Meet Startup @TW

As Hong Kong startups respond to new political reality, how does Taiwan fit into their plan?

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In Hong Kong, a new political reality is taking shape. After the extradition bill sparked mass protests and violent clashes with the police, the Chinese government has passed a national security law intended to prevent foreign interference and separatism. The city has since then witnessed a return of demonstrators, a series of arrests of anti-government activists, and the US decision to strip away the special status that has allowed the semi-autonomous territory to become one of the world’s three financial centers.

In the face of the situation, foreign startups may be less inclined to set up in Hong Kong, but local startups are often mulling things over before they take action. To come to a conclusion, they often need to factor in the nature of their industry, long-term business strategy, and how much cash they have in hand.

“Due to their size, startups are much more agile and responsive to change than established companies,” Charles Lo says. Concerned about the city’s outlook, the founder of Classmade believes unpredictability often breeds new opportunities for startup companies, which are constantly overcoming challenges.

But Lo also says he might consider ways to restructure the company to diversify the risk of having to leave for a new base. Classmade, which offers a professional profile building tool for students, now operates in Hong Kong, Taiwan, and the Philippines.

In a similar vein, Oursky, an app design and development company based in Hong Kong, plans to ramp up efforts to grow its business globally as a means to “offset the limitations in the local market,” the founder Ben Cheng tells Business Next. As the company works to increase the share of revenue from overseas markets like North American and Australia, now at 40%, it also expects to set up several foreign R&D offices and expand the existing teams around the world.

Many Hong Kong-based companies aren’t foreign to the idea of running a global business. “It may depend on what industries they work in, but Hong Kong-based startups seldom stay in their domestic market,” Bernard Chan points out. A Hong Kong native, he relocated to Taiwan six years ago and founded Alpha Camp, a school that helps Asian talent build a career in tech.

In recent years, more and more startups from the city are following in his footsteps to Taiwan. They have either built a software team in Taiwan or expanded into Taiwan’s consumer market, such as Klook and Shopline. While the latter has to do with an ambition to grow and scale, the former is the result of the fundamental difference between Hong Kong and Taiwan as labor markets.

Why Taiwan

In Hong Kong, fresh graduates tend to apply for jobs in real estate, finance, and the service sector, and prefer working for large corporations. But due to its long history in hardware development, Chan says Taiwan is “much more acceptive of technology-driven companies,” including young and small startups.

This is not to say the tech industry doesn’t exist in Hong Kong, but as tech talent leave the city at their 20s or 30s, the industry is taking a huge hit, says Cheng. “I think the civil unrest is not an issue in Hong Kong for [businesses] in the longer term, but the political uncertainty is.”

Oursky started in Taiwan five years ago by hiring a group of local software developers. Now, Cheng says, in addition to expanding the team in Taiwan, he plans to move some employees based in Hong Kong to Taiwan in the near future. He doesn’t rule out the possibility of relocating the entire team “if things Internet censorship happens and become an obstacle to continue [their] tech R&D [projects in Hong Kong.]”

Classmade is another company that started in Taiwan by building a local team. “When we set up overseas, one of the first things we took into account is if our idea would be copied,” he explains. “We find Taiwanese people honest and there’s no culture of doing such thing in Taiwan.”

In addition, Lo believes Taiwan has a large supply of the type of creative talent his company is looking for. He recalls hiring for a position in Hong Kong and receiving just six applications, but the same role later attracted more than 100 job seekers in Taiwan.

Classmade’s decision to expand to Taiwan, Lo says, “kills two birds with one stone,” as the country has not only a talent pool but a market that is big enough for a Hong Kong-based startup to test its products. The company also plans to focus on the Taiwanese market for business development in the upcoming years.

Omnichat, a Hong Kong-based startup developing an e-commerce messaging platform, has also been active in Taiwan as it sees a huge opportunity for its services. “There's a great number of e-commerce stores in Taiwan and they're mostly very mature,” co-founder Alan Chan says in a press release that announces the company’s seed fundraising. “Even small e-commerce businesses attach great importance to data analytics and membership management.”

Like Classmade, the company also regards the island with 23 million population as a test site. But as it gains traction in Taiwan, the plan to expand into Southeast Asia, Malaysia and Singapore in particular, is well underway.

In response to the new political reality, co-founder Lewis Pong says they may therefore consider moving their headquarter to Singapore, another financial center that can potentially replace Hong Kong, and oversee their software team in Taiwan.

“But for Hong Kong people, if we personally want to relocate to a new place with our family, Taiwan is one of the best options,” Pong says. “We share a similar culture with the people in Taiwan and it should be easy for us to adapt to the lifestyle there.”

According to an online survey published in Foreign Policy, 50% of the respondents considered leaving Hong Kong, and among them, 29% said Taiwan was their first choice of location, followed by Canada and Australia.

Moving forward

A recent report by Taiwan’s immigration agency reveals a trend of increase in the number of Hong Kongers who obtain permits to reside in Taiwan, and as violent incidents in Hong Kong are widely discussed in social media over the past few months, there has been a debate about whether Taiwan has the capacity to welcome new immigrants from the city.

To become an investment immigrant, Hong Kongers need to invest no less than NT$6 million (around $200,000) in a private Taiwanese company or start a business with the same amount of capital. Many find this requirement difficult to meet.

“Even if they have the money in hand, they probably have no idea what to invest in or how to start a business from scratch,” says Leroy Yau, co-founder of Taiwan Startup Stadium, an startup ecosystem builder based in Taiwan.

Even so, the number of applicants for the investment program has spiked last year. On alert to the source of the capital, the commission that takes applications, the Investment Commission of the Ministry of Economic Affairs, has tightened the rules of the program in March, demanding that Hong Kongers hire at least two Taiwanese employees every year.

“If you have a plan to move to Taiwan, come and live here first,” Yau gives suggestions to Hong Kongers. “Maybe also try to hire some local people.”

In addition to the investment program, Hong Kongers can also opt for entreprenuer visa, which allows new immigrants to stay in Taiwan for at least one year after raising NT$2 million (around $68,000) for their company or being accepted into an accelerator. The employment gold card is another option.

As for companies, Yau believes they are more likely to go ahead with their plan to set up operations in Taiwan during the time of uncertainty, but the Taiwanese government needs to improve its policies in order to incentivize such move.

“In fact, Hong Kong people’s understanding about Taiwan is pretty limited. Besides tourist attractions like Kenting, Taipei is probably the only place that they know about,” Yau says. “Another key issue for Taiwan, therefore, is to let those people know it is an island and they can do businesses in places other than Taipei.”

Likewise, Bernard Chan adds that Taiwan needs to continue improves its business environment, which should first attract Taiwanese people who live overseas to return and prevent brain drain. The arrival of Hong Kongers will add diversity to Taiwan’s labor market.

While it might be a difficult time to navigate for the people of Hong Kong, Chan says it’s crucial that they remember what they are good at now. “We went through so much,” he says. “Problems are everywhere, but the point is not to get distracted by all these things and try to focus on what you can do and contribute.”

延伸閱讀

Bryan Chou
Journalist

Bryan Chou is a Taiwan-based and born journalist who writes about innovation and entrepreneurship for Business Next and Meet. Over the past five years, he has written for a student press, translated numerous magazine pieces, and worked as an intern in two startups. He believes what shapes him into who he is today is not only these experiences but the people he has interacted with and the stories he has learned from them.

He has a BA in Foreign languages and literatures from NTU. After graduation, he spent a year in Prague, traveling extensively around Europe to learn about the history and culture of the region from local people. Currently based in Taipei, he hopes to present the best of Taiwan to the world.