Hong Kong’s Innovation and Technology Commission (ITC) has launched a HK$2 billion (US$256 million) co-investment scheme in a bid to stimulate private investment in local innovation and technology start-ups. Venture capital funds can apply to become co-investment partners of the Hong Kong government to back start-ups in series A and B round across all technology sectors, according to an official announcement today.
The Hong Kong government has set up a special purpose vehicle, the Innovation and Technology Venture Fund, on September 15 for the co-investment scheme. The scheme was announced by the previous chief executive of the Hong Kong Special Administrative Region Leung Chun-ying in his 2016’s Policy Address.
The government co-investment scheme has set a maximum deal size to be no more than 40% of the investment sought by the start-up, or under HK$30 million (US$3.8 million). The scheme is working on a co-investment basis at an overarching investment ratio of 1 to 2 between the government and the partnering venture funds, the maximum amount that a venture fund can invest per deal will be capped at HK$60 million (US$7.6 million).
Venture firms, who can apply to qualify for the co-investment scheme, will be assessed on their fund size, financial strength and capability, management team’s knowledge and experience, as well as their likely contribution to the Hong Kong ecosystem. The government will announced the result of its assessment by the end of April 2018. Selected venture funds will then sign an agreement with the government and start looking for eligible start-ups for co-investment.
The co-investment scheme is technology and sector neutral, meaning that all start-ups that meet certain requirements can benefit. Sectors mentioned in the announcement include financial or blockchain technology, application development, intelligent manufacturing, robotics, e-commerce, artificial intelligence, Internet of things, or cloud computing.
To be eligible for the co-investment, the start-ups must have a strong presence in Hong Kong. That means they must have been registered under the Hong Kong companies ordinance within the last seven years, have either their main or regional offices located in Hong Kong, or their key business operation or management personnel in Hong Kong. They have to be engaged in innovation and technology, and have part of their research and development or production chain in Hong Kong. Total number of employees must be less than 250.