2018 2019 2020 2021
SURVEY BACKGROUND

Hong Kong has continued to make good progress in its journey to becoming a dynamic and vibrant start-up location during the past year, despite the disruption created by the COVID-19 pandemic. This year’s Transforming Hong Kong Through Entrepreneurship study uncovers how the pandemic has highlighted the valuable role entrepreneurs play in the economy, as well as their agility to respond to changing market conditions and adapt their products and services to meet new needs.

Based on interviews with key players in the start-up ecosystem and our survey findings, the 2020 report builds on the two previous studies to assess how Hong Kong's start-up ecosystem is developing, to identify gaps in support and potential solutions to challenges. It also provides analysis and uncover trends of venture capital funding of Hong Kong's entrepreneurial landscape.

134
Hong Kong-based entrepreneurs/start-up executives
78%
founders
22%
non-founder executive
53%
growth stage
44%
early stage
3%
mature stage
TOP SECTORS REPRESENTED
32%
Technology
10%
E-commerce/retail
7%
Education
7%
Healthcare/Medical
6%
Banking
4%
Professional Services
4%
Entertainment/Tourism
200
Hong Kong-based corporate executives
55%
previously worked in a start-up (35% as founders, 20% as an employee)
69%
C-suite executives (35% CEO; 34% other C-suite)
87%
Department head or above
TOP SECTORS REPRESENTED
16%
Professional services
13%
Technology
8%
Banking
7%
Manufacturing
6%
Public sector or NGO
866
Hong Kong-based university students
92%
Undergraduate
1%
Postgrad (PhD)
3%
Postgrad (Masters)
4%
unspecified
67%
have considered working for a start-up
4%
actively operate/work for a start-up
2%
previously founded/worked for a non-active start-up
27%
have not considered working for a start-up
TOP SECTORS REPRESENTED
67%
Business/Commerce/Economics majors
17%
Science/Technology/Engineering
13%
Arts/Social Sciences/Humanities
3%
Others
Surveys conducted by KPMG and Alibaba Entrepreneurs Fund in collaboration with YouGov on June 10 – July 31, 2020
KEY FINDINGS
01
COVID-19 has highlighted the irreplaceable value of Hong Kong entrepreneurs

Our study suggests a significant number of start-ups and corporates have had to adjust their operating models in the post-pandemic economy. However, start-ups appear to be more agile and flexible in adapting their business models in response to changing demand and market needs, enabling them to take advantage of emerging opportunities:

  • 34 percent of entrepreneurs have seen increased demand for their products and services amid the pandemic, compared to 19 percent of corporates
How entrepreneurs and corporates have adapted to new realities during the COVID-19 pandemic
Percentage of respondents who agree with the following statements
ENTREPRENEURS
CORPORATES
My business has had to re-calibrate its operating model
My business has had to respond to an increased demand for products/services
My business has had to scale back its operations or put plans on hold
COVID-19 has not had a significant impact on my company’s business model or operations
Source: KPMG survey analysis
  • Approximately 50 percent of entrepreneurs polled say their organisations are collaborating to develop new products and services or are assisting the government in its pandemic response
Top digital transformation priorities for entrepreneurs and corporates in the current environment
Percentage of respondents who listed the below as top three priorities
ENTREPRENEURS
CORPORATES
Increase online sales channels
Diversify supply chain
Enhance business continuity planning
Review cyber security measures
Remote working capabilities
Source: KPMG survey analysis
Respondents could select up to three priorities
  • A majority of entrepreneurs and corporate executives surveyed agree start-ups are instrumental to develop new ideas, keep society dynamic and future-ready, provide opportunities for young people, and create job growth and upward mobility
Views on the role start-ups play in society
Percentage of respondents who mentioned start-ups play a major role in the following areas
ENTREPRENEURS
CORPORATES
Developing new ideas
Creating opportunities for youth
Finding solutions that address societal needs
Keeping society dynamic and ready for future
Diversifying the economy
Creating jobs
Providing career paths for people with different skills and mindset
Solving problems for other corporations
Source: KPMG survey analysis
Respondents could select up to three priorities
KEY FINDINGS
02
The pandemic has made purpose top of mind for organisations

The COVID-19 pandemic has highlighted how an impact-driven approach can create value while benefitting society:

  • While start-ups have traditionally had a strong sense of purpose, the pandemic is contributing to a mindset shift among corporates, leading to collaboration opportunities for start-ups
  • An increased number of social and corporate incubation programs are specifically supporting impact and purpose-focused start-ups
  • Encouraging the pursuit of purpose and fostering an entrepreneurial mindset across organisations and society more generally is critical for the continued development of Hong Kong’s ecosystem
  • More success stories are needed to encourage the acceptance of entrepreneurship as a career path, with less than one-third (32 percent) of students in our survey agreeing that Hong Kong has sufficient entrepreneur role models
KEY FINDINGS
03
Hong Kong’s venture capital landscape is maturing, with increased government support also making a positive impact

In the 2019/2020 financial year ending 31 March 2020, the number of venture capital (VC) deals increased to its highest level on record:

  • A total of 140 private venture capital deals were conducted with HKD10.89 billion invested during the 12 months, with a median deal size above HKD 10 million for the third consecutive year
  • Hong Kong start-ups continued to attract mega deals*, with such deals attracting HKD 3.29 billion in FY 19/20
  • Late-stage venture capital deals accounted for 61 percent of all private venture capital funding during FY 19/20 – a further sign of maturity in the VC landscape
  • Government VC funding, grants, and incubation programmes in FY 19/20 increased roughly 83 percent year-on-year to HKD 8.27 billion, representing 43 percent of total investments and funding received by start-ups in Hong Kong
  • A majority of entrepreneurs polled are still relying on informal funding sources. Among those not using government funding, 35 percent mentioned cumbersome application processes as a key barrier, suggesting the need for further streamlining

* For this study, “Mega deals” are defined as deals over USD 200 million (HKD 1.55 billion). In FY 19/20, there were 2 “mega deals” totalling HKD 3.29 billion.

Total capital invested in Hong Kong start-ups (HK$M) and number of deals*,
FY 13/14 through FY 19/20
Private Venture Capiital
Government Incubation Programmes
Government Venture Capital
Total Number of Deals
Total capital invested (HK$M)

*Total capital invested and deal count includes private venture capital + government venture capital, grants and incubation funding directed at start-ups in Hong Kong

Source: KPMG analysis based on data provided by Alibaba Hong Kong Entrepreneurs Fund, Cyberport, Hong Kong Science and Technology Park, Pitchbook, and public data from the HKSAR Innovation and Technology Commission.

Private VC funding directed to Hong Kong start-ups by venture stage*
and median deal size (HK$M), FY 13/14 to FY 19/20
Early Stage VC
Late Stage VC
Others
Median Deal size of total capital invested (HK$M)
Total private venture capital invested (HK$M)

* “Early stage VC” includes Seed, Pre-A, Series A and Series B; “Late Stage VC” includes Series C, Series D and Series E

** “Others” include private accelerators/incubators, angel investors, corporate funding, and crowdfunding

Source: KPMG analysis based on data provided by Alibaba Hong Kong Entrepreneurs Fund, Cyberport, Hong Kong Science and Technology Park and Pitchbook

KEY FINDINGS
04
Fintech continues to dominate start-up scene with other sectors requiring greater support
  • 76 percent of entrepreneurs and 61 percent of corporates polled agree Hong Kong is a fintech hub, but less than half believe Hong Kong is an innovation hub for smart city, artificial intelligence, robotics and biotechnology
  • Among entrepreneurs surveyed, 82 percent have local operations in Hong Kong, while 31 percent operate within the nine mainland China cities in the GBA and 26 percent operate in Southeast Asia. However, on average, 61 percent of their revenues currently come from the Hong Kong market, compared with 7 percent from mainland China GBA cities,10 percent from Southeast Asia, 5 percent from other mainland China cities and 17 percent from other global markets
  • 41 percent of entrepreneurs polled say they plan to expand into mainland China GBA cities in the next three years, while 40 percent plan to expand in Southeast Asia. To facilitate such expansion, understanding of the local market conditions, regulatory environments and available support are critical to success
KEY FINDINGS
05
Aligning start-up and corporate expectations and outcomes critical to successful partnerships
  • 67 percent of corporates surveyed have partnered or collaborated with start-ups
  • Both start-ups and corporates see significant benefits to collaborating, with 73 percent of entrepreneurs polled saying it increases their access to a scalable customer base. At the same time, 65 percent of corporates think collaborating with start-ups helps keep them up to speed with the latest innovation and market developments
  • Our study suggests such collaboration has room for improvement, with 57 percent of start-ups polled mentioning corporates’ bureaucratic processes and red tape as a primary risk. Meanwhile, 66 percent of corporates mention expectation and outcome misalignment as a risk when working with start-ups
Start-up and corporate views on cross-collaboration
MAJOR BENEFITS
ENTREPRENEURS
Access to market/scalable customer base
Credential building for future sales
Access to key decision makers
CORPORATES
Keeping up to speed with latest innovation and market development
Discovering new revenue streams and business lines
Access to more innovative suppliers/ business partners
ASSOCIATED RISKS
ENTREPRENEURS
Delays caused by bureaucratic processes/red tape
Expectation/outcome misalignment
Loss of investment/unfruitful outcome whilst strapped for resources
CORPORATES
Expectation/outcome misalignment
Opportunity cost, considering the start-up may fail
Governance/internal control procedures limiting the benefits that can be realised
TOP NEEDED AREAS FOR SUPPORT
ENTREPRENEURS
Financial support
Exposure to potential clients
CORPORATES
Digital and technology capabilities
Employee talent
Source: KPMG survey analysis
KEY FINDINGS
06
Viable career paths critical to encourage more students to study STEAM subjects
  • Two-thirds of entrepreneurs in our study say inspiring more young people to get interested in science, technology, engineering, arts and mathematics (STEAM) subjects is a key development area
  • 44 percent of students surveyed believe entrepreneurship is well-respected career path, while 40 percent believe it is feasible and sustainable
  • Long-term policies and strategies to diversify Hong Kong’s industries and make them more technology-focused would boost job opportunities for young people and generate more interest for them to pursue STEAM related career paths
Key areas to support STEAM in Hong Kong
All RESPONDENTS*
Inspiring more young people
get interested in STEAM
62%
More investment needed in teachers’
professional development
40%
More support needed from
school system
54%
Improving
program content
40%
More hands-on training in
industries needed
52%
Hiring qualified
STEAM teachers
38%
Improving facilities, labs and
instruction media
41%

Source: KPMG survey analysis
*Only respondents that indicated that support for STEAM in Hong Kong was not sufficient were polled

NEXT STEPS
Recommendations

To enable Hong Kong to improve its entrepreneurial ecosystem, we have compiled a list of suggested actions for start-ups, corporates, the public sector and students in the following categories:

  • Capturing opportunities for start-ups to grow and scale in Asia-Pacific
  • Fully optimising Hong Kong’s technology transfer ecosystem
  • Facilitating meaningful collaboration between start-ups, corporates and Government
  • Implementing innovative policies that further support the start-up landscape
We would like to show our appreciation to the key opinion leaders and industry experts interviewed for this report.
Their insights were crucial in establishing the key themes and topics for discussion.
Alfred Sit Wing-hang, JP
Secretary for Innovation and Technology,
HKSAR Government
Ricky Wong
Vice Chairman & CEO,
Hong Kong Television Network
Prof. Karl Wah-Keung Tsim
Chair Professor of Life Sciences,
Hong Kong University of Science and Technology
David Harrity
Head of Growth Propositions, Commercial Banking,
Hong Kong, HSBC
Daniel Chan
Head of Business Banking,
Hong Kong, HSBC
Lap Man
Co-Founder and Managing Partner,
Beyond Ventures
David Chang
Managing Partner,
MindWorks Capital
Roland Yau
Managing Partner,
CoCoon Ignite Ventures
Erica Ma
Managing Partner,
Cocoon Ignite Ventures
Jessica Tam
Head of the Social Enterprise Business Centre,
Hong Kong Council of Social Service
Francis Ngai
Founder and CEO,
Social Ventures Hong Kong
Lehui Liang
Head of Purpose Capital,
Social Ventures Hong Kong
Ben Wong
Head of Open Innovation,
Eureka Nova
Danny Yeung
Co-Founder and CEO,
Prenetics
Stanley Sy
CEO,
Sanomics
Xiao Jianxiong
Founder and CEO,
AutoX
Crystal Pang
Co-Founder,
Pickupp
Patricia Dwyer
Founder and Director,
The Purpose Business
Max Liu
Co-Founder and CEO,
EMQ
Special thanks to:
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