By Stephanie Chan
Hong Kong’s economy, like its skyline, may appear to be dominated by big names and multinational corporations. But its small businesses are vital, not just to the health of the local economy, but to Hong Kong’s continued status as a world-class business city.
As of March 2021, the 340,000 small and medium enterprises (SMEs) in Hong Kong accounted for 45% of private-sector employment and more than 98% of the total number of enterprises.1 The emergence of COVID-19 hit small businesses particularly hard; in a recent AmCham survey of 201 small and medium-sized businesses,2 57% of respondents3 cited “keeping business afloat” as a major challenge during the pandemic. More than a full year of social distancing, travel restrictions and remote work has left confidence among small businesses in Hong Kong at an all-time low.4
However, the signature strengths of Hong Kong’s small business ecosystem—a top-tier talent pool, an open and supportive business community, access to multinational corporations, unmatched proximity to both southeast Asia and mainland China, and a government that invests in innovation and entrepreneurship—are still intact. And according to a KPMG survey in December 2020, 34% of entrepreneurs in the SAR reported that demand for their products and services increased during the pandemic, versus 19% of corporates—highlighting small businesses’ potential to contribute to Hong Kong’s economic recovery.5
At AmCham, we spoke to some of Hong Kong’s innovative small businesses to find out how they’ve taken advantage of the resilient ecosystem to innovate and even grow through the pandemic—and beyond.
People, People, People
“Recruitment of talent, I would say, is number one,” said Stephane Boivin, CEO of quality and compliance software company Pivot88, when asked about the factors that make Hong Kong a good place for small businesses. “There’s still a lot of talent in Hong Kong,” he said, both expatriates and local workers. Boivin, from Quebec, Canada, particularly values the multiculturalism and international outlook of the workforce in Hong Kong: Pivot88’s office at Cyberport employs 40 people of 15 different nationalities, including India, China, Canada and South Korea.
“People in Hong Kong are hungry for jobs and growth and are very hard working,” said Thomas Huang, Co-Founder and COO of Hong Kong career platform startup Happyer, which targets millennial and Gen Z jobseekers. “Previously [Hong Kong] was a bit behind the US in terms of entrepreneurship, intrapreneurship, innovation, but it’s definitely been growing a lot,” he added, pointing to governmental support for students seeking to develop entrepreneurial skill sets.
However, there’s room for improvement. In AmCham’s survey of small and medium-sized businesses, talent search and retention were the two most challenging aspects of human capital. 64% of respondents considered talent search “very” or “quite” challenging, and 56% said the same of talent retention.
Hong Kong is a lot more open, on an individual basis or a company basis, to discussing ideas, to meeting, to building relationships.– Edwardo Chun, Director at FundPark
A Culture of Collaboration
Thanks in part to the presence of talent from around the world, the business culture in Hong Kong is open to newcomers and collaboration. This is particularly important to small businesses that depend on partnerships with other companies to amplify their impact.
“Hong Kong is a lot more open, on an individual basis or a company basis, to discussing ideas, to meeting, to building relationships,” said Edwardo Chun, director at FundPark, a fintech startup that offers trade financing to underbanked SMEs and small corporate clients using real-time data and risk analysis. Chun, who has worked in Brazil, Japan and the US, contrasts Hong Kong’s business culture to that in Japan, where dealmaking relies much more heavily on long-standing personal relationships.
“That [Japanese model] has positives and negatives, but for an SME trying to grow, that can really slow things down,” Chun said. “Hong Kong is more proactive, more open, more transparent in that sense.” Through AmCham, Chun said, FundPark has made connections with AmCham Japan (where FundPark has plans to expand) as well as potential business partners in Hong Kong.
Many of our MNCs members are keen to partner with innovative small business, as they represent the new economy of Hong Kong.– Tara Joseph, AmCham President
Fostering Connections with AmCham’s Center of Excellence for Small Business
This is also where AmCham sees great opportunity. In January this year, with the support of PayPal, it launched its virtual Center of Excellence for Small Business. Spearheaded by AmCham’s Innovation & Technology Committee, this initiative endeavors to provide resources and business intelligence for innovative small businesses, as well as offer a platform for SMEs and startups to access the Chamber’s wide network of MNCs and develop commercial partnerships.
“Many of our MNCs members are keen to partner with innovative small business, as they represent the new economy of Hong Kong,” said Tara Joseph, AmCham President. “This is where opportunities arise for Hong Kong’s future and a win-win solution for all. This is why collaboration matters and having said that, our plan is to open up the program so that more MNCs can be part of the initiative. Collectively, we are here to help businesses grow.”
“SMEs play a critical role in the global economy by creating jobs, contributing to production and exports, and growing a stronger middle class,” said Steven Chan, Asia-Pacific Head, Government Relations, PayPal. “However, they also face many challenges and we wanted to create a platform to help them access up-to-date information and resources on business intelligence and trends; share good practices; and expand their network. The center is a place to help small businesses to thrive and excel.”
AmCham has already connected dozens of startups to MNCs through its ongoing HK Startups Meet Multinational Companies pitch series, which launched in 2020. The winning startups from each session come away with connections to the judges, who are executives and senior managers from multinational companies. These connections, whether they be a coffee meeting or a tour of an MNC’s offices, represent an invaluable opportunity to talk through the challenges of running a business.
Access and Proximity
There are 9,025 companies in Hong Kong with parent companies outside Hong Kong, and over 1,500 companies have their regional headquarters in Hong Kong, according to InvestHK, the government agency tasked with attracting foreign direct investment.
Many small businesses rely upon business from large multinational corporations, so for entrepreneurs like Megan Lam, cofounder of Neurum, the concentration of decision makers in Hong Kong is a key draw. Neurum’s central product, the behavioral health app Clara, is designed to be deployed by enterprises seeking targeted, individualized corporate wellness solutions for their employees.
“Hong Kong is strategically located at the interconnection of Asia, alongside many of the region’s most exciting business markets,” Lam said. “It makes it easier for us for regional expansion, in order to provide services for multinational companies and employees in the regions.”
Large corporations also benefit from partnerships with smaller businesses which have the agility to pursue innovative new ideas. Thus, opportunities for established corporates to connect with small businesses are vital to maintaining Hong Kong’s attractiveness as a business hub.
Continued access to decision makers is not a given, but something that must be actively maintained and planned for. An AmCham survey in May 2021 found that 42% of AmCham members surveyed say they are considering or planning to move away from Hong Kong due to a variety of reasons, including the National Security Law and a declining mood across the community.6
Government and Private Funding
The Hong Kong government offered billions in wage subsidies and loan assistance in 2020—a key lifeline to small businesses affected by the pandemic. In AmCham’s survey, funding from government and private sectors was the factor most frequently identified as important to the resiliency of small and medium-sized businesses—although 93 out of 170 survey respondents reported that government grants were a “very” or “quite” challenging area of corporate finance for their organization.
The government’s investment in innovative small businesses, which of course predates the pandemic, comprises direct grants, subsidized office space and incubator and accelerator programs aimed at making Hong Kong a mainstay of Asia’s tech industry. Rare is the innovative company in Hong Kong that has not benefited in some way from this largesse. Happyer and FundPark are alumni of the incubator programs at Cyberport and Science Park. Although Pivot88 is an established, growth-stage startup, Boivin said, “They’re still supporting [us] with low fees for all this.” He gestured around him at Pivot88’s modern workspace in Cyberport. “It’s amazing, where we are today.”
Private investment is also healthy, aided by the government’s Innovation and Technology Venture Fund (ITVF), established in 2017 to attract private investment in startups (including FundPark). Investment from venture capital funds accordingly increased sevenfold, to HK$9.9 billion, between 2014 and 2019.7
Of course, as a finance hub, the lion’s share of the governmental resources, support and attention in Hong Kong does tend to go to fintech startups. “Those in fields such as ours may feel somewhat of a gap,” acknowledged Lam, cofounder of Neurum. However, she said, “We are an incredibly connected community and are able to find the support from organizations like AmCham.”
2 Respondents had no more than 500 employees
3 74 out of 129 who answered this question; 72 respondents skipped it