The Sleeper Must Awaken
Part 2: Hong Kong's role in the Greater Bay Area
Whenever I do get around to posting to this newsletter, I try (often way too hard) to be ironic. If for no other reason, than the little ways I can make myself chuckle are why I write this at all. I am not trying to be a “content creator”, though I respect what they do. Nor am I just shouting into the void. Everything I share to this blog, newsletter…whatever you prefer to call it, I believe in. So it is always a bit raw and a peek into how I really think. On the subject of the future of Hong Kong, I am incredibly passionate and want to see it evolve and succeed. The last post was focused on a vision of what I believe Hong Kong needs to become, today I will focus on the how.
This is part 2 of a two part (now three) series of my own personal opinions on what Hong Kong’s future should be in the Greater Bay Area of China. If you haven’t read part one, you really should do that first, or you can listen to an audio summary courtesy of Google’s NotebookLM here.
The tl;dr of the last post is this: If the GBA truly wants to be the next cradle of world-changing technology, Hong Kong needs to transform itself into the Sand Hill Road of the East. Hong Kong’s historic power as a financial centre makes this positioning an achievable, evolutionary aspiration as opposed to requiring revolutionary change. Put simply: Hong Kong can be the nexus of capital allocation for startups both launching from China and landing from the rest of the world.
If after having read the last post the irony is still lost on you, the biggest bit is right at the very top. The title: Time to Build on Sand is a nod to the physical reality in the property sector that actually building on sand creates an unstable foundation. It was also, as mentioned a shout to the general thesis that the what Hong Kong needs to become if the Greater Bay Area (GBA) can truly rival Silicon Valley is the Sand Hill Road of the East.
Breaking the Fever
So how do we hack our way out of this property-induced coma in our concrete jungle? Hong Kong's addiction to real estate is like a gamer who can't stop grinding for loot boxes - it's time to level up and explore some new quests.
First off, let's talk about location, location, location - but not in the way your grandpa's real estate agent would. We need to stop exiling our startups to the far reaches of the the territory like they're in some kind of innovation quarantine. It's time to bring the noise (and the disruption) into the many business districts scattered throughout Hong Kong.
Let's transform those stuffy old, and increasingly vacant buildings into vibrant collaborative spaces where fintech startups can rub elbows with the very institutions they're trying to disrupt. It's like hosting an eSports competition in the Vatican - chaotic, potentially sacrilegious, but the kind radical ideas this current state of stagnation demands.
Now, about those incentives - we need to stop throwing money at real estate developers like they're a rigged claw machine with the prize just out of reach, and start investing in the brains that'll build our future. How about scaling tax breaks for landlords that dedicate a portion of their prime real estate to incubating startups? The business districts can all acts as a spawn point for the next generation of unicorns. This is particularly relevant for emerging business districts like Kwun Tong, Kai Tak, Tsuen Wan, and Wong Chuk Hang that have struggled for years to find an identity beyond “business district”; these areas can become focused clusters for the new sectors that emerging in the AI era.
The property giants can swap their boring old lease contracts and NOI benchmarks for a slice of the startup pie. It doesn’t need to be complex, it can be a convertible debt structure aligned to the contract value of the lease: the startup moves into prime real estate. As the company grows, so does the value of that stake. Suddenly, our real estate tycoons are playing venture capitalist, and they don't even need to wear those awful Patagonia vests.
This isn't just about being nice to startups. It's about a path to transforming our real estate giants into genuine strategic partners. They're not just providing four walls and a roof; they're offering mentorship, connections, and a vested interest in seeing these companies succeed. It's like turning every office building into a mini-accelerator, but with better views and hopefully fewer trust falls.
And let's face it, most of these landlord entities are already asset management firms. This suggestion is not one of radical transformation, rather one of gradual diversification. Instead of obsessing over occupancy rates and rental yields, they could be tracking user growth and burn rates. It's time for Hong Kong to stop trying to control every aspect of its economy and start surfing the waves of disruption. After all, in the game of innovation, the only way to win is to play.
But let's not stop there. We need to infuse some of that street art energy into our corporate culture. Imagine if instead of another luxury mall, we created an augmented reality playground where game developers and artists could collaborate to turn the city into a living, breathing canvas of innovation. I want to give special mention to New World here, as they did a pilot program with a startup that I advise and that found some of their recent funding via Deploy called Trace3D with this very idea.
It's time for Hong Kong to stop playing SimCity and start embracing Cyberpunk 2077 (minus the bugs, of course). We need to cultivate a hybrid workforce that's not just corpo drones doing their jobs, but actively hacking the system to make it better. Let's create a city where every employee feels like they're part of a startup, even if they're working for a century-old bank.
Trading Legalese for Lingo
Alright, let's dive back into the linguistic labyrinth and see if we can't turn our risk-averse real estate moguls into innovation-hungry tech whisperers. It's time to teach these old dogs some new tricks, and by tricks, I mean the lingo of the startup world.
Imagine a world where Hong Kong's property tycoons are as fluent in "burn rate" and "MVP" as they are in "square footage" and "yield." We need to create a Rosetta Stone for innovation, where every lease agreement comes with a side of startup slang.
I am myself a recovering consultant who, in my past life, relied far too heavily on the shroud of mystic jargon. I am not advocating that the whole city start sounding like Russ Hanneman, but only by being closer to the problems startups are solving can the capital allocators of Hong Kong appreciate that venture is not literally “risk investment”, rather it is a modern version of opportunity to seize once again as so many of the conglomerates have in the past. Many of the Hong Kong titans have already done this before having been sugar producers, ship builders, textile manufacturers, and jewelers in generations past…and even many into today.
As these landlords start to understand the language of startups, they'll naturally start to see the value in these "risk investments." It's like when you start learning a new language and suddenly you can understand the jokes in foreign films. Our property moguls will begin to see the potential unicorns hiding in plain sight, right there in their own buildings.
This is not entirely absent in Hong Kong, some heavy hitters like CKC, New World, Swire, ChinaChem, Goodman ,and Jardines all have venture or innovation arms. They're not just renting out space; they're incubating ideas and fermenting innovation right in their own buildings. As mentioned above, these programs and the startups they nurture need to be further integrated, not footnotes in marketing posts on social media.
This isn't just about teaching old dogs new tricks; it's about creating a whole new breed of hybrid investor-landlords. They'll be part Warren Buffett, part Steve Jobs, with a dash of that classic Hong Kong business savvy. They'll be able to spot the next big thing faster than you can say "Series A," all while still keeping an eye on their precious square footage.
Not a Revolution; A Remix
Finally, the government needs to learn the first rule of affecting meaningful and lasting change: “Duplicate the bright spots.” A good start is helping to subsidize various ‘upgrades’ that help startups and scale-ups “fake it ‘til they make it”.
Startups are under immense pressure to keep their burn rates down which is uniquely difficult in one the most expensive cities in the world. One of the easiest way to keep costs down is to cram growing teams into very tight spaces, typically in co-working spaces. Working with landlords to upgrade from their “economy class” seats in co-working spaces to “business class” dedicated offices, even in lower grade assets doesn’t just elegantly solve space and cost constraints for the startups, it allows the startups, and by extension the ecosystem to project success and manage burn.
Another easy way to help Hong Kong demonstrate to the world that it is startup capital is to grant naming rights of lower grade assets to the startups in their newly diversified portfolios. I’d love to see the Klook logo on one of the buildings that the Fok family owns.
The old wisdom “If you have to say you are something, then you aren’t that.” comes to mind. No one outside of the Hong Kong government is convinced by the sloganism of Hong Kong calling itself “Asia’s Most Dynamic Startup City”. But if the suggestion above was put into practice…no one would have to say anything, the signs would literally be there.
The above photo was taken in Singapore. Few things are more cringe in this wider conversation than the constant comparisons to the Little Red Dot on the Malaysian Archipelago, but this really stuck me as something that is quite doable even in the near term.
The aforementioned sloganism of Hong Kong government agencies saying that it is “Asia’s Most Dynamic Startup City” is strategy that is doomed to failure. I am not saying that the aspiration is wrong, it is very much the future I am trying to paint a picture of in this series. But if we thought of this like music: Right now, the Hong Kong government is in the role of performer when it needs to act more as a producer: behind the board making all the adjustments and arrangements for the best possible performance of the real stars, the next generation of innovators…engineering economic soft power for the 21st century.
Instead of the government saying in in marketing materials, the entire city can be singing it from the literally rooftops in a chorus celebrating this new era in the city’s storied history.
Believe in a Better Way.
Leaning a bit too hard into the irony thing, a quote that has been running through my head for days and is so relevant to this topic is from a legendary architect:
“You never change things by fighting the existing reality.
To change something, build a new model that makes the existing model obsolete.”
― Buckminster Fuller
If you’ve made it this far, then you must realize how deeply important this subject is to me. One of the most vapid cliches you hear from often well meaning but not wildly self aware advisors is: “Ideas are easy, execution is everything.” (a future piece is coming on this soon). Put more succinctly: What good is a cynic with no better plan? I believe in a better way.
While envisioning Hong Kong's transformation into a startup hub, it's crucial to recognize that many of the challenges we face are not unique to our city. In fact, these systemic issues in the innovation economy exist globally. This realization led my cofounder Sophiya and I to develop a solution that addresses one of the core problems in the startup ecosystem – the disconnect between investors and industry experts.
Enter Deploy, our platform designed to bridge this gap. Deploy serves as a practical example of the kind of innovative thinking Hong Kong needs to cultivate. By connecting investors with active industry professionals, we're tackling a universal challenge in a way that could benefit not just Hong Kong, but startup ecosystems worldwide.
So how does Deploy embody the principles we've been discussing and how it could play a role in Hong Kong's journey to becoming the Sand Hill Road of the East?
The economy of innovation has become an ivory tower industry, problems are distributed globally, but in this moment too many solutions are concentrated in Silicon Valley, it is one of the reasons Beijing and Hong Kong believe the east needs its own version.
Our platform Deploy bridges the massive information gap between investors and the active industry professionals endure the problems needing solved every day. We’ve built a network of experts that gives early stage investors and edge by sourcing and evaluating startups directly from these active industry practitioners.
Our unique approach helps to quickly and efficiently identify outliers and find conviction across geographic and sectoral boundaries, creating a more inclusive and participatory innovation ecosystem. While we have positioned the technology to scale this globally, our scrappy team of two is focused on solving this problem in our own backyard(s), namely Hong Kong and Asia.
If you’d like to learn more about how you can join our private beta, or partner with us to unlock new economies of scope in your own deal sourcing please reach out.
How You Dune?
Initially, I said that this would be a two parter, but in the process of writing this and getting some help from my brilliant friends Anthony and Tyler to make sense of this, I’ve realized there is more I want to say on a process level…so expect a part 3, maybe a 4. This could go for a long time but in between I will break it up with musings on other subject matter.
As we contemplate Hong Kong's future, I'm reminded of Frank Herbert's seminal work, Dune – a story that has shaped so much of who I am today, as anyone who's met me can attest. The parallels between Dune's desert planet Arrakis and our vision for Hong Kong are striking. Just as Arrakis held the most valuable resource in the universe beneath its harsh sands, Hong Kong's true wealth lies not in its skyline of concrete and glass, but in the untapped potential of its people and its strategic position in the Greater Bay Area.
The transformation we're proposing for Hong Kong isn't just about changing policies or repurposing buildings. It's about awakening a dormant spirit of innovation and entrepreneurship that has always been part of this city's DNA. In Dune, Herbert wrote:
Without change something sleeps inside us, and seldom awakens. The sleeper must awaken.
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