The View | Hong Kong needs to throw more caution to the wind when it comes to backing start-ups
The biggest problem is an acute shortage of angel investors and seed money available, even before any venture capital money becomes involved – we need to take unconventional risks to succeed
The Hong Kong government is trying to transform the economy from its traditional to a new innovative economy, but doesn't realise that creative failure rather than cautious success will lead the way.
Last week, Hong Kong launched its HK$2 billion (US$256 million) Innovation and Technology Venture Fund (IVTF) to encourage investment in local innovation and technology start-ups in an effort to improve economic activity.
The government is inviting venture capital funds to apply to become co-investment partners of the new fund, said Nicholas Yang Wei-hsiung, the Secretary for Innovation and Technology. The government will only make investments alongside VC funds.
The government is risk averse even though it needs to take more risks to build Hong Kong’s new economy. It does not want to directly and autonomously choose which investments to make because historically, civil servants do not want to take responsibility for losses.
High net worth investors prefer to make bigger investments in bigger, non-listed companies.
But many start-ups are looking for less than a million US dollars, more like US$500,000 to roll out their product after a few years of development or angel money of US$100,000 to begin a business
Yet successful venture-capital investing requires the ability to accept and learn from losses. So the IVTF is depending on venture capitalists to do the due diligence and cover the bureaucrats’ collective reputations.
