The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is defined by superlatives. With 70 million people living in its 11 cities, it is not only the largest urban cluster in the world, but also home to 43 unicorns, start-ups with a valuation of at least US$1 billion. The Hong Kong-based start-up community platform and GCC Member WHub recently published a comprehensive white paper on the dynamic start-up ecosystem of the GBA. Read our interview with Karena Belin, CEO & Co-Founder of WHub, about the unique start-up landscape in this promising region.
What makes the start-up ecosystem in the GBA so special compared to other regions?
Karena Belin (KB): The Greater Bay Area Initiative, including 9 Guangdong cities, Hong Kong and Macao, creates a wealth of opportunities for start-ups. The GBA is already the largest bay area in the world, both in terms of area and population, and is forecasted to achieve the highest GDP in the next few years, overtaking the Tokyo Bay Area. Compared to the bay areas in the United States, the GBA offers the convenience of providing access to major cities and commercial hubs all within only a one-hour reach of each other. Imagine placing Silicon Valley, Las Vegas and New York into one single area.
The GBA has already proven to be capable of nurturing successful start-ups that shine not only regionally, but globally; DJI, SenseTime, WeBank, Klook, LaLaMove and WeLab, to name just a few. Moreover, the GBA has proven to bring companies to successful exits, such as Tencent, Huawei and Ping An. Its reliable infrastructure, access to resources, proximity to large pools of diverse customer bases and an ambitious young generation are the main ingredients for this huge success.
The GBA is already home to a staggering 43 unicorns, including DJI, WeBank, SenseTime, Klook, WeLab and many more. What makes the GBA such a strong breeding ground for start-ups?
KB: You can easily set up your company, in Hong Kong within as little as 48 hours, hire talent from more than 80 universities and colleges, manufacture your prototype within 3 weeks – compared to 3 months in Silicon Valley or other regions – and test your product in a market of more than 70 million people with diverse backgrounds, before scaling your company into the rest of China or Southeast Asian markets.
Entrepreneurs understand the benefits that the region has to offer and are tapping into its resources: For example, 50% of IPs filed in China in the tech and innovation community are filed in Shenzhen.
The GBA offers a wide range of incubators, accelerators and labs, across different industry verticals and stages of start-up maturity, all with the objective to educate and propel a new breed of entrepreneurs. Venture capitalists, from early stage ones to the well-known unicorn breeders, are highly active in the region. In addition, more and more high net-worth individuals, family offices and potential angel investors are showing interest in start-up investing; AngelHub’s start-up investment platform – the first and only one licensed by the Securities and Futures Commission of Hong Kong – provides them access to this asset class.
Last, but not least, community builders such as WHub play a major role in driving effectiveness and efficiencies in connecting start-ups with resources and stakeholders, like Talent, Corporates and Investors. Conferences and events such as the Startup Impact Summit as part of the upcoming StartmeupHK Festival in July, Asian Financial Forum, Global Sources, Slush, Tech Crunch and others further enable networking and information exchange across the GBA start-up community.
Given Shenzhen’s exceptional track record with regards to innovation, should Hong Kong be worried about being able to keep pace and compete with its neighbour in future years?
KB: Hong Kong should not be worried, in contrary, but see its closeness to Shenzhen as an advantage. Start-ups are meant to go global, and cities might have certain advantages to be the initial starting point or permanent headquarters, depending on the technology, sector and business model of a company. It’s not a question of either or, this or that city, but rather of where to start first and where to go next.
Hong Kong is well positioned for the reasons highlighted already. There is access to international talent and capital, with Hong Kong being the gateway of Chinese RMB to the world. International players, including 75 of the world’s 100 leading banks, are present here and ready for B2B or B2B2C plays with start-ups. And Hong Kong is not only one of the best gateways into China, but also out of China, and moreover an ideal HQ to the entire APAC region.
What significance do smaller cities like Jiangmen or Zhaoqing have for the development of the start-up ecosystem in the GBA?
KB: Every city has been strategically given a different role in the government's plan for GBA. For instance, Jiangmen, also known as the “Dream Incubator for Overseas Chinese”, is advancing the development of the Daguang Bay Economic Zone that deepens cooperation with Macau and Hong Kong. The Jiangmen Hi-tech Industrial Development Zone focuses on the development of emerging industries such as energy-saving light technologies.
Meanwhile, Zhaoqing is focused on new energy vehicles, energy conservation and environmental protection. Another unique initiative under the Guangdong, Hong Kong and Macao Special Cooperation Platform is the ‘Zhaoqing-Hong Kong City’, aiming to create a community that includes Hong Kong-style hospitals, hotels, malls, and schools to attract more businesses from Hong Kong and overseas into China.
The GBA is designated to reach the productivity level of Tokyo and San Francisco by 2035. What do you currently see as the biggest challenges on the way there?
KB: The biggest challenges I currently see relate to five aspects in particular. Firstly, despite the efforts of CEPA, a significant amount of red tape still needs to be cut to enable free flow of labour, goods, services and capital. The GBA still has three different customs zones, currencies, taxation and qualification systems.
Secondly, the three regions differ significantly with regards to their legal frameworks. Hong Kong’s system is broadly based on the British common law model, while that of Macau is based on civil law that largely evolved from Portuguese law. The varying legal systems can make a big difference for businesses. For example, the maximum income tax is 17% in Hong Kong, 12% in Macau, and 45% in the Mainland. Major differences also apply in intellectual property protection and investor protection, with standards in Hong Kong ranking among the highest globally.
Thirdly, the language barrier between the regions can be an issue. While 51% of Hong Kong’s population can speak English, most other cities in the GBA are predominantly Chinese speaking. Moreover, the cities vary in their common use of Cantonese or Mandarin, which is an important factor when interacting with local businesses and governmental institutions.
In addition to language, there are different practices and customs in business culture, as well as in interactions between governments and corporate organisations. ‘Guanxi’, or relationship-focused business practices, are more common in Mainland China and companies do need to understand their B2G (business to government) strategy.
And finally, there are differences in the use of social media. Accessing Facebook, Twitter, YouTube and Google is easy in Hong Kong and Macau, but can be difficult in Mainland China. The Mainland has its very own ecosystem of social media apps, most notably WeChat and Weibo, which are at the heart of online communication, and ecosystems of big tech players such as Tencent – beyond WeChat –, Alibaba, Baidu, JD or Ping An.
How can founders and entrepreneurs from Hong Kong gain access to and benefit from the GBA ecosystem?
KB: Founders should start by clearly stating their business needs when they look to expand in a new market in the GBA: Is it a search for corporate clients, investment or talent, for instance. Once the objective is clear, entrepreneurs can start to browse and get familiar with the local opportunities and any support in policies or government schemes.
Overseas founders can clearly benefit by getting in touch with local community builders, as well as local incubators and accelerators; be it to bypass communication barriers or logistic issues, getting introduced to the right business partners, industrial associations, or having support in understanding and applying for government schemes.
For example, Qianhai-based start-ups (Qianhai is a newly developed industrial zone in Nanshan District, Shenzhen, ed.) that have been invested in by Hong Kong investors can apply for discounted loans and financial aid. Also, overseas high-end talent and talent in short supply may be entitled to a 15% individual income tax discount. Moreover, Qianhai-based start-ups in ‘supported industries’, such as MedTech and AI, will enjoy a 15% tax reduction. Entrepreneurs can apply to these benefits directly through the government website.
How does WHub plan to help start-ups grow and scale in the GBA?
KB: WHub has developed a programme to help start-ups land in the epicentre of the HK and GBA ecosystem, called the “soft landing” programme. Companies can become operational in a week’s time and get introduced to the most relevant business contacts, investors and access to resources such as talent or professional services. Scaling your start-up never was that effective and fast.
In this context, WHub continues to drive corporate and start-up co-innovation programmes, helping start-ups to find opportunities for proof of concept, and at the same time facilitate and accelerate digital transformation and innovation for corporates and more traditional companies. Corporates are important stakeholders of the ecosystem, and curating and optimising their access, contributions and returns is crucial for a thriving innovation community.
Therefore, WHub will also be actively working with the local governments, such as Nanshan and Futian District Governments in Shenzhen, to ease communication in the cross-border programmes targeting start-ups. We will cross-refer the targeted start-ups to governmental, corporate or related programmes in Shenzhen, as well as engage more Shenzhen-based start-ups into learning about the available resources in Hong Kong.
Additionally, WHub will be organising more activities for start-up founders to explore Shenzhen’s ecosystem, including a ‘GBA Ecosystem Tour’, ‘GBA Market Insights’ webinars, as well as more interactive cross-border community events. And the upcoming Startup Impact Summit in July will have a dedicated GBA track.
To learn more about WHub and AngelHub, visit their respective websites at whub.io and angelhub.io.
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