The difficulty of embarking on start-ups in Hong Kong is well known, as this mature society is already well penetrated by monopolies and the city’s industry structure is monotonous - property and finance. However, there are always passionate game changers looking for opportunities over challenges, especially on the back of the government’s encouragement. Influenced by the mainland’s entrepreneurial booms, the Hong Kong government has stepped up its policy to support entrepreneurship since 2015, and the city has gradually shaken off the tag of “barren land for entrepreneurs”.
Hong Kong had 3,184 start-ups operating in major public and private co-work spaces and incubators in 2019, up 42.8% from 2,229 in 2017, with more than 12,478 employees, an increase of 97.4% over the 2017 figure, according to the 2019 Annual Startup Survey by InvestHK.
Edwin Wong and Phoenix Wan are among these passionate icebreakers. Both set up their own businesses soon after graduating from PolyU and are applying technology to change existing industry rules. Edwin graduated in 2014 with a Bachelor of Business Administration (Honours) degree in Marketing, and Phoenix graduated in 2010 with a double degree - Bachelor of Business Administration (BBA) and Bachelor in Computer Science (BSc).
Digital Platforms Starting from Zero
Edwin began his entrepreneurship journey by establishing a social enterprise where he built a website to use coupons to promote brands and sell products during his final year at PolyU. The project received HK$400,000 from PolyU Micro Fund and the Hong Kong Social Enterprise Challenge sponsored by the Hong Kong government and universities. It took the company six months to reach its breakeven point.
The first project did not work out very well, but he accumulated the experience of building brands, realized the value of endorsements in promoting products, and adopted the idea into his second project.
In July 2015, Edwin launched his second business project - an AI-powered marketing software specializing in influencer marketing and social discovery for Asia, called Cloudbreakr (https://www.cloudbreakr.com/). As Asia’s first professional network for influencers, the software provides the user with an integrated solution to conduct quick social trend analysis, influencer discovery, channel performance auditing and complete campaign management.
Five years ago when the sharing economy concept began in Hong Kong, Phoenix was inspired to create O2O (online-to-offline) platforms for various industries, including hair salons (http://hkhairsalon.com), photographers (http://photographer.com.hk/), anchors (http://hongkongmc.com) and insurance agents (http://hongkongip.com/). The idea was initially driven by his own needs such as haircuts and his interests in hosting events and taking photos. He then looked at market trends based on research to identify industries that can apply the O2O concept.
Phoenix has launched 37 O2O platforms in Hong Kong, seven in Taiwan and two in Malaysia with a similar concept.
For the first platform Phoenix created for hair salons, he did the programming himself and spent three months collecting information on 3,000 hair salons in Hong Kong for the platform.
Edwin and Phoenix both needed around six months to prepare for the setup of the company, and the most difficult part was convincing users and investors of these new business models presented by young faces.
Views on opportunity, timing control, fundraising and people management are key factors for successful operation of start-ups.
“At the very beginning, it’s more about the opportunity and the timing,” says Edwin. Initially, they spent lots of time creating the contents of targeted emails and providing free models to users. Gradually, Cloudbreakr attracted attention from the market.
“Fundraising is tough for start-ups because investors are concerned about market size. And people are also the key factor for business,” adds Edwin.
Phoenix reckons that the industry was not quite ready for such O2O platforms when he originally started. “Only 30% of hair salons had email addresses when we tried to collect information,” says Phoenix. He admits that they might have looked too young to approach investors for fundraising, given that the average age of their team was around 23 years.
Look into Southeast Asia Markets
Edwin’s business had been growing rapidly until the COVID-19 pandemic. Last year, it expanded into southeast Asia, set up a new office in Thailand and confirmed serval partnerships in Indonesia and Taiwan. It reached its yearly revenue target for 2019 within six months.
“Now is the time to rethink our business strategy. Before we relied a lot on big companies’ marketing budgets, but now we shift more to small and medium sized enterprises (SMEs) because they have become more aggressive and active in social media promotion due to COVID-19,” says Edwin. His company will resume expansion and launch more new products after the virus outbreak subsides.
In terms of market potential of the digital sector in southeast Asia, Edwin thinks that Indonesia comes in first place, supported by its population, high penetration of mobile devices and its citizens’ preference to use social media. Next comes Thailand, which has developed fastest in the region in digital transformation, has lower costs, and is close to Hong Kong. He is also interested in Malaysia, the Philippines, and Burma. Although India has the biggest market, language barriers exist.
Unless you have a solid network and dedicate considerable time, you cannot enter the Chinese mainland market, according to Edwin. It is not easy because the data and tech industry moves very fast on the mainland. However, he is interested in helping mainland brands go overseas and seize opportunities under the Belt and Road and Greater Bay Area initiatives.
For the next step of his business plan, Phoenix would like to set foot in Taiwan, Malaysia and Singapore and to find other industries to adopt the O2O concept.
Even though the current COVID-19 crisis weighs on the commercial world, especially small and medium sized companies, Phoenix says his business revenue is stable and balanced. Some of his platforms that operate over the internet, such as the insurance agent platform, have benefited from the virus outbreak. He thinks that after this virus outbreak, online business will be more popular and that SMEs will turn to move their business online.
Advice on Entrepreneurship
Edwin thinks the Hong Kong SAR government has done a lot in the past two years to encourage start-ups and that start-ups’ connection to capital should be enhanced with the support of government.
His advice to people who would like to start their own business is to “follow your heart”. It is a cliché but true. “You can adjust your approach, but you cannot forget the value you hold and what you wanted to do at the very beginning,” says Edwin.
Phoenix thinks that education regarding how to start a business is more important than financial support by government and university.
To support entrepreneurship through his own efforts, in May 2011 Phoenix co-founded Youth Entrepreneur Warrior, a networking platform for entrepreneurs in Hong Kong, with his partner James Wong to provide information and services for start-ups. The platform now has more than 5,000 members.
Regarding management and leadership, Phoenix adopts the motivation approach rather than the punishment approach.
Edwin believes that people always come first. He thinks highly of empowerment and encourages teammates to make decisions on some tasks.
