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Cocoon's Theodore Ma (left) with the winning team from Notey.

Rise of the geeks: Hong Kong's young entrepreneurs plot a tech revolution

Traditional Hong Kong investors are paying more attention as a growing number of young entrepreneurs in the city plot the next tech revolution

JUNE SUN

The atmosphere at this tech start-up pitch night feels like the geeks have finally become the coolest kids at the party.

On a Thursday evening in August, nearly 200 developers, programmers, and investors converge on Cocoon, a co-working space in Tin Hau, to listen to business ideas presented by six budding companies.

The winner, Notey, a topic-based, searchable platform for the blogosphere, took home HK$20,000 in seed money. In the industry that spawned Dropbox and Airbnb, this is pocket change, but it is a crucial step in being recognised by the technology community.

Cocoon, founded just two years ago, is one of about 40 co-working spaces that have sprung up in Hong Kong in the past four years. It is evidence of the rapid globalisation of start-up culture, where eyes, and money, around the world are searching for the next Mark Zuckerburg.

Co-working spaces provide office space, lightning fast Wi-fi, a 3D printer, and most importantly a community of partners and investors for aspiring entrepreneurs who often have nothing but a laptop and an idea.

"An app is not just an app. An app is a business," says Raymond Yip, co-founder of Shopline, an online platform enabling individual merchants to set up shop. Yip met his co-founder, Tony Wong, outside the elevator at Cocoon.

Last year, Shopline took the top prize at Cocoon's pitch night final. Three months ago Shopline was accepted by 500 Startups in California, ranked by as one of the top 10 business incubators in the world.

Yip, Wong and Shopline's chief operating officer Fiona Lau are among a growing group of young professionals who quit their jobs to seek out the fast-paced rewards of the start-up life.

"There is a new generation of young people coming back from university in the UK and the US, and they like disruption and technology," says Simon Squibb, founder of Nest, Hong Kong's first ever business incubator. "By 2010, it was no longer cool to give out cards saying you worked for a bank."

Founded in 2010, Nest provides funding and professional guidance to start-ups who successfully pitch to their team. Over HK$25 million has been invested in Nest's portfolio of companies, and Squibb says the plan is to inject over HK$100 million into Hong Kong's start-up scene.

This growth supports predictions such as the one made by last year when it named Hong Kong the No1 tech capital to watch.

For a lot of start-ups to succeed here, they need to be portrayed as Goliath
Theodore Ma, cocoon

Yet as explosive as the tech scene in Hong Kong may seem, the city is actually small in scale compared to tech hubs such as the San Francisco Bay Area, London, or Singapore.

"Frankly, Hong Kong is a victim of its own success," said Squibb. "For years, Hong Kong has done so well. Property [prices] and the stock market were going up and up. People could get a job in banks so easily, which can actually be a bad thing."

London "felt the pain more immediately" with the crash in 2008, he added, whereas Hong Kong stayed buoyant for longer because of mainland China. But now, people are looking beyond the comfort of a job in Hong Kong's traditionally powerful sectors.

"Hong Kong could really lead this - we could own this movement," said Squibb. "This is a revolution."

"In Hong Kong, entrepreneurship is part of the culture," said Vernée Ho, co-founder of Playto, an 18 month old video game development company with a product that can help children improve their concentration skills, and in which Nest invested in March. "We've always known how to do things mean and lean," says Ho.

Perhaps because razor sharp business acumen is inherent to Hong Kong's culture, it does not need to import that culture wholesale from Silicon Valley. Old hands in the city have already recognised its potential. Cocoon was founded by the Ma family, who run the successful MaBelle jewellery business.

When Max Ma, chairman of MaBelle, told his son, Theodore, to use the 14,000 square foot family property to start a co-working space in 2012, Ma Junior warned his father that he was not going to make any money for a while.

"He said you know what? It's the right thing to do," recalls Ma.

Cocoon's membership starts at HK$1,000 a month, a low barrier of entry in a city known for sky high rents. It has approximately 150 members and its entrepreneurs have received over HK$18 million in funding from investors they have met through the space.

Establishments like Cocoon and Nest are not only providing opportunities for entrepreneurs, but they are changing investor culture.

"In Hong Kong, if you are investing, equity is just so readily available," says Ma. "If I wanted something high-risk and high-return, I could literally just hop over to Macau."

There are going to be more consummated venture deals in Hong Kong this year than ever before, according to the Hong Kong Venture Capital Association. This may be a sign that the city is finally about to unleash some of its formidable financial resources on this rapidly expanding sector.

"We're getting a lot of requests from angel investors asking how they can do it," says Squibb.

"We have to entice them with these new ideas," adds Ma, who tries to link his own network of traditional Hong Kong investors to Cocoon's start-up entrepreneurs. "For a lot of start-ups to succeed here, they need to be portrayed as Goliath, not David."

Aside from money, infrastructure is vital for the success of tech start-ups. Here again, Hong Kong has the potential to thrive.

All the things that made Hong Kong a powerful financial centre, such as its proximity to easy manufacturing and its world-class logistics, also add to its strengths as a tech hub.

"Today you can build a company anywhere in the world. Why not build it in Hong Kong, which has low tax, is close to India and China, and is a safe and nice place to live?" said Squibb, adding that Hong Kong is far more international than most cities in the world.

"From day one people in Hong Kong are thinking global, which is a huge advantage," said Squibb.

"That is a huge difference to the United States, for example, where most people haven't left the country."

Yip echoes this sentiment for Shopline: "It has to be a global play."

Yet perhaps the single most important challenge for Hong Kong to become the next big tech hub is talent.

In past years, young people with the business and software skills necessary for a thriving tech scene often either left Hong Kong, in what Squibb calls a "quiet brain drain", or they pursued careers in well-established sectors such as law, property or finance.

This exhibits itself in problems with recruitment, something both Shopline and Playto have experienced.

"It's not necessarily true to say there is no talent here," says Yip. "But if I'm a great developer, I can go work for Goldman Sachs, I can make hundreds of thousands of dollars - why would I come work for you?"

For Lau, it's all about organic growth, and for young people to be encouraged. "For the tech and start-up scenes to really grow vibrantly, you need more young people out there to just give it a go," she says.

A nurturing culture can create a large talent pool earlier. This is easy to see in Ryan Lee, a 16 year old entrepreneur, who moved to Hong Kong from San Francisco three years ago, and now attends Sha Tin College.

He co-founded BeMei, an online platform connecting Chinese consumers to South Korean cosmetic surgery hospitals, which received third prize at Cocoon's pitch night. He taught himself to code, and has been programming for years.

"There are kids back [in California] that are building iOS apps at 11-12 years old," says Lee, who shrugs off people's astonishment at his age.

It is perhaps this kind of internalised culture in young people that Hong Kong's tech start-up ecosystem has been waiting for, since young people like Lee are still rare in Hong Kong.

"The education system is not graduating students with these skill sets," says Ho, who adds she has struggled to hire world class developers in Hong Kong.

Universities in Hong Kong have started addressing this issue. Earlier this year, for example, the Chinese University partnered with Google to launch Empowering Young Entrepreneurs, a programme to train and mentor young entrepreneurs.

The idea is to inspire young people to feel they can achieve success through entrepreneurship, a sentiment that Ma said has been dwindling since the 1980s, when "a lot of people still felt that one day they can become like Li Ka-shing".

But the image to aspire to in 2014 is no longer the tycoon. A line of code and a business idea is a far easier starting point for young people.

"If you're willing to accept change, it's very exciting," says Squibb. "All the ingredients are already there for Hong Kong - all it really needs is that mindset shift. When people do it, they never turn back."

This article appeared in the South China Morning Post print edition as: When geeks are given wings to fly
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