Note from Shlomo: Here is another post first published on Forbes. This time after I visited RISE conference in Hong Kong. These are my insights.
I’m writing this while flying from Beijing back to Tel Aviv, I spent time in Hong Kong (later in Beijing) at the startup-focussed RISE conference. This indeed was an interesting trip.
What interested me when visiting Hong Kong, is to figure out how the entrepreneurial ecosystem is in Hong Kong these days as opposed to other places in the Asian region.
I wanted to understand what Hong Kong’s community feels about the ecosystem they are creating, and I was fortunate enough to be introduced to quite a lot of people who are part of this system to figure this out.
Generally speaking, people in Hong Kong are aware of the shortcomings of the city when considered against other places. The entrepreneurial spirit does not exist as much compared to, say, Beijing (see here and here).
Hong Kong is a major financial centre, which supplies very convenient jobs with nice salaries to locals and expats who then have no urge to work on a startup. The crazy real estates prices are definitely unappealing for entrepreneurs looking to live there and build a startup. Even Shenzhen has become financially impossible as an alternative for those who think of living on the mainland China side of the border.
My friend and co-host on podcast China Business Cast, Mike Micheini, happens to be one of these people living in Shenzhen but working in Hong Kong, crossing the border a few times a week. I asked him how Hong Kong and Shenzhen’s cost of living influences the local startup scene.
One of the constant issues for startups in Hong Kong is to cover their cost of living. Being one of the highest cost of living regions in the world, it is only getting more expensive! A significant part of the bootstrapped savings, or the investors funding, is then being used to pay rent instead of being applied to actually growing the startup!
This has always been a hinderance in Hong Kong, and now is even overflowing to next door and across the border to Shenzhen, China. This city is growing in popularity, for its proximity to Hong Kong, as well as becoming a major business centre for China. This has therefore pushed costs of housing and living through the roof and squeezing startups for more rent.
While there are these challenges in higher costs of living, there are more and more investors in the area, as well as more entrepreneurial spirit in all its history. I believe the costs will not be a big enough reason to slow down the growth of the startup scene in the South of China.
But obviously Hong Kong has its advantages and this is what people are embracing as well. It’s easy to do business in Hong Kong, it’s an excellent place for expanding into China and has a major port which makes exporting from China easy as well.
Someone I spoke with told me that in Hong Kong, generally there are no core technologies being developed (I’m generalising here as there might be a few companies that defy this rule). So, startups coming here are mainly doing integration of a few technologies or tools, and go on to build something new out of it and create a new concept.
I asked Nick Ramil from Brinc – An IoT accelerator why they chose Hong Kong as their HQ vs China while recording our podcast with him. His answer was that the startups that come and stay with them are not necessarily from the region, and Hong Kong is more approachable than China as a Westerner moving out to Asia.
Running key aspects of your business such as marketing or hiring is more difficult in China because of the Great Firewall of China and lack of international talent, respectively. We see founders go to China for a single purpose, e.g. prototyping or manufacturing.
If you look at a broader picture, the question I asked is actually not that important. The reason is that each ecosystem just grows the startups it can and makes it fit for its market. Generally speaking, people are adjusting to the environment they are in. Opportunities for startups are really everywhere nowadays, also in places where entrepreneurship is just sprouting. I met an entrepreneur from Myanmar at RISE, and heard about their startup scene and how they built it. You end up understanding that even when the ecosystem is immature, people will find their way to build something they want.
I happened to visit Myanmar myself in 2014 and found a business with a great vision, and wrote about the experience here.
If you own a local startup based in a non-classic startup hub city, please post about it in the comments section as I’m interested to learn more about these.
Image credit by Anton