According to the Global Innovation Index 2019, Hong Kong is the third most innovative state in Southeast Asia, East Asia, and Oceania. The last year has been amazing for the Hong Kong startup ecosystem. This growing ecosystem has caused Hong Kong to enter the list of top 25 startup hubs. This has been declared in the Global Startup Ecosystem Report of 2019.

According to lnvestHK’s 2019 startup survey reports, significant improvement has been observed in all key parameters that decide the growth of the startup ecosystem of a particular region. Some of these factors include:

• Up to 21 per cent increase in the total number of Hong Kong startups raising the number to 3,184 startups.
• Over 31 per cent increase in the employment rate causing the total number startup of employees to rise to 12,478.

“The backbone of this ever-growing startup ecosystem is the multi-cultural group of founders,” says Julia Markle of ClothingRIC. “They keep on creating job opportunities for the economy of Hong Kong.”

As a result of this, there has been a remarkable rise in the number of accelerators, coworking spaces, and incubators. This ecosystem is backed with a solid network of stakeholders and builders.

The rapidly growing startup ecosystem of Hong Kong

The Hong Kong startup ecosystem has been growing by leaps and bounds. In 2019, the total investment in the startup industry raised to US$720 million. Today, Hong Kong has over seven official unicorns. The government has not only lowered the taxes but has also eased its progressive visa policies.

This has caused the tech and non-tech talent from all across the world to contribute to the growth of Hong Kong’s economy. With access to the latest technology, considerable government funding, and utilisation of technology to reduce business expenditure, the Startup Ecosystem of Hong Kong is expected to reach unprecedented heights in the near future.

Let’s discuss what is causing the startup ecosystem of Hong Kong to expand at such a rapid pace. So, without further ado, let’s dive deep into the details.

Also Read: Startup Impact Summit 2020 lends insight to break into Hong Kong startup industry in 2-day virtual conference

Funding from a diverse group of investors

“Global investors have realised the potential that the startup ecosystems of East Asia have,” claims Alex Reynolds of EMUCoupon. “Since Hong Kong has the fastest-growing of all Asian ecosystems, it has been attracting the most diverse group of investors from major origin countries.”

The interest of non-local funders is taking this ecosystem to the top of the list of global investment opportunities. Today, 34 per cent of the Hong Kong startup founders are non-locals. 59 per cent of these founders are local, whereas seven per cent are Hong Kong returnees.

The non-local founders are from diverse territories including the US, the UK, Australia, France, Canada, Mainland China, Italy, India, Singapore, Germany, and more.

Access to the widest range of industries

Today, every industry has been growing. There is no field that entrepreneurs don’t want to enter. Young developers in Hong Kong are designing apps with international appeal, disrupting fintech, and providing unique and innovative solutions to retailers. There’s hardly an industry that is not being reshaped by startups.

According to 2019 stats, the following are the industries that have the highest number of startups:

• Fintech has over 456 startups
• E-commerce/supply chain management have 342 startups
• Logistics technology and information is leading with 342 startups
• Computer and technology operates 322 of the startups
• The design has taken over 301 startups
• Professional or consultancy services cover around 287 of startups
• Data analytics has taken over 224 startups
• The hardware industry owns 210 startups
• Education and learning cover 158 of the total startups
• Health and medical is running 151 startups
• Biotechnology has 32 startups
• Robotics and smart manufacturing industry has added 33 startup
• Foodtech is operating around 41 startups
• Social innovation and venture has 54 startups
• Retail technology covers 61 of the total Hong Kong startups
• The sustainable green technology industry is expanding with 93 startups
• The smart city has 104 startups
• Gaming and digital entertainment owns 135 startups

The future of Hong Kong startup ecosystem

To grow at an even faster pace, the Hong Kong startup ecosystem needs more of everything from more talent to entrepreneurs, accelerators to angel capital, education of coworking space, there is a lot that still needs to go in to maintain the unprecedented growth of the Hong Kong startup ecosystem.

With the ever-growing startup ecosystem awareness, the young generation has become more conscious about entrepreneurship. For startups in Hong Kong, it is a great opportunity that should be utilised. The authorities should especially promote a culture of entrepreneurship where innovation and ingenuity are valued.

Also Read: Hong Kong startup ecosystem reaching for the top floor

Regardless, Hong Kong has an incredible startup environment that welcomes people from diverse areas of life. Here, every individual regardless of the skill he possesses can find a meaningful career. To support this startup ecosystem, it is important to bring parents on board.

Within the past five years, the Hong Kong startup ecosystem has gone through tremendous progress. The success of this ecosystem can be attributed to entrepreneurs without whom it couldn’t have happened. However, talent, technology, and education have also played equal roles in promoting startups and earning them funding from all across the world.

This Asian startup ecosystem offers amazing investment opportunities that bring a high return on investment and more.

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Syfe, a Singapore-based digital wealth manager, announced today that it has closed a SG$25.2 million (US$18.6 million) in Series A funding round, led by US-based VC firm Valar Ventures.

Other participants in the round include Presight Capital and returning investor Unbound, a UK-based investment firm, which led Syfe’s seed round in July 2019.

The funds will be used by Syfe to enter new markets, develop new products and services, hire top talent, and enhance its technology platform.

Also Read: Syfe raises US$3.8M to launch digital wealth management services in Singapore

“We are currently in advanced conversations with regulators in three different markets in the Asia Pacific region and expect that we will enter new geographies within the next 18 months,” said Dhruv Arora, Founder and CEO, Syfe. “We now already have clients who are based across 23 countries, despite only advertising in Singapore.”

He also added that the need to invest for the future has become even more evident during these times of increased uncertainty. “Since the beginning of the year, we have seen our customer numbers and assets increase by ten times and this fundraising allows us to sharply accelerate our growth to help even more individuals plan, save and build their wealth for the future.”

Founded in 2017 and publicly launched in July 2019, Syfe is a digital wealth manager that helps people invest and make smarter financial decisions. Its automated platform and optional advisor support enables all users — from beginners to experienced investors — to access a range of wealth management services.

The platform has no minimum investment amounts and maintains a low annual fee, starting at 0.4 per cent of the total amount invested.

Also Read: Indonesia, Singapore, Vietnam the most attractive fintech hubs in SEA: Study

Syfe is licensed by the Monetary Authority of Singapore under a Capital Markets Services License.

Andrew McCormack, Founding Partner, Valar Ventures, said: “The potential of Asia as a region — with a fast-growing number of mass-affluent consumers aiming to grow their wealth combined with the pedigree of the team and strong traction — makes Syfe a very compelling opportunity.”

Valar Ventures was co-founded by billionaire investor Peter Thiel (co-founder of PayPal, Palantir and an early investor in Facebook), Andrew McCormack and  James Fitzgerald. The firm has in the past led early funding rounds of successful global fintech companies like TransferWise, Xero and Europe’s leading digital bank N26.

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Image Credit: Syfe

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Since the first cases of COVID-19 were announced on March 23, the local economy in Myanmar, including the real estate industry,  went into a rapid downward trend, especially due to the closure of borders, airports, public transport and blocked imports of building materials necessary for developers’ construction sites.

By April, all major cities including Yangon –the largest city– were completely locked down, which forced almost every businesses to transition to work from home. The majority of SMEs (especially real estate agents) either closed shop, downsized their headcount and stopped all subscription payments in readiness for a severe drop in revenue to their businesses.

In Q2 2020, the entire real estate market crashed.  Small real estate agencies with little or no revenue, bunkered down for a forced recession.  Myanmar has thousands of individual brokers (non-paying advertisers) and only 25 small real estate agencies that advertise around 50 per cent of the properties on real estate websites.  Ad revenues from this sector were already limited; with COVID-19 – it dropped to near zero.

This combined with the notorious monsoon season arriving which is known for being the worst time for property sales in Myanmar; 97 per cent of all real estate developers also followed suit by completely stopping all marketing spend to ride out what has become a very deep recession in real estate, and property transactions turned off like a tap.

This will have a material negative effect on all related businesses including ours, other real estate portals, and real estate industry service providers.

The Second Wave: A horse with wings arrives

By September 12, the ministry of health reported a record 351 cases in a single day, the Second Wave of COVID-19 arrived and so did 200 new patients daily in hospitals.

Also Read: 5 survival strategies for startups in a post-COVID-19 world

“It is like putting wings to a horse.  A horse is originally strong and fast. With wings, it just becomes faster,” said U Than Naing Soe, spokesman for the health and sports ministry.

With the Second Wave,  the whole country is now under stay-at-home orders and the entire city of Yangon is in complete lockdown. Without doubt Q2 – Q4 2020 is going to be the hardest period ever faced by the real estate industry in Myanmar.

The effect to players in the real estate market is a massive reduction in property transactions, with revenue numbers down to around 10-20 per cent of normal sales – which for real estate portals, including ours, and other property transaction businesses eliminate any chance of profitability.

Homebuyers and renters, who make up the majority of property transactions, want to see the property they are purchasing but are unable to due to lockdowns, therefore transaction sales have been nearly non-existent since April.

With revenues declining and profitability out the door in what is now a severely wounded real estate market – reaching investor projections is unlikely.  To reach even 25-30 per cent of last FY revenue numbers would be an act of superhuman powers!

The Second Wave is much more impactful than the first and it will negatively affect full-year 2020 forecasts for every business working with the real estate industry.   Most SMEs under 100 staff serving the real estate market, will be forced to further reduce costs, completely shut down, inject external funds or personal loans to stay afloat.

Myanmar’s shape-shifting tech sector

Throughout the crisis, Myanmar continues to have a thriving tech sector, with many reputable startups who have successfully raised millions of USD in funding and have achieved rapid traction, including ShweProperty having raised US$3 million in late 2019.  As the last frontier in Southeast Asia (SEA), the tech sector opportunities are enormous for experienced first movers with strong management teams.

Also Read: How proptech startup iMyanmarHouse remains profitable despite COVID-19

However, other market news has not been so kind to the industry, especially with some tech startups closing down or forced into liquidation. This includes the:

• Withdrawal of Rocket internet’s online property and classifieds in March 2018. After five years of educating the market, then withdrawing from the country after the entry of more experienced and well-funded players.
• De-listing of the publicly listed social app MySQUAR from the UK-AIM in December 2018, reported to involve related party transactions and significant cash payments to a shareholder without signoff or disclosure.
• The shutdown of payments company Red Dot Network in February 2019 after being sold to a new owner, then reported to have left the country, leaving lots of agent’s deposits unpaid.

Myanmar’s 2020 GDP growth according to the ADB is forecast to be 1.8 per cent, one of the highest in SEA. However the World Bank’s ‘ease of doing business’ difficulty ranking is 165 / 190, and the corruption index is 130 / 180, making it a not-so-attractive destination for many investors.

The country remains mainly a cash society, which can be particularly difficult (or useful) for inexperienced tech startups who are trying to raise funds at high valuations – i.e. cash transactions can make it easier to falsify financial reporting by recycling cash or transactions through a company, then declaring it back as revenue or profit.

Investors can have significant opportunities in Myanmar, but if they are to invest without a seasoned Lead Investor on the ground, turn a blind eye and/or forego an intensive due diligence process (not just a statutory audit) to ensure 100 per cent financial, legal, employment and taxation compliance, then they risk losing their money and reputation when everything eventually comes out.

Fortunately, Myanmar has clear laws on compliance and although local statutory reporting can be easily approved in the short-term, any discrepancies or non-compliance that are re-discovered in the future will be subject to hefty fines, possible imprisonment, or liabilities passed to the directors or shareholders.

The future: Preparation for success

Although it looks like Myanmar’s real estate market will remain stagnant until the end of 2020, ShweProperty’s experienced management team remains very confident and positive about the future.

We have been through three recessions previously and believe that our compassion, decisiveness, long-term strategic thinking and diligent execution will lead the business through the crisis and emerge 100 times stronger.

Also Read: How to market your business in a post-COVID-19 world

Our business remains financially stable and our people motivated.  We have retained all our top talent and management team who have over 100 years of combined industry experience.  We will punch out of COVID-19 with more products and services, and more efficient and effective than ever before.

The business continues to be run with strong governance and fair employment contracts to ensure compliance with the law at all times.  Although some companies choose to use employment contracts that oppress their employees, we believe in employment agreements to support our staff and are approved by the labour department.

Having a professional and proven local and international management team gives less chance of a single point of risk or failure.  We have a policy to not hire direct family members or close friends, especially in sales or finance management roles which can be easily exposed to fraud.

ShweProperty also believes in strong partnerships. This year the business forged an exclusive partnership with PropertyGuru for the Myanmar Property Awards.  We were selected because of our top position in the real estate market in Myanmar.  This allows the business to work closely with developers to deliver multiple online channels to help sell and market their projects both locally and internationally.

Additionally, ShweProperty is still hiring, particularly to further strengthen the management team, and for top sales and marketing professionals to help rapidly grow the business post-COVID-19. We see strong long term potential in the market and through our streamlined property sales transaction model, we will continue to lead, dominate and support the real estate market in Myanmar.

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