HK startups walking from myths to growth

【GOGOVan】This blog is written by a student from Baptist University of Hong Kong. She wrote from the successful local startup case Talkbox to share HK startup situations as an observer. With the interview of GOGOVan, she  introduced our unique experiences to readers.

By LYNN LIU
Jacqueline Chong heard a lot about “startup legend”—a tech startup pitched ideas to investors without drawing out a business model, still gained HK$2 million venture capitals.
It happens frequently on the media, but doesn’t reflect the whole picture, said the chief marketing officer of Green Tomato, a mobile application service provider based in Hong Kong.
Outsiders see the boom of tech startups in Hong Kong in terms of recent years’ heated fundraising, while insiders are wary that misunderstandings about the industry could lead to an abnormal ecosystem.
In fact, a lack of investment in the industry was identified as a limiting factor for entrepreneurs in the city, according to a study by the Chinese University of Hong Kong Centre for Entrepreneurship and Google released earlier this month.
As one of the apps that had raised fund, Green Tomato’s TalkBox was once within a foot of so-called success.
TalkBox, the world’s first voice messenger app, is an experimental product and Green Tomato, the provider mainly focuses on outsource services, hadn’t thought about how to maintain it, let alone knowing it would be a hit.
Therefore, when users of Talkbox reached 1 million and Tencent extended the olive branch to them, the team was dragged in a daze, said Chong.
Talkbox didn’t accept the mainland tech giant’s investment, but its innovative push-to-talk function inspired WeChat, which latter became the Holy Grail of Tencent in mobile instant massaging.
Yet the team had never regretted about the choice, knowing getting would be at a cost of losing, Chong said.
“Outsiders just saw we give up a substantial investment, but they never knew that in a deal, we must consider stake holding and business model rather than only money,” she said.
Chong has been in the industry long enough to know that startups come and go—they easily got busted even after raising money.
In the Google and CUHK study, only 8 percent of local entrepreneurs stated securing venture investment as the major source of seed capital.
Likewise, in a fundraising record collected by the Startup Grand Line, a local startup community, 34 local startups had been invested since November 2013, while 22 out of them are still at Series Seed and Series A.
She expressed concern that startups built from the beginning with a short-term exit strategy but without a sustainable business model would destroy the local innovation ecosystem that has not yet been mature.
“They would give our industry a bad name,” She said, explaining that the strategy won’t give investors confidence on the project

Within two years since it launched, GOGOVan has expanded Taiwan, Singapore and Malaysia markets and is going mainland. “Our trick to localize products overseas is to hire locals to explore the market.”

 
Reeve Kwan, co-founder of GOGOVan, agrees, “Profit-driven mindset doesn’t produce game changers, while idea does. And execution is the key to success when two came up with the same idea.”
 
GOGOVan, the online-to-offline van calling app, stands out from the similar ideas—it has gained US$10 million investment from mainland’s social networking giant Renren and expanded to Taiwan, Singapore and Malaysia in two years since it established.
The co-founder and chief technology officer of the local “Uber for logistics” said the formula of GOGOVan is the composition of determination and product-oriented mindset.
Kwan and two other co-founders spent two months on combing industrial areas citywide where drivers congregate, gathering information of the market as well as pitching ideas to van drivers.
“In the early stage, some drivers didn’t take it seriously and some—usually the older ones—even didn’t know how to use smartphones, so we taught them to use the app step by step,” Kwan said and stressed that the importance of customer experience and an large users base.
As a Cyberport incubate, GOGOVan received HK$100,000 from the Cyberport Creative Micro Fund after it launched.
Seeing Hong Kong ideally suited to be a major regional startup and innovation hub, Hong Kong governments also introduce similar schemes to improve the startup ecosystem.
In his 2015 budget speech, financial secretary John Tsang Chun-wah expanded the Hong Kong Mortgage Corporation’s micro-financing scheme and injected HK$5 billion into the Innovation and Technology Fund.
Burning money, however, could not help boost innovation, said Chong.
Chong cited Singapore as a counter example and said the country has no named tech startups and faces homogenization despite its government keeps pumping money into the industry.
“Hong Kong has an OpenRice, but Singapore could develop 10 OpenRice-like apps,” she said.
Raymond Chu, Assistant Professor of Institute for Entrepreneurship of Hong Kong Polytechnic University, shared the similar opinion, “The ecosystem in Silicon Valley, the world’s innovation hub, was built on the combination of universities, startups, large companies, venture capital and infrastructure, while government just plays a supporting role.”
With its technical savvy, low taxes and strong legal system, the city is competitive to be the regional innovation hub, but still has to remove policy barriers and cultivate related talents, said Legislator Charles Mok, who represents the information and technology sector.
Meanwhile, Mok suggested local startups should work to build a healthy ecosystem and go global, rather than dragging their heels counting on the government.
In fact, between 2007 and 2012, local startups received 16 percent of institutional investments made by U.S.-based corporations against 3 percent in the city, the Google and CUHK study has found.
AppTask was one of the local startups that turn sights to the U.S. after its enterprise communication app, TeamNote, was baked and invested by Y Combinator , the famous Silicon Valley’s startup incubator.Roy Law believed that small startups could make what the mass market wants.
Roy Law, the co-founder and CEO of TeamNote, was currently wrapping up three months in Silicon Valley with his team, consulting with YC about optimizing the product.
As TeamNote explores the U.S. market, Andrew Leung, the chief operating officer of the startup, said local startups are facing similar hurdles of enhancing work-of-mouth and localizing products.
Yet Law said he has learnt the trick of removing the obstacles during the time in YC –make something people want, adding that he’s sharing this motto along with the culture in Silicon Valley with other local startups.
All people are willing to share in Silicon Valley, which differs from Asians who are afraid their ideas will be copied, Law said.
However, no geographical boundaries are in tech industry, Leung said, referring to some local startups’ hesitation of expanding mainland market out of shanzhai anxiety.
“It’s inevasible to be copied, but I see it as recognition of our competitiveness,” he said.
Kwan also holds a positive view on going mainland when facing potential competitors– Leading mainland taxi-booking apps Kuaidi and Didi.
As for TalkBox, which has long been considered as victims of shanzhai, Chong said she would not resist cooperating with mainland investors while being cautious towards expanding mainland market.
“Local startups should not go mainland unless knowing its niche market well.” She suggested.
Despite these misunderstandings, the Hong Kong startup ecosystem has grown by almost 300 per cent since 2009, and youngsters are positive in taking on the entrepreneurial journey, according to the Google and CUHK study.
Insiders said though the progress may be slow, a stably growing momentum has been seen.
Chong still sees Hong Kong a good place to foster creative products since growing numbers of local startups would like to be game changers.
Source:Prism
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