[BB33] Venture Capital in Asia

Will private capital raising be mature in Asia in the near future?
Interview with Mr. Simon Wong, Mr. Desmond Marshall and the HKBU student team

According to a report issued by the National Venture Capital Association (NVCA) of the U.S. and PricewaterhouseCoopers LLP (PwC), venture capitalists invested US$48.3 billion in 2014.  It was a ten-year high, representing an increase of 61 percent in money terms. Among the 4,356 deals completed in the year, two deals amounted to over one billion U.S. dollars.  There is no doubt that the fundraising environment in the U.S. has entered a mature stage.  We all witness a high concentration there and to some degree in Europe.  But Asia has yet to pick up, and local funds have been capped at U.S. $3 billion only.  There is a big gap to fill.
In order to better understand the mechanics behind available venture capital for our students and alumni in Hong Kong, and also the requirement of such investors, we will look into the story of a veteran angel investor, Mr. Simon Wong, and one of the biggest platforms of such, Pitch Perfect.

An entrepreneur’s angel, Mr. Simon Wong
No matter what the future holds, how could an entrepreneur convince potential investors to dip into their pockets?

During the “Entrepreneurship Seminar Series: An Entrepreneur’s Angel” held in October 2015, Mr. Simon Wong, Founding Partner of Whiz Partners Asia, shared his encounter with the headline maker Jack Ma as an example of how he chooses his investments.  Simon was one of the early angel investors of Alibaba nearly twenty years ago.  He even wrote the business plan for Ma when Ma was lacking funds to pay the business registration fee for its debut in the U.S.

While fund raising for Alibaba was never easy, Simon injected US$500,000 into Ma’s embryo startup, after listening to him for just 30 minutes.  During the growth of the company, they had been put under tremendous pressure by conditional clauses of investment banks commonly set out to generate return on investment, and it was a roller-coaster ride before Alibaba became what it is today.

As an angel investor, Simon normally hand-picks his CEOs carefully, and followed-up their development throughout.  "To decide whether the business is worthwhile to invest in relies on keen observation and long-term investment", he said. Simon believes that without a proven track record, the ability to clearly communicate visions and dreams is a critically important asset of a CEO, and that was one of the major determinants in his selection.

Innovative platform for connecting entrepreneurs and angel investors – Pitch Perfect
Times change and new forms of fundraising are emerging in Hong Kong.  Pitch Perfect instant investor matching competition is a new fundraising platform for budding entrepreneurs.  The competition has been held consecutively for three years since 2013.  Every year, over 200 teams apply and pitch, with only five winning teams going into the final stages of due diligence, review and funding processes.  For teams that go all the way, they will be coached by industry experts including professional accountants, motivators and industry advisors.
One of the brains behind this platform is venture capitalist Mr. Desmond Marshall, Managing Director at Rouge Ventures, who spoke to us on the development of the fundraising scene. 

What kind of projects are investors at Rouge Ventures looking for? 
“We normally seek proprietary technology that 
cannot be replicated easily.  Many of our contestants had some businesses in hand, and were looking for funds to expand.  While the pitching competition is open to anyone who wants to give it a try, the investors do look for certain traits in the presenter, but most importantly we are very focused on the proposed business model.  The skill set and operational knowledge can be taught, we have the expertise to do that, I myself have been advising luxury brands operating in Greater China for years.  The business model can’t be taught.”

“In terms of industries, our group of investors have the experience to groom a wide spectrum of industrial sectors, ranging from medical, robotics, new materials and retail industries.”

Why does Pitch Perfect choose to hold the platform here in Hong Kong?
Desmond acknowledges the unique geopolitical position of Hong Kong, and the ethical mindset of Hong Kong entrepreneurs: “while Mainland Chinese investors are eyeing overseas markets, European and American investors still wish to enter the vast hinterland of China, and Hong Kong sits right in the middle”. 

“Foreign investors like the ideas proposed by Hongkongers,” he said.  “Entrepreneurs here are more down to earth compared to the entrepreneurs in China, and most of them set their sight and attention on execution.  Frankly, no projects can be pushed to a national level overnight.  Small scale implementation at first, and replicate that model to other cities, is usually what investors expect.”

The coming Pitch Perfect event is going to be held in Hong Kong in March 2016.  If you aspire to be the next big entrepreneur appearing on Forbes magazine, visit: http://www.pitchperfectevent.com

Business toddlers trying out at Pitch Perfect
Encouraged by our Associate Director of the BBA (Hons) Programme Mr. Simon So Kwan-kau, a team of HKBU students, comprising students from various faculties in HKBU including the School of Business, participated in the Pitch Perfect event in November 2015, and competed against the best. 

Five months prior to meeting the team in a General Education class, Chinese Medicine student Judy Tam Pui-sum started her Instagram shop “#cmed” and “#cmedsoap” selling hand-made beauty and health care soaps with her own savings. 
Judy developed her product lines with different medical benefits out of her decade-long belief in the effectiveness of Chinese medicine.  Her aspiration of becoming a Chinese medical doctor came from the time when she picked herself up from a long struggle in chronic illness, with the help of Chinese medical treatment.  

With that business in mind, Judy met her team members, namely Jack Yip Wing-hang, Kelly Wong Chung-ting and Chan Ngai-sze. Together they decided to use her case in the competition.

While the potential investment was attractive, Judy and her team accepted the fact that they might not be up to professional standards.  Moreover, they set their sight on gaining an eye-opening experience, through a real life fundraising competition.  With advice from Simon, the team picked the product line specialized in curing eczema to target at the general public for the pitch.  It took them less than 60 days to prepare the pitching materials, right before their mid-term exam.

Although the team didn’t win any actual funds in the end, they earned the applause of the audience for being the only student team.  In the process, the team understood what they were lacking, with missing data and financial calculations as the main culprits.  Thanks to our School of Business Alumni Association that lined up this wonderful opportunity for our students, we are expecting more student teams to shine on the stage of this pitching event in the near future.
The School of Business Alumni Association
Since its inception in 2011, the School of Business Alumni Association aims to bring together our alumni in the business world; establish a concrete network among our alumni; and offer our alumni a channel to contribute to the School.  In the aftermath of the Pitch Perfect student team participation, they lined up fellow School alumni to potentially help Judy place her products at their clinics.

To become part of this network, check out the SBAA home page here: