Issue 09
January/February 2016 FEATURED IN THIS ISSUE
FROM THE EDITOR
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In a few short years, crowdfunding has become a massive industry projected to outpace traditional venture capital spending in 2016 (that’s over 34 billion USD!). It is revolutionizing the way startups fund and launch new products, and represents an incredible opportunity for entrepreneurs looking for alternative funding as well as brand-building opportunities.
What is Crowdfunding?
Upcoming Startup Events
Those looking to try out crowdfunding should take a look at the three rewards-based crowdfunding platforms in Hong Kong, two of which have launched just recently.
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FringerBacker, the oldest of these platforms, was used to raise $4.75M HKD for FactWire (an investigative news agency) this past September. Next Chapter, a new funding portal for female entrepreneurs, helped a new writer publish “My Hong Kong Vehicles” this December. Lastly, SparkRaise, Hong Kong’s newest rewards-based crowdfunding platform, is launching their first project — a hydroponic gardening system — later this year. The launch of new platforms and the sharp increase in the number of crowdfunding campaigns originating in Hong Kong, as well as more crowdfunding events and even a “crowdfunded store,” all signal that this phenomenon has taken off in Hong Kong and will be a growing trend this year. Crowdfunding cannot exist without “backers,” so let’s help support each other’s campaigns and build a stronger startup community in 2016. Cheers, Yana Robbins Editor-in-Chief
MEET OUR CONTRIBUTORS
Crowdfunded in Hong Kong
Why does Crowdfunding Fail?
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Advice from Crowdfunders
17- 20 FinTech Ecosystem in Hong Kong
Pitching to the Media
25 Where are the Startups?
MEET OUR TEAM Editor-In-Chief: Yana Robbins
Nicole Web is a Former Reporter/ Producer and News Reader for Sky News Australia. She’s now consulting and running her blog, mintmochamusings.com.
Simon Fuller is a Creative Director of Eighfivetwo. net, specialising in production and post-production of engaging video content.
Yeone W. Moser Fok is a founder and CEO of SparkRaise, a rewards based crowdfunding platform. She’s a former banker at Credit Suisse, JP Morgan and
Deutsche Bank.
Katie Scott is the former News Editor of Wired.co.uk in London. Now living in Hong Kong, she has written about everything from 3D nature documentaries to nanosatellites to the ramifications of Edward Snowden’s brief visit to the SAR.
Website Manager: Rosalyn Smith Cover Photography: Brent Pottinger General Inquiries: info@jumpstartmag.com Editorial: editors@jumpstartmag.com
Jumpstart is available at over 350 locations, including: Airport Lounges: CNAC Lounge Dynasty Lounge Royal Orchid Lounge Emirates Lounge United Lounge Plaza Premium Lounge EAST Plaza Premium Lounge WEST Morning Calm (Korean Air) SQ Lounge
Advertising: advertise@jumpstartmag.com facebook.com/jumpstartmag twitter.com/jumpstarthk
Elena Mikhaylova is a CEO of crowdfundproductions. com, a crowdfunding consulting company.
Nicole Denholder is the Founder and CEO of Next Chapter, a Hong Kong-based funding portal and rewardsbased crowdfunding platform for female entrepreneurs.
Nick Hedley is a freelance financial journalist from South Africa. He wrote for South Africa’s Business Day and Financial Mail publications before moving to Hong Kong.
Copyright © 2015 Jumpstart. The contents of the magazine are fully protected by copyright and nothing may be reprinted without permission. The publisher and editors accept no responsibility in respect to any products, goods or services that may be advertised or referred to in this issue or for any errors, omissions, or mistakes in any such advertisements or references. The mention of any specific companies or products in articles or advertisements does not imply that they are endorsed or recommended by this magazine or its publisher in preference to others of a similar nature which are not mentioned or advertised. Published articles do not necessarily represent the views or opinions of Jumpstart Magazine. Printed by Magnum Print Company Limited. 11B E-Tat Factory Building, 4 Heung Yip Road, Wong Chuk Hang, Hong Kong.
What is
CROWDFUNDING?
Why use a Hong Kong-based crowdfunding platform? By Nicole Denholder
Crowdfunding seems to be a hot topic these days - you hear about it all the time, but chances are you might not know exactly what it is. According to the Oxford Dictionary, crowdfunding is by definition “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”
for their pledge. Anyone can start a campaign and the appeal to supporters is that they are either getting access to a product or service at a discount price or it is unique or not available anywhere else yet. You can find this type of crowdfunding on Kickstarter and Indiegogo.
In a way, the crowdfunding concept has been around for centuries, but it only became a popular term in recent years due to changes in social and economic factors. During the financial crisis, small businesses needed more help than ever to stay afloat and along with the emergence of the Internet, business owners could maximise their social reach and achieve their funding goals by crowdfunding online. This is a change from the past, where small businesses would turn to banks for loans, but due to the economic downturn their access to these loans is more limited as banks now find startups or small businesses too risky.
In lending-based crowdfunding, investors do not receive a stake in the company, but instead they are repaid for their investment over a period of time and receive interest as income.
Many people have heard of big crowdfunding websites like Kickstarter and Indiegogo who have pioneered the rewards-based crowdfunding model. However, there are actually four main types of crowdfunding, which break down into Donation, Rewards, Loans and Equity. They are explained below: Donation-based crowdfunding People can donate money to a charity, personal cause or a project that has ethical or moral value and is beneficial to the community. Anyone can start or support a campaign and supporters typically donate money as they believe in a cause. You can find this type of crowdfunding on websites like Gofundme. Rewards-based crowdfunding Rewards-based crowdfunding refers to crowdfunding projects where supporters receive an item, business product or service in return for pledging their valuable funds. For example, when the Pebble Watch first came out, supporters received an early edition watch as a reward
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Lending-based crowdfunding
Equity-based crowdfunding Equity-based crowdfunding refers to a more long-term investment opportunity - investors are encouraged to fund early stage startups in order to receive a stake in the company. In return for their investment, they can also expect to receive dividends or investment appreciation based on profits of the business. These opportunities are typically limited to accredited investors. Due to the explosive growth of crowdfunding and the large demand on crowdfunding platforms, more niche and country-specific ones have emerged to cater to a more targeted community. For products that are extremely localised, raising funds on a niche platform may in turn be more effective than a large global platform. So there you have it - crowdfunding easily explained! With a better understanding of the topic, you may have a few questions on crowdfunding, such as the usual success rate of projects completing their funding goal or whether it is a viable and effective business solution. In the end it comes down to the nature of your business and product - the most successful projects tend to identify a gap in the market and have potential to disrupt the status quo. However, marketing the product and maximising its reach is also very important - the crowdfunder may have a great product, but if investors cannot discover it online easily, this will affect the success rate of the business.
1. Targeting your audience The great thing about niche or countryspecific platforms is that the audience is more targeted. If location targeting is a top priority for your product to raise funds, choosing a Hong Kong-based platform may be more applicable to your business. 2. Testing your product Hong Kong crowdfunding platforms are a great way to test out the potential value and price point of your product and receive feedback from valuable local consumers. Once you reach your funding goal on a local or niche platform and realise there is a demand in the market for your product, you can expand your scope into other global crowdfunding platforms. 3. Campaign competition When it comes to crowdfunding, everyone is in serious need of funds, so if you use a larger global crowdfunding platform like Kickstarter or Indiegogo, you’re bound to come across more competition with other crowdfunding projects on the same platform. For less competition, more support and increased potential reach & profile, a Hong Kong or niche platform may help you reach your funding goal faster. 4. Local press Hong Kong (or niche platforms) may have a greater media profile in your target market which a campaign can leverage to build a fan base, marketing buzz and increase the chances of a successful campaign. Often an influential blogger or press article may be a key driver of funds and new supporters. 5. Multiple funding cycles Crowdfunders can choose a range of platforms to maximise their reach and complete multiple funding cycles, e.g. starting with a Hong Kong platform to validate their product and do a first round of funding, then move onto a different platform for a follow-up funding round.
UPCOMING STARTUP EVENTS Jan 23 - 30, All Week StartmeupHK Festival First-of-its-kind startup event encompassing HealthTech, Internet of Things (IoT), FinTech, and data analytics. More info: startmeup.hk Jan 25 - Jan 26 FinTech Finals The 2016 Fintech Finals promises to be Asia’s biggest FinTech conference and pitch competition. @ PMQ, from $775 HKD Jan 26, 7pm How to Write Web Pages that Sell More A crash course in copywriting for startups/small businesses. @ Wynd Co-working Space, Free Jan 27, 7 - 9pm Startup Grind Hong Kong Hosts Chris Reed Chris Reed has one of the world’s most viewed LinkedIn profiles with 40k followers. He’s the founder of blackmarketing.com @ Startup Grind Hong Kong, $75 - $150 HKD
Jan 28, 6:30 - 8:30 Shaken Not Stirred Networking Drinks at Boujis Monthly networking event organized by BritCham. Network entrepreneurs and executives in a relaxed and informal setting. @ Boujis, $290 - $350 HKD Feb 19 - 21 Startup Weekend The weekend begins with Friday night pitches and culminates on Sunday night with demos and presentations. Transform your idea into action in 54 hours! @ PolyU, $80 - $280 HKD March 11 - 12 User Experience Hong Kong Learning event dedicated to bringing all product and service design disciplines together, from research, marketing, design, technology and the business to name a few, who are interested and passionate about designing great experiences for people and business. @ InnoCentre, $950 - $3,950 HKD
Jan 27 - 28 LAUNCH IoT Summit Designed as a forum for experts and visionaries, LAUNCH IoT will offer comprehensive and technical IoT programming with opportunities to network with founders, investors and influencers in the global ecosystem. @ PMQ, $1,550 HKD+
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Holga: Digital Camera Raised: $1,813,618 HKD Funded: 731% Platform: Kickstarter October 2015
Atom: Portable Battery with a Built-in Power Outlet
DSCVR: Virtual Reality Headset for Amartphones
Raised: $523,425 HKD Funded: 130% Platform: Kickstarter November 2015
Raised: $574,882 HKD Funded: 371% Platform: Kickstarter October 2015
Aumeo: World’s 1st Tailored Audio Device Raised: $2,305,828 HKD Funded: 641% Platform: Indiegogo July 2015
Hong Kong Markets: Poster Series Celebrating Local Culture Raised: $39,357 HKD Platform: Kickstarter October 2015
Spritz: World’s First Smart Water Bottle with High-Def Audio and Hydration Assistant App. Raised: $318,520 HKD Funded: 164% Platform: Indiegogo December 2015
Preciso Watch Raised: $104,340 HKD Funded: 107% Platform: Kickstarter November 2015
Want to see some of the crowdfunded projects in person? A newly opened store in Kowloon is stocking successfully crowdfunded projects from all over the world. Check out (and purchase) 21+ crowdfunded projects and growing.
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Shop 223, D2 Place, 9 Cheung Yee Street, Lai Chi Kok www.backerstores.com. Open 12-7pm Daily.
Fishbone Charging Station Raised: $914,570 HKD Funded: 400% Platform: Kickstarter September 2015
MagCable Magnetic USB Cable Raised: $1,173,737 HKD Funded: 199% Platform: Kickstarter October 2015
Anicorn: A Designer Watch with Unique Concentric Disc System Raised: $414,238 HKD Funded: 296% Platform:Kickstarter November 2014
My Hong Kong Vehicles Book Raised: $26,260 HKD Funded: 121% Platform: Next Chapter November 2015
VOMO: 20mph High Performance Electric Scooter Raised: $2,262,019 HKD Funded: 731% Platform: Indiegogo July 2015
The PhoneJoy Play: Compact Gamepad That Turns Your Phone into a Portable Console
Mokacam: The World’s Smallest 4K Camera
Raised: $541,435 HKD Platform: Kickstarter January 2013
Raised: $2,899,081+ HKD Funded: 750% + Platform: Indiegogo January 2016
Note: Minimal Sticky Note which allows readers to mark Read from Unread and Like Raised: $23,416 HKD Platform: Kickstarter November 2015 5
Calling on the crowd to fund the future There has been a wealth of high profile crowdfunding campaigns in Hong Kong in the past few years, but the SAR is still losing homegrown projects to more established crowdfunders abroad. What needs to change to get more investors and entrepreneurs involved?
There have been huge successes over the past few years in crowdfunding in Hong Kong. Independent media outfits FactWire and Hong Kong Free Press are among the projects that have been crowdfunded over the past year alone, alongside a Shakespearean festival in Cyberport and the refurbishment of a 90 year old temple. Next year will bring the arrival of two new platforms – SparkRaise and Terminal, which are now in Beta testing mode.
SparkRaise and FringeBacker are donation- or rewardsbased platforms, and are largely ignored by regulators. Equity crowdfunding in the SAR, in contrast, is regulated. Professional investors must have at least $1 million to participate in campaigns and the equity crowdfunding outfits themselves have to be accredited and licensed by the Securities and Futures Commission (SFC). It is, undeniably, a tough arena as the demise of Fund2.Me and Colony88 indicates.
Thanks to a FringeBacker campaign, FactWire Jackie Lam is founder of Bigcolors, a former equity achieved its HKD3 million target nine days ahead crowdfunding platform, which has now pivoted to become of deadline when more than 2400 people pledged a seed fund, investing in early stage startups. She explains: money. The not-for-profit project is the brainchild of “In Hong Kong, the equity crowdfunding space is still in its veteran Hong Kong journalist Ng Hiu-Tung who infancy stages. There is significant investment in education wanted to emulate the BBC’s model in the and awareness needed for the wider community as to face of a media landscape dominated by what crowdfunding is.” billionaire-owned outfits. He admits he was shocked by the response: “I For startups, equity crowdfunding can “Getting people to put initially thought that it would be become a diplomatic nightmare with their trust in a [crowda trial launch that would be supscores of investors offering little inported by my friends.” vestments and then wanting a say, funding] project in Hong but it can be a hugely rewarding Kong is harder than Maryann Hwee is the executive model, says Will Ross at Nest and in the USA or Europe, director of FringeBacker, which investable.vc. He explains: “The launched in 2012. Hong Kong where online transacbiggest challenge for startups is Free Press is another of her orscale and they can use corporate tions are more prevalent ganisation’s success stories, but investors for this. The latter offer and the crowdfunding it has also been behind many a combination of financial capital charitable drives including World model more accepted.” and human capital. It’s not just dumb Vision’s One Goal programme to money. The investors are bringing in Yeone Fok, SparkRaise support child nutrition in Asia. She value. They want to see the company says that “people feel empowered succeed.” if they invest and then see the project come into fruition”. However, says Yeone Fok of Frederick Saurat is co-founder of Terminal.tech (formerly SparkRaise, getting people to put their trust in a projEastFounder.co). Currently in Beta, the company combines ect in Hong Kong is harder than in the USA or Europe, a fundraising marketplace with “a new generation of the where online transactions are more prevalent and the ‘Bloomberg terminal’” – the software system, which, accrowdfunding model more accepted. She says: “Here, cording to CNBC, connects and provides data to 300,000 people value interpersonal contact and trust. People market professionals worldwide. This Intel Terminal will use therefore tend to be more sceptical so what is needed “intelligence technologies - algorithms and machine learnis education and proof of concept.” ing - to provide data analytics and insights about private tech companies and the markets,” Saurat explains. He Nicole Denholder has opted to focus on female entrebelieves that this added service will build confidence: “We preneurs in setting up Next Chapter. The platform’s will be able to develop transparency about the ecosystem.” first campaign, a childrens’ picture book written by He adds that a societal shift is also pushing investment in a Hong Kong mum, has smashed its target raising startups. “The Millennial generation doesn’t trust banks. USD$3388. Denholder says she is looking for innovaThey are starting to invest money in what they know - the tive or unique products, or projects that “have a good DotCom companies - and this phenomenon will increase back story or [could] be something that a niche target massively in the coming years.” audience is looking for.
SparkRaise will incorporate a social network, which
Fok hopes will garner “increased trust” between entrepreneurs and potential investors “as you will be able to see what people have backed previously and what their own campaigns have been”. She hopes this feature will attract local talent who were considering taken their product to the likes of Kickstarter and Indiegogo. “Over the next two years, I would love it if the crowdfunding campaigns currently going to the USA with their products came to Sparkraise”, she says.
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By Katie Scott
However, the traditional finance sector and the government need to get onboard. Ross says: “There is a complacency in the traditional finance sector that Fintech (crowdfunding included) will lose its edge when it becomes more regulated. To write off technology wholesale would be stupid. It is less about disruption and more about commercial revolution and competitive advantages.” As Saurat says, there are neighbouring countries moving quicker than Hong Kong to encourage innovators: “I hope that the government will understand the importance of Hong Kong becoming a FinTech hub and that it will participate by adapting regulations in order not to see this ecosystem moving somewhere friendlier.”
Why Do Crowdfunding Campaigns FAIL?
By Nicole Webb
Crowdfunding…… it’s the very latest catchphrase that promises to “make your dream a reality.” Got a great idea? You’re in business. Whack it up on one of the many crowdfunding platforms, make your pitch, sit back and watch the dollars roll in, right? Wrong. While there are many inspiring success stories, there are equally as many if not more crowdfunding campaigns that simply fall short of the mark. That is, they fail to meet their monetary goal. The grand business plan is then left to drift off into the sunset…usually never to be heard of again, becoming nothing more than someone’s pipe dream. You don’t have to be Einstein to understand that no matter how big or small your project, crowdfunding is risky business. One of the biggest platforms, Kickstarter reports that 62% of crowdfunding campaigns are unsuccessfully funded. So, what goes wrong when campaigns don’t make their target? Who’s to blame? What’s to blame? While most of the online crowdfunding platforms usually offer plenty of advice and support, that doesn’t mean campaigners don’t have their work cut out for them. A quick Google search will soon tell you the most popular reasons campaigns fail: 1. People underestimate the time they need to invest – they don’t lay the groundwork. Every project needs a carefully thought out preparation and execution plan. 2. An unpersuasive or uninformative video pitch, or no video at all! 3. The failure to build relationships. It seems that in order to be successful you need a crowd and you need to work that crowd really hard! 4. And who would think it, but there are campaigners who simply fail to research their market thoroughly enough.
Desima launched her campaign Connect a Pot – a low maintenance self watering pot on Kickstarter. While she managed to get 85 backers, she only made a quarter of her $22,000 goal. She says, with hindsight she should have lengthened her fundraising duration from 30 days to 60 days. “From a psychological view it would have given more people who viewed my project the view that it still had plenty of time to reach its goal.” She also says she could’ve made her video more entertaining as well as lowering her funding goal. “Even though I would have lost money at this point, I would now have a product to sell.” Doris Leung who runs Diamond Cab in Hong Kong (cabs for people with disabilities) launched a campaign to replace these cabs with newer versions. She was 58 percent funded but not enough to complete her long held dream. She says while platform Indiegogo gave very good guidance, perhaps her product wasn’t right for the platform. “I think tech, eco, affordable household or living products are more popular in crowd funding.” Co Founder and CEO of Ambi Labs, Julian Lee launched a crowdfunding campaign for Ambi Climate – a connected device that automatically controls your air conditioner. His first campaign on platform Crowdtivate failed spectacularly. It was a different story altogether though when he relaunched with platform Kickstarter, reaching their funding goal in just nine hours. Julian said the biggest change was the platform itself although they admittedly put in more effort in the second campaign.
One of the biggest platforms, Kickstarter reports that 62% of crowdfunding campaigns are unsuccessfully funded. simply too unusual. “The product is not a common garment and the style is not common and we didn’t have a large market.” Cheung said “If I joined crowdfunding again, I would like to create more simple design products and improve the packaging.” “Crowdfunding provided a good platform for me to show my design to the public.” George Baily launched the campaign Hong Kong Temple Map using Fringebacker – a project to protect Hong Kong’s temples with a photo shoot list to build awareness and appreciation. He said that a crowdfunder in Hong Kong needs to have a solid Cantonese presence (at least for this kind of topic) whereas we tried to do it only in English, and secondly the reach of Facebook was actually quite limited even with paid advertising.” “Fringebacker was helpful in setup but don’t provide any marketing or automatic audience in themselves.” Don’t forget, even if you defy the odds and meet or exceed your campaign goal, the real fun is only just beginning. Many successfully funded reward campaigns run into serious hurdles in manufacturing and shipping a successful product. A great idea and cash is simply not enough. You need business, supply chain, and manufacturing skills to really succeed!
“One point of comparison was in terms of our video views. In our first campaign, we had only 100 backers for 12k+ video views, but for KS, we had 700 backers for 20k video views. Of course, it still hard to say - perhaps we were just so much better at pitching our story in the 2nd!” Joseli Cheung launched Dressing Dreams on Fringebacker, a platform for artists, musicians, designers and the like. She believes her product – a multi-function cape -- was
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“We’ve learned that crowdfunding is all about momentum and we made sure to drive huge amounts of traffic to our campaign from day 1 this time around.” (Thin Ice)
What did you learn? “No matter how much research you do in advance, you can never fully understand how much work there is until you run a campaign yourself.”
(Oura Ring)
“If we had it to do over again we would simplify our reward levels. A $1, an Early Bird Special, $25 reward, $50 reward, and $100 reward are all that you need. At least in the beginning it is better to start with just a few rewards. You can add more later on in the campaign if it is necessary.”
(Garlic Shaker)
“[I} filmed with a cell phone. Kind of low tech but it did the job nicely since it was all close up. I then edited the video in the simple Windows Movie Maker.”
(Kevlar Playing Cards)
Can one get rich crowdfunding? “I believe you can get wealthy by using crowdfunding as your first step. On it’s own, the money it earns is on a one-time basis. But if you plan for it, a successful crowdfunding campaign will gain you publicity, investors, retailers, licensees, etc. This is the new way to prove to the world your business model works, and this (rather than the funds raised) is the real value of crowdfunding.”
(Aumeo Audio)
“Taking the highs with the lows. The first few days are exciting but ultimately there is a dip in interest during the middle of the project. Stay positive during this slump.” (Kevlar Playing Cards)
“You can´t change or delete comments you have uploaded, so you need to think before you type.”
(Oura Ring)
LEARN FROM SUCCESSFUL
Crowdfunders “We knew, from the start, that we wouldn’t have the funds to hire outside help. Instead, we’ve been learning all the aspects of launching a successful crowdfunding campaign ourselves. The same applies to the video. We picked up the Adobe Creative Suite and got right to making content. A few weeks before our campaign launch, we made a short teaser video to familiarize ourselves with the production process and see how we could improve. The feedback from that video had a lot to do with the success of our actual campaign video.” (Atom Battery)
“Once a campaign stops answering questions, it doesn’t take long for the comments to turn negative. If you lose control of the “mood” in your comments, your campaign will start to go downhill. That is when minor issues turn into distrust and simply venomous comments. I’ve seen comment threads turn from friendly to nasty in less than 10 consecutive comments.” (Decadent Minimalist)
How did you make your video?
“Make sure you have a big enough budget to make a high quality video. It has become the standard to have a strong video in crowdfunding and almost no one even reads a campaign if they don’t like the video.” (Thin Ice)
What challenged you? “Everything. As the creator, you are a 1 person company – product design, manufacturing, marketing, accounting, purchasing, shipping, customer service, sales, janitorial – you get the idea. Before you start, do yourself a favor and figure out if you have the drive to complete the project. It is easy to create/run the campaign if it is doing well. Will you have the drive and fortitude to push through to the finish when things are not going so well? You need to know this up front because EVERY campaign will hit a snag – some will hit many…” (Decadent Minimalist)
“[prior to launching the campaign] talk about it for a long time to build steady awareness with friends and family. Also, a lot of people actually don’t understand how crowdfunding works, so be sure to really explain it, and again, keep talking about it.” (Wuju Hot Sauce)
“Figure out how much time you need to prepare, then double it. Preparation is the key and rushing or redoing things makes them more expensive, less effective and much more stressful, so giving yourself enough time to get it done right is so important.” (SunPort)
“Itirate, itarate and iterate. You’ll never get it right the first time.”
“Don’t feel bad that other projects that seem suckier than yours are doing better – you aren’t racing against anybody else but yourself.”
(Bedjet)
“advertise, advertise, and advertise. If people can’t find your project or don’t know about it, they will never back it. Kickstarter traffic alone does not fund projects.” (Kevlar Playing Cards)
(Atom)
Give Me Advice, please! “Make sure you are open to adapt. The backers you get during a crowdfunding campaign will become your biggest customers going forward. It makes a lot of sense to make them as happy as possible and to learn from their feedback to improve your future marketing.”
(Thin Ice)
Oura Ring: Sleep Tracking Ring
Raised $5,052,190 HKD on Kickstarter
Decadent Minimalist: Wallet
Raised $4,023,363 HKD on Kickstarter
Atom Battery: Portable Power Outlet Raised $523,463 HKD on Indiegogo
“...Never give up on the media you want to get. This might be obvious but it is too easy to believe that a simple email will offer you a publication in any websites or magazines… There are so many ways to contact ANY media through social networks. If you believe your product is worth it, then try again and again.” (Slick Stabilizer)
Wuju Hot Sauce
Raised $473,615 HKD on Kickstarter
Kevlar Playing Cards
Raised $344,986 on Kickstarter
Bevel: Turns Smartphone into 3D Cam Raised $2,350,846 HKD on Kickstarter
Bedjet: Climate Control for Beds Raised $10,567,702 HKD on Kickstarter
Aumeo Audio - Tailored Audio Device Raised $2,305,828 HKD on Indiegogo
Slick Stabilizer: Motorized Steadycam Raised $2,605,943 HKD on Indiegogo
“For those who consider crowdfunding their projects, they should first consider which crowdfunding platform best suits the profile of their target audience, and then they can go from there.”
(Felix)
“Kickstarter doesn’t sleep and for the first little while, neither do you. The rush you get when you launch is pretty incredible and you can’t help but monitor everything around the clock, which means life outside of your Kickstarter can get put on hold.” (Bevel)
“Finally – don’t assume your success on Kickstarter will be easily replicated in real retail settings until you actually get out there and prove it to yourself. Success on Kickstarter is with a very specific customer demographic that may be harder to access once you get out into the real “business” world of consumers.” (Bedjet)
Thin Ice: Weight Loss Clothing Raised $4,593,124 HKD on Indiegogo
SunPort: Solar Delivery Device Raised $934,774 HKD on Kickstarter
The above quotes are taken from interviews found on Jumpstartmag.com 9
Image credit: WeMakeVideos.com
HOW TO PRODUCE A GREAT CROWDFUNDING VIDEO By Simon Fuller, Creative Director of Eighfivetwo.net, specialising in production and post-production of engaging video content. You can reach him at: info@eightfivetwo.net
The purpose of a crowdfunding video is to ask people who you’ve never met to believe in something that you feel so strongly about. When you make a video— be it for a crowdfunding campaign, a television commercial or just a simple message— you are effectively going into that person’s home. So here are some tips to help you with your campaign video:
potential investors that you don’t really need the money. Just you talking in front of a camera with a very non-descript background is fine. You may wish to insert some vision of your prototype product over your speaking. It’s also okay to have friends and family who have legitimately used your product or service to give a testimonial, on camera.
Be presentable The first thing to consider is that you look presentable. Keep your dress code conservative and neat. People are going to be more receptive to someone who takes pride in themselves.
Demonstrate features Don’t just show your product; demonstrate it’s features. As investors can’t touch and feel your product, giving them a good visual of what it does is important.
Less is more. Nobody is going to sit and watch a Crowdfunding video that runs for more than five minutes. It’s important that you get your message across under this time and capture their attention in the first 30 seconds. Personally I would say 2 to 3 minutes maximum for any crowdfunding film. Leave your audience wanting more, which enables a level of engagement with your audience.
Get the sound right And finally and most importantly is sound. A lot of crowdfunding videos fall short in this area. While cameras will record beautiful pictures, the recording of sound needs to be just as clear. If your camera is 6 feet away from you the resulting sound is going to sound hollow with an echo. Once this is recorded there is nothing you can do to make it sound it clear. That is why you need to use a camera that will allow you to attach an external microphone. Ideally a small clip-on microphone is best.
Keep it simple. Let’s remember that you want people to invest in your idea. If you’ve got all the Hollywood effects these can be distracting. It also might say to
How to pitch your crowdfunding project to the media By Elena Mikhaylova
During the three plus years I’ve been involved in crowdfunding, I’ve spoken to hundreds of entrepreneurs who either wanted to, or were already, running crowdfunding campaigns. I see a lot of startupers whose primary goal is to create a buzz around their project, and only secondarily want to raise funds. Unfortunately, the vast majority of crowdfunding campaigns disappear without attracting a single news article or a blog post. I’ve come up with several recommendations for crowdfunders to follow in order to increase their chances of getting noticed. They are structured to answer the following questions: Who to contact, What to write, and When to do it.
WHO 1. Journalists don’t work for you! The fastest way to piss off a journalist is to assume that they exist to promote your project. Journalists don’t work for you; they work for their readers! So avoid asking them to share your information or to help you spread the word about your campaign. Instead, help them by offering timely, well-organized information that they can use to write an article. Also, don’t assume that just because they decided to write about you that their review will be a favorable one. There is a chance that they may NOT like your product! Make sure to read all published content before sharing it via social networks. We had a client who spent an entire morning re-tweeting, sharing in different Facebook groups, and emailing his friends and business partners an article which actually said that his product was “a useless toy for people who don’t know what to do with their money.” He was so excited about the publicity that he didn’t care to actually read the article before promoting it.
2. Research first You are guaranteed to come across companies offering to sell you an entire database of journalists who cover your topic. How exciting does it sound, receiving thousands of email addresses for only a few pennies! The only problem is, these spreadsheets aren’t always effective.
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For example, a client of mine who had a project for a kitchen appliance received a “custom database” of contacts which included “Prison News” from Alaska, and “Trans*** of Thailand” newswire. Do your homework before approaching journalists. Sending a press release about your baby product to someone who covers hacker news would be a waste of time for both of you. Don’t be lazy! Spend time researching similar projects, and studying their media coverage. By crafting your messages after you’ve done the proper research, you will have much better “conversion rates.”
3. Bloggers: offer them something in exchange Make a note of the differences between journalists and bloggers. Journalists are paid to write about news. They usually have a huge influx of information on a daily basis, and tend to appreciate short, concise messages that can easily be transformed into articles without time consuming research. Very often, they depend on the editors who assign them a job. Bloggers, on the other hand, don’t earn salaries, nor do they have to sift through hundreds of press releases. They enjoy the freedom to choose what to write about, and when to publish what they have written. But bloggers are not volunteers who have nothing else to do with their time. Most of them will not cover your project just because you sent them a message. When contacting a blogger, think about what you can offer in exchange for publicity. It may be cash for a sponsored post, a sample of your product for a review, or a prize for a giveaway for their readers. Don’t rely on the press kits that bloggers post on their websites or send to you. Verify all of the information (their number of fans, followers AND their level of engagement, the amount and geography of traffic to their website, and a bounce rate). Steer clear from those who seem to have lots of fans and followers, but no engagement. There is a high probability that their social
value is deceiving. You may search for website traffic information using SimilarWeb.
4. Read the submission rules It will help you to better understand who to contact (a specific journalist or an editor) and what kind of materials they expect you to provide. An editor may be more inclined to lend you the proper consideration if you show respect for their “house rules.” 5. Build relationships on Twitter Remember: social media is about conversations, not advertising. Identify the industry bloggers and journalists who are active on Twitter. Read through their tweets, and try to understand their personalities. Twitter now allows users to comment on retweets; use this opportunity to stand out from the crowd. We’ve started conversations with several editors and journalists from top-level media by commenting on their tweets. Once they recognize your name and are paying attention, you may then talk about your project. I’ve found ANewsTip to be one of the most useful tools to monitor the tweets posted by journalists.
6. Monitor pitch requests Subscribe to HARO (HelpAReporterOut). They send pitch requests from various journalists and bloggers three times per day. Make sure to respond immediately. Many journalists receive the information they are looking for within 15 minutes and do not open the remaining messages.
WHAT 1. Know the definition of NEWS! Anyone who has ever been in charge of a crowdfunding campaign knows that unless it was very successful from day one, it is much more difficult to attract media attention after their campaign is already up and running. As for journalists, an event that happened yesterday is pretty much considered to be ancient history. They write about what is either happening at the moment, or what will happen in the near future. Make sure that your “news” actually is new!
Another mistake that many startups are making is sending messages to the media to announce their existence. NO ONE CARES! Unless you have some very compelling news, avoid bothering the media. These guys are busy; the moment you waste their time is the moment you close the door to a future coverage opportunity.
2. Your pitch content Don’t send long press releases or drawn-out “love letters.” Journalists don’t have time for them and they can easily tell whether you have ever actually read their articles. Remember, the media needs facts and real stories, not long-winded advertisements. Avoid using buzzwords such as “revolutionary,” “innovative,” or “groundbreaking.” Write in a way that makes a journalist’s job easier by limiting your messages to 150-250 words and DO NOT INCLUDE ATTACHMENTS. Most journalists access their emails via smartphones, so they are most likely not going to read long messages or open attached documents. If you have high resolution images or videos, use Dropbox and send a link to the folder instead. Make sure to craft a subject line that would make the recipient eager to view the rest of your message. Monitor the open rates of the emails you are sending out. If your initial emails are not being opened, try sending another message with a different subject line within a couple of days. There are many email tracking tools to help you with this, such as Sidekick or Yesware.
3. Don’t spam! If you didn’t get a response, check to see whether the message has been opened. Don’t send inquiries such as, “did you see my previous message?” or “I am still waiting.” Journalists do not owe you any explanations. Don’t waste your time and theirs. Come up with another angle, or look for the next journalist to approach.
4. Embargo doesn’t always work! The only option you have is to ask journalists to wait until your campaign launch date. The same applies to the media requests about exclusives. A friend of mine relied on the promise that an editor of a major media gave to her about covering their campaign on its first day in exchange for exclusivity. Unfortunately, after the campaign was launched, the editor conveniently “forgot” about their agreement, and the campaign was left with almost zero publicity.
WHEN 1. Participate in events One of the best ways to meet targeted journalists is to participate in industry events. I realize that not everyone can afford to spend thousands of dollars to exhibit at CES. The good news is that there are always a lot of free, or very inexpensive, options. Don’t hesitate to ask about discounts or payment plans for startups. Crowdfunding platforms also send their representatives to major trade shows, so this can be your opportunity to introduce yourself and to increase your chances of receiving help from the platform.
2. Research editorial calendars Most media outlets publish editorial calendars a year in advance. Research whether they have topics related to your project. Contact them early on! Printed media’s submission deadlines are often several months before magazines are released to the public. Even without the calendars, you can often predict what the media is going to write about at a given time; for example, “Back to school,” “Holiday gift guide,” or “New Gadgets For Your Summer Vacations.” Plan ahead and approach the media with your ideas.
3. Hijack the news Few strategies can be more beneficial than monitoring major news and finding ways to attach your project to those events. For example, when the Supreme Court voted for the same sex marriage act, we were able to attract lots of coverage for a project directed by a gay client. Did the New York Times just publish an article about equal rights? Well, we have a female founder who can share her experience of succeeding in a male-dominated industry. Perhaps there is a discussion about immigration reform? One of our clients happens to be a successful immigrant-entrepreneur from China. You got the idea.
4. Don’t launch your campaign during major events Make sure not to launch your campaign close to any major industry events. The media will be too busy covering the main news and will likely ignore your messages. We had a client who launched a campaign
for a baby product during the week of the ABCKids Show in Las Vegas. The vast majority of bloggers we contacted responded with an automated “out of office” messages. The following week, her campaign had fallen out of the news circuit. This same rule goes for any technology projects that are launching in January, as the media at that time is overwhelmed with the Consumer Electronics Show. Thus, your campaign has a very small chance of being covered by the major news outlets.
5. Approach the media during a slow season On the other hand, you have a better chance of reaching journalists when you approach them during a slow season, such as between Thanksgiving and New Year’s Eve. The media is looking to fill in the gaps with compelling news stories as most businesses are busy with year-end reports, planning for next year, and are distracted by winter vacations. So, your news can become more valuable, and journalists are more willing to read your pitch.
6. Your campaign dynamics influence the publicity that you receive Keep in mind that many top media will not write about your project until they see that you are off to a strong start or even until your campaign reaches its goal. So, use your campaign’s milestones to attract more media attention. The opportunities include: the most funded campaign of the day, the most funded campaign in a category/subcategory, the most funded campaign in your city/state, the campaign with the largest number of backers (in a category or a city), stretch goals or new product features added based on your backers’ feedback, or reaching your funding goal.
Conclusion Public Relations, being one of the major components of a crowdfunding campaign, requires a lot of attention. At the same time, it is essential to balance the sought-after media attention with social media efforts, guerrilla marketing, email campaigns and your personal network engagement. Only the combination of these efforts will result in your crowdfunding campaign’s success. Reprinted with permission and edited for Jumpstart Magazine.
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FinTech Innovators Champion Hong Kong as Asian Hub
By Katie Scott
FinTech startups are booming in number and winning big name backers here in the SAR, but is the current momentum sustainable? Katie Scott talks to the innovators to find out.
The annual Asian Financial Forum in Hong Kong saw thousands of people from within the finance sector meet, and business innovation and disruption was high up on the agenda. Financial Technology or FinTech is a relatively new term for centuries of innovation. The ATM, credit card and online banking are all technologies we take for granted. FinTech is now booming, its sweep is wide and it is innovating in the limelight. Startups are talking about their visions, whether to industry peers, universities or to the press, and governments and traditional financial institutions are listening and engaging with them. Last year saw the establishment of three successful accelerator programmes – the DBS and Nest Accelerator, Accenture’s FinTech Innovation Lab and Swire’s Blueprint. The fruits of the Standard Chartered and Baidu Supercharger accelerator will be showcased in April. Startups also competed in the FinTech Finals at which 24 businesses got to present their ideas to a select and powerful panel of bankers, entrepreneurs, VCs and designers. With innovations and collaborations, co-working spaces, mentorships, panels, debates and newly established university courses on the topic, it is, undeniably, an electrifying time for FinTech innovators in the SAR.
Dramatic Growth, Huge Potential FinTech takes in everything from RegTech to crowdfunding to Bitcoin exchanges. Chloe Wang of Channel News Asia wrote that the sector boasted
“more than US$12 billion in investments worldwide in 2014,” which, according to Accenture, was triple the figure from the year before. Growth has been dramatic and global. However, Asia Pacific claimed just $800 million of this figure. Janos Barberis is the founder of FinTech. hk, an organisation he terms the “Yellow Pages of FinTech in Hong Kong.” It supports the industry by listing companies, events and relevant papers as well as producing content, including videos, to heighten awareness. He argues that there is still a huge margin for growth as the FinTech industry here has “nowhere near the same amount of investment as the USA and Europe.” The drivers behind the industry are also different, Barberis continues. “FinTech development in USA and Europe was pushed by the financial crisis. Here in Asia, it has been about market reform. It’s about how we can make credit available to the SMEs who couldn’t get credit before; or how we provide bank accounts to people so that they can pay their bills. It’s market driven. For example, the India government has the goal that every single Indian person has a bank account by 2017.” Closer to home, Accenture stated in a report called Every Day Bank in China: “Over the past three years in China, there have been 111 million new internet banking customers, which is a 19 percent increase in new personal bank accounts, and a 24 percent increase in online payments.” Of those in the online sphere, AliPay and Alibaba are titans. In a paper entitled The Evolution of FinTech: A New Post-Crisis Paradigm?, Barberis and his co-authors write: “China’s AliPay processes over one million transactions each day without being a bank… Alibaba has fulfilled two main government policy objectives by creating 2.87 million direct and indirect job opportunities, and providing over 400,000 SMEs with loans ranging from $3000 to $5000.”
A Word of Warning In Hong Kong, there is excitement and caution. In April, the Government created the Steering Group on Financial Technologies. Six months later, at the Thomson Reuters Sixth Annual Pan Asian Regulatory Summit, the Secretary
for Financial Services and the Treasury, Professor K. C. Chan lauded the growth: “…the number of startups registered has jumped 46 percent to more than 1500 in a space of less than a year. Around 90 of them are engaged in FinTech, and this figure could well be out of date even now,” he stated. However, he added a word of caution: “An efficient and trustworthy financial services industry must be underpinned by a regulatory regime that makes customer protection one of its pillars.”
The Value of Bitcoin Leonhard Weese, President of the Bitcoin Association of Hong Kong, is acutely aware of this guardedness. Bitcoin is termed a digital commodity in Hong Kong as opposed to a currency (crypto or otherwise), and banks are barred from offering Bitcoin products. In November, Bitcoin was declared illegal in Taiwan. Weese is pessimistic that this will change anytime soon. He says: “Two American Bitcoin service providers, BitPay and CoinBase, would love to come to Hong Kong but no one will partner with them or give them a bank account.” Indeed, Chan pointedly said in his speech: “When the payment platforms are turned into de facto deposit institutions, this could raise prudential and systemic concerns as well as conduct risks like frauds and cybercrimes. How to welcome these new neighbours into the house of financial regulations that was originally built for financial institutions is no small matter.” One solution is creating different licensing models for different businesses. Barberis writes of the “light license” models being deployed in some countries “…that aim to minimise regulatory and compliance costs for firms seeking to deliver specific banking activities to certain population segments” – South Korea and India are among them. Aurélien Menant says Hong Kong Customs and Excises Department understood the business model for his startup, Gatecoin, and granted it a Money Service Operator license. “This has been a big boost for our young startup since it gave us more credibility and legitimacy towards customers and financial partners.” However, the general lack of regulation will be a disadvantage in
the longer term. Menant says, “Bitcoin and Blockchain have become trendy words in the banking space over the past 10 months. Even in Hong Kong, most financial institutions are starting to have a broad idea of what they are, but lots of them still have a very blurred picture of it. Some misconceptions remain. The fact that Hong Kong Monetary Authority does not regulate or state anything about it does not encourage them to dig deeper into it.” He is confident that regulation will help quiet some of the fears: “In the USA and Europe, we observed a growing understanding of Bitcoin by law enforcers and regulators, which triggered a considerable decrease in its unlawful use. Hopefully this understanding and regulation will come to Asia one day.” “I do not know if Bitcoin will ever be a unit of account, but within the next two to three years, it is bound to become a major remittance and payment solution, as well as a common clearing system, since lots of solutions offer cash to cash remittances using Bitcoin in the back end. To give you an example, we are currently integrating with an international bank that will offer this kind of services between Europe and Africa, using our platform in the backend.” Weese uses Bitcoin himself for buying on Taobao, coupled with a Chinese exchange and an AliPay account. He says that friends who use it tend to be either ex-patriots living in China or digital nomads. He believes the biggest uptake in Hong Kong will be “online merchants who sell all over the world and are currently paying a five to eight percent fee to Paypal”. However, he agrees that more education is needed and this was why he set up the Bitcoin Association in 2014.
Share and Share Alike For Cedric Jeannot, CEO of Information security and tracking service APrivacy, it is openness that would accelerate his company’s growth. He explains: “We have a lot of banks interested in our technology but the sale cycle is very long as each bank needs to test the security of the product and verify that it meets all of the compliance requirements. This process is similar for all banks but gets re-done for each institution. If one
bank was to share its findings, it would save a lot of time and really propel our growth.”
can occur reasonably quickly and to the benefit of all parties.”
This would require a shift in embedded practices but, in the meantime, banks and financial institutions are at least talking to startups. Nicole Denholder is the founder of Next Chapter, a crowdfunding platform that champions projects created by women. She recounts, “I went to see one of the banks and they wanted to learn about crowdfunding. It is interesting because people usually go to crowdfunding platforms to raise between USD 10,000 - 100,000, which they might have traditionally approached a bank to get as a loan.”
Once they have industry support and funding, startups can expand, but Igor Wos, co-founder of online payment processing solution TofuPay, argues that the talent pool in Hong Kong is limited. “There are many difficulties and challenges with starting a company in general,” he says, “but we feel hiring candidates locally is difficult as the culture here is still focused on younger people joining larger companies and climbing corporate ladders. Luckily more and more people get attracted to joining generally more risky, but also more exciting, startups.”
Accelerated Growth
The Halls of Academia
The founding partner and mentor lists of the various accelerator programmes are an encouraging reflection on the level of engagement between the established and the fledgling businesses. The accelerators have allowed startups access to the right people.
Hong Kong University’s Master in Finance programme is soon to start its first FinTech Course – claiming to be unique in Asia. It will be headed up by Henri Arslanian, head of corporate development and strategic partnerships at APrivacy. He told Jumpstart that “the course will provide students not only with the latest developments on FinTech and their practical impact on the financial world today but will also empower them with the knowledge and understanding of the impact it may have on their careers moving forward. The students will learn about all the different pillars of FinTech including robo advisers, Blockchain, digital currencies, cryptography, payments, big data, artificial intelligence, crowdfunding and P2P funding. Their final exam is to come up with a FinTech start-up idea, put together a marketing deck and pitch it to the class.”
Kevin Mak is director of IronFly Technologies, which is “a combined order and execution management system for equities and equity derivatives.” It was part of the Blueprint programme and the FinTech Innovation Lab. Says Mak: “The accelerators have allowed us to do more with less and much faster. We have benefited from access to key members of large organisations where we are now forming relationships. We have also received valuable advice from experts across numerous fields that has both helped us optimise our business, as well as avoid potential problems. All of these are aspects that small companies looking to grow are often unable to afford, both in terms of time and dollars.” Most importantly, access was all that was needed to helped defeat the indifference Mak says he came up against when he started talking to larger companies. He says: “…established institutions favour their own well-understood set of processes that they are incentivised to follow. Where we have had success is in situations where there is a distinct, clearly defined need that an institution is unable to fulfill (such as a request from a client) that we have an effective solution for. In these situations, change 18
The introduction of this course is timely, if not overdue. Barberis says, “education in Hong Kong has always been conservative but lecturers are here to inspire the next generation of leaders. The corporate world is getting tougher and tougher, and they have realised that their students will have more of a chance if they buy or join a startup. Look at the number of MBA graduates in the USA who have joined a tech company or a startup instead of joining Goldman Sachs. It’s a dramatic change from ten years ago.” He adds that there has already been a boom in the numbers of home-grown entrepreneurs in FinTech: “I am seeing local teens coming up from
the universities and local bankers saying, “Ok, the shift is coming, let’s be part of it.” The course boasts 15 guest speakers from the FinTech world, as well as those from the traditional banking sector, who will talk about the challenges that they are facing. Arslanian says “the fact that so many FinTech industry practitioners are happy to take time from their precious weekends to come and share with the students is very touching and demonstrates that the FinTech community cares about giving back to the community and in building the next generation of FinTech talent.” TusPark has been a pioneer in building relations between academia and industry since 1994. Tsinghua University Science Park has 30 branches around China and has helped 1530 companies to date. It is running the Supercharger Accelerator, which kicked off this month, and was behind last month’s TGN Bootcamp. The managing director and co-founder of TusPark Hong Kong is Joanna Cheung. Her organisation, she explains, builds bridges: “What we are trying to do is create a gateway both into and out of Hong Kong,” she states. “Many of the companies we help are looking to expand globally but especially into China. They require more of a partner rather than an investor, and access to guidance on the feasibility of their model and advice on capital flow. We help them find the appropriate business partners and access to the market research they need.” The key is maintaining momentum. Accelerators offer access to practical help, financial support and guidance, but there are many organisations in Hong Kong that will step up after the programme has drawn to a close. As Barberis says, “I think the next 12 months is all about making sure that these businesses have selected a path to go. Otherwise, people will look back and say there have been too many events and too many startups launched, but what came out of it? Now it’s about converting that energy into success.”
Financing
Payments
Accelerators/Incubators
Hong Kong’s FinTech Ecosystem
Organizations
Investment &
Wealth Management
90+ Startups 5.5% of HK Startups
P2P Education Business Tools
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P2P: A funding lifeline for small businesses? P2P lending has the potential to bridge the massive gulf between investors and the small business sector – but it’s an industry that’s still finding its feet and place in the market. Nick Hedley, financial journalist, talks to industry players and experts to find out where P2P is headed. Whether it’s matching vacant homes with travelers or commuters with nearby taxis, the internet is shaking up industries around the world. A shake-up of the banking sector by online lending marketplaces, which often tread where banks won’t, means new funding options for entrepreneurs and small businesses. “Simply put, small businesses have a huge credit gap,” says Mukesh Bubna, founder and CEO of Hong Kong peer-to-peer (P2P) lending platform Monexo Innovations. “The World Bank talks about that gap being US$300bn in the Asia Pacific. We are trying to fill that,” Bubna, who previously specialized in consumer banking at Citibank for nearly 20 years, said in an interview with Jumpstart Magazine. “Bank funding is not always an option and money lenders charge very high interest rates – I see that being an issue and I think we need a third alternative in this space. P2P lending has been doing exactly that in geographies such as the US and UK.” P2P lending has quickly become a powerful alternative form of finance in mainland China, the US and the UK, though its rise in Hong Kong and elsewhere has been slower. Like crowdfunding sites, P2P platforms aim to match investors with businesses in need of growth-boosting loans. Just by selling a good idea, startups can raise capital via crowdfunding sites – where investors can take a stake in a business or earn future benefits from it.
By Nick Hedley
But P2P platforms such as Monexo are geared towards existing businesses which can use their cash flow as leverage, says Bubna. Monexo began operating earlier this year, while Hong Kong’s first P2P lending service, WeLend, launched in 2013. WeLend has since expanded into mainland China, a more developed P2P market that was born in 2007 and is dominated by the likes of Lufax, Dianrong.com and Jimu Box. Monexo will rather target less-developed markets in South East Asia and India, Bubna says.
Not just a last resort Though P2P financing may be seen only as an alternative when banks deny a loan application, the speed and ease of getting a loan online can be highly attractive for small- and medium-sized enterprises. Applicants often don’t need to supply onerous information such as profitability forecasts, nor do they have to provide guarantees, collateral or loan deposits – since their unsecured loan can be based on cash flow generation. That’s not to say funding recipients are all on the brink of failure: Investors want peace of mind, so P2P intermediaries are compelled to screen their listings for creditworthiness. As an example of a successful borrower, Bubna says a boutique barista chain which usually generates HKD10,000 of cash each day could underwrite its cash flow for the next 60 days in order to qualify for a HKD600,000 loan, to be paid back over a similar period. Monexo’s funding typically comes from private investors – many of whom have experience in the US and UK markets, or have been waiting for platforms to open up in Hong Kong, he says. Monexo is also “talking to a few institutions” as it tries to grow its finance pool.
Like crowdfunding sites, P2P platforms aim to match investors with businesses in need of growth-boosting loans.
The intermediary usually matches loans of between HKD300,000 and HKD500,000 at an average tenure of about 18 months, Bubna estimates. P2P lending rates are much more affordable than money lending rates and “can be better or at par (with bank loans),” although they could not compete with mortgage rates in Hong Kong. Harjeet Baura, a partner at professional services firm PwC in Hong Kong, says “there are a number of instances globally where P2P rates are lower than unsecured lending from banks.” This is largely because P2P platforms operate from very low cost bases relative to financial institutions. And since banks have to deal with complex procedures when evaluating each loan, it is often not worth their while to serve the small business sector, particularly for small or short-term loans where margins are small. Banks must comply with onerous anti-money laundering laws while they also have to generate increasingly higher returns on their assets under new banking guidelines. “As a small business, it’s actually quite hard now to borrow, especially if you need a small amount or if you need money on a short term basis,” says Baura.
Could banks wade in? But Baura says banks – many of which first saw P2P lenders as competitors – now appear more keen to partner with them where possible, and seem more eager to learn from the quick and easy customer experience that these platforms offer. Banks have an opportunity to partner with and endorse reputable P2P platforms, or refer small businesses to them, he says.
This is already happening in China, where financial institutions have become major funders of P2P sites. Dianrong.com said in August that Standard Chartered and other banks had invested as much as $207m in their platform. In addition to filling the small business funding gap, Baura believes P2P platforms could capture the consumer lending market amongst young people, who did not grow up with the mindset that banks are the only place where one can get a loan. “What’s to say that in five years’ time the natural place when you want to borrow money is to go to a P2P site, where it’s easier, slicker, you get a decision quicker, and in many cases, the interest rates are lower than banks. A typical bank might take two-to-four weeks to process a loan for a new-to-bank customer, while a P2P provider can do it in three-to-five days.” Since they could base creditworthiness on new factors including social media profiles, P2P sites could also serve the “financially excluded” or “unbanked” population, which has no access to banking for reasons including the lack of a title deed or credit history. “There is a gap in the market and I think P2P lenders can fill that gap. It’s a lot harder to get funding from a bank now than it ever has been, so people have to look at other sources,” Baura says.
Regulations on the horizon But the growth of P2P lending has not been problem free. Though China was among the pioneer countries in the P2P space, scores of sites have already shuttered in country, according to a Morgan Stanley report, which blamed fraud and cash flow issues for their failure.
The industry is still finding its feet, and so one of the biggest risks to the P2P sector is how governments decide to regulate it. Other Internet-based companies, including taxi-hailing app Uber, have been greeted with tough laws – and even bans – in several countries. There is not yet any dedicated P2P regulation in Hong Kong, though platforms must comply with laws such as dual password requirements, where online transactions need one-time passwords. Some more dated financial sector laws apply to P2P platforms, both directly and indirectly. Baura says regulators are “still trying to get their heads around P2P,” though a major scandal could speed up the process. “This is an area where the regulations are behind what is happening in the market with technology really driving the P2P space,” Baura says. “Any new regulations in this area should be focused primarily on providing protection, both for the consumers (borrowers) and the investors (lenders).” As more P2P platforms establish themselves in the Hong Kong market – and given the growth is managed responsibly – small businesses are likely to warm to the idea of P2P financing, particularly if they begin to hear more success stories. Regulations will have an important role to play in keeping the trust between the small business sector and the lender community. But given the massive funding gap in the small business sector, and considering the sector’s importance in job creation, regulators must also ensure that the P2P lending market is not throttled by misdirected laws.
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Crowdfunding Regulations By Yeone W. Moser Fok What more natural place than Hong Kong to assume the role of Asia’s FinTech hub. Hong Kong has emerged as a global financial centre, having long acted as the capital formation centre for Mainland enterprises. Moreover, it will continue to benefit from its unique position as a “superconnector” between China and the rest of the world.
1.
Preparing and registering a prospectus
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Not being allowed to advertise or invite the public to buy securities
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Getting a license under the securities ordinance if you are a crowdfunding platform advising or dealing in securities
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Potentially needing a money lender license for lending-based crowdfunding platforms
But what about the regulation of Hong Kong’s financial sector? Despite entrepreneurial activity in Hong Kong reaching new heights, regulation has not kept pace with innovation and technological change.
Hong Kong’s regulatory framework Hong Kong does not have any specific crowdfunding rules and there are no laws that expressly allow or disallow platforms to operate. However, there do exist securities laws and regulations that may be relevant to crowdfunding.
While certain exemptions exist, in practice they involve tight restrictions that make it challenging to fully take advantage for a crowdfunding platform:
The SFC’s notice on crowdfunding (May 2014) reminds the public that certain laws and regulations may be applicable to crowdfunding participants and operators. The SFC also highlights a substantial list of risks, including ones around the crowdfunding platforms themselves, such as the loss of investment, fraud, money laundering, and even identity theft.
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Limiting the offering to a maximum of 50 people
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Only offering to “professional investors” (basically institutions or high net worth investors only)
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Total offering size cannot be more than HK$5 million
Crowdfunding activities in Hong Kong may be subject to securities regulations if they involve an offer to the public to buy securities (e.g., shares, debt instruments or interests in collective investment schemes). These require:
4.
Minimum investment size of HK$500,000
Can Hong Kong remain competitive? Crowdfunding offers SMEs and entrepreneurs a cost-effective and efficient route to financing, but existing regulations pose hurdles that make fundraising time-consuming and costly for SMEs. Furthermore, limiting the participation in securities crowdfunding to only a small number of institutional and high net worth investors is antithetical to the broad and open participation that crowdfunding is meant to represent. Hong Kong is already seen to be lagging behind other jurisdictions in Asia with regards to securities crowdfunding. Legal frameworks for crowdfunding are already in place in Malaysia, Thailand, and South Korea. Japan is creating a crowdfunding council to examine ways to relax regulations and Indonesia and Cambodia are working on adopting regulations. China’s leadership has also demonstrated support for crowdfunding, asserting that it is an important part of China’s “Internet Plus” strategy. The Philippines and Singapore have yet to finalize rules for crowdfunding although Singapore has sought industry and public comments following publication of a Consultation Paper by its Monetary Authority. Apart from the SFC’s short notice on crowdfunding, Hong Kong has largely remained silent. If Hong Kong is to truly become the global FinTech hub we hope it will, then we need regulations that reflect a shifting entrepreneurial landscape and that are focused on helping to promote small and medium enterprises. Adopting crowdfunding regulations would be one step in that direction.
Bookkeeping and Accounting Rescue for Year-End 2015 • • • •
Meeting Tax Deadlines Completing Audited Financial Statements Tax planning strategy and considerations Qualified Hong Kong CPA’s Contact us: aso@fastlanecap.com
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arborventures.com gweekspeech.com incl.io improvemy.it openport.com powernonstop.com rumpleandfriends.com talkpush.com
generalassemb.ly sassyhongkong.com twilio.com kfit.com deliveroo.hk student.com thetradedesk.com
Paperclip / Sheung Wan
Garage Society / Central
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me
Blueprint / Quarry Bay
Meet
Cyberport
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latticelimited.com jumpwilly.com blondemedia.asia variab.ly dragonlaw.com.hk ioiocreative.com bemytour.com
carshare.hk popscout.co shoplineapp.com whub.hk mercurr.com notey.com plando.so
Idea Lab @ HKSTP
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coachbase.com spacebox.com.hk nosh.hk pelago.events littlestepsasia.com • • • • •
Here
The Good Lab / Kowloon
uhooinc.com lumoshelmet.co fanswifi.com cognix.com.hk bluegic.com showmuse.so onehouse.hk
The Hive / Wan Chai
CoCoon / Tin Hau
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weestay.com new-narrative.com weebor.com jackhammington.com experiencethepulse.com
rooftoprepublic.com ohmykids.org hocfu.com microforests.com wanderbee.com
Visit jumpstartmag.com/meetmehere for a clickable list of startups.
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Startups Around Town pressstart.com.hk games and event planning venture.
spacesgenie.com online marketplace for short-term pop-up shop rentals.
snakehead.com.hk is a platform for hiring last minute restaurant staff.
rentasuitcasehk.com
helperchoice.com connects domestic helpers with potential employers in Asia and the Middle East.
fleximums.com is a recruitment agency with flexible jobs for moms.
is a rental company for travel goods and accessories.
korgearsforlife.com brings innovative Korean products to Hong Kong.
bespokify.com is a B2B automated custom patternmaking technology.
bottlesxo.com is a one-hour wine delivery service.
urbanspring.hk is working on installing public water dispensers in Hong Kong.