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Start-ups Take Off

David Chung  

Dr David Chung, Chief Technology Officer, Cyberport

 

The largest delegation of Hong Kong companies from the information and communications technology (ICT) industry travelled last month to the birthplace of the start-up culture.

“This was the first time we organised a delegation to Silicon Valley,” said Dr David Chung, Chief Technology Officer, Cyberport, which organised the trip together with the Hong Kong Trade Development Council. “The goal is to generate demand for services from our ICT companies.”

Dr Chung said such missions, which have previously taken delegations to Shanghai, as well as the Canadian cities of Calgary and Vancouver, help Hong Kong companies widen their markets and explore funding opportunities.

“The experience-sharing is also very important. You can read about those secret-to- success stories, but seeing them for yourself is very different,” he said.

The 46-member delegation, involving 26 companies, visited IT start-ups, including Zynga and StartX, Stanford University’s student start-up accelerator programme set up by university alumni. “We found one of the companies there was already working with one of our start-up companies,” Dr Chung said.

Eye-Opening Experience

  The delegation visited StartX, a Stanford student start-up accelerator, to learn about the start-up
 

The delegation visited StartX, a Stanford student start-up accelerator, to learn about the start-up culture in Silicon Valley and to exchange ideas

Dr Chung laid the groundwork earlier this year, meeting key Silicon Valley partners, including Hua Yuan Science and Technology Association (HYSTA), a group established by Silicon Valley-based Chinese tech entrepreneurs. That resulted in a trip to Hong Kong by HYSTA’s Executive Director Leslie Yuen, who said that the March visit to a Cyberport conference was “an eye-opening experience.”

“My impression was always that Hong Kong was a financial capital, but I didn’t know about its technology potential,” said Mr Yuen. “I was impressed to learn that Hong Kong is number-two in Asia in terms of cloud-computing readiness.”

For the first time, HYSTA, which organises regular visits for US tech companies to China, added Hong Kong to the list of Chinese cities in its July visit. The trip, he said, allowed the visiting delegation to see the benefits of working with Hong Kong companies.

“Hong Kong’s taxation is the third-lowest in the world,” Mr Yuen said. “It has a mature legal system, especially when it comes to IP, which is one of the biggest concerns for US firms. And the city’s close collaboration with Guangdong and Shenzhen makes it a strategic base.”

Cream of the Crop

Hong Kong companies showcase their products and solutions at Stack Event, a series of events providi  

Hong Kong companies showcase their products and solutions at Stack Event, a series of events providing insights into emerging areas in cloud computing

 
Set up in 1999, HYSTA was established by “cream of the crop” US-based Chinese mainland entrepreneurs as a “home-away-from-home” base. Entrepreneurship “is in HYSTA’s DNA,” Mr Yuen said, who added that the group’s goal is to create successful Silicon Valley-based Chinese start-ups that will eventually connect with the China market.

He said the association promotes the application of best company practices in the East and West, where “we morph the best of both worlds.”

One member who has emulated that is former HYSTA President and current board member Jack Jia, who’s also founder and CEO of Baynote, Inc, a leading recommendation software firm.

“China’s tech industry is taking off,” Mr Jia said. But unlike the US ICT industry, where companies tend to specialise in one sector, he noted a significant difference in China’s tech culture.

“Major mainland tech firms such as Tencent, Baidu and Alibaba tend to integrate vertically,” which he said, makes it harder for outside companies to collaborate. “The labour might be cheaper, but it takes three to five times more people to set up a company, because everything is done in-house.”

He said recent developments, especially in the area of cloud-computing, now allow start-ups to grow without major infrastructural investment. “Having data centres mean all the middle layers can be contracted out, which changes the landscape and is transforming the cost of setting up business.”

Comfort Zone

  Jack Jia 
 

Former HYSTA President and current board member Jack Jia, who’s also founder and CEO of Baynote, Inc

To illustrate his point, Mr Jia noted that the first company he helped set up, Interwoven Inc, in the 1990s, cost US$4 million to launch. The third company he established, in 2005, cost US$1 million. And the latest firm he set up, last year, cost a quarter of a million to build.

Despite the cultural difference in US and Chinese tech firms, Mr Jia, who is also a partner of GSR Ventures and an angel investor, said China is a market that cannot be ignored. Hong Kong companies, he said, have the choice of expanding to the mainland using Shenzhen or Shanghai as their launching pad. Or they can focus on the wider global market.

“Both markets have access to angel investors, but to go global, Hong Kong companies must understand the Silicon Valley market, just like Taiwan and Korea, which, from the outset, have always focused on the international market.

“It depends on the company’s comfort zone,” he said. “Some thrive on a relationship-based culture, which works best in China. But it’s also highly competitive there. Once an idea enters the market, there will be many others that will try to copy it. Also, China is not one uniform market like the United States.”

The tech industry in the West, he said, is more organised and mature, with higher revenue. “The US, however, is not growing much at the moment. Social media is stabilising, and the mobile market is most promising. But the bar is certainly higher in the US.”

Competition from Within

Leslie Yuen  

HYSTA’s Executive Director Leslie Yuen says Hong Kong ICT firms should tap Silicon Valley’s expertise to expand their markets

 
“Chinese companies themselves are facing fierce domestic competition,” Mr Jia added. Some mainland firms are now eyeing the US, where the market is more developed and competition is less fierce. “Chinese companies now are in the very early stages of exploring the US market.”

Silicon Valley, not surprisingly, is attracting its fair share of mainland investors, who are also getting involved in global initiatives, organising technology conferences, among other things.

HYSTA’s Executive Director said Hong Kong companies should follow the mainland’s lead and start looking at collaborations with Silicon Valley.

“This trip is the first step to get traction, but we want to go beyond that,” Mr Yuen said. “We want first-tier Hong Kong tech companies to leverage opportunities by setting up in Silicon Valley.”

The accepted wisdom of start-ups starting in the local market first before expanding overseas is now outdated, thanks to the advent of cloud technology. This, Mr Yuen said, allows SMEs to think big.

Cyberport and HYSTA will continue promoting collaborations between Hong Kong and Silicon Valley firms. Another US ICT delegation will visit Hong Kong next month.

Related Links
Cyberport 
Hua Yuan Science and Technology Association

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