Creating a vibrant startup ecosystem in Hong Kong

Dr. Winnie Tang October 11, 2021 10:00

In May this year, it was reported that another unicorn (a startup company with a valuation of at least US$1 billion and having been established for less than 10 years) has joined the Cyberport community. According to the analysis of unwire.pro, a local online media, the total number of unicorns in Hong Kong is 12, mainly distributed in five areas: logistics (GoGoX, Lalamove), finance (WeLab, TNG, Airwallex, BitMEX), deep technology (SenseTime, SmartMore), cryptocurrency (FTX, Animoca Brands, Amber Group) and tourism (Klook). The number of startups also increased last year, reaching 3,360, an increase of more than 5% compared with 2019, according to an InvestHK survey. Although the increase is relatively small compared with 20% to 40% in previous years, such a figure is already very encouraging when taking the economic strain brought by the COVID-19 epidemic into account.

However, the annual Global Startup Ecosystem Report 2021 (“Startup Report”) by Startup Genome, a startup research company, shows that several cities in the Mainland have either secured the top positions, or climbed to higher ranking year by year. However, Hong Kong’s ranking has dropped for three consecutive years, from 25th in 2019 to 29th last year, and 31st this year.

“America continues to dominate the Global Rankings, with 50% of the Top 30 ecosystems coming from this region, followed by Asia with 27%,” said the Startup Report. Since 2017, the first place has been the Silicon Valley of the United States, with the second and third place taken up by London and New York respectively. Shanghai was ranked the 8th in the world and 2nd in Asia in the past three years, ahead of Tokyo, Seoul and Singapore. As for Shenzhen and Hangzhou, both were newly added to the list last year with them being ranked 22nd and 28th respectively. This year, they jumped to the ranking of 19th and 25th. Asia’s first is Beijing, which has been ranked No. 1 in Asia for four consecutive years, the city has hovered between the 3rd and 4th in the world in recent years.

According to China Unicorn Enterprise Research Report 2021 released by a Mainland research company, there were 82 unicorns in Beijing, accounting for more than 30% of the country's total number of unicorns. What’s more, 60% of decacorns, valued at over $10 billion, were also located in Beijing. No wonder the city can take the first place in the startup ecosystem in Asia.

One of the advantages Beijing’s startup ecosystem enjoys is the government’s financial support. The government has provided “$2.2 billion in private capital to tech projects and was committed to paying about $15 million in loan interest for startups to reduce borrowing costs by 20%” under the epidemic last year, according to the analysis of the Startup Report 2020. At the same time, the figures from the National Bureau of Statistics of China show that Beijing’s investment in research and development (R&D) last year was the largest among cities and provinces in the country in terms of the portion of local GDP which was 6.44%, while that of Israel was 4.95%, South Korea 4.81%. Compared with these places, Hong Kong’s 0.92% was really insignificant.

Nurturing talents and startups requires a lot of investment. The Trade Development Council found that "sufficient sources of funding" was one of three most important factors promoting the growth of startups in Hong Kong as concluded from more than 50% of the survey respondents, while "broad customer base" (42%) and "continuous innovation" (36%) are the other two. The findings were based on a survey conducted last year on 259 startups which were established in Hong Kong for less than 8 years and headquartered here. Although Hong Kong is an international financial centre, local startups find it challenging to raise funds. It is timely for us to think about how the government and the private sector can play a more active role.

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Dr. Winnie Tang

Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong

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