Report: Hong Kong is 5th Fastest Growing Startup Ecosystem; Ranks 25th in the World


“Hong Kong is fully capable of successfully developing a strong startup ecosystem. Its number one priority is to help its entrepreneurs catch up to global knowhow.”

To close out last week’s StartMeUp Festival, Compass held an event to summarise their Global Startup Ecosystem report and specifically to share the insight they found out about Hong Kong.

Hong Kong is the 5th fastest growing startup ecosystem and ranks the 25th in the world, according to the Global Startup Ecosystem Ranking 2015 study released by the San Francisco based research firm Compass.

We’ve reprinted the summary below and you can download the final perspective as well.

We’d love to hear your thoughts in the comments.

Compass Findings and Recommendations

Hong Kong is at the early phase of development called Activation under Compass’ Ecosystem Lifecycle Model. Challenges typical of startup ecosystems at the Activation phase are all present in Hong Kong including:

  • A funding gap at the ‘normal seed’ round, owing to a lack of active angel investors and a limited pool of startups with global potential
  • A talent gap with startups having difficulty in accessing high-quality technical talent
  • “Hong Kong must foster interactions between startups and other stakeholders in the local and global startup ecosystems,“ says Jean-Francois Gauthier, CFO and Head of Business Development of Compass.
  • The Compass report also highlights that Hong Kong commands strategic advantages and opportunities in Internet of Things and Financial Technology, and should develop sector-specific strategies to develop its leadership position.
  • Hong Kong as a Startup Hub in a Network Economy

As local research partners of Compass, the University of Hong Kong and InnoFoco believe it is vital to have a proper understanding of the unique DNA of Hong Kong as a small city economy and how the networked global economy operates in the 21st century.

“The Silicon Valley model has been the dominant model of innovation led growth, characterized by its scale and entrepreneurial fitness. Hong Kong does not have scale. So the city has to mobilize all the knowledge of its networked people and their partners to act as mavens, connectors and salesmen in finding the right niches to build innovative businesses,” explains Prof Yue-Chim Richard Wong, Professor of Economics in The University of Hong Kong. He adds that it is a process described in Malcolm Gladwell’s highly popular book The Tipping Point: How Little Things Can Make a Big Difference (2000).

Hong Kong Needs More Than Tech Talents

Regarding the talent gap, it should be borne in mind that globalization and technology have made it much easier nowadays for people from different locations to work and collaborate with one another. It also means that it does not matter where scientific discoveries and breakthrough technologies originate — the important thing is who commercializes them. “Seen from this perspective, Hong Kong needs not just more tech talents, but also designers, product development and marketing specialists as well as professionals who understand technology and innovation and are experts in commercialization,” says Rachel Chan, Founder & Chief Catalyst of InnoFoco.

Not So Much About Funding – But Capacity Building

Many stakeholders believe that the seemingly lack of risk capital is just a symptom of the early stage development of the Hong Kong startup ecosystem. Compass recommends amongst other things that Hong Kong should invest in attracting global accelerators to Hong Kong and developing special access for local startups in accelerator programs located in top startup ecosystems.

Positioning Hong Kong

Hong Kong is a city that works and works fast. It is well positioned to be an accelerator for startups to build and scale their international business and to realise their global ambitions. The University of Hong Kong and InnoFoco recommend the following positioning strategies for Hong Kong:

  1. Plays to its strengths as a service economy: Innovation (whether it is technology or non-technology related) is likely to accelerate in many services, within the service sector itself as well as through the “servitisation” of the manufacturing industry. Hong Kong is a service economy, and should take pride in and ride on its achievements.
  2. A Super Connector to the World: Connectivity is the new currency in a globalised, digital and knowledge economy. In a network economy, Hong Kong is well positioned to play the role of a ‘Super Connector’ in linking ideas, capital, talents, production facilities and markets.
  3. As a Test Market: Hong Kong is an ideal place for market validation – for both B2C and B2B businesses.

Catalysts for Growth

To fully realise Hong Kong’s potential as a startup hub, the University of Hong Kong and InnoFoco echo Compass’ recommendation that different players in the ecosystem need to build and strengthen their global footprints and connections. Hong Kong also has to strengthen its role as a “Customer” of innovation. Both the private and the public sectors need to see the value of working with startups as their innovation partners.

Policy makers and regulators have to understand the nature of startup businesses, striking a balance between enabling disruption to happen and ensuring that public interests are protected. “Changing from an efficiency-driven model of economic development to an innovation-driven model is going to take a long time. But this would not happen if the government does not start to act decisively in this direction,” says K C Kwok, Honorary Senior Research Fellow of The University of Hong Kong.

The Hong Kong startup ecosystem should not be restricted by the geographical confines of the HKSAR but is intimately connected with the ecosystems in the Pearl River Delta and to the world. “In knowing how to speak the language of business that everyone in the world speaks, Hong Kong can play host and hub in connecting its partners around the world.” concludes Prof Wong.

A full HKU/InnoFoco positioning paper on “Hong Kong as A Startup Hub: Mavens, Connectors and Salesmen” can be downloaded here.

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