Many of my young friends are interested in starting their own business in internet technology.
I always remind them that the survival rate of the internet startups, those that operate over three years, is around 5 percent, and the success rate is even lower.
The situation is even worse in Hong Kong. Alibaba’s HK$1 billion Hong Kong Entrepreneurs Fund has picked only three companies out of more than 200 applications.
That demonstrates well how cruel the situation is for startups in Hong Kong.
The fund, established in November last year, intends to support young Hong Kong entrepreneurs, providing them with capital and mentoring during the startup phase.
It announced the first batch of its investment projects on Thursday. As a not-for-profit fund, it’s widely expected that a large number of local startups could benefit from the fund.
However, the fund has taken such long time to select just three companies from more than 200 applicants, which means the chance of being selected is only 1 percent.
Also, the market had expected that the fund would support startups that were in their early stages of development.
It turns out that all the three selected companies have already become big players in their specific markets, and some have even fetched several hundred million dollars in market value.
Yeechoo, one of the three lucky companies, was launched in 2013 by two women entrepreneurs who used to work in investment banks.
The platform enables women to rent designer dresses and accessories at below-retail prices.
It has filled a market gap in the metropolis, where many people are struggling to find the right outfit for big occasions.
The founders are familiar with business operations, and the platform has already become a leading player in Asia.
It also has lured some celebrity clients like actresses Cherie Chung Chor-hung and Priscilla Wong Tsui-yu.
Another selected company us Shopline, a DIY e-commerce platform for creating online shops for merchants in Asia. It helps people who have limited knowledge about internet technology set up and manage their online stores easily.
The company received an investment from Silicon Valley’s 500 Startups Accelerator in 2014, and raised several million dollars from seed investment last year.
The company’s chief operating officer said the platform has several thousand paying members and has already expanded into the Southeast Asia market.
The other company, GoGoVan, might be the most well-known among the three.
The app, which connects users to delivery service providers, completed B-round fund-raising last year, and attracted investors like Chinese social network RenRen, which invested US$10 million.
GoGoVan had a market value of US$300 million even before being selected by Alibaba’s fund. In short, Alibaba’s investment is similar to a C-round investment.
Cindy Chow, executive director of the fund, said the fund would pick companies that have the potential to expand into Southeast Asia or mainland markets, or become part of the ecosystem of Alibaba itself.
Currently, there are two types of startup funds in the world. The first is a non-profit fund from government or non-government organizations like Jockey Club, which would offer support for young entrepreneurs with very little return.
The second type is similar to a venture capital, whether for profit or not, and such funds care more about financial return for sustainable development.
It also carefully selects investment projects from the commercial and ecosystem perspective. Google Ventures and BGC3 created by Bill Gates fit into this category.
All this shows how difficult it is to have a successful startup in Hong Kong.
Alibaba’s fund only invested in companies with a well-developed business model.
Those who have failed but still expect a second chance may get disappointed again.
This article appeared in the Hong Kong Economic Journal on May 6.
Translation by Julie Zhu
[Chinese version 中文版]
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