Fireside Chat with Investor Denis Tse
Denis Tse is the Managing Principal of Asia-IO Advisors and Executive Director of HKVCA.
This interview with Denis Tse was conducted and condensed by EntrepreneurHK (EHK).
1. How is the early-stage investment scene in Hong Kong? Are there lots of angel and early-stage investors in the city?
Although there are growing number of early stage investors in Hong Kong, it is still very nascent. You have a few real star entrepreneurs coming from here, and I hope more of our local community can look up to them as role models. We also lack those who have gone through the lifecycle building big, robust products, and that’s a valuable experience to be had — where as in China, a big group of people have lived through those experience already, and they are more ready as entrepreneurs.
I am not concerned about the number of investors here. After all it is easy to flip the switch and call yourself an angel investor. The problem is information asymmetry, which is somewhat is sustained by negative perception (“there are no good deals in Hong Kong so why trying?”), and the lack in follow-on funding (what’s next after seed investment).
2. Where can entrepreneurs find these early-stage investors?
The search cost is very low. Good Chinese investors are widely covered in entrepreneurial magazines and websites that are cheap to buy/easy to access. There are tools that identify which investors have invested in what. With tools like LinkedIn, investors are more accessible. The question is whether you are good enough to get their response.
The best way is to get references and referrals from your entrepreneurial peers. That however is a function of the nascency of the entrepreneurial community. Alternatively, they should contact HKVCA, Cyberport, etc.
3. Asia has far fewer VC firms and institutional investors than the Valley, and all the top dogs (i.e. GGV Capital, Sequoia China, IDG, Qiming) are in Beijing. Do institutional investors exist in Hong Kong?
The key is where oversupply or shortage of capital for quality investment opportunities. Where are more opportunities, it is reasonable to expect more capital. Frankly, for quite a number of entrepreneurial markets in Asia, there is a bit of overflow of venture capital already.
Most of the “top dogs” you mentioned also have presence in Hong Kong, and there are indeed very good institutional-grade venture investors residing in Hong Kong. Again the question is whether the asymmetry in attention and focus is driven by perception or actual observation.
4. Singapore has SingTel Inno8. What about strategic investors? Do they exist in Hong Kong?
Yes, you can call RenRen a strategic investor making an investment in Hong Kong (in GoGoVan). Li & Fung has strategic investment arm. Over the past 20 years, even some mid-sized companies made very good strategic venture bets. It’s just that few call them strategic investors in fashionable terms.
5. Asia focuses on monetization far sooner in the company building process. Silicon Valley will wait 2-3 years before determining your revenue model. For example, Asian investors will focus in on EBITDA very early on – a concept almost unheard of among early-stage VCs in the Valley. Does Hong Kong investors take a more Asian approach (quick monetization) or the Valley approach (incubate big disruptive ideas)?
If your entrepreneurial business operates in an environment/market where access to outside capital is not easy, you will have to rely on internal cashflow to survive. That is true everywhere. Conversely, if a business can attract a long money train, it can focus on other strategic objectives other than just cashflow conservation that BUILD A BUSINESS – like market expansion, market share acquisition, building loyalty, etc.
The key is to focus on whether there is a pathway to Build a Product, and from it to Build a Business, and then whether the people is the right team to bet on.