Venture Fund: Engine Propelling Tech Start-ups in Hong Kong

Interview with Mingles Tsoi, CXO of Particle Accelerator Ltd (ParticleX)

Mingles Tsoi, CXO of Particle Accelerator Ltd (ParticleX)

The global Covid-19 pandemic has changed the future of business in many ways. One of the more positive consequences has been the creation of a more vibrant environment for start‑ups. The number of start‑ups in Hong Kong reached a record high of 3755 in 20211. These were spread across 18 sectors, including fintech, e‑commerce, consultancy services and infotech. Tech start‑ups have become a powerhouse of new thinking for Hong Kong’s innovation‑driven economy during the pandemic.

To succeed as a start‑up entrepreneur one needs support in many different areas. Concept building, unique technology/R&D capability, high‑performance work team and start‑up capital are all indispensable. One of the biggest hurdles is lack of funding. Mingles Tsoi, Chief Exploration Officer (CXO) of Particle Accelerator Ltd (ParticleX) has worked in the education and consultancy sectors for many years, helping guide the growth of a variety of different venture projects. Over the past five years, as a venture investor, he has witnessed how Hong Kong’s innovation and technology sector has developed, largely as he has reviewed an average of more than 1000 investment proposal and interviewed more than 200 tech start‑ups on an annual basis. In an interview with HKTDC Research, Tsoi looked at the prospects for innovation and technology in Hong Kong and offered valuable suggestions for start‑ups from the perspective of a venture investor.

Beacon for start-ups

ParticleX’s mission is to fill the funding gap in Hong Kong’s tech start‑up ecosystem, while innovatively nurturing promising new business in the tech space. As well as providing them with funding, it also supports the deepening of their scientific research, while helping match local and global tech starts‑ups with big corporations and establishing tech application solutions as part of its role as an angel investor. ParticleX has invested in 40 start‑ups in Hong Kong and other parts of the world since its founding in late 2017, grooming them from the seed stage. It has shown good insight in its selection of venture projects. In 2021, Forbes selected 100 Asia‑based start‑ups as ones to particularly watch. Of these, 10 were from Hong Kong, with ParticleX having invested in five of them. In 2022, ParticleX was designated as one of the region’s leading start‑up backers/investors as part of the Forbes Asia 100 to Watch List.

The company is dedicated to early‑stage start‑ups and selects outstanding start‑ups for investment after a careful review of more than 1,000 applications from across the world on a yearly basis. This review process involves five to six rounds of interviews, with the final selection based on a comprehensive assessment of each applicant’s background, business concept, execution power, technological strengths and social impact, as well as several other factors. In addition to providing each selected project with venture capital of up to USD 200000 (HKD 1.57 million), ParticleX also deploys its resources and connections to further support these projects and ensure future funding access.

ParticleX is devoted to build a start‑up ecosystem in Hong Kong. In addition to direct investment, it is committed to the promotion of greater co‑operation between industrial developers and scientific researchers and the subsequent commercialisation of research results. It also regularly hosts start‑up workshops and sharing sessions relating to fund‑raising, strategic positioning, budgeting and a variety of other related topics.

Global challenge

A vibrant start‑up ecosystem is incomplete without interaction and brainstorming by different stakeholders. Entrepreneurship competitions and challenges are ways to encourage new trials. ParticleX has been hosting the ParticleX Proptech Global Challenge with partners since 2020 and has successfully attracted the participation of more than 230 global proptech start‑ups. This year the challenge has been extended to the field of urbantech in six areas: (1) real estate & built environment; (2) infrastructure, energy and utility; (3) transportation and mobility; (4) food supply, public health and security; (5) circular economy, cleaning and waste management, and (6) lifestyle, culture and education. ParticleX hopes these global challenges will help connect start‑ups with big corporations, angel investors and incubators worldwide and encourage the use of sophisticated technologies to resolve difficult urban issues – and, in this way, build a massive ecosystem of urban technology applications, improve the quality of urban life, and shape the future.

Meanwhile, Tsoi has developed a set of entrepreneurial rules and encourages aspiring individuals to join the entrepreneurial teams and become part of the start‑up ecosystem.

Concept building

Concept building is instrumental to successful entrepreneurship. Being able to fill existing market gaps or make major technological breakthroughs in related areas is a big advantage. Projects that can improve public life and make a positive social impact will draw the attention of investors and the market. Tsoi cited the following start‑up companies that succeeded in securing investment from ParticleX.

Ampd Energy is a Hong Kong company that is committed to creating an emission‑free future for the construction sector. The company’s flagship product – Enertainer – is a powerful energy storage system specifically designed to power major construction projects without the direct use of fossil fuels. The Enertainer reduces carbon emissions by as much as 90 %, lower noise levels more than 30 times and completely eliminate tailpipe emissions. The Enertainer has already been deployed at more than 100 construction project sites in Hong Kong, Singapore and Australia. Ampd is also in the process of expanding into the UK and is actively exploring opportunities in continental Europe and the US.

Gense Technologies has created a portable medical imaging device for in‑depth screening and monitoring at home and in clinics. The device targets the early detection of some of the costliest diseases of the liver, lungs, kidney, and so on, as well as the management of chronic diseases. Developed as a home‑based medical imaging modality to assist telemedicine, the imaging scan can be operated by users with little training. It is powered by cloud‑based machine learning algorithms for the continuous monitoring of the disease. This device can greatly reduce waiting time and costs for patients.

Thinking ahead

Tsoi pointed to the need for new entrepreneurs to think ahead, saying: “A blueprint for entrepreneurship requires careful and long‑term planning. A start‑up company must properly plan its development and funding for the next five years and have a clear growth map, including break‑even time, revenue forecasts and detailed plans for fund utilisation. The essence of business is cash flow and good management of corporate finance is a must.

“When we say most start‑ups will find themselves in the “Valley of Death” in the second year, what we mean is that their pool of funds will dry up before they start making a profit or generating cash flow. They will feel the pinch of daily costs and may not be able to keep their business running. This is the most common problem encountered when starting a business. For some sectors with a long investment cycle, especially biomedicine, companies need to go through a long period of R&D or clinical trials and may face massive funding gaps.

“Start‑up companies need to draw up good funding plans in the light of their business development needs. Rather than just looking at their short‑term capital turnover (for the next few months), they need to consider the details of what is needed for sustainable development, such as long‑term capital supply and duration.”

To date, ParticleX has provided venture projects with more than US$10 million in start‑up capital. Maintaining that this is just the start, Tsoi said: “We are ready to inject more funds into promising venture projects in order to sustain their development and allow Hong Kong’s technology and innovation ecosystem to become ever more vibrant. In line with this, we recommend that tech start‑ups ensure that their businesses grow in order to secure follow‑up funding support. We have seen most of our invested venture projects growing at a pace five to 10 times faster than before. We consider it our mission to help them find investors for the next round, raise additional funding and extend the development scope of their businesses.”

Tsoi noted that while continuous funding support can keep the engine running, venture projects need to be inherently strong, particularly with regard to generating recurrent income and creating sustainable cash flow. It is difficult, he believes, for businesses that lack market acumen and do not have a unique product offering or that merely duplicate existing models to succeed.

Strong team

An outstanding tech venture team needs to have strong R&D and execution capabilities. Concept is the most valuable asset at the start of a venture. Knowing how to successfully convey a good concept to potential investors is a prerequisite for any venture team. Tsoi views start‑ups as a miniature version of a large‑scale company. The team may be small but all its members must play to their strengths. An ideal venture team needs professional research and technological talent, but executives who are good at conveying ideas and developing business are just as important. Execution power and collaborative spirit are qualities valued by investors, and start‑up companies should be aware of this.

The development of venture projects is often a race against time. The innate fighting spirit of entrepreneurs and their striving for perfection are what make the start‑up ecosystem vibrant. ParticleX is optimistic that start‑ups in Hong Kong will be able to make up for lost time and continue to move forward in the field of science and technology and create new opportunities for Hong Kong’s future development.

Note:

1 The 2021 Startup Survey conducted by Invest Hong Kong (InvestHK)​​​​​​​

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