Hong Kong has a strong venture capital industry and a vibrant
capital market, which together afford a much needed financial
backdrop for financing growth businesses. This business friendly
environment provides funds for start ups as well as exit strategies
for more mature companies.
A strong venture capital presence to provide follow-on financing
for post-angel companies is important to the development and growth
of angel financing. In this light, Hong Kong is blessed as a key VC
hub in Asia, with 294 venture capital firms operating in the
territory as of first half of 2008. It has a strong lead in raising
funds, raising US$16 billion in 2007 and about US$8 billion in the
first half of 2008.
Before the 1990s, Hong Kong did not have much of a venture
capital industry. Financing of new businesses relied largely on
one's own savings or pooling of resources from the immediate
family members or close friends. In the late 1980s, the first
venture capital companies began to emerge in Hong Kong. This marked
the first time when newly established companies without
self-funding resources were able to seek equity financing from
unrelated third parties.
The Internet boom in the late 1990s and the China factor
attracted even more foreign venture capital firms to Hong Kong and
also spurred the growth of some home-grown VC funds. Today, Hong
Kong probably remains the largest VC hub in Asia, having weathered
ebbs and flows, including the blow from the dotcom bust and an
increasing trend for those VCs focusing on mainland China to locate
their operational bases to Beijing or Shanghai.
In terms of size and depth, Hong Kong's venture capital
industry pales compared to Silicon Valley. The industry also has
perhaps paid too much attention to later stage companies to the
neglect of early stage companies. With more quality angel financed
companies coming on scene in Hong Kong, a shift of emphasis
hopefully will gradually occur to catch up to the needs of early
For years, Hong Kong has been a significant world-class
investment banking center servicing IPOs of local and PRC companies
both on its own stock exchange and overseas bourses including the
NASDAQ. Since the mid-1990s, we have witnessed a spate of listings
on the NASDAQ or the Hong Kong Stock Exchange of PRC focused
Internet or technology companies, many of which were managed
primarily out of Hong Kong.
The first wave from mid- to late-1990s included the listing of
Sina.com, Sohu, and Netease on the NASDAQ, followed in more recent
years by Baidu, C-Trip, Tencent (operator of QQ) and Alibaba, etc.
on the NASDAQ or in Hong Kong. These listings provided the ultimate
exit for their founders and investors and a road map and prized
goal for countless other striving startups and entrepreneurs.
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