Luxembourg has a unicorn, and so does the Czech Republic. That puts them ahead of Hong Kong, which doesn't have a start-up valued at $1 billion-plus even though its economy is bigger than those European countries - combined.
A global count by CB Insights lists 166 start-ups as unicorns, with another 50 on the cusp. One's in Nigeria and another's in Scotland, but none are in Hong Kong, a city long considered the entryway to China but whose economy contracted in the first quarter and now is among the worst performers in Asia.
Venture capital (VC) investors, business professors and striving entrepreneurs say the dearth of Hong Kong unicorns stems partly from a cultural norm that favours stable jobs in bedrock financial and real estate companies rather than risky, go-it-alone propositions. At the same time, businesses often targeted by start-ups - such as property and retail - are controlled by a handful of billionaires, including Li Ka-shing and Lee Shau Kee, who can suffocate any challenges.
"The level of risk-taking is low," said Ali Farhoomand, a business professor at the University of Hong Kong. "It's a society with an old-fashioned way of making money. The young basically are locked into the old formula."
Most of the students taking Farhoomand's course on creativity and innovation are from China or abroad, he said. "I'm just flabbergasted. This gives you a flavour of what's wrong in Hong Kong."
That void of entrepreneurship may be creating a self-fulfilling prophecy. Fledgling Hong Kong companies received $266 million in VC technology-company funding last year - or about one-third the amount of companies in Singapore, according to Pitchbook Data Inc.
This year, Hong Kong has seen 10 VC investments in technology companies, London-based consultant Preqin Ltd said on May 19. That compares with China's 503, South Korea's 51, Singapore's 37 and Japan's 36.
David Shin started his financial technology start-up, PayWise, in Hong Kong about two years ago. He said his funding all came from overseas, and ultimately he decided to shut down the company, which used Ripple technology to transfer funds for banks and corporations.
"There was a lot of money in Hong Kong, but a lot of family money - not institutional or smart money," said Shin, who has since moved to Singapore. "They're not technology-savvy investors. They're more plugged into the real estate or financial markets."
Financing and insurance along with real estate, professional and business services accounted for about 28 per cent of Hong Kong's gross domestic product (GDP) in 2014. The 10 richest people have a combined net worth equivalent to 35 per cent of its economy, compared with 5.2 per cent in India and 1.4 per cent in China.
"The finance and real estate markets are so lucrative, there's no need for people to innovate," said Phil Chen, an advisor at Horizons Ventures Ltd, the private investment arm of Li with a portfolio featuring Facebook and Spotify. "Entrepreneurship is such a hard road."
Yet those sectors aren't having such a good year. Hong Kong's gross domestic product fell 0.4 per cent in the first quarter from the previous three months. From a year earlier, Hong Kong's real GDP grew in March by just 0.8 per cent, slower than 13 other economies in the region, according to data compiled by Bloomberg.
The government has tried, with mixed success, to encourage a start-up culture in Hong Kong. Among those was the massive Cyberport development west of downtown. The HK$13-billion ($1.7 billion today) project, aimed at attracting technology companies, was built by Li's son, Richard, after being awarded in 1999 without competitive bidding.
InvestHK, set up in 2000 to attract foreign direct investments and businesses, said Hong Kong was home to 1,558 start-ups employing 3,721 people as of August 2015. The number of start-ups increased 46 per cent last year, the survey said. "Cyberport is incredibly active," said Jayne Chan, head of investor relations at StartmeupHK, affiliated with InvestHK. "They have to expand their incubation spaces."
Yet a smaller percentage of the founders were from Hong Kong. The proportion declined to 57 per cent last year from 60 per cent in 2014, according to InvestHK.
The government has started addressing the lack of venture capital funds in Hong Kong. Chief Executive Leung Chun-ying in January announced an HK$2-billion fund to encourage private funds to invest in start-ups through a matching process.
InvestHK is using a different approach in its sales pitch for entrepreneurs. Instead of talking up the city's potential for apps like Uber or Yelp, it's selling nearness to the world's factory floor across the border in China's Guangdong province.
"We've been out there promoting Hong Kong as a potential hub, especially on the hardware side, with the proximity to Shenzhen," Chan said.
Soundbrenner makes a wearable metronome that buzzes to the beat on a wearer's wrist. Florian Simmendinger started the business in Germany before deciding that, as a hardware company, Soundbrenner could save money by moving to Hong Kong.
Doki Technologies Ltd uses that manufacturing model, as well. Doki developed a smartwatch for children 6 to 12 years old that allows video and voice calls, GPS tracking and emergency alerts. Founded by Hong Konger Casper Chien, Doki has raised money through crowdfunding and private investments.
"People in Hong Kong are generally more practical," Chien said. "Everyone is looking for that immediate return. To be part of a start-up takes a lot of guts."
© Bloomberg
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