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Hong Kong is one of the go-to destinations in Asia for businesses to seek funding for their operations, whether they are starting from scratch or are looking to expand their existing business into the wider region. This is due to the city’s wide range of investor and government schemes.
In this guide, we put together a list of government grants and business funding options together with some practical tips on how to connect with and attract investors.
Government grants in Hong Kong
The Hong Kong government provides various business grants to companies based on their industry and goals. Listed below is an example of four grants that companies can apply for:
Enterprise Support Scheme
The Enterprise Support Scheme (ESS) is a funding programme under the Innovation and Technology Fund (IFT) that encourages the private sector to invest in research and development (R&D).
The objectives of the ESS include:
- Attracting mainland China and foreign companies to establish their R&D presence in Hong Kong
- Creating a rainforest of technology startups
- Creating more technology-related job opportunities
- Increasing private sector investment in R&D
The ESS supports downstream R&D activities that focus on commercial application and viability of project deliverables. The scheme does not support mass production activities, general business operations (improvement of production or operational processes), general business financing and staff training.
The ESS provides maximum funding support of HKD 10 million for each approved project on a dollar-for-dollar basis to successful applicants for up to 24 months.
Research and Development Cash Rebate Scheme
The Research and Development Cash Rebate Scheme (CRS) encourages local enterprises to invest more in R&D in the private sector and establish a stronger partnership with designated local public research institutions.
The CRS provides a cash rebate equal to 40% of the company’s eligible expenditure in two types of applied R&D projects, which are R&D projects funded by the Innovation and Technology Fund (ITF) and R&D projects funded by companies and conducted in partnership with designated local public research institutes (partnership projects).
Innovation and Technology Venture Fund
The Innovation and Technology Venture Fund (ITVF) aims to encourage more private venture capital (VC) funds to invest in local innovation and technology (I&T) startups.
A special-purpose vehicle called The Innovation and Technology Venture Fund Corporation (ITVFC) will co-invest with VC funds selected as Co-investment Partners (CPs) in eligible local I&T startups (investee companies) at a ratio of 1 (ITVF): 2 (CP).
The incentive a CP will receive is a carried interest of 35% of the realised capital gain upon selling the ITVFC’s shares in an investee company to a third party.
CPs can also buy all of the ITVFC shares in the co-invested investee companies within the Active Investment Period.
Technology Voucher Programme
The Technology Voucher Programme (TVP) is a funding scheme that aims to support non-listed local enterprises in using technology services and solutions to improve productivity and/or upgrade or transform business processes.
The TVP provides a funding ceiling of HKD 600,000 on a 3 (government): 1 (enterprise) matching basis. Funding of no more than three-fourths of the actual project cost will be given to the applicant, and up to six projects from each applicant will be approved.
Other government grants
In addition to the grants listed above, the Hong Kong government provides the following grants to businesses of all sizes:
- Innovation and Technology Support Program (ITSP)
- CreateSmart Initiative (CSI)
- GoodSeedPartnership Research Program (PRP)
- General Support Program (GSP)
- Re-industrialisation Funding Scheme (RFS)
You can find more government funding grants here.
Private equity in Hong Kong
Hong Kong is the second-largest private equity market in Asia and one of the three popular regions for private equity in addition to New York and London.
Private equity firms usually invest in companies going through financial difficulties, mismanagement, or debt. Private equity funds in Hong Kong obtain their funding from family offices, limited partners, sovereign wealth funds, asset managers and high-net-worth individuals and firms.
Venture capital
Venture capital (VC) funding has become popular among small businesses or startups that need funding and mentorship. As a small company, they may lack access to bank loans or other debt instruments, so they seek funding from VC firms.
Venture capital (VC) firms provide funds to startups or small businesses that are believed to have potential long-term growth of at least ten times of the investment in return for a minority stake. They also offer mentorship opportunities and accelerator programs.
Once the VC firm invests in a company, a member of the VC firm will usually be a part of the startup’s management team, which allows the VC firm to be involved in the company’s decisions.
Angel investors
Angel investors invest their personal money in early-stage startups or during the seed phase in exchange for ownership equity and provide mentorship and guidance for new startups.
Angel investors can also invest as groups or networks by pooling their funds together to invest more money than an individual angel investor would.
The investment range for independent or group investors can range from USD 25,000 to USD 100,000. However, they can contribute to more than that. Businesses do not need to repay angel investors because they give ownership shares in exchange for the funds.
How to find & attract investors in Hong Kong
Finding and attracting investors is an important step for funding your company, and there are several ways to find investors in Hong Kong, such as networking events where investors gather and look for companies to fund.
Examples of networking events in Hong Kong are:
- Startup Weekend
- Startup Grind
- Garage Society
Top private equity firms in Hong Kong include:
- The Abraaj Group
- ACA Capital Group Limited
- Queen’s Road Capital
- Tiger Securities Asset Management Company Limited
Some VC firms in Hong Kong are:
Some individual and group angel investors in Hong Kong include:
- Individuals:
- Groups:
Conclusion
Thanks to the government’s support (by offering grants and incentives) and the city’s status as a financial hub, thus offering a plethora of funding options, Hong Kong is a favourable place for many businesses seeking funding or further expansion into the region.
If you need advice on or help with funding your business, do not hesitate to contact Acclime. Our local experts can help with anything from raising funds, making introductions to providing a company secretary who can confidently deal with your company’s rapid growth and its changes within.
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About Acclime.
We are a premier provider of professional formation, accounting, tax, HR & advisory services in Hong Kong, focusing on providing high-quality outsourcing and consulting services to our international clients in Hong Kong and throughout the region.
