As an international trading hub and cultural melting pot, Hong Kong is characterised by a unique blend of tradition and constant transformation. While the four key industries of finance, trade and logistics, professional services, and tourism build the backbone of the SAR’s almost exclusively service-based economy, the city also offers a nurturing environment for a variety of new industries. Hong Kong has continuously developed its innovation potential over the past decade, particularly in digital and sustainable technology. The local start-up ecosystem has grown substantially, both in breadth and depth, and is showing no signs of slowing down.
As of this month, Hong Kong was home to a total of 3,755 start-up enterprises according to the results from the 2021 Annual Startup Survey conducted by InvestHK. This represents an increase of 68.5% within the last four years and by roughly four times since 2014. The largest number of start-ups came from growth industries such as FinTech, e-commerce, logistics and supply chain technology, as well as professional services and IT. In addition, Hong Kong’s innovation landscape also covered data analytics, EdTech, HealthTech, smart city, biotech, and green technologies. Around 13,800 people were employed in start-ups in 2021, up by 29% from last year, suggesting a swift turnaround following the overall drop in employment due to Covid-19 in 2020. In the last four years, employment in the start-up sector has more than doubled.
Over the past ten years, around a dozen Hong Kong-based start-up ventures have reached the rare ‘unicorn’ status, i.e. a market valuation of more than US$1 billion. The exclusive list comprises of innovative tech companies across various industries and sectors, including online bank WeLab; e-payment providers Airwallex and TNG; crypto ventures BitMEX, Amber Group, and FTX; blockchain gaming company Animoca Brands; logistics companies Lalamove and GOGOX (formerly known as GoGoVan); travel booking platform Klook; e-commerce platform POIZON; as well as the world’s most valuable AI company SenseTime.
Hong Kong on the Global Startup Map
Despite its remarkable growth trajectory over the past several years, Hong Kong’s start-up ecosystem is still lagging behind the international competition in the eyes of some analysts. This can be attributed to a variety of factors, as highlighted in an HKTDC Research survey among some 260 start-ups in mid-2020. For instance, the availability of talent remains a key issue. While five Hong Kong universities were ranked Top 100 in the 2021 QS World University Rankings, every third survey respondent stated that recruiting suitable talent was one of the three biggest challenges they were facing. This was largely due to a perceived shortage of talent in the STEM disciplines. High labour costs in Hong Kong compared to the rest of the Greater Bay Area were also named as a challenge.
Another ongoing topic in the start-up sector is fundraising. While government-funded incubation programmes such as IncuTech, run by Hong Kong Science and Technology Park (HKSTP) and Cyberport, provide successful applicants with access to financial aid, marketing and business matching services, the demand for these programmes has far outgrown the available capacities in recent years. Meanwhile, raising venture capital from the private capital market instead also comes with difficulties due to a lack of locally active angel investors, according to respondents to the HKTDC survey. Hence, many start-ups were hoping for the government to create additional funding sources, while also raising the international profile of Hong Kong’s start-up ecosystem to attract a larger number of overseas investors.
The Global Startup Ecosystem Report 2021, published by US advisory and research firm Startup Genome in partnership with the Global Entrepreneurship Network, ranked Hong Kong’s start-up ecosystem in a modest 31st place globally. The report’s scoring system is based on six differently weighted factors: Performance; funding; connectedness; market reach; knowledge; and talent. While Hong Kong was rated highly in terms of market reach – a measure for the early-stage scalability of start-ups – it underperformed in all the other categories, according to the publication. Beijing (4), Shanghai (8), and Shenzhen (19) were all ranked well ahead of Hong Kong, while the US dominate the overall list with eight entries in the Top 20 – led, of course, by Silicon Valley.
Likewise, StartupBlink’s Global Startup Ecosystem Index 2021 ranked Hong Kong 32nd overall and 10th in Asia. In the global industry rankings for FinTech and transportation, Hong Kong was placed notably higher, in 11th and 22nd place, respectively. Yet, the city’s comparatively low placement in global rankings suggest that Hong Kong still has a long way to go to establish itself in the top bracket.
Bridging Hong Kong and Germany
While there may be plenty of room for improvement in Hong Kong’s ecosystem, local start-ups are increasingly showing their potential on the international stage. Take Carnot Innovations, for instance: Founded in 2018, the company has developed an advanced analytics software platform for performance optimisation in commercial buildings, which enables substantial energy cost savings through AI-driven fault diagnostics; a solution with application potential well beyond Hong Kong. Earlier this month, Carnot Innovations was chosen as the winner of the 2021 Start.up! Germany Tour Asia Contest, together with Indian logistics start-up Freightwalla, and will have the opportunity to participate in next month’s final – live and on site in Germany.
Start.up! Germany Tour is a joint initiative by DIHK, the German Chambers of Commerce Abroad (AHK) and the Chambers of Commerce and Industry (IHK). From 14-17 November 2021, some 80 start-ups from over 30 countries around the world – including three from Hong Kong! – will embark on a digital tour through the German state of North Rhine-Westphalia and connect with established companies in the region. Also joining the international start-up pool this year are Hong Kong-founded tech company eSix, which facilitates 5G connectivity for industrial and smart city applications, as well as UrbanChain Group with their IoT-based smart parking platform parkingbnb.
Hong Kong’s strong representation in the start-up programme is a testament to its growing innovation capability, particularly with regard to smart and sustainable solutions for the future of mobility and urban living. With its densely built-up environment, high energy intensity, traffic, and waste production, the city provides an ideal testing ground for tech innovations that could help address some of the most pressing issues of our time.
In order to help foster the innovation potential and co-operative synergy between companies in Hong Kong and Germany, GIC has been organising several digital delegations in the past two years to an overwhelming response from participants. In a webinar organised earlier this month by the Hong Kong Economic and Trade Office in Berlin, GCC President Bjoern Lindner together with the Hon. Edward Yau, Secretary for Commerce and Economic Development, also highlighted the many opportunities Hong Kong offers for young enterprises from Germany and all over the world.
On 28 October, GIC will be hosting the AHK Innovation Night. Building on the success of the first edition in 2019 and with the support of Hong Kong Science Park and Monx, the event will provide an excellent opportunity for young entrepreneurs to connect with corporates and potential investors in the Hong Kong–German business community, and lay the foundation for new partnerships and co-innovation. But not only that: In an open pitch format, ten shortlisted start-ups will be competing for a place in the Grand Final at the Greater China Xceleration Days 2021 in December. The start-up participants represent a colourful cross-section of Hong Kong’s innovation landscape in three main categories: ESG (JPM Silicon, Kno Global, Meo Air Analytics, and Ocean Material Group), FinTech (AREIX Analytics, Divizend, FreightAmigo, and LORA Technologies), as well as HealthTech (HK-Dtech and Mazecare).
The winner of the night will be determined by a jury of high-calibre innovation experts, comprising of Mr Wilson Chan, Associate Director Partnerships at HKSTP, Mr Stefano Passarello, Chief Visionary Officer at Monx, and Ms Agnes Wun, Co-Founder & CEO of Neufast and 2019 Innovation Night Champion. With a diverse and exciting line-up ready to pitch and judge, the event promises to be an entertaining and inspiring evening for founders, tech enthusiasts, or any members of the business community with a passion for networking and new ideas.
By Hendrik Hillebrecht
Related Links
- Source: HKSARG Press Release – Numbers of overseas and Mainland companies and start-ups in Hong Kong
- Source: HKTDC Research – Hong Kong Start-Up Survey: Ecosystem Overview
- Source: IHK zu Dortmund – Start.up! Germany Tour
- Source: StartmeupHK – Hong Kong: Asia’s Most Dynamic Startup Ecosystem
- Source: StartmeupHK – Hong Kong’s Startup Ecosystem 2021
- Source: StartupBlink – Global Startup Ecosystem Index 2021
- Source: Startup Genome – Global Startup Ecosystem Report 2021
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