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The HKSTP team at the Elevator Pitch Competition 2020

For startups around the world, finding funding and support is always important. With today’s business climate, it has become even more pertinent particularly in the Asia-Pacific (APAC) region where competition is cut-throat. Amidst the pandemic, the investment landscape has evolved and so has the investor sentiment in the region.

According to a report released by Cento Ventures, a Singapore-based venture capital firm, the overall exit proceeds in the Southeast Asian tech industry fell by around 50% in the first half of 2020. Funding in Vietnam dropped by 22% in the first half of 2020 as compared to the previous year, from $284 million in the same period last year to $222 million. In Hong Kong, the total value of startup deals hit $9.84 billion, a 39% year-on-year-drop compared to last year.

However, things are starting to look up. Based on the 2020 Google Temasek report, the regional tech investment landscape is set to flourish with an increase of 17% in the number of deals between the first half of 2019 and 2020. The deal value in the fintech sector surged to $835 million in the first half of 2020, from $475 million in the first half of 2019. Leading digital health apps were used four times more than before the pandemic while leading education apps were used three times more.

It is evident from the emerging trends that sectors embracing innovation and digitalisation are thriving in the new normal. As such, Hong Kong Science and Technology Parks Corporation (HKSTP) recently concluded their annual flagship event, the Elevator Pitch Competition (EPiC 2020), bringing together thousands of entrepreneurs, VCs, and other industry stakeholders from all around the world to put forward innovations in view of the market needs.

During the week of EPiC 2020 event, a conference was held specifically to share insights and trends in the investment and corporate innovation space. Co-organised by HKSTP and the Hong Kong Business Angel Network, the conference was aptly titled Investment X Corporate Innovation Conference and explored three crucial topics on today’s startup landscape:

• Accelerating corporate innovation in the midst of a pandemic
• Amplifying extraordinary possibilities in the Greater Bay Area
• Asia Innovation Investment Landscape – Ripe for Collaboration

Emerging trends and current climate: challenges and opportunities

Raymond Wong, HKSTP Head of Investment

The US-China trade war, followed by the general economic downturn due to the pandemic have overall reshaped the investment sentiment in the past two years. “Many investors, especially corporate investors, were also affected by the pandemic as their core businesses were impacted, and thus there was a decrease in the allocation of funds. With limited funds, investors are more prudent and investee companies became a priority,” said Raymond Wong, Head of Investment, HKSTP.

New areas are emerging, given the ever-changing corporate as well as consumer landscape. Such sectors include remote enterprise solutions like value chain optimisation tools, customer tracking solutions, digital medicine, education technology platforms, as well as online delivery services.

“The need for innovation is dire and the need to reinvent is inevitable,” shared Wong. With online meetings becoming the norm, reconnecting is easier than ever before. “With geographies and time zones blurred, startups can reconnect with regional and global investors in a faster and more convenient way to foster collaboration and look for investment opportunities,” he added.

Peter Mok, HKSTP Head of Strategic Partnership

Under the current business climate, collaboration is becoming the key to unlock innovation. On that note, Peter Mok, Head of Strategic Partnership, HKSTP shared, “Digitalisation is aggressively picking up in terms of corporate adoption. Second in line is automation, especially with healthcare products like lightweight robots and automated thermostats, the demand is high.” Based on his interactions with tier A startups in Hong Kong, regional and international businesses at EPiC 2020, Mok shared that one major shift is the increased focus on corporate innovation.

“Businesses are now taking a completely different approach to corporate innovation than the past. They are starting to create dedicated divisions for this, adopting innovative solutions to adjust their business models and adapt to the fast-changing business landscape. Corporate innovation is now being seen as a need for survival and there is a keen demand,” he shared.

“We are engaging corporates from eight different industry verticals, including banking and finance, construction, real estate, education, and healthcare among others under a three-stage programme: understanding corporates’ pain points, providing long-term solutions and working in cohorts across industry verticals instead of individual startups to foster collaboration and partnerships,” Mok shared.

On the investment side, Wong added that there is an ever-increasing demand for quality. With the high-risk factor in the current volatile market, investors want to play it safe. They are looking for mature and good-quality companies. “The number of deals has dropped but the amount invested is increasing”, he explained.

Offering support to tech startups in Asia

US-based biotechnology startup, Mi Terro, topped other finalists to be crowned champion and claimed the top prize at the competition

Going beyond the domestic market is always a crucial yet challenging issue for startups during their entrepreneurial journey. To further support tech startups in the region, HKSTP has been actively establishing strategic partnerships with other Asian markets such as Singapore, Vietnam, Thailand, Japan and South Korea, etc, carrying forward the strategy of “Asia Buy, Global Sell”.

“Through the collaboration with regional institutes, incubators and the vast investor network, we hope to help local startups go beyond Hong Kong’s market to search for more business opportunities and attract top-notch companies to establish a foothold in Hong Kong with our go-to-market programmes. Hong Kong is definitely an ideal launch pad for startups to lift their ideas to success,” Mok added.

As one of the largest incubators in Asia, HKSTP offers a wide range of value-added services to support the tech startup scene in Hong Kong and beyond, including tools and research labs for application and product development, early-stage investments, mentoring and business consulting, and connecting Park companies with local industry and trade associations. The incubation programmes are full-blown starting from idea stage to startup and scaling stages, coupled with an Elite programme dedicated to high-potential companies.

With a robust network made up of a thousand investors, HKSTP connects the right startup to the right investors at the right time. Wong shared that they have been working closely with investors to understand investment strategies and participate in the decision-making process. Leveraging the Corporation’s resources to attract private sector funding in nurturing early-stage technology startups, HKSTP Ventures has grown its fund size to around US$ 80M asset-under-management (AUM) and hit 1:13 times leverage of private capital successfully. From 2017 to 2020, investment raised in the Science Park has topped US$ 3.8 billion.

He also shared that there is a shift in the risk appetite of investors in general and startups need to be better prepared to get a shot at fundraising. “Startups need to focus on their core competency even more than before. They need to identify their most valuable offering: is it the technology or the solution, and then upsell it.” Startups also need to learn to pivot fast to adapt to changing consumer demands and market trends.

“A more synergistic and collaborative ecosystem is going to be the new normal. Startups should join hands with other startups or even their competitors to explore new collaboration opportunities at this point to create greater synergy. It could further enhance their cash flow and spark new ideas under the current challenges,” he added.

Hong Kong is emerging as a tech hub and has the potential to help local, regional, as well as global businesses thrive in the region. In line with this, HKSTP is serving as a super-connector that bridges gaps between industries and across borders. After all, collaborations and scaling are key to survival under the new normal.

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This article is produced by the e27 team, sponsored by 
HKSTP

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The post Where is the investment scene in Hong Kong and the APAC headed? appeared first on e27.

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