The Hong Kong Business Angel Network (HKBAN) was formed in 2010 through the collaboration of the Hong Kong Science and Technology Parks Corporation, the Hong Kong Venture Capital Association and four of Hong Kong’s leading universities. KITE Invest spoke with HKBAN’s Chairman, Allen Yeung, about the Hong Kong’s nascent angel community and his vision for the future of angel investing in the region.
KITE Invest: Due to the fact that six various institutions created HKBAN, in your estimation how does this make HKBAN stand apart from other business angel networks?
Allen Yeung: The way that HKBAN has been formed is from two angles, the supply side and the demand side. The supply side of angel investment comes from the HKVCA and Science & Technology Park Corporation and Network; the demand side comes from the incubation programs from the Science & Technology Park and the universities’ spin-off companies that their graduates created. All of these institutions are coming together as stakeholders and they care quite a bit about how to bring together the two sides of the matchmaking. It is this component that makes HKBAN very different from other angel groups we see in the West.
KITE: With HKBAN’s close relation to universities, in your opinion have you seen grave differences between startups and university level startups?
AY: The Hong Kong Science & Technology Park Corporation has as of today is affiliated with 500 companies, and 450 of those are SMEs and startups. These are more mature than the university level Startups.
As a result, we have a good range of startups, starting with university startups to more mature startups in the Park.
KITE: How would your describe the Hong Kong Business Angel community at large? How does it differ from other Angle communities in the region?
AY: Hong Kong is a world financial center. Apart from New York and London, Hong Kong is definitely the financial center for Asia. As a result, there is no lack of money per se.
The majority of investment and funds in Hong Kong are big private equity IPO funds and trusts of family offices that invest in bigger deals of more mature companies. Due to the large-scale nature of this type of investment, startup size investments did and do not fall within the type of investments these funds are looking for.
Due to this lack of interest in startup funding, HKBAN was formed, in order to seek out more high net worth individuals and not fund managers. Moreover, when we started four years ago neither this type of investment or investor were a part of the culture found in Hong Kong. Nonetheless, startups were seeking seed money, and that is why there was a gap. Hong Kong is relatively nascent in building its own innovation hub, unlike what you would find in Silicon Valley or Cambridge, UK.
KITE: As a result of HKBAN’s presence over the last few years, how have you seen the landscape of the angel community change?
AY: First is the number of active members. We started with around 20-30 members to now close to 100, and in this time we have seen 24 companies received investment, an aggregate investment of HKD 136 million (USD$17.5 million).
KITE: As a young association, what are some of HKBAN’s goals and next steps?
AY: Although 100 angels is not a small number for an angel group, we hope that the number of participants will continue to grow. Also, with the 24 deals since we were founded, we would like to see 24 deals in one year or 100 deals in the next 3-5 years. Moreover, with the number of deals done already we will begin to see some good exits, and the exits would motivate more people to join both from the investor and entrepreneur communities. With this, I foresee in the near future that the ecosystem will become much healthier and cyclical.
Another aspect is how to expand and enhance our network with our neighboring city, Shenzhen and become a twin city scenario of investment. A soft border separates Hong Kong and Shenzhen these days. I would like to see in five years were the two cities will help each other grow, exchange ideas and increase deal flow.
KITE: HKBAN hosts the Asian Business Angel Forum (ABAF), Asia’s largest premier angel investor gathering and conference for emerging and growing businesses. Can you share a bit of the background of ABAF and what have been some of the highlights to come out of the ABAF?
AY: ABAF was inaugurated in 2010, and each economy sent a representative to a committee, which would then rotate to host ABAF. The first meeting was held in Singapore, and then Shanghai, then Kuala Lumpur, Mumbai, Hong Kong, and next year will be in New Zealand. Among the Asian countries there is a growing need to share the best practices, to which we compare the ABAF to ACA in the United States and EBAN in Europe.
We saw last year at the conference held in Hong Kong a record high number of attendees that came from all over, including the US and Europe. What can be taken away from this is that the ABAF is not seen as just an Asian focus, but rather truly international.
KITE: And lastly, beyond the ABAF, what other services does HKBAN use to bring angels and Startups together? What are some of the biggest challenges of matchmaking?
AY: The most difficult component of matchmaking is time, having enough time to get to know each other. At the end of the day investments are being made between people. The company is not just the business plan, but the people behind the business. We can circulate a thousand business plans, but at the end of the day it is about meeting, understanding, and feeling comfortable investing in each other.
The second challenge is how we can help each angel to do syndicate deals, so they can spread their risk across industries and invest in other areas outside of their domain.