Today I paid a visit to the Hong Kong Science and Technology Park (STP for short) and CUHK . The point of this blog is supposed to be a record of what it takes to get a startup started up, and I really haven’t been doing a good job of it. This post should be more helpful.
In 2009, while attending CUHK I managed to add myself to the attendance list of the 2009 Stanford University Round Table on Entrepreneurship, co-hosted by CUHK and Shenzhen University at the STP. After the conference my professor Dr. Kevin Au gave me a little tour of the park’s incubation program. I was very impressed with the place and decided I would return with a startup. Three years later, here I am.
I was half the age of everyone else, but had less hair so I blended in.
The Hong Kong Science and Technology Park
The Park opened in 2001 to promote applied R&D, technology implementation, and entrepreneurship in Hong Kong. Previously I had the impression the park was substantially associated with CUHK but today I learned the school is only starting to become more involved. Geographically, the STP is close to CUHK, they share an MTR stop and are only a 5 minute bus ride apart (you can’t really walk there). Part of the park caters to spinoffs or university/corporation backed ventures. Some large corporations such as Hitachi, Fujitsu, Unilever, Bridgestone, and DuPont have subsidiary offices at the park. The part we’re interested in, of course, is the park’s startup incubation program. The program is split into four different categories, each with different application and operation parameters:
- Incu-Tech (startups that need office space): IT/telecommunications, electronics, precision engineering, green tech
- Incu-Bio (startups that need lab space): therapeutic/personal care, Chinese/herbal medicine, regenerative medicines, medical devices, diagnostics
- Incu-Design: media/communications, interior/architecture, fashion, consumer products, packaging/branding, visual/spatial arts
- Incu-App: web based, smartphone apps, games, programs
Tech is a three year program with a maximum aid package of $83,000. Bio is a four year program with a maximum package of $110,800. One little hiccup we’re having is the STP’s suggestion that we’d be enrolled in the Tech program (lower aid package) but operating in the Bio program (higher cost). Something which I was not happy about.
If you are interested in apps, there is another incubation center in Hong Kong entirely dedicated to computer based startups. Both parks are, in the opinion of more than a few Hong Kong people, in the middle of nowhere. The views can’t be beat, though.
Startups at the STP
The website lists 89 startups currently in the various programs. Only four are in the Incu-App program, it might be new. In the Incu-Tech/Bio program there are five “green tech” companies, eight “electronics” companies including several semiconductor startups, and ten “biotech” companies, among others. Of the “green tech” companies, one is designing small turbines for wind and hydro applications, one is a sort of consulting firm who specializes in making motor driven applications more efficient (not really sure what they do), one provides solar system optimization, and the last one develops membranes for use in water purification.
The STP is located on an expansive ocean front plot of land. The body is there, but the soul isn’t. Innovation centers like Silicon Valley, Austin, or Boston are not easily coerced into existence. Governments can’t do it, universities can’t do it. It takes some kind of organic mixture of a culture that accepts and promotes risk and failure, streamlined regulations, access to capital, and a pool of talented, risk taking people. Hong Kong doesn’t quite have that yet. A big shiny park helps, but while visiting, it just seemed empty. I think in time Hong Kong could be an innovation center as Silicon Valley is now. Here’s the tour:
To get to the STP you alight at University station on the East Rail Line, then take bus 272k to the park.
The center of the park has what could only be a huge bug in a spacesuit. Or an auditorium.
Just past that building is the ocean.
Requirements, Benefits, and Application Procedure
Our company seems to be a bit larger in scope and capital requirements than most others. Which surprised me, I didn’t think we’d be out of the ordinary. I thought I was with my kind. From my conversations with the gatekeepers, it appears that the STP expects most startups to show up with enough capital to fund their enterprise for the first six month.
The problem is our startup requires an (apparently) large initial capital investment. We’re developing and building hi-tech waste management equipment that is supposed to process tons of waste per day. I thought our startup costs were quite low, but apparently this is not the case.
Here are the entry requirements:
- Business plan based on one of the four categories.
- Business must be a newly registered Hong Kong company.
- Founders and employees must legally be able to work in Hong Kong. Hong Kong Immigration doesn’t care if you start out with a tourist visa and get an investment visa later. Best place to do business in the world, oh yea.
- Either: one of the full time staff must be R&D and own 10% equity -OR- the R&D team must have at least 20% equity.
- At least 50% of the total staff (founders and employees) must be R&D.
- At least two full time staff must be working in Hong Kong.
- Enough capital to startup and operate for approximately six months.
- The startup cannot have sold more than 20% equity to another company except in the case of a university spinoff. Two or more companies cannot have investments in the startup. There is no limit on individuals equity positions in the startup.
- No retail or mass production.
- Require less than 1,600 square feet of office or lab space.
Benefits of the STP incubation program:
- 3 or 4 year program: if you don’t screw up you’ve got the best office and lab space in Hong Kong for several years.
- First year of rent is free (for the first 800 square feet, any amount over that and you pay from day one). Second year onward rent per square foot is Tech $1.40/Bio $1.82.
- Microfund (Tech $5,800/Bio $7,700) for anything except salary, rent, travel.
- Business Support Fund ($38,600/$51,500) for marketing, training, consulting, accounting, etc.
- Technology Support Fund ($38,600/$51,500) for lab services, joint R&D, tech consulting, legal (patents), data centers, etc.
- Access to Angel and VC investors; business, legal, accounting and general consulting.
- University partnership program such as employee recruiting, joint R&D projects.
- Ocean view and a (hopefully) collaborative environment (I hope everyone isn’t super secret and anti-social).
Here is our step by step application process, which varies slightly from the norm:
- Submit an incomplete application to the STP (includes biz plan, presentation, application packet, resumes; does not include any capital reserves or employees beyond the founders, including a lack of the necessary 10% equity R&D full time employee)
- During the two month application review process, the STP will actively help us locate and interview investors and employees.
- Once we are approved, we will use our position as an approved incubatee to secure financing and employees before we enter the lab.
- The time from being approved to entering the lab can be from 3 to 6 months, or longer if a lab is not yet available.
- Order the first round of materials and equipment, about a month to be delivered.
- Enter the lab and begin work. Rock and Roll.
It seems like the program, and startup success, is ours for the taking. The STP wants us in the program and I think I’ve got enough support and guidance from the right people at CUHK to not screw it up too badly. We’re always only one step away from snatching defeat from the jaws of victory, though, so I should always expect to fail, prepare for the worst, and do my best.