2018 2019 2020 2021
EXECUTIVE SUMMARY
Innovation and technology (I&T) is key to Hong Kong's economic growth plans and entrepreneurship is vital to maintaining its status as one of the most vibrant and competitive opportunity hubs in Asia.

This study provides explores Hong Kong's progress in establishing itself as a world-class innovation hub, covering government and policy, research and development, talent and education, funding, business support, and culture and norms. It also assesses Hong Kong's role as part of the Greater Bay Area's I&T ecosystem development.
ABOUT THE STORY
KEY FINDINGS
Hong Kong's I&T ecosystem increasingly vibrant against backdrop of National 14th Five-Year Plan and GBA development
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As part of China's 14th Five Year Plan, Hong Kong is encouraged to elevate its status as an international I&T hub and reinforce its unique position of close links with the GBA, Chinese Mainland, and other key global markets.
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Hong Kong's efforts to accelerate I&T development and GBA integration over the past decade led to a two-fold increase in I&T GDP, with double-digit growth achieved for the first time in 2017-18 and again in 2018-19.1 There was also a three-fold increase in the number of startups in Hong Kong2.
Number of startups in Hong Kong (2013-2021)
Source: InvestHK's 2021 Startup Survey
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The pandemic created new headwinds for startups, with nearly half of entrepreneurs surveyed (46%) finding it difficult to interact with customers, and about a third (29%) struggling to manage a decline in revenue. Despite this, the startup ecosystem remains vibrant with 12% year-on-year growth in 2021, reaching a record high of 3,755 companies.2
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63% of Hong Kong startups have a strong interest in expanding into GBA cities. They expect this to help them access a larger market (65%), tap strong talent pools (40%) and gain exposure to and potentially enter partnerships with large corporations (30%).
Challenges to entrepreneurs as a result of the pandemic
46%
Difficulty in reaching and interacting with customers
29%
Decline in revenues / sales
22%
Dectease in customer spending
20%
Operation shutdown or reduction due to government ban
17%
Difficulty in credit and capital access
16%
Insufficient funds to pay operating expenses(e.g.rent / utilities / equipment)
16%
My business customers not being able to pay their bills or delay payment
16%
Bottleneck in logistics and distributions
12%
Concerns about the liability of employees being exposed to the Covid on the job
3%
Others
Source: Deloitte entrepreneur survey
Entrepreneurs' views on the main advantages of the GBA
Access to a larger market / customer base
65%
Access to strong talent pools
40%
Exposure and partnership opportunities to more large corporations
30%
R&D cooperation with mainland universities, research centers and corporations
25%
Financial incentives by government
21%
Proximity to supply chain
18%
Low business operation costs
14%
Access to entrepreneurial services
12%
Others
6%
Source: Deloitte entrepreneur survey
The Hong Kong Government has made unprecedented strides in accelerating and extending the HKSAR's I&T ecosystem into the GBA
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Budget allocation and spending on I&T has hit new heights, with more than HKD130 billion invested over the past four years.3 More than 40% of entrepreneurs agree the Government is effective at cultivating an ideal entrepreneurial environment, boosting public confidence in adopting startup-led digital solutions, and supporting I&T startups. Most students remain neutral.
Government support to startups is sufficient in Hong Kong
Government has created a favorable entrepreneurial environment
Source: Deloitte entrepreneur & student survery analysis
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To seize development opportunities under the 14th Five-Year Plan and in the GBA, the latest policies announced by the Hong Kong Government focus on promoting I&T cooperation with key cities in the Chinese Mainland. This includes the “Twin Cities, Three Circles” concept, the San Tin Technopole and the Shenzhen-Hong Kong I&T Cooperation Zone.
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However, having to deal with two different institutional systems is a challenge for half of the entrepreneurs surveyed, emphasising the importance of regulatory harmonisation.
Venture capital funding in Hong Kong now covers the entire startup funding journey; government co-investment schemes need to be enhanced to maintain momentum
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Venture capital funding in Hong Kong has evolved to cover the entire startup journey, with mid-to-late stage funding now 65% of deal volume.i
Value of deals at different funding stages (HKD million)
Source: Preqin, Deloitte Analysis

Note: seed stage includes seed and grant; early stage includes angel, series a and series b; mid or expansion stage includes series, b, series c and expansion; late stage includes series d, series e, series f, pre-IPO and add-on; exit includes pipe and secondary stock purchase
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Since the Government set up the Innovation and Technology Venture Fund (ITVF) in 2017, it has invested more than HKD142 million in 22 startups and attracted over HKD889 million in private co-investments.4 HKSTP and Cyberport also play a vital role in startup financing, with a combined investment of HKD400 million in 41 startups.5
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Progress is evident, but the Government should accelerate vetting, revisit the ITVF scheme to attract more long-term investments with a moderate to high risk appetite to support startups that are R&D-driven and have long research lifecycles, and encourage venture capital funds to take on additional risk through co-investment.
Hong Kong has a well-connected, supportive network for startups that will continue to serve as an essential catalyst for cross-border ecosystem development
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The number of co-working spaces, incubators and accelerators in Hong Kong doubled from 2017 to 2021, reaching 124 in 2021,2 testament to the efforts of its Government, universities and large corporations.
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56% of entrepreneurs agree Hong Kong has enough incubators and accelerators, with 70% finding the support for marketing, business development and networking, fundraising, mentoring and IT useful.
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There is a consensus that cross-border connectivity and support can be strengthened to better integrate Hong Kong startups into the GBA network.
Entrepreneurs' views on whether support for startups is sufficient
Incubation / acceleration programme
Networking events
Investor events
Office / co-working space
Business advisory service (legal / tax / finance)
Coaching and mentoring services, e.g. mentorship programme
R&D commercialisation support
Source: Deloitte entrepreneur survey
Satisfaction with the services provided by incubators and accelerators
Access to marketing/advertising support
Business skills development
Network development
Access to investors/funders
Mentorship
Access to like-minded entrepreneurs
Access to IT resources
Source: Deloitte entrepreneur survey
Hong Kong has a sophisticated business culture with a budding entrepreneurial mindset among young people, but requires a startup friendly environment to nurture the next unicorns
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Although 61% of students believe Hong Kong's entrepreneurial spirit is on the rise, fewer than a third want to work at a startup (33%) or establish their own startup (23%).
Entrepreneurs' and students' views on Hong Kong entrepreneurial spirit
Source: Deloitte entrepreneur & student survey
This is often due to lacking a solid business idea (40%) or access to capital (38%). Hong Kong needs a risk-taking culture to foster innovation amid intensifying global competition for young talent, capital and startups, and more prominently celebrate success stories and startup heroes.
Entrepreneurial intention of students
Have considered working for a startup
Have not considered working for a startup
Previously worked or actively working for a startup
Source: Deloitte student survey analysis
Reasons for students not considering a startup career
Lack of a solid business idea
Insufficient funding or capital
Low risk tolerance or appetite
Lack of entrepreneurial support
Family pressure
Peer pressure
Unclear career path
Others
Source: Deloitte entrepreneur survey
CALL TO ACTION
There have been encouraging efforts by multiple stakeholders to foster a thriving I&T ecosystem in Hong Kong. The integration of Hong Kong's I&T sector within the Greater Bay Area will be a key catalyst for growth.
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Employ a comprehensive strategy to bolster integration with the Mainland GBA cities, with a focus on harmonising different institutional systems: The GBA is crucial to scaling up Hong Kong's I&T development, but institutional differences remain a challenge. The Government should harmonise regulations and strengthen cross-border connectivity and support in order to better integrate Hong Kong startups within the GBA network. Additional marketing should be done to increase visibility and promote cross-border business support that is available to Hong Kong startups who wish to expand into GBA.
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Accelerate I&T adoption through 360-degree public procurement: To build public confidence in startups' digital solutions, the Government could enhance public procurement, for example through dynamic contracts or spiral contracting. It should increase the visibility of measures to increase startups' participation in public.
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Establish an independent research-industry consortium to forge long-term collaboration between academia, R&D centres and industry: This body would bring together researchers and industry players in Hong Kong, GBA Mainland cities and globally to cultivate a multi-disciplinary research environment and promote technology transfer. Clear governance and guidelines on joint research, commercialisation and intellectual property (IP) should be defined at the start.
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Enhance co-investment schemes by increasing risk appetite and introducing alternative models: The Government should enhance its co-investment programmes to more aggressively inject funding into high-risk, high-impact and scalable startups. One consideration is to update ITVF's co-investment ratio, which would also encourage more private investors to invest in local ventures.
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Strengthen policies to attract global talent and build a sustainable pipeline of local talent:
The Government could i) expedite the hiring of foreign I&T talent via dedicated visa channels, ii) provide a fast-track to permanent residency for top I&T talent, iii) reduce innovation costs through affordable office spaces or tax incentives, and iv) entice talent to work in Hong Kong after the outbound employee programmes end.
To nurture local I&T talent, the Government could establish a body to facilitate the implementation of STEM education and introduce state-of-the-art technologies in schools. This would give students the experience of interacting and experimenting in the metaverse.
Entrepreneurship must be seen as a desirable, viable career. More can be done here, including by including entrepreneurship in career education, and matching students with mentors, or providing internship opportunities, at startups.
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