have been registered under the Companies Ordinance within the last seven years; having either their main or regional offices located in Hong Kong, or their key business operation or management personnel in Hong Kong.
Furthermore, they have to be engaged in innovation and technology, and have any part of their research and development or production chain in Hong Kong.
Lastly, to be called as startups, they should have a total number of employees (including the main office and its subsidiaries if any) less than 250.
The co-investment scheme is targeted at startups which are at series A or B stages.
That means startups which are looking for seed funding or pre-series A funding will unlikely be the targets for co-investment.
Moreover, this co-investment scheme has set a funding cap for each investment. For the part to be invested by the Government, via its investment vehicle, the ITVFC, the maximum amount per deal is not more than 40% of the investment sought by the start-up or HK$30 million (US$3.8M), whichever is the lower.
As the scheme is working on a co-investment basis at an overarching investment ratio of 1 to 2 between the Government and the VCs, the maximum that a VC will invest per deal will be capped at HK$60 million (US$7.6M).
The current application under the ITVF scheme is open to VCs only. The game rule is that VCs which are interested to become co-investment partners should apply by 15 January 2018.
They will be assessed according to a set of established criteria based on their fund size, financial strength and capability, management team’s knowledge and experience as well as their likely contribution to the Hong Kong ecosystem. Please refer to ITC’s website for further details.
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Once the application by VCs is closed, they will be assessed by the Government upon the advice of an independent Advisory Committee. It is expected that results of the application will be announced by end April 2018.
Successful VCs will then have to sign a Master Agreement with the Government for the co-investment partnership and they will then start looking for eligible startups for the co-investment.
Should you be interested in this scheme, you may visit ITC’s website