27 October 2016
Bernard Chan (second from right) takes part in the launch of Alibaba's Hong Kong Entrepreneurs Fund in November. Photo: HKEJ
Bernard Chan (second from right) takes part in the launch of Alibaba's Hong Kong Entrepreneurs Fund in November. Photo: HKEJ

What startups should know about Jack Ma’s HK entrepreneur fund

Alibaba Group Holding Ltd. – the Chinese e-commerce giant – launched the Hong Kong Entrepreneurs Fund in November.

It is a not-for-profit initiative aimed at financing suitable businesses started up by Hongkongers or in Hong Kong and using the Alibaba ecosystem.

The fund is backed by HK$1 billion (US$130 million), and as with other funders of startups, the intention is that it will generate returns from backing winning businesses.

The difference is that it will plough the returns back into funding more startups.

As well as funding, the initiative will also be offering such help as mentoring.

The fund will also be organizing internships for young people in Hong Kong to work in the Alibaba Group in the mainland.

I am a member of the fund’s governing board in Hong Kong, so I am keen to spread the word about the fund.

News of the Hong Kong Entrepreneurs Fund and the internships was generally seen as positive in the community and the media.

However, I have heard a few questions that perhaps reflected some misunderstanding or even skepticism. It would be good to go over some of these.

One question I was asked by a reporter was whether the fund was for Hongkongres only, or whether mainlanders in Hong Kong could apply.

The criteria are pretty clear: the majority of the applicant company’s founders should be Hong Kong permanent residents, or a meaningful amount of the company’s operations should be based here.

Obviously, this allows for some flexibility, which is a good thing.

But anyone – whether they are Hongkongers, mainlanders or other Asians or westerners or whatever – can take part.

Startups often involve groups of people from different backgrounds. The fund aims to encourage those with a significant Hong Kong connection.

(Alibaba has also set up a parallel investment fund in Taiwan, and similar conditions apply.)

Another question is about the requirement that startups use Alibaba Group systems or services in some way.

Will this restrict the fund to companies in very specific activities?

Alibaba Group covers a very wide range of services.

Most people know about the e-commerce platforms like Taobao for retail and for wholesale. These offer a lot of opportunities for on-line marketing of goods and services.

But the Alibaba ecosystem goes beyond that.

Providers of logistics and support services to users of these platforms will be eligible to apply.

So will developers of apps and other services linking with Alibaba’s platforms, as well as any company using Alibaba’s cloud computing platform.

That covers quite a lot of potential areas.

There may be an emphasis on trading, distribution and marketing, but these are traditional Hong Kong strengths.

A third question is whether the link with Alibaba gives the whole initiative (and the internships) a mainland bias.

First of all, Alibaba has global ambitions, and startups with international plans will be welcome to apply.

Secondly, China is a superb market for entrepreneurs aiming to scale up and go beyond Hong Kong.

As with the internships, a mainland emphasis is natural, given that the fund is organized by a major Chinese company and aimed at new businesses in Hong Kong, China’s traditional gateway.

The idea is not to push entrepreneurs in a particular direction.

No one will be forced to apply for funds or internships – but the opportunity is there for those who are interested.

Let’s not forget that the Hong Kong Entrepreneurs Fund is one of many options, and new alternative sources of finance and assistance are in the pipeline.

In his recent Policy Address, Chief Executive Leung Chun-ying mentioned several programs to nurture startups and new talent in creative and other industries.

The new Innovation and Technology Bureau will be looking into ways to incentivize startups in tech fields.

And Hong Kong offers all sorts of incubator and accelerator programs and networks of venture capital and angel investors.

The Alibaba initiative is one option.

It is not a charity or a public relations exercise.

It is a serious plan to identify good ideas, and it intends to make a return on its investments.

It will do that by helping Hong Kong entrepreneurs find success.

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Executive Council member and former legislator; Hong Kong delegate to the National People’s Congress

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