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HK Budget: $50M venture fund for growing startups

The Hong Kong government will be offering financial assistance to technology startups with its plan to set up a HK$50 million corporate venture fund. The amount is earmarked for companies located at the Hong Kong Science and Technology Park (HKSTP) and those that have participated in its incubation programs.

“Financing needs increase as startups grow,” said Hong Kong SAR Financial Secretary John Tsang during his budget speech, adding the fund is envisioned to encourage financing in new enterprises.

The corporate venture fund will give the government-owned HKSTP, which will manage the fund, a financial stake in selected startups on a co-investment arrangement on a matching basis with private funds.

He added that the proposed HK$5-billion injection, announced last month, into the Innovation and Technology Fund (ITF) will also help strengthen support for relevant enterprises.

Too small for impact
Industry advocate, Legislator Charles Mok , is quick to react to new corporate venture fund.

“This size is too small, almost laughable,” he said. Compared with the government-supported venture funds in Singapore and Taiwan, Mok pointed out HKSTP’s HK$50 million venture fund is only about one percent of the size and “about 1,000 times less than the similar venture fund from China’s State Council.”

He added the benefit for local startups is beyond HK$50 million, as the fund is available via a co-investment format with private funds on a matching basis. But “it still depends on how much money they can ‘attract’ the private side,” he said. “This current scheme seems like a conservative trial.”

Mok also questioned why the funding availability is limited only to the past and present incubates of HKSTP. “There're many others in Hong Kong not using the HKSTP support but need capital investment,” he said.

Despite these concerns, Mok said the industry has been advocating the government to provide capital support beyond the small size loans and grants, thus HKSTP’s venture fund is a “small step, very small step, in the right direction.”

Struggle to commercialization
Different from the ITF, which mainly support R&D centers and academic researches, the latest venture fund provide direct equity investment to startups at their later stage of development.

“Most local startups have been struggling to raise capital as they enter a later stage of development,” said Mok. This later stage refers to the Series A or Series B funding, which is often critical to bring new technology products into commercialization.

“Support from the government is particularly important in Hong Kong, where private sector plays a minimal part in local technology development,” said Gary Chan, professor from Department of Computer Science and Engineering at the Hong Kong University of Science and Technology.