09 Oct, 2018 Cyberport catalyses Hong Kong’s vibrant digital tech investment ecosystem
Digital tech start-ups in Asia have increasingly become the magnet for international venture capital firms so much so that the total amount of investments is set to surpass those for start-ups in the United States and Europe in a few years.
The Asian region has caught up fast in the competition for global venture capital investment and tech investments stand out as the strong driver for venture capital growth. In 2017, global venture capital investment surged 49 percent to a record high of US$164.4 billion as compared to 2016, with the majority of growth from Asia, instead of the United States as in previous years. Across Asia, start-ups received funding exceeding US$14.6 billion for 317 deals in the first quarter of 2018. Asia-based venture capital investment stood above the US$14 billion mark for the fourth consecutive quarter.
Venture capitalists from around the world are increasingly eyeing up Asia’s digital tech start-ups because of their great diversity: notable investments have been poured into leading-edge technologies, including Artificial Intelligence (AI), Internet of Things (IoT) and robotics, e-commerce, mobile payment and financial technology (FinTech), medical technology (MedTech), education technology, and ride-hailing and sharing platform. The Asian region has matured substantially over the past few years into a structurally larger market.
China: the new venture capital investment powerhouse
A growing percentage of the 25 most active venture capital firms in the world, 18 of them headquartered in the US, have established their presence in Asia to increase their reach to startups in budding innovation hubs. China is the most popular country after the US, as 7 of these top most active venture capital firms have at least one office there. Israel’s crowdfunding platform, OurCrowd, opened their Hong Kong office earlier this year. Denes Ban, Managing Partner of OurCrowd, says venture capital investment hit a record high in the second quarter of 2018, reaching US$69.8 billion across 3,108 deals. “What is interesting is that the top 10 deals contributed over US$27 billion of venture capital investment – almost 40 percent of the global total. Chinese companies represented eight out of the top 10 deals globally.” Ban believes OurCrowd will help Hong Kong tech companies to get more funding and to get access to OurCrowd’s global investor network, one of the world’s biggest.
Jeff Lonsdale, Managing director, Asia of Founders Fund, leading venture capital firm in the United States founded by renowned entrepreneur and investor, Peter Thiel, echoes Ban’s sentiment. “Recent statistics have indicated that Chinese start-ups are already raising more capital than their North American counterparts. However, what will happen over the next three years is dependent on the macroeconomic factors and whether China’s economic convergence continues on pace.”
Dr Sue Xu, Managing Partner of AMINO Capital, a Palo Alto venture firm focusing on data-driven technologies with investments in China, including Mobike, says in the meantime venture capital investment in the Greater China area has also become the largest backer of start-ups globally. “One third of start-up financing in 2017 came from China, compared with the US at 45 percent. This has attracted global talent to establish companies in China and Hong Kong, especially returnees from Silicon Valley.”
Hong Kong emerges as digital tech innovation hotbed
Innovative digital tech start-ups in Hong Kong have attracted the attention of international venture capitalists and seen stellar fundraising achievements recently. For instance, TNG, a Cyberport incubation programme’s alumnus, raised US$115 million in venture capital last year, valuing the company at more than US$500 million and is now planning for an initial public offering. Travel tech specialist Klook, another Cyberport alumnus, was OurCrowd’s first investment in Greater China where the company invested alongside top Asian VCs and institutions including Sequoia China, Matrix Partners and Goldman Sachs, Ban notes. “OurCrowd recently invested a second time in Klook, where we joined a US$200 million Series D round. We will continue to further expand our investment footprint in Asia. We are seeking technologies, just like Klook, in Asia that are disruptive and have a proven technology, with a billion USD market potential.”
For Hong Kong start-ups seeking funding from Asia, Dr Xu believes those companies in financial services, logistics, shipping and real estate enjoy the strong historical backdrop. “These are the exact areas that AI and blockchain could make the most difference.”
Cyberport boosts fundraising capabilities of early-stage start-ups
To promote the development of the venture capital ecosystem for digital entrepreneurs in Hong Kong, the Cyberport’s Macro Fund, an investment fund with an initial size of HK$200 million, aims to co-invest with other private and public investors in seed to Series A stage funding in Cyberport digital entrepreneurs. Last year, Cyberport launched the Cyberport Investors Network (CIN), a structured platform that engages worldwide investors of leading venture capitalists, angel investors and private equity funds, to enhance the fundraising and deal-making capabilities of Cyberport start-ups. CIN comprises over 100 investors of different categories including angel, Pre-A and Post-A rounds, who are interested in new economy opportunities. Their diverse practices and investment aptitudes complement the needs of the Cyberport start-up community. Cyberport’s incubation programme, in addition to financial assistance, also offers a range of services including fundraising training and investor matching opportunities for the incubatees to accelerate their growth.