Inside Entrepreneurship Oct 2014 by Education Post

October 2014

Inside Entrepreneurship

Stary Chen

co-founder of Leido Technology

Forming the start-up ecosystem: co-working spaces Nurturing young entrepreneurs: Incubators at a glance Start-ups: Leido Technology and OpenCart

Courses, events, and more

www.educationpost.com.hk/ie-oct2014

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CONTENTS Incubators

Nurturing emerging entrepreneurs What can incubators offer? BRIAN YEUNG

Community

Forming the start-up ecosystem ANDREA ZAVADSZKY

Start-up

22 24

Stary Chen, co-founder of Leido Technology WONG YAT-HEI Daniel Kerr, founder of OpenCart WONG YAT-HEI

The Region

The unlikely rise of Shenzhen: paradise for hardware innovators FREDA WAN

Education

Sound advice can save a start-up ZORAN NEDELJKOVIC

Incubators

eurs n e r p e r t n e rging e m e g n i r u t Nur offer? s r o t a b u c n i n a c What Brian Yeung

ong Kong’s entrepreneurship incubation programmes are nurturing a new generation of businesses, both from here and

abroad. The city has the potential to become a popular entrepreneurship hub in Asia, according to re-

InvestHK’s StartmeupHK Venture Programme, for

gional experts.

example, targets “entrepreneurs with global vision and scalability to set up business in Hong Kong”,

To date, InvestHK, Nest, the Hong Kong Science &

regardless of industry or sector. All entries are as-

Technology Parks Corporation (HKSTP), Cyberport

sessed based on their value proposition, business

and the Hong Kong Design Centre (HKDC) are of-

model, team and benefits to Hong Kong. However,

fering incubation programmes to support entrepre-

experience to date suggests that most programme

neurs across a variety of industries.

beneficiaries will be from the e-commerce sector. Simon Galpin, director-general of investment promotion of InvestHK, notes that many start-ups InvestHK assists are engaged in solutions for e-commerce or digital marketing. He believes that Hong Kong’s proximity to the manufacturing centre of high-end technology products in southern China, the high mobile penetration rate of 237 per cent, and a deep local talent pool, add further appeal to the city’s start-up ecosystem. Founded in 2010, Nest, Hong Kong’s first business incubator, also welcomes start-ups across industries seeking to apply for its three-month incubation programme. “We look for an idea that is unique, that has a digital, scalable element, which can go beyond Hong Kong and make it globally,” says Simon Squibb, chief executive of NEST. Having himself established a creative agency, Squibb believes the most important thing is the founder. He says: “Being the founder of a start-up is a hard job, and we need to know that the founder will be able to persevere with it through the highs, and also the lows.”

Photo: iStockphoto

Inside Entrepreneurship

Incubators Tech start-ups: the next Silicon Valley?

every six months as qualitative assessment criteria.

Executives from Cyberport and HKSTP are cognisant

But Allen Yeung, vice-president, business develop-

of Hong Kong’s potential, particularly for tech start-

ment and technology support of HKSTP, describes

ups. Their view is in line with a call made by Forbes

passion, perseverance and leadership as the most

last year that Hong Kong is the world’s “No.1 Tech

important qualities required in a successful tech

Capital to Watch”.

start-up.

Both Cyberport and HKSTP’s incubation pro-

HKDC has an incubation programme specifically for

grammes focus on technology. While Cyberport

the design industry across a variety of disciplines. As

targets information and communications technol-

of July 2014, HKDC’s incubation programme had

ogy (ICT) start-ups, HKSTP has three incubation

accepted 157 applications. These comprise product

programmes catering to the needs of technology

design, which accounts for 29.9 per cent, followed

start-ups across the IT, biotech and energy sectors,

by fashion at 21 per cent, and visual or spatial arts,

including an 18-month Incu-App, a three-year In-

at 18.5 per cent of the total.

cu-Tech and a four-year Incu-Bio programme. Dr Edmund Lee, executive director of HKDC, sees In deciding whether or not to support a start-up,

Hong Kong’s potential for entrepreneurship lying

Cyberport takes into account a venture’s manage-

beyond tech start-ups. The city earned a global rep-

ment team, its project’s creativity, business viability,

utation for the manufacture of toys and electrical

proposed half-yearly milestones and contribution to

appliances in the 1960s and remains a regional de-

Hong Kong’s ICT industry.

sign centre, with innovative products and talent in the design sector, he says.

HKSTP looks at the competence of a proposed project’s management team, a sound business plan, in-

While he highlights the prominence of design and

novation, R&D content and proposed milestones for

designers in society, Lee notes that both they and

Dr. Edmund Lee

complex business environment, where innovative culture is crucial. “We look for companies with both design and business potential, creative with a global vision, passionate about design, resourceful with a can-do attitude and a strong business mindset to succeed,” he adds. Polishing a rough diamond While HKSTP, Cyberport and HKDC offer financial assistance for business operation, InvestHK and

“

Passion, perseverance and leadership are the most important qualities required in a successful tech start-up

“

businesses are facing an increasingly uncertain and

NEST provide a platform for entrepreneurs to raise funds directly from potential investors.

those Hong Kong registered start-ups which have an office at its entrepreneurship centre (EC), and

For instance, winners of the StartmeupHK Venture

HK$330,000 for those who don’t.

Programme will pitch to potential business partners and investors at the StartmeupHK Venture Fo-

HKSTP provides Incu-Tech start-ups with a max-

rum, which Galpin expects several hundred peo-

imum of HK$645,000 spread over three years,

ple in the local and overseas start-up communities

Incu-Bios with HK$860,000 over four years and

to attend.

Incu-Apps with HK$400,000 over 18 months. HKSTPC also offers a new initiative, Leading Enterpris-

NEST also takes its incubatees on a roadshow with

es Acceleration Programme (LEAP), to support in-

over 100 investors. After three months, NEST will

cubatees and graduates to expand into overseas

list them on Investable, an invite-only equity crowd-

markets.

funding platform that provides start-ups with access to a wider network of investors, online presence on

All incubation programmes highlight mentorship,

its website and all the necessary legal documenta-

consultancy and networking opportunities.

tion required. NEST may also occasionally choose to invest directly in some start-ups.

Dr John Lo, chairman of the design admission panel of Design Incubation Programme, describes the

Cyberport offers financial assistance to its incu-

mentorship experience that its programme offers as

bates, with HK$530,000 maximum assistance for

“polishing a rough diamond”.

An overview on incubation programme offerings InvestHK

Length Financial aids Investment opportunities Mentorship & consultancy Networking Co-working space

3-month

Nest

HKSTP

Cyberport

HKDC

3-month

From 18 months to 4 years

Up to 2 years

Incubators

He says: “Many designers are idealists – they think

Kong’s start-up ecosystem has to offer. “The rise in

their ideas are the best – but they lack business per-

entries is a clear indication of Hong Kong’s contin-

spective to make their big ideas economically via-

ued appeal for start-up businesses,” he says.

ble and sustainable.” Alice So, senior manager of the Entrepreneurship In addition, Cyberport, HKDC and HKSTP provide

Centre, Cyberport, notes the rising number of

co-working space to their incubatees.

co-working spaces and greater collaboration among start-up service providers, seeing it as a sign of evo-

In September, Cyberport launched its new 27,000

lution of the local start-up ecosystem.

square-foot co-working space, Smart-Space 3F. Its competitive prices range from HK$800 a

“The local start-up ecosystem has been evolving tre-

month per hot desk, to HK$5,000 a month per

mendously in recent years”, So says.

two-seater office. She considers the city’s proximity to China to be HKDC offers free rental for office premises for the

an edge, offering start-ups further room to expand

first year and 50 per cent off the rental fee for the

and helping them raise funds globally. The amount

second year.

of investment Cyberport’s incubatees received from January 2006 to the end of July this year totalled

HKSTP also provides rent-free offices for one year to

HK$189,390,000, according to So.

start-ups with offices at EC during incubation. Asked whether investors should look for start-ups This year InvestHK’s StartmeupHK Venture Pro-

from incubation programmes, Squibb says: “Start-

gramme has drawn 550 entries, representing a rise

ups that have gone through an incubation are

of almost 40 per cent on last year. Galpin takes

guaranteed to have dedicated their full attention

pride in the programme, which has attracted scala-

to building a business. Incubation programmes are

ble start-ups, family offices and high-net-worth indi-

tough, and those who make it through are deter-

viduals interested in the investment potential Hong

mined, focused entrepreneurs.”

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Director-General of Investment Promotion Mr Simon Galpin promoted the StartmeupHK campaign in London in June 2014.

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Prizes

rapidly developing startup ecosystem is spreading,

Winners will receive benefits worth over US$500,000:

which is one of the purposes of our StartmeupHK

• Sponsored trip to Hong Kong*

brand and competition,” he added.

• Pitching to angel investors, venture capitalists, strategic partners and the wider startup community

The competition is well supported by a number

• Services from leading accounting, legal, hosting and

of generous sponsors, who are providing prizes

professional services firms

worth in excess of US$500,000. (see box below)

• Business matching and networking opportunities

These sponsors include Accenture, Baker Tilly, Co-

• Mentorship and assistance to build your business

Coon, CWL Partners, DLA Piper, Dorsett Hospital-

• Free work space in Hong Kong

ity, EastFunding.co, Fintrade-Mercer Advisor Ltd,

• Media exposure opportunities

Fintrade-Mercer Corporate Law Ltd, Hong Kong

• Business incorporation and trademark application

Commons, KPMG, Loft, NEST, Orangefield, Paper-

services

clipHK, PricewaterhouseCoopers, Soft Layer-IBM,

*For finalists based outside Hong Kong

Schneider Electric, Tanner De Witt and WYND Co-Working Space. HKSARG’s Financial Secretary John Tsang and Secretary for Commerce and Economic Development Greg So will attend the Forum on 11 November and present awards to the winners. There will also be panel sessions featuring successful startups from Hong Kong and renowned international speakers.

eup.hk www.startm t a w o n r Registe s: ted with u hk Get connec /startmeup cebook.com a f . w w w : k Faceboo k startmeuph Twitter: # thk.gov.hk uphk@inves e m t r a t s : Enquiry

Community

p ecosystem u t r a t s e h t g n i Form Andrea Zavadszky At the end of August, excited young people were gathering in co-working space CoCoon for the Pitch Night Finals, probably the largest crowd since the start of the programme in late 2012.

Early arrivals took their seats at the presentation

stage, while those networking at the back had to resort to watching events on a screen, as well over 150 people got together.

Pitch Night is one of the community-building en-

The organisers also invite investors, who listen to

deavours set up by CoCoon founders, father and

the pitches and may decide to invest if they like

son Maximilian and Theodore Ma. It offers start-ups

what they hear. So far over HK$18 million has been

a chance to present their business ideas and see

raised by Pitch Night participants through different

the reaction or validation of the projects by their

venues.

co-workers. The top three start-ups in each series can win a prize of up to HK$20,000.

Another regular programme, the Freelance Meetup, helps pair start-ups with freelancers including

“Seventy eight companies have participated in the

IT, sales, marketing and communications profes-

19 consecutive monthly pitch nights. All five pitch

sionals.

champions are still working on their start-ups. We have an audience of 100 to 150 people each time,”

“Our community defines us. CoCoon has trans-

Theodore Ma says.

formed into a vibrant community of entrepreneurs who gather to learn and support each other.

Photo: iStockphoto

find useful, but then it’s the community and the talent pool we have here that attract more like-minded people,” Ma says. CoCoon, based in Tin Hau, may be one of the first co-working places to have opened, but it is not the only one building a community. Paperclip Sheung Wan-based Paperclip, opened this year by serial entrepreneur Deepak Madnani after six years of incubating the plan, also goes beyond the idea of simply providing affordable space. He wanted to strengthen the product with courses for start-up entrepreneurs on the latest ideas on entrepreneurship

“

Our community defines us

“

Co-working is just one of the services our members

Theodore Ma, Co-founder, Cocoon

and business, and on what he had learned from his own experience. Inside Entrepreneurship

Community

Photo: Berton Chang

Paperclip Academy was set up parallel to the

problem, and the only way I saw was to create an

co-working space, offering several scheduled class-

academy that serves start-up needs, connecting and

es a week. Madnani himself teaches the lean start-

educating entrepreneurs and creating a space where

up and business model canvas workshops, which

people who wish to work with entrepreneurs can

build up business knowledge step by step. These

come to and share. The space is almost secondary.

core workshops are supported by talks with success-

The magic about what we do is that people find the

ful entrepreneurs and with those who have just been

space stimulating as we’re constantly having great

through the first hurdles, courses on coding for start-

events and workshops. Start-ups are always sur-

ups, marketing and social marketing, and a variety

prised – they’ve outsourced their learning needs to

of other useful seminars. These occasions also give

Paperclip and trust us to offer the best workshops

participants a chance to mingle and network.

and events.”

“I wanted to solve a problem that providing purely

The Good Lab

space cannot solve,” Madnani says. “Once Paper-

The Good Lab opened in 2012 out of a different

clip has rented out the desks and office space, what

consideration. The five funding members felt Hong

other value is the start-up getting? It’s a challenging

Kong needed a hub for social entrepreneurs and

1. Theodore Ma, co-founder of CoCoon, has forged a strong community in the co-working space. 2. The Good Lab focuses on social entrepreneurship and social innovation. 3. Paperclip offers seminars and talks on a regular basis. 4. The Good Lab collecting funds for an eco project. 5. Michael Ma, co-founder of Wynd, enjoys the balcony looking onto the Old Police Headquarters. 5

social innovators where they could meet, share re-

“We run workshops to help nurture the ethos of

sources and be inspired.

social innovation in companies and governments, including a two-day workshop on social innovation

“Our main targets are social entrepreneurs and

for leaders in corporations, government and civil so-

social innovators, and professionals who want to

ciety. We also tailor-make courses for companies,”

make a difference in our society,” says The Good

Yet says.

Lab community curator Tony Yet. There are talks on inspiring projects, people share Now they have about 150 members in two centres,

their experiences and The Good Lab also offers men-

one each in Cheung Sha Wan and Prince Edward.

tors for those who need advice. One recent largescale event, the two-day Green Building Hackaton,

The Good Lab has a whole range of activities, in-

was attended by 42 people from all walks of life,

cluding courses, talks, workshops, and community

such as architecture, design, art, business and en-

engagement.

gineering.

Inside Entrepreneurship

Community

A corner in Wynd on Wyndham Street.

Wynd A bright and airy co-working space on Wyndham

supply may lower the entry-level for entrepreneurs

Street, with balconies looking onto the Old Central

to start their business and create a better ecosystem.

Police Station, Wynd has a different profile again, with fewer tech companies and more from the crea-

“We have a very good relationship with the co-work-

tive industries. Wynd has also housed several com-

ing community; part of our mission is to build a

panies headquartered overseas seeking to set up

sustainable start-up ecosystem in Hong Kong for

shop in Hong Kong.

the Asia-Pacific region,” he says. Wynd provides

“

networking events and seminars to its tenants, and is carving out a special place for itself in Asian entrepreneurship. “Hong Kong is definitely becoming a ‘place to be’ for entrepreneurs and it seems the word is spreading across Europe, Australia and the US,” he says. “We are also seeing quite a few companies moving from Singapore to Hong Kong. We are trying to adapt to this situation by providing memberships aimed at helping new start-ups from overseas.” About two dozen co-working spaces have opened in Hong Kong in a short time. Ma says the growing

participates in or sponsors NGO events.

Hong Kong is definitely becoming a ‘place to be’ for entrepreneurs

“

Michael Ma, co-founder of Wynd, says Hong Kong

Michael Ma, Co-founder, Wynd

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Community

Elaine Tsung

Photo: Jonathan Wong

The Garage Society

The lower floor has a “quiet room” for those who

The start-up ecosystem seduces by its novelty, ener-

seriously need to concentrate and there are also 14

gy and innovation. Elaine Tsung felt its draw as soon

office rooms. “We have more established start-ups,”

as she joined The Hive just over two years ago, and

Tsung says.

decided to make her own investment, opening the Garage Society in April this year.

As a tenant, General Assembly, which offers programmes and updates on contemporary skills, great-

“Garage refers to the place where many of the pres-

ly contributes to creating a community at Garage

ent-day big tech companies got off the ground, but

Society. “We custom-built two classrooms for them.

now people don’t have to go it alone …. Society

It’s not a landlord-tenant relationship, we collabo-

refers to the community they find here,” Tsung ex-

rate a lot,” Tsung adds.

plains. Tsung has big plans. She believes the start-up comSmack in the middle of Central, on Des Voeux

munity will keep growing, and so is ready to expand

Road, Garage Society is swanky and cool on 10,000

to another location next year. She also wants to open

square feet and two floors. The upper floor is not

Garage Academy, “where wisdom is exchanged”.

only known of its cute yellow fridge, but also for a spacious terrace, a rarity in Central. The co-working

“Space is easy to replicate. To be a power hub of

space on this floor is informal and it can get a little

entrepreneurs of Hong Kong, that is the most diffi-

noisy, but it is good for those who like networking

cult part to drive. It is a lot of work but I enjoy it a

and being in the middle of what is happening.

lot,” she says.

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Start Up

Stary Chen,

logy o n h c e T o d i of Le co-founder Photo: May Tse Wong Yat-hei

Every day thousands of children cross the Shenzhen border to attend school in Hong Kong. This regular commute, and the safety

issues it entails, are a cause for concern for many families,

something which led Stary Chen, co-founder and chief executive

of Leido Technology, to develop the SafeArrival system, which

combines GPS and cloud technology to help parents and schools keep track of students travelling back and forth.

What inspired the idea of SafeArrival?

What were the main challenges?

It struck me when I heard about the incident of a

Developing a new technology is never easy. It is a

child being locked up in a school bus for hours

process of trial and error, and we had to keep trying

without the driver realising. I saw the lack of man-

to achieve what we wanted.

agement in transporting students to and from school as a glaring problem that should be addressed.

Running a start-up is really demanding, but to own something you have created is an unbelievable ex-

I am a believer in technology being able to make so-

perience. It makes all the hardship worthwhile.

ciety a better place. SafeArrival allows parents and teachers to know that children have arrived safely at

We are currently in the test stage. We have invit-

school or returned home. The child carries a small

ed six schools to try out the SafeArrival system and,

device the size of a one-dollar coin and is able to

so far, the feedback has been positive. Generally,

â&#x20AC;&#x153;check inâ&#x20AC;? whether at school or at home.

schools in Hong Kong are rather conservative about

using new technologies and government schools are

The number of start-ups is growing rapidly in Hong

exceptionally conservative. We are happy, though,

Kong, but I think the culture of running start-ups

that we have been able to get the support of interna-

is still not widely accepted. Investors don’t have a

tional and private schools.

clear understanding of the impact they can have and remain focused on making a quick profit. I hope

Another challenge for me as a team leader is to keep

that mindset will change in the future.

everyone on the same page. I try to listen to different opinions before making a decision because the suc-

What are your plans for the future?

cess of the business is a team effort.

SafeArrival is our first project and we are looking forward to helping more people with IT solutions.

How large is the team?

We plan to expand the service on the mainland after

I met my two partners when I was doing my mas-

we’ve got things up and running in Hong Kong.

ter’s in business information systems at City University. I am in charge of user experience, while my

The ultimate goal of Leido Technology is to offer IT

co-founders work on the programming. We have

solutions which address social issues and have a

also employed three colleagues to do IT support and

positive impact on society. My team and I will con-

sales and marketing.

tinue to work hard to run a sustainable business and create value for society.

you

think

the

local

support

for start-ups? I was an awardee of the PolyU Microfund 2013 Entrepreneur Stream for coming up with the idea for SafeArrival. It is encouraging to see universities are willing to support entrepreneurship. Also, as an “incubatee” of the Hong Kong Science and Technology Park, I am soon going to move into an office provided by them and I am really grateful for that. On the other hand, Hong Kong is a really small market, and it is not enough to support start-ups with funding and office space. I believe much more can be done. I think there should be support in terms of network-

“

I am a believer in technology being able to make society a better place

“

What

ing and advice on legal, financial and copyright issues from the government and other organisations. This would help start-ups transform more ideas into sustainable businesses. I also think it is really important to connect start-ups with investors and other available resources. Inside Entrepreneurship

Start Up

Photo: Bruce Yan

of OpenCart r e d n u o f , r r e K Daniel Daniel Kerr, founder of OpenCart,

Wong Yat-hei

one of the worldâ&#x20AC;&#x2122;s top e-commerce

software suppliers, saw a market gap in the technology of e-com-

merce and decided to make it his

any money from it, but two years ago things finally

niche. A seasoned software engi-

took a turn for the better, and so I decided to quit my

own e-commerce software in 2007,

decided to run OpenCart in Hong Kong because my

neer, Kerr started working on his

job and launch OpenCart. I am from Britain, but I

before launching the start-up in

wife is from here.

2012.

What do you think of the start-up culture in Hong Kong?

How did you set up OpenCart?

The last time I went to a start-up meeting, I noticed

I was working as a software engineer for a battery

that most of the companies there were started by

company when I realised how much the technology

people who had immigrated to Hong Kong and

of e-commerce was outdated. No one had updated

were taking advantage of the manufacturing capa-

the technology for a number of years, so I decided

bilities of the mainland.

to develop my own. I think it is great that Hong Kong is so close to the For five years, I worked in a full-time job during the

mainland and is able to make use of both its po-

day and on my own project after work. I complete-

tential and its huge market. From the point of view

ly destroyed my health; I was eating my meals in

of OpenCart, the mainland has a huge market for

front of the computer, and going to bed at one in

e-commence and consumers take to the idea of

the morning. In the first five years, I did not make

online shopping really well. We are currently the

number one e-commerce software supplier in Chi-

ready. We have different levels in the company, de-

na, according to figures from PayPal last year.

pending on the skill and experience that our staff have accumulated while working with OpenCart.

How does OpenCart differentiate itself from its competition?

On the first level we have staff providing free sup-

Our biggest competitor entered the market by

port to OpenCart users. Eventually we give them

spending millions of US dollars in advertising. Un-

small projects to complete. As they become more

fortunately, their software was not very efficient and

savvy and experienced, I will increase the project

users required a dedicated server just to sell one

size up to creating full websites.

product. With OpenCart you can have more than 60 installations on one server, with no performance problems. This means web hosting companies prefer to use OpenCart as they can sell more hosting to users without having to buy new servers. OpenCart is a pure shopping cart through and through. It contains modules that allow you to include various sections of text and images throughout your site. But at its core OpenCart is designed and allow people to buy them. What are your future goals for the company? OpenCart has successfully developed as one of the most recognised online shopping carts within the past couple of years. In 2013, we doubled our profits compared with 2012. We are about to release our 2.0 version of OpenCart. It has many new features such as a responsive template that allows for a different viewing experience, depending whether the user is viewing it on a desktop or a mobile device. Once OpenCart 2.0 is released we will start working on a hosted solution where users can just fill in an online form and have their own ready-made online shop. Some of our competitors, such as Shopify, are doing this at the moment, but OpenCart has

“

Hong Kong is so close to the mainland and is able to make use of both its potential and its huge market

“

with one thing in mind – to display products online

many more features. Who do you have on your team? At the moment, we have six people working for OpenCart, including myself. I do intend to expand this, but only after our hosted solution system is Inside Entrepreneurship

The Region

Photo: AFP

The unlikely rise of Shenzhen: paradise for hardware innovators

FREDA WAN

Many cities aspire to become a Silicon Valley for

the World Economic Forum in a report published

their region, but Shenzhen may be the only one that

earlier this year. “Poor quality is now the exception

started out as the world’s factory – and a capital for

rather than the rule.”

pirated goods. Breaking through Shenzhen’s manufacturing prowess is now key to its

Like any other entrepreneurial ecosystem, having

role as an enabler of global hardware innovation.

factories alone would not have made Shenzhen a

Dozens of Kickstarter-funded consumer products

hardware innovation hub. A suitable talent pool, the

are made in Shenzhen, developed and perfected

right culture, and a community of investors, acceler-

alongside factories and supply chain managers.

ators and incubators are also needed.

It turns out that the phenomenon of pirated goods,

In these respects, Shenzhen has also developed

especially in consumer electronics, is an indication

against the norm. Although this city of about 18

of the flexibility, creativity and speed of Shenzhen’s

million people has nine universities, it lacks the

manufacturing system. Factories are able to produce

equivalent of Stanford in Silicon Valley or Tsinghua

small quantities, and willing to iterate on highly spe-

University in Beijing’s Zhongguancun. Highly re-

cific features of the new product. Although labour

spected research institutions are usually considered

costs have risen, quality and technological know-

essential for an entrepreneurial ecosystem, because

how have also significantly improved.

a large pool of highly educated engineers and scientists is needed.

“We are moving from ‘Made in Shenzhen’ to ‘Made by Shenzhen’ to ‘Designed by Shenzhen’,” Liam

However, in the case of Shenzhen, this pool of tal-

Casey, founder and CEO of PCH International, told

ent is to come from China’s tech giants. Telecom-

27 munications leaders Tencent, Huawei and ZTE are based there. Foxconn, the Taiwanese company best known for assembling Apple products, also has a large presence. BYD, the maker of rechargeable bat-

Some of these technology companies have policies that encourage employees to innovate and build spin-offs. Tencent and Huawei have venture funds that invest in start-ups whose software products align with their platforms and business goals. Foxconn has even started its own incubator, Innoconn, which has a campus in Beijing. This allows Foxconn to invest in early-stage hardware start-ups and, reportedly, keep tabs on the maker community so that new technologies can be incorporated into Foxconn’s capabilities instead of developing into a competitor. Focus of the world Today, the annual Maker Faire Shenzhen, held in the spring, has become an international event for

“

We are moving from ‘Made in Shenzhen’ to ‘Made by Shenzhen’ to ‘Designed by Shenzhen’

“

teries and electric vehicles, is from Shenzhen too.

Liam Casey

makers from all over the world. A few early movers from the maker community in the US and Europe have set up more permanent bases here, such as the accelerator HAXLR8R and the maker platform Seeed Studio. These have helped attract funding and launch dozens of hardware start-ups in recent years, with the crucial processes of prototyping and iteration being carried out in Shenzhen.

Photo: Bloomberg Inside Entrepreneurship

The Region

There are several local influencers in the ecosystem too. Chaihuo Maker Space holds many workshops and events for aspiring innovators to network or promote their products. What’s next? What might be a weak link in the promising entrepreneurial ecosystem – apart from more urgent concerns such as intellectual property rights protection and visa restrictions for foreigners – is the domestic investment community, which does not seem ready for the roller coaster nature of supporting start-ups. Shenzhen is home to some of the largest privately-owned financial institutions, including China Merchants Bank and Pingan Insurance, but a vibrant community of venture capital and angel investors has yet to emerge. Municipal governments have set up venture capital guiding funds since 2006, targeting high-tech SMEs, but as government initiatives they tend to have limited horizons and cannot provide the longer-term support for start-ups comparable to private sector VCs. Photo: AFP

“

What might be a weak link in the promising entrepreneurial ecosystem … is the domestic investment community

“

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Education

Sound advice can save a start-up An advisory panel or board of directors can

help steer a new venture from the shoals of disaster to the shores of success.

ZORAN NEDELJKOVIC

In the midst of launching and running a new busi-

“It’s a commonly-held belief that cash flow prob-

ness venture, many entrepreneurs may overlook one

lems lead to the demise of most start-ups,“ Moroko

vital ingredient that could mean the difference be-

says. “However, a 2011-12 report by the Australian

tween overall success and failure – good advice.

Securities and Investment Commission on corporate insolvencies found that 44 per cent of firms rated

Sound advice can come in many shapes and sizes

poor strategic management as the main driver of

but it’s not only large established corporations that

insolvency. The survey revealed what we had been

can benefit from having a formal advisory panel

hearing anecdotally in our research: that cash flow

or board of directors to help provide a profession-

and trading losses fall behind poor strategic man-

al strategic direction. In fact, it is start-ups that can

agement as a key cause of insolvency.”

perhaps benefit most from such an arrangement. Challenge ahead Dr Lara Moroko, lecturer in management (market-

Major issues start-ups face include identifying a

ing) at the Macquarie Graduate School of Manage-

market willing to try and buy their products, gener-

ment (MGSM), which offers an MBA in Hong Kong

ating enough cash flow, assessment of future growth

in collaboration with HKMA, to help many entre-

opportunities and generally how to structure the

preneurs prepare to be leaders of successful ven-

business to be profitable from the earliest days.

tures, says start-ups can benefit from boards or advisory panels from day one because they can access

“Advisory panels can help start-ups gather informal

a range of business skills and experience that will

information, using their own networks and resourc-

help them resolve key issues – and possibly even

es, which can then be fed into decision making with

save the business.

the board,” Moroko says. “Naturally, it may be difficult to pay board members up front. However, many

Dr Lara Moroko

start-ups can use their existing networks to attract

Moroko notes that advisory

boards and advisory panels to act on a probono ba-

panels have become more

sis or in exchange for equity.”

common, particularly since the global financial crisis, to

According to Moroko, what a start-up team needs

help gain a competitive

to consider first are their own skills and experience.

edge in the world of

“Being honest about your own strengths and weak-

business. “There is a

nesses can be challenging, but it is critical in assess-

greater acceptance of

ing the gaps that a board or advisory panel might

advisory panels as an

fill,” she says.

efficient way to draw in expertise, way be-

Market-oriented

yond the scope of the

The second consideration should be the start-up’s

start-up, to deal with

intended market, while the third factor is working

specific

style and the level of interaction from the board or

says.

issues,”

she

panel. Is it to be hands-on, informal, structured and process-driven, strong in strategy or tactical execu-

Moroko says the start-

tion? “Once the team know what they are looking

up community is a ma-

for, it is much easier to find a board or advisory pan-

jor focus of the MGSM

el that is a good fit with the start-up,” Moroko says.

MBA programme, since

Once the start-up is running, the level of interaction

small

from a board or panel in its operations depends on

a major employer in

the agreed working style.

any

businesses economy.

are “We

maintain an ongoing “When a board is first formed, it is important for

relationship with the

the CEO of the start-up to set clear expectations on

business community to make

the type of relationship that’s required, be it strictly

sure we’re helping to tackle real

advice, assistance with execution, or ongoing men-

business problems as well as ac-

toring,” Moroko says. “Advisory panels can be a

ademic or theoretical ones, and

great way to supplement a board in terms of receiv-

then feed this back into the class-

ing short-term advice on particular issues or during

room to benefit future leaders of

specific stages of the company’s growth.”

the business community.”

Holistic vision Advisory panels can be renewed as frequently as every three to six months, particularly in the very early stages of the business.

Inside Entrepreneurship

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