There has been incredible focus by the world’s startup media trying to place Hong Kong as the next “Silicon Valley of the East”. With world-class presenters, and a number of government and industry events held in the city, Hong Kong looks to grow as the leading ecosystem in Asia. However, as a long-term Hong Kong resident who has been entrenched in the startup scene for more than five years, I have first-hand knowledge of whether Hong Kong can or can’t be the next Silicon Valley. In the first of a number of posts covering all of Asia’s tech ecosystem players, I will delve into whether this is really the case or if we have fallen for promoters' hype.
Just Getting Started...
Over the years, Hong Kong has continued to live up to its reputation as an international financial and business centre with many exciting developments to look forward to.
More significantly, Hong Kong boasts one of the best growth rates in the world with its increasing number of startups being launched every year. According to Oddup’s Hong Kong Startup Ecosystem Report, there were 2,021 new startups in Hong Kong in 2015, representing an impressive 63% increase from the previous year. Interestingly, one of the most buzzed-about news items on the street is the recent announcement from Massachusetts Institute of Technology that it will establish its first innovation centre in Hong Kong in 2016, indicating the world's most startup-savvy institution's bullish signs on the bright prospects that Hong Kong has to offer for many new entrepreneurs.
Its growth momentum is all set to remain well over the next year as the city's spotlight continues to shine as Asia's world city, but nonetheless there remain big hurdles that must be overcome in order for Hong Kong to endeavour to be crowned Silicon Valley of the East.
Does Being Close To It All Help?
Hong Kong's geographical proximity to its neighbour Shenzhen, the world's number one manufacturing hub, leads me to question whether Hong Kong will see Shenzhen as a friend or foe. Numerous experts assert that Hong Kong possesses all the quintessential elements favourable for hardware startup development. These include: one of the world's lowest tax rates for businesses, well developed intellectual property protection, and the rulings that make it most convenient for relevant entities to develop businesses than elsewhere in Asia. However, with its competitive advantages in funding sources, human capital and rental prices, Shenzhen forges ahead.
Media Hype Has Masked The Real Issues Hong Kong Faces.
Despite the signs of continuous growth as evidenced in the media and in the startup growth figures, I take a neutral stance on the short-term sustainability of Hong Kong's startup environment to significantly grow into Valley-grade for interested stakeholders.
There is much noise, attention and hype surrounding Hong Kong startups which distracts from the city’s reality of its notoriously high cost of living and lagging immigration processes for talent from overseas. Lack of the government regulatory support on crowdfunding and other Fintech (e.g. P2P lending) platforms, widening gaps in socio-economic and political ties with mainland China, and lack of post-seed funding for startups raising Series A and beyond are all hurdles.
The Question Still Remains...
While it is uncontested that Hong Kong offers the unique mix of both the western and eastern cultures, Hong Kong's Umbrella Movement in 2014 is a strong testimony that reflects the conflicted minds and cultural differences between the Hong Kong locals and mainland Chinese. Enterprises that once set their eyes on Hong Kong to enter into the lucrative Chinese domestic market now consider to do so directly into China.
There is still the looming question of whether Hong Kong will be able to nurture today's startup seeds to create a material tech hub.
