A pioneer in Hong Kong’s venture-capital industry and a driving force behind the development of local start-ups, Dr Gordon Yen, Founding Managing Partner of Radiant Tech Ventures, has been exploring new frontiers for the past seven years.
Donald Choi (right), Executive Director and CEO of Chinachem Group interviewed Dr Gordon Yen, Founding Managing Partner of Radiant Tech Ventures
Where the story began
The establishment of a venture capital fund, Dr Yen recalls, was somewhat fortuitous: “I got my bachelor’s degree in manufacturing engineering in the US and master’s degree in business administration in Canada. After returning to Hong Kong, I worked in traditional fields like infrastructure and manufacturing,” he says. “In 2000, I encountered an opportunity to represent the company that I was working for in managing an early stage technology investment in a supply chain digitisation start-up from the US. Through that project, I got to know co-investors from the venture-capital industry who sparked my interest in that field.”
The beginning of the new millennium was a period when industrial transformation and upgrading became a major trend. At that time, Dr Yen had opportunities to work with local research institutes and universities, and he realised then the high quality of scientific talents that were in Hong Kong. There were still some drawbacks: although the foundation of local research was solid, Hong Kong was lagging behind Europe and the US in terms of commercialisation of technologies. Dr Yen, understanding the crucial role venture capital plays in commercialising an innovation and seeing an unmet need in the local market, launched the first Radiant venture fund in 2014.
“The tech bubble burst in 2000 and eroded investor confidence, but not the inherent value in technology,” he explains. “Innovation has always had its value in Hong Kong, as reflected by the market. This has been especially so in recent years. With a push by the government and industry, technology is back on investors’ lists once again and the scene will surely flourish even more with the Greater Bay Area initiative in play.”
The first thing is to understand what value it can bring to its users. Next it’s how big their target market is, and their strategy – or what advantage they have – to gain market share . Finally, it’s the background and the roles their team members play.
Founding Managing Partner of Radiant Tech Ventures
A platform to put ideas into practice
When it comes to finding the right start-up venture to invest in, Dr Yen says there are a few factors to consider: “The first thing is to understand what value it can bring to its users. Next it’s how big their target market is, and their strategy – or what advantage they have – to gain market share. Finally, it’s the background and the roles their team members play.”
At present, Radiant Tech Ventures mainly invests in business-to-business (B2B) start-ups that create innovations in business automation, artificial intelligence and software as a service platforms. These types of start-up help users boost operational efficiency and ensure sustainable business growth. “Business-to-consumer (B2C) has its limitations,” says Dr Yen. “The consumption patterns differ from place to place. Even if a product works in Hong Kong, it’s not necessarily the case in other markets. For B2B, there’s a higher chance that you can successfully break into a foreign market with the existing model.”
Dr Yen believes that, compared with Europe and the US, there is still room for growth in the Hong Kong venture capital market: “In Europe and the US, many institutional investors allocate a certain percentage of their capital into venture capital investments, as such asset class is less correlated with the economic cycle. The risk is high but so are the returns,” he says.
“As a global financial centre, Hong Kong has seen the local venture capital market gradually take shape in recent years, but there is still plenty of room for growth if you compare it with the European and US markets. I hope local institutional investors will allocate a standing part of their capital pool into venture capital, fostering a vibrant market with more diversified investment options. That would also enable a deeper venture capital market, where various stages of venture funds will be available to support start-ups through different phases of their life cycle, from seed to late stage, enabling more local start-ups to embark on the road to success.”
Choi and Dr Yen both believe that venture capitalists provide more than funding: they put ideas into practice. “I’ve met many young entrepreneurs, most of whom have showcased great passion for the business they started. However, owing to a lack of working experience and understanding of the industry, their proposals usually fail to address the needs of the market and customers,” Dr Yen says.
“To technology start-ups, the biggest challenge is often the initial launch of their product in the market. Therefore, in addition to investment through its corporate venture fund, Chinachem Group also provides start-ups with opportunities to put ideas into action, offering pertinent advice and guiding them through the process like a mentor. This helps start-up businesses move in the right direction.” Choi says.
Chinachem Group also provides start-ups with opportunities to put ideas into action, offering pertinent advice and guiding them through the process like a mentor. This helps start-up businesses move in the right direction.
Executive Director and Chief Executive Officer
Opportunities in the Greater Bay Area
With Chinachem Group being one of the major developers in Hong Kong, Choi has expressed his keen interest in the advantage Hong Kong has in developing property technology. Dr Yen responds that Hong Kong is the ideal sandbox for testing proptech. Given Hong Kong’s high density and mixed-use developments, it is the best testing ground for start-ups to optimise innovations and study their feasibility.
“The Hong Kong market, however, is too small to incubate start-ups and innovations at the international scale. This is where the Greater Bay Area development comes into play,” Dr Yen notes. “We can take advantage of the larger market to create a greater impact.”
But while the wider market is important, he reminds Hong Kong start-ups that localisation is essential when entering the Greater Bay Area arena: “Even though Hong Kong is a relatively more multi-cultural city in the region, you cannot simply take the existing model to other cities in the Greater Bay Area. You’ll never succeed. You have to integrate into local culture and engage local talent to improve your odds of success in that market,” he says.
In recent years, Hong Kong has seen a start-up boom. Entrepreneurs have relied on support from venture capitalists and institutional investors to dream big and grow their businesses. To Radiant Tech Ventures and Chinachem Group, the Zeek project is a great first step in their joint venture partnership – and there are many more to come.