There has been a noticeable change in the Hong Kong startup scene in the past decade, according to Click Ventures Founder and Managing Partner Carman Chan.
In an interview with e27, she reveals that 10 years ago, startups would only start expanding overseas in their fifth or even tenth year of operations. But today, startups would even start expanding in their first year, and this is where the venture capital firm can play a crucial role.
“We position ourselves as a co-investment partner of other venture capital (VC) firms, so we try not to compete with them. We have a focus that can complement other VC firms,” she begins.
“Most of the VC firms that we partner with, they are locally focussed … while we play the role of helping to connect the founders to the global ecosystem. Because most of the companies that we invest in, they plan to expand globally and most of them start early,” she continues.
US and China remain a favourite for startups in Hong Kong to expand to, despite their drastic differences. The markets are preferred over Europe as it tends to be more fragmented.
When it comes to challenges that these companies are facing in their effort to spread their wings into international market, Chan says that it depends on the sectors that the startups are working in. Both B2B and B2C startups, each has their own unique challenges.
“It’s actually easier for B2C startups because they have all these online marketing tools and open API, so you could be expanding from Day One through these open platforms … then you could market your products in different countries through app stores. You just need to measure the matrix and shape your marketing strategy,” she explains.
“It’s a bit more challenging for B2B startups because they should be involved in face-to-face communications. They need to have a local sales team; they also need to understand which market to start first,” she continues.
Click Ventures itself is one of the leading venture capital firms in Hong Kong, with a focus on early stage investments. In March, it has been named by leading private market data provider Preqin in their Top 5 Performing Seed Funds (Vintage 2003-2015 Funds) and Top 4 Venture Capital Funds to Watch lists.
The firm’s most notable portfolio companies include Spotify, Docusign, Palantir, and Memebox. It has also invested in local startups such as Oddup, Orii, and Eventxtra.
Key to a high-performance portfolio
When it comes to investment philosophy, Chan says that the firm’s take is similar to other VC firms, except for two things.
“The last six-month traction of the company, and in difficult times, how the founders are making decisions,” she points out.
The two factors help the firm understand the startup’s business model, how they define their strategy, and the outcome of the strategy itself.
Click Ventures also want to make sure that the founders are “hungry enough.”
“This seems very abstract but we found it very important. You know, if you have the right idea, the right timing, the execution ability, but you are not hungry enough for making your company successful … you may not have the persistence to do what you are doing,” she adds.
Chan also explains how nurturing a high-performing portfolio begins with finding the right channel first. Which is why, the founder named building the brand’s reputation as an important part of it.
“If you want to attract the good [ones], you need to be able to show your own values. As a VC firm, what is our value apart from money? Because good companies are not just looking for capital. They want something extra apart from the capital, that could add value,” she explains.
Hong Kong today
In addition to startups’ appetite for international expansion, another notable trend in Hong Kong’s tech ecosystem is its rise as up-and-coming hub for ICO and blockchain in general. A recent South China Morning Post report dubbed Hong Kong –together with Singapore– as the “new kids on the blockchain” as more companies chose to have their ICOs there instead of Mainland China.
But the progress is not without challenge.
“Similar to other countries, the regulation is not clear yet … If you want to set up cryptocurrency exchange in Hong Kong, there is no clear regulation on licensing like in Switzerland or Malta,” Chan explains.
Chan also added that industry players in Hong Kong basically have a unified voice in this matter: They expect a clear regulation, especially since countries such as the US have introduced guidelines on the matter.
“Globally, founders outside of China are exploring China but it will be difficult for them to jump to Beijing since Day One, as there are a lot of barriers. It will be easier for them to start in Hong Kong and the Greater Bay Area first,” she says.
“These foreign companies can bring knowledge and talent to Hong Kong market, this will help activate the ecosystem,” she closes.
Image Credit: Click Ventures