HK can be launchpad for SE Asia startups looking to tap China: Cindy Chow, Alibaba HK Entrepreneurs Fund

(L-R) Rachel Lau moderates a fireside chat with Helen Wong and Cindy Chow at DEALSTREETASIA's Asia PE-VC Summit 2018 in Singapore.

As competition among startups heats up in China, Hong Kong can be a good launchpad for Southeast Asian startups looking to expand in this part of the world, especially in manufacturing, trading, logistics, and services sectors, according to Cindy Chow Lok Mei-ki, executive director, Alibaba Entrepreneurs Fund.

“China is a big market for local startups. Competition in China can sometimes push or scare away SEA startups from investing here, and hence Hong Kong can be a good launch pad,” Chow said in a fireside chat at DEALSTREETASIA’s Asia PE-VC Summit 2018 on Wednesday. She said that competition in Hong Kong, which has a population of 7.3 million, is relatively moderate compared with Beijing and other large cities in China.

Chinese e-commerce giant Alibaba launched the fund in 2015. It now has set up two separate funds in Hong Kong and Taiwan respectively to support entrepreneurs with investment capital and strategic guidance.

“China has a huge mobile internet users’ base, and entrepreneurs are sitting on more heavy capital and technology. Competition is so intense in China that if you don’t innovate, you are finished,” added Helen Wong, Partner at Chinese venture capital firm Qiming Ventures.

As per the Global Competitiveness Report 2017-18 by World Economic Forum, Hong Kong is endowed with the world’s best physical infrastructure, supported by strong and stable financial markets. With roughly 2,000 early and late-stage startups, the city’s proximity to Mainland China gives companies a competitive edge, said another report.

“Hong Kong is very advanced in terms of finance, infrastructure, educated workforce, logistics, and innovation. Good teams can make good use of the place,” Cindy added. “A lot of entrepreneurs in Singapore are connected with Hong Kong, which can be used as a platform to tap the China market.”

Hong Kong launched an HK$2 billion (about $255 million) Innovation and Technology Venture Fund almost a year ago with the aim of encouraging venture capital firms to co-invest in local innovation and technology startups. The fund recently announced five venture capital funds as co-investment partners for identifying investment targets and making investment proposals to the government.

Asked if the ongoing trade war between China and the US can be favourable to Southeast Asia, Wong said, Chinese investors are less active now in Silicon Valley than a few years ago, and she foresees more Chinese strategic investors looking at growth opportunities in Southeast Asia.

“We are interested in opening an office here soon. We are very strong in China in the areas of content, entertainment, e-commerce and healthcare. Going ahead, we will see if some models of those businesses can be replicated for startups in SE Asia,” she added.

Qiming Ventures led a $30-million round for Indonesia’s fintech startup Akulaku last year. The firm closed three funds this April totalling $1.39 billion, with a focus on investing in Chinese and US tech and healthcare firms, bringing total funds under management to over $4 billion across 12 vehicles.