19 Jan 2015
Raymond Yip, Fiona Lau and Tony Wong and from Shopline
While a new generation of entrepreneurs is emerging in Hong Kong, both local and from abroad, young business bosses still face challenges in securing seed capital from local financial resources.
An interim report from Google and the Chinese University (CUHK) Center for Entrepreneurship shows that while nearly two-thirds of a pool of local experts interviewed consider inadequate accessibility to financial resources as the most important limitation for Hong Kong entrepreneurs, 88 per cent of 612 young entrepreneurs surveyed cited self-funding as their major source of seed capital.
The big question is what differentiates those start-ups that succeed in attracting private investment from those who do not, and what makes a difference when pitching business to private investors.
“From my experience, it was hard in the beginning,” says Raymond Yip, chief executive of Shopline. “I made a mistake when I approached the process as if begging for money. You should never do that.”
Together with two other co-founders, Tony Wong and Fiona Lau, Yip has developed a DIY e-commerce platform for creating online shops. At first, the team did not turn to investors for seed financing. Instead, the trio each put in HK$30,000 from their own pocket and started their business.
Through their personal network, they secured a meeting with Rui Ma, the venture Beijing-based partner of 500 Startups, a Silicon Valley seed fund and accelerator, which has invested in hundreds of internet start-ups in more than 50 countries globally.
However, their pitch did not come through right away as Ma deemed the business to be at too early a stage to judge its success. After many back-and-forth pitches, they impressed Ma by tripling their number of users from 500 to 1,500 in a short time. At Ma’s recommendation, Shopline became only the second start-up from Hong Kong ever to be accepted into 500 Startups, and was granted an investment of US$100,000 from the programme.
“You should always believe in your product and show it,” Yip says. “If your business is at an early stage, you don’t have that many numbers to prove yourself anyway. You should show that you have the confidence to execute, you have the right team, and that it is the right time to do it.”
To date, Shopline has received investments from sources ranging from an angel investor to, accelerator and strategic funds in the United States, Southeast Asia and Hong Kong, although Yip did not disclose the amounts.
Asked whether there are differences between investors in Asia and Silicon Valley, he remarks: “In my experience, Asian investors generally tend to be more conservative [than those in Silicon Valley]. They look for start-ups which have been earning some revenue to show potential for growth.”
Yip’s experience resonates with Xania Wong and Jeremy Lai, who recently went on a study trip to Silicon Valley thanks to the Empowering Young Entrepreneurs (EYE) Program organised by Google and CUHK’s Center for Entrepreneurship.
Together with four other teams, Lai and Wong underwent training on how to pitch business to investors and had the chance to present to a group of Silicon Valley investors at Wearable World, Altos Ventures, 500 Startups and Plug and Play Tech Center, a global accelerator that specialises in tech start-ups.
Looking back on the experience, Wong, who founded a mobile job-matching platform, JOBDOH, connecting employers and temporary workers, recalls that a fundraising coach reminded her not to focus solely on Hong Kong when pitching to global investors.
“US-based investors were interested in the Chinese market potential, but not Hong Kong alone,” Wong says. “Having said that, most US investors are unlikely to invest in start-ups outside US markets.”
To arouse investors’ interest, she customises her pitch based on audience profiling. For instance, she started her pitch by organising a convention as an example for Wearable World, since they were arranging one that week.
She adds: “Hooking the audience in the first 30 seconds is vital. You need an engaging point that relates your business to your audiences.”
Lai is a founding member of Optica, a start-up that provides software technology to improve the visual experience of people who suffer from colour blindness. When he pitches his business to potential investors, he highlights the significant market potential (250 million people worldwide are colour blind), as well as his team expertise and his personal entrepreneurial journey.
Jeremy Lai of Optica
“Selling yourself comes first, product comes second,” he says, “You can’t expect a green light right away. It is important to leave an impression so that you can follow up with potential investors after the pitch.”
This might be easier said than done, however. None of the six teams from the EYE programme were picked up by the Silicon Valley investors during their stay. However, JOBDOH and Optica have secured investments of HK$430,000 and HK$100,000 respectively from Cyberport.
Lai sees trial and error as an opportunity to learn. He explains: “It is rewarding to meet panel members who ask tough, difficult questions as they are vital pointers for taking your venture to the next level. Business meetings and pitches, formal and informal, are the bread and butter activities of most start-ups; so don’t despair if you have a ‘bad’ meeting. The most important thing is to learn from it and make your next presentation even better.”
Xania Wong of Jobdoh
Fundraising for start-ups is indeed a long and winding road but should hold no fears for forward-looking entrepreneurs.
In fact, last year Hong Kong start-ups attracted record levels of venture capital investment since the global financial crisis in 2009, with a total of US$40 million from venture capital funding in local start-ups in the first 11 months. This was almost double the US$22 million in investment achieved in 2013, according to recent research from the Hong Kong Venture Capital and Private Equity Association. The growing amount of investment from venture capital funding in local start-ups may offer a reason for hope.
As Shopline’s Yip puts it: “I have been rejected many times … A lot of investors will tell you that it’s like dating. I kind of get it. You have to say: ‘Here is the product and here is the team. I hope you like it. If you don’t, that’s okay.’ Then you move on.”
Table: Essential ingredients for a five-minute presentation in Silicon Valley
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