Startup Magazine of Hong Kong: Jumpstart Issue 11 (May/June 2016) Hong Kong

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ISSUE 11 MAY/JUNE 2016

A NOTE FROM THE EDITOR

CONTENTS

According to our recent and ongoing online poll, 93% of Hong Kong’s startups have a specific exit strategy in mind. With so many big exits around the world, it’s no surprise that even in our young ecosystem entrepreneurs are excited about the possibility of one day doing the same.

Unlike other areas of entrepreneurship, a lot of what happens behind the scenes is a mystery. Does the buyer approach the startup or the other way around? How long does it take? How does one prepare to sell their startup? How does the valuation work?

We approached those that have personally experienced selling or buying startups in Hong Kong, including Taxiwise, Bigcolors, Social Agent, The HK Hub, Pixels, Flipter, The Workground, Kiss Hugs and others in attempt to unravel some of the mystery and got a lot of useful insights that we share in several articles throughout this issue.

Several verticals have been gaining popularity in Hong Kong, and one of them is the IoT (Internet of Things) space. In addition to Brinc, a San Francisco accelerator called Wearable IoT World has recently made a home for themselves in Hong Kong. There’s also a new IoT experience center that opened up in Cyberport. Check out an IoT update from Brinc and an interview with Wearable IoT World inside.

Enjoy this issue and happy start of summer!

CLASSIFIEDS...........................2 Community shoutouts

NEWS BRIEFS..........................3 Startup happenings in Hong Kong

DIRECTORY..............................5 Spotlight on select entrepreneurs in Hong Kong

SELLING YOUR STARTUP......6-8

Yana Robbins Editor-in-Chief

The science of selling your startup

STARTUP SUCCESS...........10-11 “What Interviewing 86 people taught me”

MEET OUR TEAM Editor-In-Chief: Yana Robbins Contributors: Janos Barberis Nick Rami Laurence Fauchon Amanda Cook Iris Leung Katie Scott Robert Christie Cover Designer: Joyce Ngo Special Thanks: Robyn Evans Cunningham Ludivine Taverne Regina Larkö Stefanie Myers General Inquiries: info@jumpstartmag.com Editorial: editors@jumpstartmag.com Advertising: advertise@jumpstartmag.com

Jumpstart is available at over 350 locations, including: Airport Lounges: CNAC Lounge Dynasty Lounge Royal Orchid Lounge Emirates Lounge United Lounge Plaza Premium Lounge EAST Plaza Premium Lounge WEST Morning Calm (Korean Air) SQ Lounge

LIFE AFTER EXIT......................15 Hong Kong startups share what it’s like

VENUE DIRECTORY.............16-17 Check out these great spots for events and workshops

SOCIAL GOOD.....................18-19 It feels good and you’ll have an easier time hiring

IOT UPDATE........................20-21 IoT interest and activity is on the rise

COWORKING DIRECTORY......... 23 facebook.com/jumpstartmag twitter.com/jumpstarthk

The most comprehensive list anywhere

FINTECH UPDATE.....................24 What’s next for Hong Kong?

CAPTION CONTEST................. 29 Win a 2-night stay at Ovolo Southside.

Copyright © 2016 Jumpstart. The contents of the magazine are fully protected by copyright and nothing may be reprinted without permission. The publisher and editors accept no responsibility in respect to any products, goods or services that may be advertised or referred to in this issue or for any errors, omissions, or mistakes in any such advertisements or references. The mention of any specific companies or products in articles or advertisements does not imply that they are endorsed or recommended by this magazine or its publisher in preference to others of a similar nature which are not mentioned or advertised. Published articles do not necessarily represent the views or opinions of Jumpstart Magazine. Printed by Magnum Print Company Limited. 11B E-Tat Factory Building, 4 Heung Yip Road, Wong Chuk Hang, Hong Kong.

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Startup News Briefs

Send us your news for the next issue news@jumpstartmag.com

Hong Kong Science and Technology Parks Corporation (“HKSTP”) is named the Technology/IT Incubator of the Year by the International Business Innovation Association (“InBIA”) at the organisation’s annual Incubator Awards. education center focusJust Opened! Maker Lab, a fully equipped shared maker space & ping IoT, smart prototy s ing on the application of digital fabrication technologies toward b.hk. devices, and hardware products located in Quarry Bay. www.makerla

pe and select n granted a US Patent for novel swi bee has app list’ do “to bile mo a ture capiSorted, Studio, backed by Hong Kong ven d Fun d Min at ped elo dev was gesture. Sorted tal firm Mind Fund. staysorted.co Cyberport tenant has launched an IngDan Experience Center that showcases the most innovative Internet of Things (“IoT”) products and allows visitors to experience evolving technology personally, along with workshops and seminars organised regularly.

SpotHelp, a popular on-demand concierge service, has launched CubPass, an access pass for children’s activities in Hong Kong. www.cubpass.com

Well Being Digital, a Hong Kong based company that aims to enable affordable & accurate underlying technologies for mHealth/wearable devices won the Best Wearable Mobile Technology Award at GSMA Mobile World. Con-

New Coworking Spaces! Welcome threekeyshk.com, thedesk.com.hk and HUB PMQ.

Congratulations to Aumeo Audio for being named a 2016 Cool Vendor in Human-Machine Interface by Gartner, a tech research and technology company.

Prenetics, a Hong Kong-based medical technology company raised $10M to popularize patient DNA testing in Asia. www.prenetics.com

HelperChoice, a Hong Kong-based social impact startup dedicated to eradicating modern slavery and forced labour of migrant domestic workers, is chosen as the only Asian finalist in the Pitch with Purpose competition.

Forbes recently named Cyberport entrepreneurs Reeve Kwan, co-founder of GoGoVan, Timothy Yu and Bradley Chiang, co-founders of Snapask, and Jamie Chiu, founder of LULIO, to their inaugural “30 Under 30 Asia” list.

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5

The Science of SELLING Your Startup

By Katie Scott An increasing number of Hong Kong startups have hit the headlines for achieving superb sale prices. Jumpstart spoke to some of their founders about how you can join their ranks.

A quick trawl through the business news from the past few years sees prominent coverage of some serious acquisition deals for a handful of Hong Kong entrepreneurs.

you never hear any of that because it’s kept out of the limelight. Get the thought of an exit out of your head right now.

Focus on the product, market and how to make it fit. Focus on your team and learn how you can help them reach their goals.

When the time does come to make that decision then think about it.”

James Giancotti is CEO of Oddup and a founding partner of the seed investment company Bigcolors. He was involved in In April 2014, the sale of Taxiwise for an the sale of Taxiwise to Ikky and Austraundisclosed sum saw backer Bigcolors lian outfit Crowd Mobile’s acquisition of make a staggering return of 22 times on mobile dating app Kiss Hugs. He says its original investment. Although unusual that the offer for Taxiwise came direct in scale, this sale is from the buyer while the Kiss Hugs one of many to hit the team had more of an input in the headlines, and there Build a profitable final sale price. He continues that will be many more with and desirable a familiar gripe from startups is your bills. I am now of the mindset that an increasing number that they can’t access funding. you are better off solving a problem and business with of VCs and investors He argues that actually, there are getting a solution that people are willing strategic marlooking to Hong Kong some companies “...that are getting to pay for straight away rather than getket positioning. for opportunities. In a money thrown at them” - and has ting millions of users.” report on the startup been through two acquisitions that With that, there ecosystem of the In fact, says Huang, just focus on making are more options prove this. Buyers will find you if SAR, government you have something they want, your outfit a model company. Although than selling it. initiative Startmeup.hk Giancotti continues, whether your you may not be working with the intenstates that the city is a An IPO could team, the IP around your product or tion of attracting a buyer, if you do, and “gateway to 4.7 million even be one of the traction and revenue you have everything is in order, it will pay divihigh net worth indigarnered. He says: “If you look at dends. He explains: “As a best practice, those options. viduals in Asia Pacific high profile acquisitions like that of I think that all businesses should follow with wealth totalling Whatsapp by Facebook, it had such good housekeeping rules from both a US$15.8 trillion.” a huge customer growth, especially legal and finance perspective. When an on mobile. You need to have a company opportunity arises, then these aspects Is there a magical formula for attractthat is worth buying.” of your business won’t become road ing this money? Are there specifics that blocks for a trade sale. Belinda Montes, founders can do to make their business Social media and eCommerce specialist our CFO and my co-founder, has, for more saleable? The answer is no or, to Michael Michelini founded Social Agent, years, done a great job maintaining our be more precise, they shouldn’t be builda SaaS lead generation platform, which financial framework and legal structure ing a company with the intention of sellhe sold to software develso when the opportunity ing. Kevin Huang is the CEO of Pixels, opment startup Unchained with Gravity4 came up, the multi-screen advertising company Apps. He mentions that “for Many entrepreneurs this was not an issue that was acquired by Gravity4 in Novemour deal, a lot of it was the dream of exiting their at all. My advice to all ber 2015. He started the company 13 team. Companies in Hong startups and businesses years ago. He offers this advice: “build Kong and China are starv- company. But do they is to ensure you hire a a profitable and desirable business with ing for developers, and are even know who would good finance manager, strategic market positioning. With that, willing to buy up compabe a suitable suitor? accounting/audit firm there are more options than selling it. An nies for the talent. There Keeping a list of who and lawyers. One day, IPO could even be one of those options.” were also some skilled and you’ll find out that it’s you could work toconnected marketers on money well spent.” gether with is key.

This sentiment is echoed by Truong Lam, the team to help as well. co-founder of Taxiwise and now working But not just the team, we Get your company in orfor Cisco in San Francisco. He mentions had a mobile app develder and then spend time that “getting an exit should not be the oped that fit into their portfolio and we talking about your venture openly with ultimate goal! Building a great company were able to synergize on the code and both competitors and complementary with great people should always be your make efficiencies in development.” companies alike. You never know what passion. Make sure you know what your kind of opportunities may arise. Jengoals are. Stop reading TechCrunch on Before a sale is in the cards, he argues nifer Cheng is the founder of cosmetics exits. The news always portrays a sale of that startups should just focus on getting startup Glam-it! but is also a serial entrea company as very grand, but you do not a balance between growth and earning preneur. She was director of Business know what goes behind the scenes, and money. He states: “Everyone says, “Get Development APAC for Rackspace, and all the bad things that a team may have bigger, don’t worry about revenues”, but vice president of uBuyiBuy and BEECraexperienced before the sale. Of course, in the meantime, you have got to pay zy - both of which were sold. One sale,

“

”

“

x”

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JUMPSTART MAY/JUNE 2016

blanket emails. Write something personal and researched. The digital world is still very human.” As well as business opportunities, this approach might lead to the discovery of a synergy between two companies, which could lead to a sale.

Michelini notes that “many entrepreneurs dream of exiting their company. But do they even know who would be a suitable suitor? Keeping a list of who you could work together with is key.” He adds: “For us, we started offering our service to a few potential suitors. We kept the option open to either raise another round of money, or to exit the business and merge with a bigger company.”

Salvador de la Barrera founded Flipter, a social network, which he describes as “...a global repository of opinions and collective knowledge pool, with the purpose of providing a place for reference and insights where people could discover what and how people around them thought and felt about important topics around life.” It was bought by 1WorldOnline, but de la Berra describes the sale as the coming together of like-minded people.

He says: “In a way, it felt more like finding a cool group of people who shared an interest and the desire to impact the world with technology via polls, quizzes, etc and then deciding to work together.

You could say that polls and quizzes are This is exactly what hapour “rocket” that we like to pened with Pixels, says work on. It’s great to work Huang. He says, “We had ... we saw it was team- everyday with people who a joint discussion about share your passion.” ing up and joining potential synergies and forces. It was the marhow we can leverage our Mawgan Batt decided to riage of two startups expertise in the respecsell her business, thewho share the same tive regions and experhkhub.com, in October tise in ad tech. As the vision with a common 2015 to spend more time discussion progressed, with her sons and opted goal in mind. it became apparent that to advertise the business Pixels becoming a part of on Facebook. She says: Gravity4 Inc would be the “In Hong Kong, Facebook best way forward.” is a very useful tool for making connections. I was already an active member on Lam says that Taxiwise’s acquisition a number of entrepreneur, parenting and was also as a result of synergies. He writing groups, and decided to pursue explains: “Originally, Taxiwise was quite that route first to see if there was any successful in the enterprise and SME interest.” There was. She continues: “I category. However, we even saw more received around 50 requests for further potential if we joined up with another information on the business, which I startup that has the same vision as us. initially followed up with a non disclosure We didn’t see it as a sale. For us, we agreement (NDA). Once I received a saw it was teaming up and joining forces. signed copy, I then sent out details of It was the marriage of two startups who the sale including valuation, transaction share the same vision with a common information, etc...This then resulted in a goal in mind.” number of meetings with interested parties over a few weeks, and then I agreed an offer with one of the parties.”

“

she recounts, came about after a chance meeting at a startup conference. She explains that you don’t need to shout about your worth, just go out with the mission of finding “good people with good companies.” She says: “If you put yourself up for sale, the analogy is a girl shouting out that she’s very ready to date. That puts people off. You need to be the last person standing with something special to offer and then people will approach you. You should be building value to the point where you have to bring in other people to help you grow it more. There is only so much marketing and fluff will achieve. You need to build a company that is sustainable and scalable.”

Michelini says, “A lot of people just don’t reach out. All you have to do is just be human and personal. Don’t just send out

x”

Once you have a buyer, then the negotiations and paperwork processing can start. Batt appointed a consultant “who drew up the sale and purchase agreement, and compiled all of the necessary paperwork.” She says that the process was simple and took only three weeks from offer to completion.

Lam reiterates the advice of having your housekeeping in order as this will help the process. He says: “If you have paperwork ready and your accounting work is legit then you shouldn’t have a problem.

Though finding and documenting everything can be a pain, doing it early on and keeping paperwork at hand helps a lot.

The other part is the agreement of the startup itself. Make sure everyone is on the same page and all the founders have a common goal and interest. I do warn you that it could take some time because 7

a lot of paperwork is involved - a lot of signatures and company chops. It was a headache, but besides that it should be a piece of cake if both parties have all the paperwork ready.”

Making sure everyone in the company is happy is key here - take this approach or keep quiet until the deal is a definite. Michelini recounts: “We told some of our team that we were considering some suitors, and it actually caused at least one person on the team to leave beforehand. He didn’t reveal his reasoning, but his reaction seems to be related to the prospect that we were going to ask him to work for the potential new owner for a certain amount of time if the deal went through.” Michelini is blunt: “My advice to other founders who are looking to merge or sell their companies is that you need to keep your mouth shut! It can affect your team, your customers and your morale. There are high chances that these deals may not go through (a few got close but no cigar) and then how do you tell the team that it fell through?”

Hopefully it won’t. If a deal looks certain, the founder needs to decide what they want. Do you want an asset sale or full company sale? Do you want any involvement in your company after the sale? Once the decisions are made, the discussions can push ahead and then a memorandum of understanding can be drawn up. Michelini also recommends adding “an attachment with various

milestones and events that would happen at certain parts.” He says though that there is a certain degree of trial and error, that “business transactions are not like programming - there isn’t a hard and fast ‘code base’ with hard rules. It is what the buyer and seller both agree on and accept.” Remain patient throughout, he continues, relaying that the sale of his company took between five and six months.

After the sale, you can opt to stay on either as a member of the staff or as an advisor like Batt, who provides “input and support where needed.” Salvador de la Barrera is still 100% involved with Flipter, managing the Latin America operations now under the brand 1World. He has watched his company go onto greater things thanks to the acquisition. You can cut ties and move onto new projects like Cheng and the Taxiwise team. Whatever your choice, if handled well, a sale could offer the financial security to pursue new projects or opportunities within a larger and more established outfit. Maybe it could be your startup hitting the headlines in the coming years, and hopefully for a sale that will get investors within and outside of Hong Kong talking and looking our way.

Interview with Florian Simmendinger CEO and Co-Founder of Soundbrenner.com Soundbrenner has created a revolutionary platform that empowers musicians to master rhythm better and faster than ever before. At the heart of this platform is the Soundbrenner Pulse, a smart vibrating metronome. It is the world’s first wearable device for musicians. Soundbrenner is headquartered in Hong Kong and has international offices in Berlin and Los Angeles.

How did you spread the word to get customers in 74 countries?

Our initial launch on the crowdfunding site Indiegogo stirred up a lot of attention. We receivedjn6m over 200,000 page views and people from all over the world know us today thanks to the crowdfunding launch.

That being said it was a lot of work and we hustled every day to get the word out during the campaign – it didn’t happen by itself.

Describe your typical working day from coming to the office to leaving it.

I usually come in the office around 10 or 11am. I try to understand the most urgent challenges for the day and try to tackle those first. Afterwards I go through the e-mail. Living in Hong Kong means that a lot happens during nighttime in the US while you sleep, so sometimes I wake up to over 100 new emails.

During the day I try to avoid distractions as much as possible, focus and produce as much work as I can possibly fit in the day. At 9pm I go to the gym. Most days I go back to the office around 10:30pm and have another work session until 1am or so.

What was your most memorable moment so far?

There are many: Feeling the beat for the first time with the first prototype, launching the product on crowdfunding, holding the first product from the production line in my hands, seeing the first customer reviews…Big celebrations are abundant when you run a startup, it’s a rollercoaster.

For a full interview, visit www.jumpstartmag.com

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JUMPSTART MAY/JUNE 2016

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9

What interviewing 86 entrepreneurs taught me about

SUCCESS

by Amanda Cook, Founder of Wellpreneur, wellpreneuronline.com According to The World Bank, over 150,000 new businesses start in Hong Kong each year. In fact, 400 new businesses started on the day I wrote this article alone. Not too long ago, I was one of those new businesses.

Fresh out of my health coach training program, with visions of leaving my corporate career for a life of entrepreneurial freedom and flexibility, I tried to ignore the statistics telling me that only half of new businesses survive beyond 5 years.

There’s a place for never­failing optimism (especially in entrepreneurs) but what about the wisdom in learning from others’ mistakes?

So, I started interviewing entrepreneurs about their successes, mistakes, advice and life balance. After 86 interviews, I’ve seen a multitude of ways you can build a successful business­but just a few common underlying principles. Here, I’ll share some of the key themes I learned from interviewing these successful entrepreneurs.

Entrepreneur Secrets to Success Just get started. At some point every entrepreneur needs to stop planning, and just jump in. Putting out a Minimum Viable Product and finding your first paying customer is the fastest route to clarity­ you’ll never find the right product trying to figure it out yourself. Sean Croxton, founder of Underground Wellness, said “You can take a million courses, but until you put yourself out there... you aren’t going to go anywhere. As hard as it is, you just have to start.” Adina Grigore, founder of natural skincare line S.W. Basics, echoed this idea of starting before you’re ready: “Get your product out there and see what people think—you won’t necessarily feel completely prepared, but you have to push through. People aren’t nearly as judgmental as you think they are.”

Build an audience first, then ask them what they want. This was an overarching strategy which works especially well with online marketing. Build an engaged audience around your topic by sharing valuable content, then ask them what

10 JUMPSTART MAY/JUNE 2016

problems you can help to solve. Not only do you get clear direction from potential customers about what they want ­but it takes the pressure off you from having to invent the ultimate product or service.

Mark Sisson, founder of primal lifestyle site Mark’s Daily Apple, shared this about product creation: “There has to be bi­directional interest. Listen to the ideas, concerns, and questions that your audience voices, and figure out what parts resonate with you as well. It is in this intersection that you can often do your best work.”

Infuse YOU into your brand to attract your ideal customers.

Lots of people provide similar products and services. You don’t necessarily have to create something completely new to be successful. But you DO have to add your own unique angle to it, to resonate with your best customers. Generic products and services just don’t cut it.

Instead, these entrepreneurs recommend incorporating your unique story, quirks and experience into your brand.

Women’s Empowerment Coach Julie Santiago shared: “It is often the parts of yourself that you are most self c­ onscious and embarrassed about and that you try to hide that make you most appealing to others and most authentic. The more you show this side of your life, the more you attract the right type of person to your blog or business, someone you can truly help.”

Guess what? You’re not the best at everything, and that’s ok. Because entrepreneurs wear so many hats when starting a business (marketing, product development, sales, accounting, IT department) it can be tempting to think that you know how to do everything best. But you’ve got to build a team to succeed.

Even with a micro­businesses or as a solopreneur, you can build a virtual team at low cost. Mark Sisson advised: “Take advantage of technology, especially when building a team. You can collaborate with people from across the world, who are the best at what they do. This also means that you can focus on what it is that you’re good at, and let others help with the rest.”

Share what you’re working on and get support: From mentors to coaches to advisory boards to mastermind groups, the entrepreneurs I interviewed stressed the importance of finding a community for support, encouragement and accountability. Starting a business is a

Interview with Kyle Ellicott of Wearable IoT World rollercoaster ride of emotions, and you need people to celebrate with you as well as push you back into action after a setback. Nisha Moodley, Founder of Fierce Fabulous Free, says: “Get support early on, and create a community to meet with and collaborate with when you need help. Find people with similar ambitions whose businesses are at a similar level.

Having an outside perspective and someone to hold you accountable is incredibly helpful.”

Make Time for Self Care Of course I couldn’t interview 86 wellness entrepreneurs without getting some wellness advice. Everyone agreed that you have to build time for self­care and exercise into your schedule, no matter how busy you feel. Denise Duffield­ Thomas, Author of “Get Rich, Lucky Bitch,” says to get rid of the guilt: “If you give and give with nothing in return, you will quickly burn out, and no longer be able to help anyone. Serving everyone else while not taking care of yourself will damage you, which damages those you help in the long run.”

Although your startup is unique, the principles behind growing a successful business are not - ­so open yourself to advice and guidance from mentors who have done what you want to do!

You’ll still need to do the work ­but you’ll save time and hopefully avoid some painful (or costly) mistakes as you’re growing your company!

Recently arrived to Hong Kong from London, Amanda Cook advises wellness entrepreneurs on digital marketing to find more customers and grow their business. Join her free 5­-day Blogging Challenge to fill your blog with content your ideal clients will love (+ share!): wellpreneuronline.com/challenge © illustration by Freepik.com

IoT is projected to be a US$11.1 trillion marketplace by 2025, affecting every industry. Read what Kyle Ellicott, Co-Founder of Wearable IoT World, has to say about their recent expansion to Hong Kong. For full interview, visit Jumpstartmag.com.

© Wearable IoT World

In simple terms, what is IoT? First of all, IoT is transforming the world; it’s not just another trend. IoT is simply the concept of correlating any device with an accompanying on and off switch to the Internet. According to McKinsey, the IoT market is projected to be a US$11.1 trillion marketplace by 2025.

What are your favorite IoT projects?

This is a hard one, because there are just too many! In terms of products that will really change our lives, I would have to name OSVehicle, an Open Source Vehicle project – which is actually based in Hong Kong, as one of those products. OSVehicle is a solution for eco-friendly mobility and is perfect for Smart Cities. The team is very focused on the idea of democratizing mobility in ways we haven’t seen since Henry Ford created the assembly line. In today’s world we want and need things to be more efficient, especially our vehicles, something we spend so much time in. The open source model will allow people to contribute their designs for potential full-scale production, which will lead to new innovations and technology in vehicles that have only been dreamt of to date. This includes giving vehicles the technology to communicate with one another and empowering drivers with valuable real time information on the road like never before.

With new technologies like OSVehicle, CarFit (another Hong Kong startup) and many others, we’re

able to have new seamless integrations of key technologies that impact our routines in such a positive and meaningful way. This quickly begins to change how we look at certain industries (automotive, agriculture, hospitality, etc.) and the way we expect to interact with them. We have an exciting future ahead of us.

Another product, TZOA, is an environmental tracker that was named as one of Time Magazine’s and Popular Science’s Best Innovations of 2015. What Kevin Hart, the Founder, and his team have created is very exciting and has the potential to help a lot of people around the world. Their device can actually detect the particular matter floating around in the air and tell you in realtime what it is along with the quality of the air; that’s just one feature. For example, say you have asthma, and now you place one of these devices in your home, office, or even on you (as a wearable), and it will instantly have a positive effect on your quality of life. You’ll know the moment you enter an area that could be filled with pollen and instead are able to avoid it. Again, another example of seamless integration of technology into our lives.

Tell us about your expansion to Hong Kong We see great potential in Hong Kong for startups entering the Asian marketplace and we are really excited to extend our expertise from the U.S. to this region. Hong Kong is an ideal place for the accelerator, and the city can really play a big role as an epicentre in Asia. The launch of the U.S.-Pan Asia Superhighway accelerator will focus on driving IoT innovation and entrepreneurship in Hong Kong and Asia while pushing forward IoT development globally.

For a full interview, visit www.jumpstartmag.com 11

3 Steps to Successfully

Selling Your Business

by Rob Christie, CEO of Counsel Asia, www.cfocounsel.asia

At some point, every business owner thinks about selling. No matter what stage your business is at, it is never too early to start planning an exit strategy.

Achieving a successfully sale requires careful preparation.

The latest sale I was involved in was an SME in Singapore that had been going for more than 10 years. This construction project management company had over 100 professionals in more than six countries. The lessons learned from this sale also apply to start ups and SMEs.

1. Factors to consider when thinking of selling There are many reasons why you might want to sell your company and it might not be an easy decision. Some startups are built to sell, but many owners become attached to their business, customers and employees. Is your decision about money, retirement, a change of direction or family reasons? Whatever the reasons, talk with shareholders and family before making any decisions.

Consider how much is your business worth? How much do you want? Do you need to lower expectations or work harder for a few more years? Who will

run the business while you go through the sales process? Realistically, expect to be distracted for three to nine months.

What are you going to do next? Will you work for a buyer, set up another business, or sail off into the sunset?

for valuation is a price/earnings multiple (P/E). For example, they might take an average of the past three years earnings and value the company at ten times those earnings (a P/E of ten). Alternatively, buyers might be interested in the management team, a specific IP, a client, a long-term contract, numbers of custom2. Once you’ve decided to ers, number of subscribers, or even a sell, prepare, prepare, pregeographical market you have entered. pare Normally, it’s a combination of factors.

Target factors improving your valuation Buyers want clarand ditch those not payity and to avoid ing off. Close or sell side “Identify any skeletons in risks, so the better projects. If the valuation the closet. Issues discovyou prepare, the metric is earnings, focus smoother and on maximizing earnings ered during due diligence quicker the sales will raise flags and risks and in three years’ time. If process will be and the it is subscribers, focus could result in a buyer not better the valuation you on subscribers – it may should be able to achieve. purchasing the company, a seem obvious but often reduced valuation, delayed this is forgotten. Focus on Begin by ensuring you the goal. payments or long warranhave the right team to see ties where the seller covers you through. I was hired Identify any skeletons in as CFO by shareholders liabilities.” the closet. Issues discovwho wanted to sell in three to five years’ ered during due diligence will raise flags time. In the end, we sold the business and risks and could result in a buyer not in three and a half years. We set targets purchasing the company, a reduced valuand the sale went almost according to ation, delayed payments or long warranplan. ties where the seller covers liabilities.

The longer a business operates, the Consider who your buyers might be, more issues emerge, such as tax, pendand your valuation. The industry norm ing court cases, insurance claims, etc. If you can’t clear them, consider whether to disclose them to a potential buyer.

Focus on what the buyer wants, your objectives and metrics. If you are selling for a 10x multiple of earnings, anything that adds $1 to earnings is worth $10 when you sell. If you need good people to get there, get them early and give them time to pay off. If you can’t afford good people, look at giving them shares or options. If people or investments are not performing and affect valuation metrics, consider whether you need them.

Understand any shareholders agreement and any other agreements covering investments such as convertible notes and bank covenants to ensure approvals are sought and disclosures are made at appropriate times.

Prepare a due diligence pack and keep it up to date. Use a due diligence checklist to work through documentation needed for legal and accounting aspects for the past three years of business operations.

12 JUMPSTART MAY/JUNE 2016

what startups does Hong Kong really need?

Submit ideas, find ideas, vote on ideas jumpstartmag.com/ideas

Set up a virtual data room to store documents; this provides levels of access and audit trails. Get this ready early rather than rush through it during the sale. Even small businesses find accounts, taxes, lease and employment details build up and are hard to find. The pack also helps find problems and gives you time to address issues.

Seek advice about making your financials look better. Clean up your balance sheet as early as possible, don’t forget earnings (or whatever metric you are using to sell) and where possible, ensure earnings growth. At the very least, buyers want to see finances for the past three years. Be ready to explain them.

Select an internal team to review the sales process. Brief them about areas they will be expected to discuss with potential buyers and what areas they should not.

Depending on the size of the sale, create an external team which are on the larger end and may consist of consultants, lawyers, tax experts and other advisers.

You’ll certainly need a lawyer, so factor fees into your calculations.

Prepare for the unexpected. Market downturns, personal issues, other business opportunities and unexpected problems when conducting negotiations and due diligence may test your patience, so try to keep a sense of humour! The process might not be easy for a small company particularly if facing a large purchaser with a lot more resources.

Consider ways to minimize tax implications for the company, yourself and other shareholders prior to the sale. Finally, set a sales process timeline and stick to it.

Prepare a “teaser: document of less than than 10 pages, summarising the business. Include details about products or services, organisational structure, headcount plus some clients and minor financial details. To get buyers interested, highlight your business’ value. For competitive reasons, you may not want to state who you are.

buyer is (i.e. provide less information to competitors than other buyers). I’ve seen a few cases where competitors have just come in and done some due diligence then walked away with the info – the NDA being really only as good as your ability to pay legal fees, so be careful.

Discuss absolute and non-negotiable terms you expect including whether you For initial contact and management want “Discuss absolute and nonwith buyers, conto stay with the buyer’s negotiable terms you expect sider using a third company, whether they including whether you and man- want you to stay, will party who understands your business agement want to stay with the there be an ‘earn-out’ to discuss the sale opbuyer’s company, whether they period where you need portunity. This allows for to stay in order to plausible deniability that want you to stay, will there be reach certain targets, your company is for sale an ‘earn-out’ period where you or for example if you if you prefer the market need to stay in order to reach want certain employnot to know about it. certain targets, or for example ees looked after.

if you want certain employees

If you cannot identify looked after.” a buyer, advertise in a trade magazine or online (i.e. Craigslist or AsiaXpat for smaller companies). Alternatively, hire a broker.

It’s an expensive option for a smaller company, but useful if you have exhausted other possibilities. If you’ve prepared early on, you should not need this option.

After initial contact, list interested parties. Obtain a non-disclosure agreement (NDA) and be ready to answer questions regarding your business. What is provided at this stage depends on who the

Obtain indicative non-binding offers and explore further details, monetary and non-monetary. This should lead to a binding offer, subject to contract and due diligence, at which point choose the best offer to enter into an exclusivity period and move to due diligence.

If you sell to a large organisation, due diligence could take a while. In the case of the Singapore SME, the buyer raised more than 500 queries. Since we had a virtual data room, all details were readily available and the buyer never needed to

3. The sales process Once you are ready to sell, it’s time to identify a buyer. If you have venture capital or external funding from a professional house, they will be able to assist.

If not, you may have already thought of a suitable buyer, possibly trade, sale to a competitor, partner or private equity firm.

Otherwise, prepare a target list of 10 or more buyers. Who benefits the most from purchasing your business? Ideally, get two or three potential buyers interested in order to have a negotiable position.

13

come to our office which kept the sale quiet until the last day.

You need to decide who knows about the sale. Discussing it with a larger team or employees could get them excited about a buyer but it may also result in employees and clients leaving.

Examine every clause in the sales agreement; it’s all negotiable and don’t give anything away lightly. Look at delayed payments, how much is upfront, how much later, whether you receive cash or shares, earn outs – how much and for how long, key staff arrangements, non-compete clauses and warranties.

Build a good relationship with the buyer and their team and raise issues as soon as they happen. Buyers want a level of trust or they might back out. Be open and honest about issues, as the last thing you need is problems and for the sale to break down.

Valuations is a whole different subject. In theory, a company is worth the discounted present value of its future cash flow. This assumption is difficult for smaller businesses and depends on a large number of assumptions. So stick with your numbers and if a buyer

14 JUMPSTART MAY/JUNE 2016

wants you, they will find a way to justify it. For start-ups, valuation depends on management, vision, how much money is need and what people will pay. Ultimately, you are only worth what someone will pay.

Finally, you and your lawyer must check all sales and purchase agreements.

Don’t underestimate the time this takes.

In the case of the Singapore SME, more than 50 documents needed to be signed and delivered on the closing date. The business was successfully sold to a UKlisted company that was an excellent fit with our business in Asia. It took almost nine months, and lots of late nights, but it was worth it.

Rob Christie has worked in Asia for 25 years. He currently advises business owners wanting to restructure, grow or sell their businesses at CFO Counsel (www.cfocounsel.asia). Prior to this, he was head of finance for various companies with revenues between U.S. $10-$70million. Having grown up in a pub, he has also, as a sideline, started, bought or sold many F&B businesses.

An App for Designing 3D Objects by Sketching A recently launched British-made app, Gravity Sketch (gravitysketch.com), is shaking up the world of 3D creation.

Launched this March 2016, the app allows anyone to easily hand sketch 3D models on their iPad and then export them for printing in plastic, metal or ceramics. You can design things like characters, planes, spaceships, furniture, glassware, rings, pendants and more.

The Gravity Sketch team, based in London, has been invited to partner with 3D printing industry leader Shapeways, enabling the app users to order their 3D prints directly from within the App, shipped in just 2 days.

LIFE AFTER EXIT

by Iris Leung

The Workground, Taxiwise and Social Agent founders share what they’re up to.

There are a number of reasons why startups get bought: They could have a powerhouse team that could be a great addition to the acquirer, or technology that can be plugged into an existing product.

Or perhaps they’re a friendly competitor with complementary product offerings.

In the case of transport app Taxiwise, which was an all-cash deal “in excess of seven figures,” it was an acqui-hire where co-founders Jean-Marc Ly, Truong Lam and Lawrence Tse were seen as key cogs to launching Ikky’s business.

Ly remembers making the shift from entrepreneur to employee after exiting his startup: “When my co-founders joined Ikky as full-time employees, it was a very different shift in terms of mindset which we had to learn quickly. We were not ‘founders’ so needed to operate within metrics and the boundary of our roles,” he said.

With the help of the Taxiwise co-founding team, Ikky “underwent different business model changes” and launched the app while signing up “a considerable amount of restaurants.”

Ly added that their new roles had pros and cons. “You had less of ‘wearing different set of hats’ which took a while to get used to. You do miss the founder way of thinking but know that you have more resources and are much more set up for success.”

Fast-forward to two years after the acquisition and the Taxiwise co-founders have moved on with their lives. While Tse went back to teaching, Ly said that he and Truong decided to move back to the US to be closer to friends and family.

“Since our move back to the US, Truong and I have been involved in advising other startups and joining the workforce as designers and growth marketers. We used our entrepreneurial experience to redefine any team we join and add a bit of scrappiness to it,” he said.

Brian Sze, co-founder of co-working space the Workground, which sold their brand to Mainland Chinese business park builder TusPark (the space now rebranded to TusPark HK), also went down a similar path.

The Workground-TusPark deal is a unique one as it was the acquisition of a co-working space brand and its community. As TusPark is already an wellestablished brand in China with over 10 locations across major cities,why were they interested in the Workground? Sz explains: “They had their sights [set] on Hong Kong as an important strategic location to enter and they identified the Workground as a brand worthy of acquiring. They wanted to launch quickly and with an immediate presence, so buying an existing player that already had two outlets made sense to them.” He also noted that the Workground already had a fast-growing customer database in prime Hong Kong locations (Central and Causeway Bay).

While his co-founder Joanna Cheung stayed on as Managing Director, Sze has moved on to support a number of startups in business development roles. After leading sales growth at property platform Spacious and helping them raise a US$3 million Series A round last year, Sze is

now tackling the food delivery space with Deliveroo -- a British company that is trying to make their mark in Asia.

Similar to the Taxiwise co-founders, he also sees value in working with an established player in a competitive space and cites “corporate culture,” “great product,” and “deep pockets” as reasons to stay put.

While the Taxiwise and Workground case studies are exemplary of startups who have a brand or team that’s attractive to the buyer, what about two companies with complementary offerings operating in the same space?

In the case of SaaS lead generation platform Social Agent and software development startup Unchained Apps, a merger made the most sense. “It was a good match, as Unchained Apps had good developers and product managers, and Social Agent was heavy on marketing,” said Michael Michelini, co-founder of Social Agent.

After the deal went through in late 2014, Michelini shifted from CEO to head of business development for Unchained Apps and has left the role earlier this year to pursue independent projects.

“I’m now focused on my podcast and consulting for people to do business in Hong Kong and China,” he said, but also shared his never-ending passion for starting up. “I prefer always being an entrepreneur -- I love the early stage when an idea is just budding and developing.”

While most entrepreneurs believe operating in stealth mode is the way to go, Michelini advises the opposite if they want to exit one day. “Don’t be afraid to talk to your ‘competition’ as those are the people most likely to merge with. When competitors merge, it makes them much stronger in the market to grow - don’t be so secretive,” he said.

At the end of the day, not all founders will be serial entrepreneurs. Some exit their startups, and having gained firsthand how to build great products and teams in the entrepreneurial realm, plug those skills back into the ecosystem.

While it may never be too soon to start thinking about your exit strategy, Ly urges first-time founders to avoid getting distracted by the prospect of a glitzy sale. “It should be about building great companies that can expand and improve people’s lives. Build a great product that has market fit, get a great team and a set of good advisors and work hard towards that mission. Getting fascinated with big exits will derail you from the company’s mission.”

15

Sheung Wan

Kowloon

15

The Loft +852.3905.1000 host@theloft.com.hk theloft.com.hk

200 sq ft

Block B, 3/F, Tontex Industrial Building, 2-4 Sheung Hei Street, Kowloon

The Loft coworking space occupies a sprawling 8,000 sqare feet, providing a relaxed atmosphere for people in creative industries. The interior is designed to be comfortable and inspiring for our loft members. m Amenities: Projector, screen, white board, wifi, air-conditioner, reception service, kitchen amenities.

Price: $500/HKD per hour. Discount for members. et erat quis

Soho Printing Press +852.9176.1096 spp@lightstage.hk lightstage.hk/soho-printing-press G/F + M/F, 6-7 Tank Lane Sheung Wan, Hong Kong

150 1,600 sq ft

Soho Printing Press is a stunning indoor and outdoor venue with 1600 square feet across ground and mezzanine levels with a spacious private terrace, an on-site open kitchen, two well-appointed restrooms, and, surprise – a king size bed on the upper level.

Amenities: Full chef’s open kitchen, tables and seating for 70 people, Bose speaker system and Samsung TV display, 2 bathrooms, private balcony, multiple entrances.

Best Used For: Chef’s Popups, Creative Workshops, Private Parties, Product Launches.

Sheung Wan

Lightstage +852.9176.1096 www.lightstage.hk hello@lightstage.hk G/F, 218 Hollywood Road, Sheung Wan, Hong Kong

A stage for creative events in Hong Kong, the minimalist LIGHTSTAGE design aesthetic draws on ample light and versatile whitespace to keep the spotlight on your event. Furniture, gallerygrade adjustable lighting, state-of-the-art AV and technology are included in all packages. The LIGHTSTAGE team is poised to assist with a full range of event services both in-house and through preferred event partners. LIGHTSTAGE specialises in interactive, cross-disciplinary events that dance across the borders of art, fashion, design, tech, live entertainment, community, retail, and performance.

LIGHTSTAGE and our client community of artists, creatives and premier global brands are passionate about illuminating the shared frontier between today’s digital and physical worlds and staging experience-driven events that surprise and delight, and cultivate connections. Join our party. Step onSTAGE.

350

2,500 sq ft

Amenities:

Full range of display + seating furniture, speakers, microphones + projector, high-speed wifi, glass retail display, event concierge services.

Best Used For:

Art Exhibitions, Parties, Tech + Retail Showcases, Press Launches.

VENUE GUIDE Find more online!

Chai Wan

Three Keys Craft Space +852.2682.8102 www.threekeyshk.com hello@threekeyshk.com 906-907 Paramount Building 12 Ka Yip Street Chai Wan, Hong Kong

Three Keys Craft Space is a hub for individuals and small groups built by makers, for makers. A maker is anyone who creates, ranging from a woodworker to an illustrator to a website designer. In our 3,500 square foot coworking space, our staff, technicians, multiple workshops and open studio area encourage members to bring their ideas to life.

3,500 sq ft Amenities: • Outdoor balcony • Kitchen • Shower • Wifi • Meeting room

The space was created with the goal of having people from different creative backgrounds work together under one roof.

Three Keys hopes their members are able to improve their own craft and in turn cultivate the creative community providing a place for people to connect, collaborate, and work.

Central

Press Start Hong Kong +852.9283.2312 www.pressstart.com.hk events@pressstart.com.hk 3/F, 18 Gilman’s Bazaar, Central, Hong Kong

25

350 sq ft

Situated at the heart of Central, Press Start Hong Kong is an event space with a collection of over 130 board games of all shapes and sizes and a flexible venue configuration that can be customized to meet your event needs. Our 350 square foot space hosts 25 people comfortably, and the projector and chalkboard wall make this a perfect space to organize team-building social events.

Amenities:

The Press Start team can offer our event planning services to create a games-centric event to best suit your group, with various event formats available, and we are on site to introduce, teach and facilitate. Our network of catering partners also provides food and drink to augment your event experience. For enquiries on event formats, detailed price guide and catering options, please write to us at events@pressstart.com.hk.

Best Used For:

Projector and screen, magnetic chalkboard wall, refrigerator, movable and foldable furniture, custom lighting, 130+ board games.

Team-building events and offsites, private parties, game nights, board game socials.

Putting Social Good at the Core of Your Business Plan

by Laurence Fauchon, Co-Founder and CEO of Helperchoice.com

As a startup co-founder, I come into contact with investors, mentors and others who all have their own ideal business models in mind. For some, scalability is most important, for others it’s the revenue model, and yet others focus most on sustainability. I agree that all of these are important, but I also want to encourage all aspiring entrepreneurs to consider the social impact of their businesses. There are literally millions of social problems in the world and you can be a founder and change-maker.

Bringing social good Virtually all companies start with finding a solution for a certain pain point. Most often your service or expertise makes things more convenient for your clients.

But there are also startups that do more than that and use social good as their prime motivation. It’s a win-win situation for your client, the community, the world and you.

And being profitable at the same time Changing the world is not easy. You need to have the tools and techniques to ensure that your product is sustainable. This is the beauty of a social impact startup or social enterprise; you don’t just do CSR on the side, but simply every purchase directly improves the human social or environmental well-being. The impact is real!

But do people care?

Yes! I run social impact startup HelperChoice and trust me, businesses that do good are sexy! In April 2016, I was the runner-up in the international Pitch

with Purpose competition, specifically for women entrepreneurs who founded high-growth, scalable business that were offering solutions for the world’s most pressing problems. It was supported by the United Nations Foundation, Dell, Johnson & Johnson and Guggenheim Partners. There are many incubation programs who look for impact companies and the media also loves companies with a vision that do good.

And what about Hong Kong?

It is definitely true that most startups in Hong Kong are in the food and fintech industries. But that shouldn’t stop you!

There can only be so many food startups before the market is too crowded. When you find a niche and do social good, your competition will most likely be nowhere to be seen, at least not at the moment.

At the Pitch with Purpose competition startup, I was not just the only Hong Kong representative, but also the only Asian nominee. And as I am writing this, I am invited for a Hong Kong-based competition that celebrates entrepreneurs who are both tech and social.

Where to start Hong Kong faces multiple issues at the moment: what to do with the ageing population? Underemployed youth? Air pollution? Long waiting lists for medical care? The list is endless. To expect the government to jump in and solve all of these issues is unrealistic. But that doesn’t mean we should just shrug our shoulders and move on. The answer is quite simple: put social good at the core of your business plan and come up with

a sustainable and scalable solution. You can’t tackle all issues, but the startup community could do it together.

If you do decide to go the social way, the rules of the game remain the same.

Think carefully about your concept, create a prototype and validate your idea with friends and others that you trust.

Constructive feedback will push you to create an even better product and to come up with a truly innovative product or service. Make sure that you love your own idea and that you can see yourself doing it for years. If not, you probably shouldn’t go further because running a social good business asks a lot from you. You will see a lot of social injustice and unethical practices that will drive you crazy. And not only do you need to create a, solution for a social ill, you also need to convince the client and bring them value. Because without them you can’t do any good.

Customers love buying and doing good The dream of every business is that customers are either physically or virtually lined outside the door to get your services. Doing good is an added value.

Many people want to do good, but they don’t always have the time to volunteer or donate. So if your product is better than what is currently on the market and doing good is at the core, you have set yourself up for success. Of course there is still the potential that it goes south, but with a solid business plan that has been validated, you are headed in the right direction.

Everyone wants to work for you In order to be truly sustainable, scalable and profitable, you will need to find the right people to work for you. In a place like Hong Kong, this is very challenging and turnover rates are high. When you start out, you may not be able to offer competitive salaries, but your social mission should convince those who want to do good. Ultimately these are exactly the people that you want to work with so the self-selection will only aid you. As you grow, more and more people will come to you and even beg you to give them a job.

My journey You are probably thinking “all good and well, but it’s not that easy.” Let me conclude this article by telling you my story.

I was an investment banker for 9 years doing mathematical modelling, and even though I enjoyed it, when I found out that

18 JUMPSTART MAY/JUNE 2016

days I’m frustrated that domestic workers continue to be in forced labour, but we have already helped over 5,000 to find a job debt-free. The workers love us and so do the employers who tell us they never hired better helpers.

We are able to do social good due to technology and we continue to innovate and find new ways to help more workers. There are 340,000 foreign domestic workers in Hong Kong and we aim to not just help all of them, but to also empower all other 11.5 million migrant domestic workers worldwide to find good employers and jobs that they are comfortable with. We dream big and so should you!

my foreign domestic worker had paid 3 monthly salaries, 21 times the legal limit, to find her job with me I was appalled.

These domestic workers leave their children behind with the hopes of providing for them and to lift the entire family out of poverty, but instead they are taken advantage of. After doing research, I found out that actually my helper had been “lucky”; she had her passport and her fee was less than average. But the issues of overcharging, confiscating passports, and forcing helpers to work for abusive employers are widespread. In fact, 95% of domestic workers in Hong Kong face some form of exploitation according to a 2016 report from the Justice Centre Hong Kong.

I investigated the current markets and realized innovation and ethics were the answer. Almost all domestic workers

find their jobs through employment agencies as they have no direct safe access to employers. Because of unethical agencies, they often end up in forced labour and what we call modern slavery. At the same time, employers are also unhappy with the agencies services and many faced hidden fees.

My business partner and I came up with a business plan that aims to eradicate illegal placement fees for domestic workers and to stop modern slavery by empowering both the employer and the helper.

We founded HelperChoice and in its early days it was a very rough model to test the market and within days we received so many signups from both employers and helpers that we realized we had found the right model. Of course we had to make some changes and we continue to innovate to offer our clients the best website to find an employer or domestic helper. There are

What are you waiting for?

There is a lot that we can do, especially in a city that is mostly left to its own devices. We entrepreneurs should not just focus on making bucket loads of money and becoming Hong Kong’s first unicorn, but instead create globally-recognized companies that make the world better.

Join us and become a change maker!

Laurence Fauchon is Co-Founder and CEO of HelperChoice.com, a social impact startup eradicating illegal agency placement fees by connecting employers and domestic workers directly. Laurence strongly believes in startups that change the world for the better.

19

Update on IoT and Innovation in Asia

by Nick Rami, Head of Validation at Brinc

From Tesla making waves with its latest autopilot updates and consumer testimonial videos, to the viral photo of Mark Zuckerberg strolling past rows of unaware individuals in virtual reality (VR) headsets, IoT is clearly a point of consumer interest. We’re now even seeing new wearables hit the market that aim to help people fight pollution and breathe easier in China with Broad Group’s Lung Pro, an armband filter that feeds purified air to a face mask.

We see consumer IoT products launch every day on Kickstarter and Indiegogo, and (for the most part) they’re improving. We’re moving past devices that are simply connected, and transitioning to complex, well thoughtout devices, such as PillDrill, a Brinc startup who recently launched a simple medication management system collecting important data with quality user experiences to improve our lives.

The innovation and shift in mindset has even influenced the manufacturing sector. In the past, Asia served as the producer of products. Today, as companies look to move up the supply chain, the number of factories open to working with startups and supporting innovation continues to grow.

Shenzhen-based Shape Prototype is a great example of a traditional manufacturer adding startup support to their services. Co-founder Amanda Hsu comes from a manufacturing family business and her goal “...is to help startups by providing the most economical and effective prototyping and manufacturing solutions.” Their openness to sharing knowledge, resources, etc., eases a massive pain all hardware startups feel in the early

20 JUMPSTART MAY/JUNE 2016

IoT. Even big names in the space such as Wearable IoT World are partnering with Asian counterparts to get involved in the budding IoT scene of Asia.

days of prototyping and manufacturing.

For example, they offer rapid custom prototyping service which has no minimum order quantity (MOQ), demonstrating their support for startups at the earliest stage. They also provide DFM analysis and cost estimation for startups at a later stage who are ramping up production and want to make sure they keep operating lean.

Remotec Technology, a 25-year-old family business, is a consumer electronics company focused on manufacturing universal remote controls (URCs) for global brands and home automation products. According to Director Jayne Law, the company is keen to support startups through a wealth of services and technology that were previously not accessible until their recent business strategy transformation. With only 50 staff, the company is focused on consumer-centric design and engineering rather than just mass manufacturing. Establishing strategic partnerships and getting involved with local competitions (Winners of the Hong Kong Institute of Engineers Competition for the “IoT Development for Smart Cities”) within their local startup ecosystem represents their desire to be more involved at the startup level.

Even more intriguing is that we’ve seen factories now who want to take on the role of the creator. Studio Dott, a well-known Belgian design firm with an office in Hong Kong, receives numerous inquiries from their Chinese manufacturing partners asking for help to design, brand, market and sell their products in international markets.

The amount of focus and activity around IoT in Asia is palpable throughout the region. Brinc, the world’s first end-to-end IoT platform, purposely set up its headquarters in Hong Kong with supporting offices in mainland China to leverage the manufacturing capabilities of the nearby Pearl River Delta. Penang, Malaysia, is a hotbed of engineering and technical talent, and they’re actively strategizing how to nurture the local demand for IoT entrepreneurship.

Maker Zoo in Bangkok, Thailand, is a makerspace focused on hardware and

The number of IoT startups beginning to plant flags in the ground here in Hong Kong continues to grow. Startups from all over the globe relocate to Hong Kong because of its numerous strategic advantages.bKello, a Brinc startup originally from France, has relocated to Hong Kong to work closely with us as the founders build the world’s first lovable alarm clock. IoT startup Eight, who created the smash hit smart mattress cover, has team members full-time in Asia to support manufacturing. Simple Wearables founder Angelo Umali, who is originally from the Philippines, decided to stick around and run his startup from Hong Kong because he saw tremendous value in the community of HK and because during the prototyping days, Shenzhen was a quick jump across the border.

© Aumeo Audio

With Q1’16 being the second strongest quarter of IoT investment to date, it’s safe to say that interest in and openness to IoT is on the rise. IoTcentric conferences are happening every week all over the globe, and IoT meetups take place everyday. We’ve seen IoT startups pop up from all over the world, and it’s exciting to see both the developed and developing markets turn to smart technology as a potential solution to solve their problems.

All of the above combined factors focus on the collaborative efforts at every stage of the startup lifecycle to give the company its best chance of survival.

The reality is that we have seen countless IoT startups unfortunately end up failing because they didn’t set up a successful foundation to begin with.

As we tell our founders countless times, building an IoT startup is unlike any other as you’re essentially building multiple businesses (hardware, software, platform) at once. If you’re serious about building your dream IoT business, it’s highly recommended you join an accelerator or investment program. Brinc, HAX, Highway1, and other hardwarefocused programs have resources, knowledge, and most importantly handson experience of the do’s and dont’s for an IoT business. Joining one of these premier programs and the invaluable insight and support they provide will save you headaches, money and, most importantly, time on your wild journey to success.

Soundbrenner

PillDrill

www.soundbrenner.com

www.pilldrill.com

Among Brinc’s fastest growing startups is Soundbrenner, developer of the world’s first music wearable, the Soundbrenner Pulse which allows musicians to stay on beat by delivering silent and punctual vibrations.

The company has raised more than $200,000 USD on crowdfunding platform Indiegogo and closed $500,000 USD in the latest seed round of funding. Soundbrenner is currently shipping globally after less than 12 months from ideation of the product.

Each year in the U.S., poor medication adherence causes 125,000 deaths and costs the U.S. more than $100 billion in avoidable healthcare spending. Many have attempted to tackle the problem with technology, but none of the efforts have gained any real traction, either because they’ve been too invasive, or too complex and required non-trivial changes to the user’s existing pill-taking habits.

Aumeo

www.aumeoaudio.com The world’s first tailored audio device, Aumeo is a groundbreaking audio product that takes audio personalization to a whole new level by customizing sound to a user’s hearing sensitivity. With Aumeo, users can enjoy audio experiences like never before for music, film and even voice calls.

Aumeo Audio has raised nearly $300,000 USD for its Indiegogo campaign and successfully raised an additional $250,000 USD from angel investors. Aumeo Audio is currently shipping globally following only approximately 12 months after ideation and product development.

PillDrill is a smart medication management system that simplifies the task of everyday pill-taking. It helps meds get taken on time, tracks what’s being taken and when, and sends real-time adherence updates to the people who matter most.

Easy to use, PillDrill adapts seamlessly to any medication routine and works whether you care for yourself or a loved one.

Just named best new home healthcare product by more than 100 top retail pharmacy buyers who previewed the device at a recent ECRM conference, PillDrill is strikingly simple to use and does not require any real change in a person’s existing pill-taking habits. It’s not a complicated piece of hardware, and it’s not an app. Instead, it offers a light tech-overlay onto the pill taker’s existing routine to provide all the benefits of a technology product without any of the hassles.

21

Are you a startup working on an

EXIT STRATEGY?

Read this first...

You’re a fledgling tech startup that wants importance of corporate governance to sell one day, but what should you -- namely getting your books in order. include in your exit strategy? Building a “If the buyer wants you, you have to great product and presenting a strong make sure your legal and accounting team comes to mind, but there are deal and the setup of your company is solid breakers in every foiled acquisition that -- because it gives the buyer a feeling you, the startup founder, may not be that you know what you’re doing and that aware of. they’re making a good investment. This We had a chat with James Giancotti, is something startups get wrong all the co-founder of seed investor Bigcolors time.” and CEO of startup ranking platform To get the legal perspective, we Oddup. In the past, Giancotti and the reached out to Dragon Law, a company Bigcolors team helped portfolio comthat offers online legal services. Their panies Taxiwise and Kiss Hugs get Head of Legal Chris Sykes shed some acquired. light on what the due diligence process While the former was an all-cash deal looks like. where reservations startup Ikky “A buyer will, normally with the help paid more than seven figures of lawyers, do thorough due diligence on to hire the Taxiwise founders, your financial records Crowd Mobile was interest“When a buyer purchases and legal and company ed in Kiss Hugs’ technology, secretarial records. Your a business, they want IP and user base. bookkeeper or acto see that the IP (trade According to Giancotti, it countant should have is actually quite rare for a buyer mark and patents) have access to well-organized to make a purchase based on and accurate financial been protected through the entire package -- they’re information,” he said, registration and proper usually either interested in the as numbers are key to legal documents. If you team or the product. He said determining your comthat Taxiwise was an acqui-hire employed a consultant to pany’s valuation. where Ikky needed an experi“You also need to create the app, then you enced team to build out their make sure you have all need to show that you had the legal paperwork in O2O (online-to-offline) model while Kiss Hugs was a strategic a legally binding agreeplace to illustrate the investment from an Australian ment with them and that story of your business company that needed access to the IP belongs to your as a well-run, compliant the Asian market. business from day one.” company, not them” Based on his experience According to Sykes, helping startups prepare to be issues during the due sold, Giancotti said that there’s diligence process don’t a number of things companies can do to always end in withdrawal from the attract buyers. buyer’s side but a common ‘deal breaker’ “The first is to build a product that is in the ownership and protection of people want and to catch the attention of intellectual property. the buyer. So there needs to be some“When a buyer purchases a busithing that stands out such as the technolness, they want to see that the IP (trade ogy or traction. Secondly, build a team mark and patents) have been protected that’s very strong, strong enough that the through registration and proper legal acquirer will want to buy the whole lot -documents. If you employed a consultant not just a few people,” he said. to create the app, then you need to show Above all, according to Giancotti, is the that you had a legally binding agreement with them and that the IP belongs to your company, not them,” he said.

Overall, Sykes said that if you’ve always maintained up-to-date financial and legal records -- then your startup is in good shape.

To give a concrete example, we reached out to Hong Kong entrepreneur Mawgan Batt, who found a buyer for her media startup The HK Hub through Facebook.

Heavily involved in a number of online communities, Batt posted that her business was up for sale and was surprised to receive a flurry of proposals. After sifting through approximately 50 offers and finding a buyer that was aligned with her

22 JUMPSTART MAY/JUNE 2016

by Iris Leung

long-term vision for her limited company, Batt then tapped into the resources of SME service provider Mango (mangossl. com) to help her prepare to sell.

“I knew somebody who came recommended by a lot of people that was a lawyer and has a business that offers consulting to small businesses, accounting software and legal framework while keeping costs low. We were able to structure it so the buyer shared our costs 50-50,” she said.

The entire process, which included drafting up a contract of sale and the transfer of directorship, cost $10,000 HKD in total -- which she was able to split with the buyer.

Hoping to pay it forward to fellow Hong Kong entrepreneurs, Batt gives a full range of advice on preparing to sell.

“You need to be really clear about what you’re selling, know your numbers and be able to talk about your business in a confident way and understand it backwards and upside down. Have a very tangible reason for why you’re selling and accept that you’re going to have some kind of involvement in the business even after you’ve sold it -- be clear about everybody’s expectations,” she said.

Also able to speak from the buyer’s perspective as Bigcolors acquired likeminded Australian startup GetViable in 2014, Giancotti shares his views on the mindset shift that Hong Kong startups should take note of. “Hong Kong companies that want to get acquired need to have an international view. The biggest buy-outs we’ve seen are from the US, UK and Australia that look at Hong Kong as a springboard into Asia -- so companies looking to get acquired should have visibility outside of Asia,” he said. “There are many companies in Hong Kong that say they’re international, but still have an Asia mindset.”

He also shared that the Bigcolors team spent nine months getting to know GetViable inside out as a company before acquiring them. So it’s worth noting that the due diligence process can take close to a year’s time.

To sum up, startups hoping to attract buyers should keep the following checklist in mind: Build a great product, grow a strong team and ensure your legal and accounting is in order. Remember that the due diligence process will be thorough and, specifically for Hong Kong startups, make sure you’re always thinking global.

The Wave

Three Keys

4 Cats Co-Business Community

Directory of Coworking Spaces

in Hong Kong

Blueprint. 16/F Cornwall House, Taikoo Place, 979 King’s Road, Quarry Bay Campfire. 4th floor, Cheung Hing Industrial Building, 12P Smithfield Road, Kennedy Town 4 Cats Co-Business Community. Unit 1101, 11/F, Eastern Centre, 1065 King’s Road, Quarry Bay Central Park. 11/F Daily House, 35-37 Haiphong Road, Tsim Sha Tsui, Hong Kong.

Cocoon. 3/F Citicorp Centre, 18 Whitfield Rd, Tin Hau The Coffee House. 10/F Aberdeen Industrial Bldg, 236 Aberdeen Main Road Coffice. Unit 1101,11/F, Tower 1, Cheung Sha Wan Plaza, 833 Cheung Sha Wan Road, Lai Chi Kok, Kowloon Cowork CHM. Unit B, 4/F, Mackenny Centre, no. 660 Castle Peak Road, Kowloon Cowork CHM. Flat 2, 7/F, Kiu Kin Mansion,No 566 Nathan Road, Mongkok, Kowloon The Crafties. 1/F Sing Kui Commercial Building No. 27 Des Voeux Road West, Sheung Wan Cyberport Smart-Spaces. Units 1205-1208, level 12, Cyberport 2, 100 Cyberport Rd, Telegraph Bay The Desk. 511 Queen’s Road West DumSumLabs. 14/F, 100 Jervois St., Sheung Wan Fashion Farm Foundation. Unit A, 9 & 10 Floor, D2 Place, 9 Cheung Yee Street, Cheung Sha Wan, Kowloon Garage Society. 9F, 33 Des Voeux Road Central Garage Society. 299QRC, 299 Queen’s Road Central, 19/F The Good Lab. L1, The Sparkle, 500 Tung Chau Street, West Kowloon The Good Lab. 5/F, Le Prabell Hotel, 372 Portland Street, Mong Kok, Kowloon HaHaHub. 18/F., Block B, Tung Luen Industrial Building, 1 Yip Shing Street, Kwai Chung The Hive. 21st Floor, The Phoenix Building No.23 Luard Road, Wan Chai The Hive Kennedy Town. 6F Cheung Hing Industrial Building, 12P Smithfield Road, Kennedy Town The Hive Sai Kung. Tai Mong Tsai Road, Sai Kung Hong Kong Commons. 25th/27th Floor, Workington Tower, 78 Bonham Strand, Sheung Wan The HKFYG Jockey Club Social Innovation Centre. 11B-E, Genesis, 33-35 Wong Chuk Hang Road The Hub. 1F, Fortune Building,150-158 Lockhart Road, WanChai, Hong Kong Hub PMQ. 7th floor of Staunton. No.35 Aberdeen Street, Central Idea Lab @ HKSTP. 2 Science Park West Avenue Hong Kong Science Park, Shatin, New Territories Incu-Lab Space. Unit 2102, 148 Electric Road, Tin Hau Three Keys. 907 Paramount building 12 Ka Yip Street Chai Wan The Loft. Tontex Industrial Bldg, 2-4 Sheung Hei St, San Po Kong Makerbay. Yau Tong Industrial Building Block 2, Sze Shan St, Yau Tong Makerlab. Unit H, 2/F, Tung Kin Factory Building, 200-202 Tsat Tsz Mui Road, North Point Missolink. Unit B. 12th Floor, King Yip Factory Building, 59 King Yip Street. Kwun Tong, Kowloon Ooosh. Rm 803, 8/F, Lai Cheong Factory Building, 479 Castle Peak Road, Cheung Sha Wan, Kowloon Paperclip. 3/F, Nam Wo Hong Building, 148 Wing Lok Street, Sheung Wan Playground.work. 1/F, 244-248 Des Voeux Road Central Retro Spot. Unit 4H, Tung Kin Factory Building, 200-202 Tsat Tsz Mui Road, Quarry Bay Smithfield Collective. 5F Cheung Hing Industrial Building, 12-P, Smithfield Rd, Kennedy Town TGN KT Innovation Hub. 118 Wai Yip Street, Kwun Tong, Kowloon TGN CWB Workhub. 23/F Island Beverley, 1 Great George Street, Causeway Bay TGN Central Workhub. 8A Winning Centre, 46-48 Wyndham Street, Central TGN TST Workhub. 4/F Yes & Right House, 1-3 Mody Road, Tsim Sha Tsui, Kowloon Uno Co-working. 6/F, Central 88, No.88-98, Des Voeux Road Central Uno Co-working. 10/F, Dawning House, 145 Connaught Road Central Uno Co-working. Rm 706-707 JD Mall, 233 Nathan Road Jordan Kowloon The Wave. 10/F, 4 Hing Yip Street, Kwun Tong Wynd. Room 10/F, Room 1003, Yu Yuet Lai Bldg. 43-55 Wyndham Street, Lan Kwai Fong

For an up-to-date list of coworking spaces, photos pricing and a map, visit www.jumpstartmag.com or scan the QR code.

23

© Hank Terrebrood

H

ong Kong’s FinTech Ecosystem ALMOST 3 YEARS IN THE MAKING, BUT WHAT’S NEXT?

Hong Kong FinTech development is almost three years in the making. When Accenture announced its local version of their Innovation Lab (their Application is currently open for the 3rd batch) back in July 2014, what FinTech meant to the public and banks was still unclear. Fastforward to today and Hong Kong is host to three FinTech Accelerators, the latest of which was recently featured here in Jumpstart Magazine.

This increased activity reflects a combination of private sector developments as well as public sector support. Indeed, Invest HK has been looking for a dedicated FinTech team with new staff covering Asia, Europe, and North-America. The Financial Services Treasury Bureau (FSTB) has published its FinTech report, one year after the creation of its committee. Regulators have established their FinTech Contact point, such as the Securities & Futures Commission (SFC). Academia is also preparing the next generations of graduates to hold the right skill sets, The University of Hong Kong has FinTech courses at an MBA, Certificate level and one of its academic public (co-authored with the University of New South Wales) entitled The Evolution of FinTech, has recently been picked up by the New York Times. Finally, Hong Kong will be hosting its next large-scale FinTech conference on the 30th of May. The above reflects the fact that Hong Kong is naturally a FinTech hub given its combination of human and financial capital it derives from being Asia’s first financial center. However, there is another element that fuels Hong Kong’s growth.

24 JUMPSTART MAY/JUNE 2016

As the FinTech ecosystem matures and information becomes increasingly shared across hubs, the center of gravity of FinTech activity is gradually but surely moving East. The recent Accenture survey exemplifies this with a four-fold increase in investment last year reaching US$3.5 billion. Regionally governments are also stepping up their game; the Monetary Authority of Singapore (MAS) is holding a week-long FinTech Festival, and the Australian government has issued its own policy report on FinTech.

The latter is perhaps the most important and interesting read that the region has seen. First of all, the focus is on data.

Whilst the definitional problem around FinTech still exists, it seems that there is room to develop a new paradigm in our understanding by talking about TechFin instead. This is not a play on words because, if understood correctly, it fundamentally changes how we expect the future of finance to look and who will be at its core. In that respect, the CEO of DBS recently made it clear that his competition is Alibaba rather than another traditional bank.

This has deep consequences both in terms of human capital and regulation.

If we accept that banks are FinTechs (in that they are financial services firm using technology) and that Alibaba is a TechFin (e.g. online e-commerce platform doing financial services) the question is not that the end product they do is the same (e.g. a loan), but how do they create, handle, originate and maintain the product as well as what the experience is for the user. We are moving from a “Know-your-

By Janos Barberis

Customer” mindset to a “Know-YourData” era. Bank’s wealth is their balance sheet whilst for tech firms it’s their data and IP to extract value from. Data privacy becomes a bigger stake than deposit insurance scheme and this is crucial in a context where the millennial generation is data rich but cash poor.

Hong Kong is going up this learning curve as we speak whilst other jurisdictions like China or India have already leapfrogged the future way of doing finance. Venture capital money, which is so often quoted in headlines of news stories, has created a success story in part, but mainly contributed to turning the entrepreneurial world into a massive Research & Development center led by startups. Founders have explored and evaluated what works or doesn’t, and now they benefit from a solid foundation (e.g. public awareness, staff training, investor sharpness) on which they can build and grow their (next) ventures.

We are at the start of a 20-year cycle in FinTech and we would be fools to say we truly know where this is going. Indeed, Amara’s law says that we tend to overestimate the effect of a technology in the short run, and underestimate the effect in the long run.

Let’s conceptualize this trend instead of focusing on the ability of a product to scale to market. This will provide a better capacity to understand where we are heading instead of being regularly disrupted by the velocity of news and innovation.

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Best Mobile App Award Winners 2016 Organized by Hong Kong Wireless Technology Industry Association (WTIA) for tenth year, the Hong Kong ICT Awards: Best Mobile Apps Award aims to recognize and promote outstanding local mobile and wireless technology inventions and applications. There are eight categories under the Hong Kong ICT Awards 2016 with one Grand Award in each category, and the Grand Award for the “Best Mobile Apps Award” went to Storellet, a loyalty app.

For a full list of winners, links and photos, visit jumpstartmag.com

26 JUMPSTART MAY/JUNE 2016

Storellet Loyalty Platform

CPSL Mobile App

Storellet solves the problem of too many loyalty cards and apps. Unlike traditional loyalty systems, the platform is able to integrate with the majority of restaurant POS systems, and through this integration, merchants can streamline the earn-and-burn bonus point process.

Carwash is a mobile app that provides on-site car washing and detailing service utilizing retired, unemployed and underemployed workers.

CPSL Mobile App is a customer-centric application facilitating cargo terminal users for proactive monitoring of their shipments. Acting like an assistant, the functions integrate seamlessly with users’ daily work flow with the brandnew interactive experience. Users can make inquiries through the artificial intelligence (AI) virtual help desk; plan their tasks according to a personalized agent inventory list; receive push notification for shipment status change on mobile devices and wearable; perform shipment tracking; and share shipment information instantly at their fingertips.

RTHK Vox

Genie

RTHK Vox is a mobile app that capitalizes on the popularity of Karaoke and selfies. It crowdsources videos and lets audience partipate in choosing who will be featured on TV, apps or web.

Genie is a recruiting marketplace that connects businesses to an extensive network of temporary job-seekers.

The app tackles the pain of hiring temporary workers, which traditionally involves third-party hiring agencies, whose operations are less transparent, less efficient and are plagued with hidden costs, and the reliability and quality of workers are also in question.

By replacing agencies with cuttingedge technology, the app enables businesses to confidently source quality temporary workers.

CarWash.HK

Group Buyer App Group Buyer is a mobile app that helps business gain new customers through group and repeat purchasing. The app can push e-Coupons to nearby customers within 50 meters using iBeacon technology.

27

What startups does Free Startup Event HK need?

Press Release Calendar & Submit/find ideas Submission DIY Submission Entrepreneurs Directory Free Banner Ad Design Pay What With Booking You Want Print Classifieds Free Magazine Online Personal Business Subscriptions Classifieds Comprehensive Online Article Free Business Coworking Submission Magazine Barter Directory Open to Event Copies at Faceook Community Space 350 locations Page Finder Print Ads from $1500

Interview with Leo Tumwattana, the CEO and creator of Sorted, a fast task management iOS app with patented swipe gestures.

You have patented some swipe gestures for your new app Sorted. Why did you decide to do that?

I didn’t start off with the intention to patent any gestures. I was obsessed with finding a better way to stay organised. One day I was having lunch with some friends and I showed them an early prototype of Sorted. During the chat, I blurted out, why can’t we select multiple things in one swipe? I caught myself mid-sentence and remembered how the pullto-refresh gesture was patented. I got curious, bought a book - Nolo’s Patent It Yourself - and started digging into the subject.

Q: What is involved in filing a patent and how long does it take?

This can turn into a very long question. Basically there are three types of Patents: Utility Patent, Design Patent, and Plant Patent.

What most people have in mind and what I applied for is a Utility Patent. After understanding the types of patents, you then have to do a bit of research into what similar inventions are out there and whether your idea is patentable. To qualify as patentable, patent laws usually require the invention’s subject matter to be a Novelty, Non-obvious, Useful.

The details of patentability is not difficult, but can be vague. Nolo’s Patent It Yourself covers this well in simple terms. I highly recommend this book.

In total, I think I spent two to three months going through the process, which I think was a great learning experience.

Q: How much does it cost?

The filing fee for a US patent is only about USD $130. The real cost comes from drafting the patent and creating the technical drawings. Depending on how complex your idea is, the cost for drafting a patent and doing the technical drawing can be between USD $5,000 and tens of thousands.

What I did was write up an initial draft of the patent and create the technical drawings. I then gave it to my friend David Lee who is a registered US patent agent to polish.

He recommended that I apply for the Patent Application Grant (PAG) from Hong Kong’s Productivity Council which helped cover 90% of my patent fees (HKD $120,000). So, in total, I spent less than HKD $30,000 personally to obtain my patent.

Find the complete interview, visit Jumpstartmag.com

28 JUMPSTART MAY/JUNE 2016

Caption Contest #5

Caption Contest

“Your Caption Here” We provide the image, you provide the funny caption.

Enter by emailing info@jumpstartmag.com with subject line “Jumpstart Caption Contest.”

Deadline for submission is June 1, 2016.

The prize for the winning entry is a

2-night stay at Ovolo Southside Valued at $6,600 HKD

The winning caption will be announced in the next issue of Jumpstart and on jumpstartmag.com. Please read “Caption Rules” on Jumpstartmag.com for terms and conditions, and by submitting your caption all entrants agree to these rules.

30 JUMPSTART MAY/JUNE 2016