Fred L.’s Post

Thanks Hong Kong Economic Times (香港經濟日報HKET) for the interview. 100億創科產業引導基金 投資5領域 https://lnkd.in/gUKx9EZU The recent Policy Address by the Chief Executive of HKSAR marks a significant advancement in Hong Kong's commitment to fostering a robust innovation and technology ecosystem. The establishment of the "Innovation and Technology Industry‑Oriented Fund" with an impressive allocation of HKD 10 billion as a fund-of-funds underscores the government's strategic focus on developing comprehensive industrial chains. By delineating five specialized sub-funds targeting critical sectors such as life health technology, artificial intelligence and robotics, semiconductors and smart devices, digital transformation, and sustainable development, the policy ensures targeted investment in areas with high growth potential. The favorable 1:3 government-to-private investment ratio not only maximizes the impact of public funds but also attracts substantial private capital, further strengthening Hong Kong's position as a leading innovation hub. Moreover, the initiative to bolster Hong Kong's startup ecosystem through the reallocation of HKD 1.5 billion from the "Innovation and Technology Venture Fund" demonstrates a forward-thinking approach to nurturing early-stage enterprises. By increasing the venture capital matching ratio from 1:2 to 1:3, the policy effectively incentivizes more venture capital firms to engage in co-investment, thereby enhancing the availability of crucial funding for startups up to their Series B rounds. This enhanced support structure is pivotal in accelerating the growth and scalability of innovative startups, fostering a vibrant and dynamic entrepreneurial environment that can drive long-term economic growth and diversification. Additionally, the focus on developing the low-altitude economy highlights Hong Kong’s dedication to embracing cutting-edge technologies and expanding its logistics capabilities. The planned pilot programs for drone deliveries and the strategic research into necessary infrastructure such as charging stations and landing sites reflect a proactive stance towards integrating new technologies into the urban landscape. Collaborative efforts with mainland China to establish cross-border low-altitude air routes will not only enhance regional economic integration but also position Hong Kong as a frontrunner in the emerging field of low-altitude logistics. Overall, these comprehensive policy measures collectively reinforce Hong Kong's ambition to be a global leader in innovation and technology, driving sustainable growth and establishing a resilient and diversified economic foundation. #PolicyAddress #InnovationAndTechnology #ITIOF #ITVF #LowAltitudeEconomy #Drone #FlyingTaxi #HKET

China is not only demonstrating how much an effect government policies have on startups and business growth, but also what happens when the mindset isn’t to win, but instead is not to lose. It would be awesome if every idea and startup was successful, but that just isn’t going to happen, no matter how much government leaders and bureaucrats wish it to be. Something that is also common in the USA, unfortunately. Most ventures will fail – it is a fact of life. But what government does to help (or hinder) those ventures is what makes the difference. What government needs to do is not to run scared and only restrict funding to what they consider the best ideas most likely to succeed, but instead provide the policies and ecosystem to maximize the ability of all ideas to potentially grow and thrive. They need to let the market sort it out, which is something government has never been able to do effectively. The US needs to continue to focus on its policies toward early-stage ventures to provide the regulatory structures they need to effectively raise capital and grow at all stages of their development. There is so much more the US can do in this regard. Now is the time to seize the opportunities and make the US economy even stronger in this area. https://lnkd.in/d5k6DKkD #capitalmarkets #venturecapital #equities

"Several firms have complained about their inability to track down founders who closed their companies and left China."...."Plaintiffs can ask the courts to impose restrictions on founders whose companies have reneged on their obligations, making it difficult for them to travel". Eleanor Olcott and Xueqiao Wang describe a trend that I have been seeing ever since the lockdown ended. Namely that founders are fleeing China. Compared to Jack and Pony Ma in 2000, today's founders are in an environment of: -Golden shares with direct party interference at the board level; -Random "Common prosperity" contribution "requests" at any moment; -Foreign VCs and PE funding drying up for Chinese based companies; -Inability to get public listing on western markets due to everything from CFIUS concerns to harassment of due diligence agencies in HK and China; -CCP wanting access to data to build up LLM for AI war with US and the West; -Lack of protection for founders ownership of key intellectual property; and -Rampant "disappearing" of founders who are perceived to be uncooperative or potential rivals to Beijing It is therefore unsurprising that many are leaving. However, a SUCCESSFUL departure and relocation requires an integrated strategy involving: i) Locating the business in a jurisdiction like the US in such a way as to avoid "The TicToK" issue/complication of being seen as a Trojan horse for the CCP; ii) Designing the ownership to be tax efficient for the founders; while also attractive to Silicon Valley VCs; and also flexible enough for an evolving capital table and future IPO; iii) A plan to move and protect key IP; and iv) A personal plan to move key employees and staff up sufficiently with a skilled workforce. To design and execute such such integrated strategies requires a multi-disciplinary team implementing different elements of the plan in different jurisdictions. Failure to plan and follow through properly will mean more than the failure of the enterprise...it could mean personal harm to the founders. #backupplan https://lnkd.in/dab3mhaQ

So we have the Financial Times article about the crashing VC market, but its has got one major misleading statement. The FT is talking about China has throttled its private sector. But it's missing one important bit of information which is that most Chinese VC funds get their cash from state money. Most Chinese VC funds are state funds (which can lead to all sorts of problems.) So you actually see this from the article itself. Most of the funds that are being redeemed are state owned, and at that point it makes sense what is going on. As long as the local governments were making money from real estate they could pump the cash into VC funds. Once the local governments have run out of cash, then they start pulling funding. This would be bad if this killed innovation, but the issue then becomes whether government backed VC's actually went into things that generated stuff for companies. One problem with China is that a lot of VC's are in fact disguised real estate deals. You put money into tech companies that buy office space in your local science park. Since you have a ton of cash, what ends up happening is that the VC cash is used to push up real estate values, and everyone is happy, until you have a real estate crash and the whole system blows up and you have to hit the reset button. https://lnkd.in/g5kdmJBG https://lnkd.in/gAVd8nxK https://lnkd.in/gQCdydAD

Something to take note of is the collapse of the VC market in China and the rise of state controlled businesses. “In 2018, at the height of VC investment, 51,302 start-ups were founded in China, according to data provider IT Juzi. By 2023, that figure had collapsed to 1,202 and is on track to be even lower this year.” Thanks Matt Ocko for sharing Scout Ventures #dualusevc

✨ With the deep implementation of the “Belt and Road” initiative and the accelerated development of the GBA, coupled with strong support and investment from the HKSAR government in technological innovation, Hong Kong’s innovation ecosystem is flourishing at an unprecedented pace. 🌏 This growth is closely linked to the dynamic innovation landscape in mainland China. As both regions continue to develop rapidly, it’s essential to engage in further dialogue to ignite our innovations. 🌐 Join Us at the forum jointly organized by CYZONE and CUHK Business School to gain a deeper understanding of the latest trends in China’s innovation and entrepreneurial landscape, structural changes, future challenges, and the key to startup commercial success – cooperation. Our CIO Joyce Ng will moderate one of the panel discussions with investment veterans! We will delve into challenges faced by Hong Kong start-ups entering the mainland market; the interests and strategies of mainland VC investors; and the potential for a closer co-investment ecosystem in the GBA. 📅 Activity Detail: 2024 Hong Kong Bauhinia Innovation Forum Date: 07 November 2024 Time: 13:00 – 16:30 Venue: CYT LT3, CUHK Registration for the event: https://lnkd.in/gjQxdb4S We look forward to seeing you and exploring new avenues for innovation together! #CUIL #IgnitingInnovation #Investment #TechIndustry #Entrepreneurship

A recent Financial Times article highlights the dramatic shift in China's venture capital landscape and its impact on the private sector. Key takeaways: 📉 New company formation has plummeted from 51,302 in 2018 to just 1,202 in 2023. 🏦 State-backed funds now dominate, accounting for ~80% of capital in the market. 🔒 Stricter investment terms, including personal liability for founders, are becoming common. 🌍 Many VC firms are shifting focus overseas as domestic opportunities dwindle. This shift raises important questions about the future of innovation and entrepreneurship in China. One industry insider says, "The whole industry has just died before our eyes. The entrepreneurial spirit is dead." How might they impact global business and innovation? Read the full article: https://lnkd.in/dGt2mQ55

📣 A New Threat from China: What Investors Should Expect? 📣 For decades, China has ranked among the top five most attractive countries for investors. Despite this, TA Ventures has consistently steered clear of investing there. Here’s why. Until recently, only the USA outpaced the world’s leading nations in foreign direct investment. However, China is quickly learning from its primary competitor, rethinking and expanding its technological ecosystem. Today, “Made in China” is no longer just about imitation — it’s about adaptation. ☑️ Technology Development China is actively adopting lessons from the USA, where tech giants like Amazon, Google, and Facebook have pioneered platform economies and encouraged third-party innovation. Instead, China is focusing on superapps — comprehensive solutions bundled into a single application tailored to the unique needs of Chinese consumers. The Chinese government plays a key role in driving technological advancement, particularly in artificial intelligence and e-commerce. State support provides the foundation for rapid innovation and competitive growth. ☑️ Self-Sufficiency as a National Strategy China is making strides toward technological independence by investing heavily in critical sectors. This strategy aims to reduce reliance on imports — an essential goal given ongoing trade disputes and sanctions. Additionally, the government is prioritizing human capital development, including initiatives to bring skilled workers back from Silicon Valley. ☑️Public Funding for Innovation China’s venture capital ecosystem benefits significantly from state funding for startups, allowing the government to maintain control over every stage of their development. In the semiconductor sector, for instance, China attracts 75% of global venture capital investment, far outpacing the USA 11%. However, not everything is as promising as it seems. In the second quarter of 2024, foreign investors withdrew a record $15 billion from China, and foreign direct investment in the first half of the year dropped by 30%. The decline stems from geopolitical tensions and restrictive new regulations that complicate traditional economic analysis. For example, key statistics are now considered state secrets, and market research could be classified as espionage. At TA Ventures’ inception, my partners and I decided against investing in China after recognizing certain red flags: a rigid political system prone to sudden regulatory changes, challenging conditions for foreign investors, and highly volatile financial markets. But that’s not all. By the end of 2024, China introduced additional risks for investors and the global economy at large. Low consumption and declining production costs indicate troubling economic conditions and weakening momentum. China's sluggish inflation figures have already raised concerns in global markets, and these trends are likely to negatively impact industries with direct or indirect ties to the Chinese economy.

I resonate with B. Paul Santos' insightful commentary on Singapore's position in the equity markets. He speaks with the authority and understanding necessary to align the SGX with the aspirations of the startup and VC ecosystem in Southeast Asia. TL;DR: Success begins with a shift in mindset before taking action. But here’s the next challenge: Who will step up to lead this mindset shift and commit to transforming IPO opportunities for startups, even if it means risking their career? Over the past 16 years, I’ve witnessed a few courageous individuals in Singapore drive change in the startup landscape. From pioneering the iconic Block 71 and the launch of JFDI, Singapore’s first accelerator, to initiatives like IPPL-led accelerators and government-backed programs like iJAM.Reload, TiS, and SGTech commercialization grants. Change was made by bold initiatives and courage of men who stepped in to transform the startup ecosystem to what it is today. The question now is who are the next people who will see through the new change. Whether we’ll see a new wave of innovation that propels Singapore into another golden era for startups—or risk being overtaken by a rising Bursa Malaysia as the preferred destination for IPOs. https://lnkd.in/erAiiWv2

🌏 Southeast Asian startups shouldn’t have to cross oceans for capital. A recent piece from Jenny Lee and Yao Loong Ng in Fortune discusses the challenges faced by regional companies in accessing international capital markets. Despite regional dominance, many of our brightest companies struggle to gain traction in international capital markets. Yet, Southeast Asia is brimming with potential and high savings rates. The region needs a more integrated, regional market where companies can raise funds closer to home, and investors can seamlessly access opportunities across borders. This is crucial as global markets turn inward, potentially leaving emerging markets behind in the funding race. Liquidity begets liquidity. Simple but not easy. Initiatives like the collaboration between the Stock Exchange of Thailand and SGX to enable cross-border access are a step in the right direction, but more needs to be done. By harnessing regional savings and supporting active asset managers with a deep understanding of local markets, we can create a vibrant and resilient funding environment for Southeast Asia’s future unicorns.🌱 https://lnkd.in/gsiedfnN #SoutheastAsia #Innovation #CapitalMarkets #RegionalGrowth #GraniteAsia #InvestingInTheFuture #EmpoweringStartups