Cracking China: The expat entrepreneurs growing businesses in Hong Kong

The allure of Asia is undeniable, but success is not a foregone conclusion.

by Adam Gale
Last Updated: 22 Sep 2017

'The next stop is Cyberport.’ You’d be forgiven for thinking you’ve fallen asleep on a train and woken up in a dystopian future, but Cyberport is very much a real place (see main image), a tech hub nestled on the south coast of Hong Kong island, with plans to have its own eponymous MTR (mass transit) station.

The complex itself is bright and buzzy, with bean bags, primary colours and ping pong tables. At first it seems to resemble any other start-up accelerator or incubator, albeit with a view of the lapping turquoise waters of the South China Sea.

There’s a difference, however. Unlike most accelerators, Cyberport is a business wholly owned by the Hong Kong government, completed in 2003 with the expressed aim of cultivating Hong Kong’s nascent digital tech scene, covering finance, business and living.

While Cyberport provides financial support, networking and events space for its 500 on-site tenants, a mix of digital start-ups and big beasts like Microsoft, taking up one million square feet of office space – and 400 or so off-site member companies, the similarly government-owned, non-profit Hong Kong Science Park does the same in electronics, biotech and hi-tech engineering industries.

For a famously free market economy, the hand of the government is never that far away when it comes to strategic industries here. If Theresa May wanted an example of an industrial strategy that works, she could do much worse than to look at Hong Kong.

All in all, there are over 2,000 start-ups in Hong Kong and the figure’s fast rising. Although that puts it a good way behind some of its global and even regional rivals, the city is making a concerted push to turn tech into one of the central pillars of its economy, alongside the likes of finance, tourism and logistics. Indeed, logistics firm and Cyberport incubatee GoGoVan has just become the city’s first ‘unicorn’, after merging with Chinese rival 58 Suyun.

The immense opportunities in Asia are attracting entrepreneurs from all over the world. Unsurprisingly, given the historic ties with the UK, there’s a fair few Brits among them. Indeed, one in three of the start-ups at Cyberport is foreign, and one in nine is British.

MT met some of the expat entrepreneurs, some based in Cyberport, some in the bustling central district, to find out what they’re doing, what it’s like growing a business on the doorstep of China, and what it takes to make it work in Asia.


Mark Blackwell, Morphis

CEO and co-founder

Sector: Landscape architecture

I worked on the London Olympics for three years, then became responsible for a big studio in a big American corporation in London. The growth in China was phenomenal, and I found myself coming over every six weeks, every month, then twice a month, until I spent most of my time walking around London as a zombie. The opportunity came up for me to run the business in Asia for two years. We hadn’t planned for that as a family, but we thought it would be an amazing opportunity and dropped everything to come over.

We could have gone to Beijing, Shanghai, Singapore, New Delhi, but Hong Kong is Asia’s gateway, and it’s a wonderful, liveable city. Two years here go very fast. In our third year, we really had to start thinking what we wanted to do for the long term. We just felt that if we went back to London or if we hadn’t tried to set up a business here, we would have kicked ourselves in ten years’ time.

Morphis designs spaces outside of buildings, from large scale planning of new communities over 37 square kilometres, down to very intimate spaces like city plazas. It all focuses on our three big values – health and wellbeing, connecting with nature and curating space to create memorable destinations for people.

We established in June 2014. Hong Kong’s a great place to do business – it’s a liberal city with low taxes and a collaborative spirit, and there’s such potential and ambition here – but not being paid for six months while setting up a business is something else, a crash course in getting no sleep. That’s part of Asia as well though. If you ask me what I’m going to be doing in two weeks’ time, I can tell you about 20%; in the UK, I’d probably be set up with meetings made a month in advance.

The government and Invest Hong Kong were incredibly supportive - promoting us on their website, arranging photographers and introducing us to people – and so was the local community in our industry, but our break came through a competition we entered in the September that year. At one point we had five people round the kitchen table at home because we didn’t have any office space. There were 90 international submissions and we won - it was a great platform for us.

The range of opportunities in Asia is huge. If we’d been in New York or London, it would have taken us two or three times longer to get where we are now. Some of that is down to GDP and the sheer ambition of Asia, some of it is because planning regulations in mainland China aren’t as stringent as elsewhere, which means a project that would take 5-7 years in the UK will take 2-3 years, from inception to completion.

About three quarters of our work is in mainland China, but 80-90% comes in through Hong Kong developers. We actually set up a Shanghai office on day one, to take tax issues away from clients moving money to Hong Kong, but I’ve never actually been there. All our design work is done here.

What’s incredibly exciting is the outbound investment – now we have a number of repeat clients, we are seeing those clients investing out of Asia into Europe and the US, and they’re approaching us about projects there. We have to think globally, to support our clients’ needs.

There are nine of us in Hong Kong at the moment, which is important because it means we can avoid the troughs you get with smaller teams. It's a young team, yet experienced as creative thinkers and designers. While finding junior talent is easy, you can’t run a business with just junior people. Because it’s a relatively small industry here, the supply of senior people is very limited, which has been a challenge, so from December our new studio in London will support the work we do here, to help us create truly memorable destinations wherever they are in the world. 

 


Chris Sykes, Dragon Law

Legal tech evangelist

Sector: Legal tech

I met our CEO Daniel Walker at Uni. We both studied law and both became solicitors. He was living in Hong Kong and I was in Madrid when we started Dragon Law, the first legal tech company in Hong Kong. I came over here three years ago.

In a nutshell, Dragon Law makes technology for creating, storing and e-signing legal documents.  We’re not a template seller. You answer a few questions, then the software that we made ourselves cleverly builds a legal document.

Originally we were seen as a competitor to law firms but we’re not, we don’t give legal advice. We’re just trying to create a new part of the legal industry at an affordable level. It deals with a problem law firms have faced for many years, which is that you can’t serve start-ups with the traditional model of ‘this is going to cost you £x per hour, now where’s my retainer?’.


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SMEs often have no money and it’s expensive to open a folder. With us, you can serve them on a monthly basis with a subscription fee (our top subscription is just over HK$21,000 a year, or about £2000), then when they’re bigger you can start charging. In this way the technology can be used by the customer on one side and the lawyer on the other.

We’re now about 50 people, with about 30 in Hong Kong, as well as a team in Singapore and a few consultants here and there. We’ll shortly be recruiting our first people in Australia. They’ve all been English common law jurisdictions so far, and the mainland isn’t in our view at the moment –it’s a completely different legal system with difficult barriers to entry. But ultimately there’s no reason we can’t expand, as the technology’s not linked to one particular language.

Hong Kong is a very easy place to do business in, it’s small and easy to get around and it’s a very good location in terms of communications. There’s lots of events, and anyone will meet up with you. Before you know it you’re talking to an investor – all of ours are Hong Kong based.

We were incubatees at Cyberport, graduating last year. They provided us with very affordable, spacious accommodation and $330,000HK in subsidies towards various costs, like marketing and accounting. Our first office was small but it was free, and unlike other incubators Cyberport doesn’t take any equity.

The skills are definitely here but the talent bill can be expensive. We have a mix of Hongkongers and non-Hongkongers. In the legal profession here, people’s parents pay for them to study law, get a training contract and go to work for Baker McKenzie or Clifford Chance. They’re not likely to go work for a legal tech company. I had the same thing – when I showed my parents round, they were disappointed I didn’t have ‘solicitor’ written on my door. But there is an appetite for working in start-ups, and it’s growing.

 


Alex Medana, FinFabrik

CEO and co-founder

Sector: Fintech

I have 16 years of experience in the real world of banking, and two as a fintech entrepreneur. I’m fin – pause- tech. There’s a lot of fintech start-ups where I don’t understand how they’ll make their money, that are tech-fin. They say we’ll destroy the banks, but I don’t see that happening ever. You’ll need fewer of them, but you’ll still need a bank somewhere. There’s an emotional attachment.

You need to ask three questions with a bank – do they know me, do they love me, are they helping me. I can bet you the answer is no, no and definitely no. FinFabrik, which I co-founded 13 months ago in Cyberport, can help banks answer yes, yes and yes.

At our core, we’re in capital market and wealth management, making the retail investor a better informed investor through data analytics. You didn’t hear me say robo-advisory, blockchain or machine learning, because the tech isn’t important, it’s a means to an end.

I moved to Hong Kong in 2010 with Deutsche Bank, after six years in London and two years in Bangalore. In Asia, particularly Hong Kong and Singapore, it’s very easy to set up a business, but at the same time you have to have a network and relationships. You can’t just come in and say ‘hey I’m Alex, I’m an entrepreneur’. You have to create the brand, to have that collaboration between the start-ups, the big banks and the regulators, and to engage with talent.

One thing that wasn’t easy was to open a bank account – it can take six weeks if you’re lucky. But the monetary authorities have done a lot of work with the banks to accelerate this.

We are thinking about the move to China. Our ambition was never to just stay in Hong Kong – we’re Asia based and Asia first, though through my network I go all over the world. For the mainland, you need to be connected with the right partners. It’s such a big country. You could have 10 million customers tomorrow, it’s that sort of scale, which means you have to have the architecture, investment and data sets in play to be able to support it, and you really need to understand the market, what they are willing to pay for and use.

 


Elisa Harca, Red Ant

Regional director, Asia

Sector: Digital marketing 

I like being a transplant. It’s really interesting culturally and creatively. I grew up in London, but moved to New York for five years after uni, working for big digital agencies. Seven years ago I joined Red Ant back in London and in 2012 I came to China to set up our Shanghai office.

I was absolutely blown away by the scale of the Chinese digital landscape. They are really ahead of the game in ecommerce. They’ll wake up, check the weather, do some banking, message a friend, book a taxi, order a coffee and buy a gift without ever leaving WeChat.

The market is here for UK retailers, but a lot of them think they can come into China and expect it to be profitable, in a short period of time. They also think that because ‘Made in China’ is cheap, that staff and marketing in China is cheap, but it’s completely the opposite. Marketing activities probably cost five times what it would in the UK. The ones that brave the storm will reap the rewards, but it’s definitely not a short term gain.

If you don’t have local knowledge and insight, you can make the wrong decisions. We have a joint venture with a Chinese company, and all my team in Shanghai are local Chinese. If you’re a product business, the regulations can be quite hard to understand. For example, to pass Chinese law a foodstuff ingredient needs to have been used in the market for 30 years. If not you’re working with a local partner, you might not even know what the reason is, just that your product hasn’t passed the test.

There are some good examples of success stories, for example Muji and Ikea in retail. When Chinese people go to furniture stores, they like to hang out and have a snooze. You’ll often see people in the window of Muji having a bite to eat with their friends. If you go to Ikea, you’ll see people lying on the bed sleeping. They noticed it was a difference in Chinese behaviour, allowed it and adapted to it, and then they penetrated the market.

I opened the Hong Kong office four years ago. Most of the retailers have their headquarters here, so a lot of the business I generate for China comes from Hong Kong.  I met clients like Lush here. They’re working in China, but they chose Hong Kong because if you’re thinking pan-Asia, it doesn’t make sense just to be in China. If you’re based on the mainland, the opportunities and challenges are so immense that you lose focus on pan-Asian opportunities.

Those of us who live in Hong Kong describe it as two degrees of separation rather than six. People are very willing to connect you – that’s a big difference from the UK, where networking is a bit of a sleazy word.

The staff are also really good quality, and I’ve found them loyal and trustworthy. Retention can be an issue on the mainland on the other hand. If they’re working for Prada, they’ll jump ship for Gucci for 200RMB, which is about £20. I’ve got a great, stable team in Shanghai and touch wood they’ll stay, but I’ve had to work hard on it.  

I have learned that, when you’re doing localised marketing in China, you need to use mainlanders. You can’t do it with Hongkongers – their culture is totally different, as or even more different than ours is from America’s.

The perception of China is that it’s hard work, and yes it is. But it’s also very open to people compared to other countries in Asia, even if you’re not fully equipped. They will accept you if you don’t speak the language, as a woman, as a foreign entity. You’ll do better with local connections, but you can do it without them.

 


Wing Cheung, Lattice

CEO and co-founder

Sector: Fintech

I was previously head of portfolio analytics at Lehman brothers and VP at Nomura in London, working with hundreds of professional fund managers all over the world. The technology for Lattice came from a discovering a fundamental pain: despite the fact that there are trillions of dollars of assets under management, there was no technology that translated investor opinions on the market and personal circumstances into a tradable portfolio. 

A portfolio is essentially a high-dimensional decision making tool reflecting our risk appetite, our personal circumstances (e.g. you may only want to trade stocks or exchange-traded funds) and our opinions on the market (e.g. GDP will go down or the oil price will rebound). If fund managers don’t have a technology to map those to your portfolio, they have to use human heuristics, which is trial and error, without precise proof.

After a decade’s research, we developed our V2P (view to portfolio) precise mapping technology, which automatically expresses your views into a portfolio with 96% efficiency, compared to 60% for human mapping. That’s how you make money.

This is universal problem, not just for the capital markets. We met 20 banks in Hong Kong. The feedback was fantastic, but they said why not adapt it for the lower end, for individual investors, so we’re creating the world’s first opinion-driven robo-advisor. 

Since launching Lattice in Cyberport four years ago, we’ve won global clients including Hermes Asset Management and Bank Leumi in Israel, and have won major fintech awards including from UK Trade and Investment. I spend half my time in London and half in Hong Kong, and the team of eight is split equally between them too.

Funding has been really hard. We’re a tech company holding different product companies. We’ve found each product company is easy to explain and people are happy to fund our subsidiaries, but because the top one hasn’t got massive revenue yet, they don’t know how to value it.

But we think it has massive applications. We want to change the entire investment world’s decision-making process, to make it easier but also transparent. Eventually V2P will allow decision performance attribution, allowing us to attribute how much of a fund’s performance is due to the fund manager, the risk manager or just luck. 

Elisa Harca and Alex Medana are speaking at Think Asia, Think Hong Kong, September 21 at the Queen Elizabeth II Centre, London.

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