Looking to encourage innovation development in Hong Kong, a group of professionals got together to form Hong Kong’s X Technology (HKX) fund, an investment vehicle aimed at supporting technology start-ups in the city.

Last month, the fund announced that it had made its first investment into six technology firms, from healthcare to insurance. Professor Guanghua Chen, co-founder of HKX, sat down with The Asset to share his views about the initiative and the fund’s plans.

TA: How did the idea of the fund come together?
GC: In 2015, a group of us got together and we figured that there might be an opportunity for Hong Kong to make some contribution in terms of start-ups. Initially we wanted to do it as an NGO-type activity, but then after some discussions we figured it might not work because you need to commit a lot of people’s time. Therefore, this effort has to be a profit driven investment type of activity.

Were there any challenges in setting up the fund?
Everything was sort-of ready when Neil Shen of Sequoia Capital agreed to this idea. Then we started to talk to a few professors. We really didn’t have to do much persuasion – after a while it just all clicked. We called the first meeting in March 2016. A lot of people turned up, including the Sino Group. Prior to our first meeting we were already in contact with the Sino Group, they more-or-less committed to support us by donating their office space. From then on it was very smooth, I think it’s because everybody – the community and professionals – were all ready and we wanted to do this.

How does your fund reach out to these start-ups?
One way is that they submit their applications online. Sometimes we find them at competitions we attend and approach them. There are the company lists in Science Park and Cyberport. If we find something interesting we contact them. Another important source is our network, in particular, our mentor program. We found that it has been the best source.

What are the common mistakes made by start-ups?
One common mistake is the start-up company’s initial business model, [i.e.], how to connect it to the market. Usually the student has an interesting technology but how to connect it is not very clear. Another problem is the lack of key members. Usually for us it’s just a student and professor. They normally don’t have commercial experience. They are not business savvy.

What needs to happen to make Hong Kong an innovation hub?
I think the government should invest more in universities. I feel that we will lose our competitiveness if we don’t. Another problem is immigration. For example, key angel investors that want to relocate to HK often go through lengthy process. This is the type of person we need. When they come, they will bring resources, money and connections to Hong Kong. There needs to be a green channel for tech, start-up and angel investors. We have to cut the bureaucracy here first.

What are the long-term goals of the fund?
We are a small HK$300 million fund, we want investors as soon as possible. Hopefully, in a year from now we will be able to invest in another 20 companies. We are thinking about setting up a presence in Shenzhen when these companies start to grow rapidly. The market is not only Hong Kong.